Legend Biotech Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 13, 2024

There are 19 speakers on the call.

Operator

Please note that today's conference may be recorded. I will now hand the conference over to your speaker host, Jessie Young, Head of Investor Relations and Public Relations. Please go ahead.

Speaker 1

Good morning. This is Jessie Yang, Head of Investor Relations and Public Relations at Manjun Biotech. Thank you for joining our conference call today to review our Q1 2024 performance. Joining me on today's call are Yin Huang, the company's Chief Executive Officer and Laurie McCumber, the company's Chief Financial Officer. Following the prepared remarks, we will open up

Speaker 2

the call for a Q

Speaker 1

and A. We have Huawei Fan, Chief Scientific Officer and Steve Gaffel, Head of Commercial Development for the U. S. And Europe 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 herein.

Speaker 1

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. Thank you.

Speaker 3

Hello, everyone, and welcome to our Q1 earnings call. I am pleased that you could join us. As many of you on this call know, 2024 has been an eventful year for us. Obviously, our major news was the approval of Corvicti by the FDA and European Commission for second line relapse or refractory multiple myeloma. These approvals have the potential to change the treatment paradigm for tens of thousands of patients in the United States and Europe.

Speaker 3

The feedback from key opinion leaders, oncologists, advocates, patients and caregivers has been tremendous. On March 15, we received international media attention when the FDA's Oncologic Drug Advisory Committee or ODAC meeting raised awareness about multiple myeloma and the positive benefit risk profile of CARVICTI. ODAC's unanimous 1120 recommendation in favor of CARVICTI was independent and objective validation of its value proposition. We also added another noteworthy approval to our growing list. The Brazilian Health Regulatory Agency has approved Correvctiv for 2nd line multiple myeloma.

Speaker 3

I am pleased to report that Correvctiv is now available by prescription in Brazil. Our patient facing colleagues and those who work in manufacturing are energized and eager to share our transformative therapy with more patients around the world. As you will see on our addressable market slide, our second line indication translates to an addressable patient population of 80,000 across 3 major markets. Turning to financial developments. CARVICTIN net trade sales for the Q1 were $157,000,000 which is 100% increase year over year.

Speaker 3

Sequentially, net sales decreased by $2,000,000 from $159,000,000 in the Q4 of last year. This was a result of phasing due to the timing of orders and when they were delivered and built for as well as manufacturing testing needed for the upcoming expansion. Importantly, there was growth in patient demand and obviously that was before the recent second line approvals. So we do anticipate continued growth for Cravicti, particularly in the second half of the year as we continue to add more slots and expand our capacity. Right now, there's no higher priority in the company than making more supply available to the market and reducing the van to van time.

Speaker 3

We're working to expand production from every angle. We're continually increasing production at our Raritan, New Jersey facility, where we have doubled cell processing capacity since the beginning of 2023. We're laser focused on completing physical expansion of our Raritan site this year. We plan to double CARVICTI capacity by the end of 2024 compared to the end of 2023. Our production capacity will be augmented later in the year when our Obelisk facility in Ghent, Belgium is approved for commercial production.

Speaker 3

Clinical production already started back in January. With the 2nd line FDA approval, the specifications for manufacturing CARVICTI were widened, which should give us greater yield going forward. Finally, Legend and J and J expanded a previous agreement with Novartis to perform commercial manufacturing for CARVICTIS through the end of 2029. The increases to our production capacity will help ensure we meet our target of annualized capacity of 10,000 patients lost by the end of 2025. Our cash balance now stands at $1,300,000,000 which we believe provides us the resources needed to increase production and gives us financial runway into 2026, when we expect to begin to achieve an operating profit.

Speaker 3

In other developments, we continue to bring more hospitals online as authorized treatment centers. We have now a total of 72 U. S. Hospitals certified to treat CARB X patients. So our reach in the community is growing in parallel with the increase in eligible patients.

Speaker 3

Outpatient treatment comprises approximately 1 third of our volume and remains an important differentiator for us. Due to the longer onset of CRS for CARBECTIVE patients, this side effect can potentially be managed in the outpatient setting, which allows those hospital beds to be utilized for other patients who need them. Finally, since our last earnings call in March, we published our first ESG report. Not only does it summarize our achievements as responsible corporate citizen, the report provides a great overview of the company and transparency into how we conduct our business. To sum up, so far in 2024, we have achieved our significant regulatory goals and are working to execute with excellence to meet the growing demand for Corvecti.

Speaker 3

Now I would like to turn the call over to Laurie to walk you through the financials for the Q1. Laurie?

Speaker 4

Thank you, Ying, and good morning, everyone. As Ying mentioned, we generated approximately $157,000,000 in total net sales for Perfect D during the Q1, an increase of 118% year over year. Sequential growth was roughly flat due to the timing of orders and when they were delivered and billed for as well as manufacturing testing needed for the upcoming expansions. As a reminder, we share equally in all profits and losses for CARVICTI ex China with our partner Janssen. Turning to revenue.

Speaker 4

Total revenues for the Q1 were $94,000,000 consisting of $78,500,000 of collaboration revenue from the sale of CARVICTI and license revenue of $12,200,000 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 March 31, 2024 was $59,800,000 or a loss of $0.16 per share compared to net loss of 112,100,000 or a loss of $0.34 per share for the same period last year. Moving on to expenses. Collaboration cost of revenue for the Q1 2024 was $49,100,000 compared to 35 point $6,000,000 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 expansions.

Speaker 4

Additionally, cost of license and other revenue for the Q1 2024 was $5,600,000 compared to no cost of license and other revenue for the Q1 of 2023. These costs are 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. Research and development expenses for the first quarter 2024 were $101,000,000 compared to $84,900,000 for the same period last year. The increase of $16,100,000 for the 3 months ending March 31, 2024 compared to 3 months ended March 31, 2023 was due to primarily to research and development activities in SituCell, including higher patient enrollment for Phase 3 clinical trials and continued investment as well in our solid tumor programs, which includes 2 IND approvals that advanced into Phase 1 development. Administrative expenses for 3 months ended March 31, 2024 were $31,900,000 compared to $22,200,000 for the same period last year.

Speaker 4

The increase of $9,700,000 year over year is primarily due to the expansion of administrative functions and infrastructure to increase manufacturing capacity. Selling and distribution expense for 3 months ended March 31, 2024 was $24,200,000 compared to $18,000,000 for the same period last year. The increase of $6,300,000 year over year due to the cost associated with commercialization of CARVICTI, including the expansion of the sales force and second line indication launch preparations. To summarize, our spending remains on track and we continue to maintain a strong balance sheet. As of March 31, we have $1,300,000,000 in cash and equivalents, deposits and investments.

Speaker 4

Additionally, we earned in April a milestone payment of $45,000,000 in connection with the FDA's approval of CARVICTI's label expansion to treat second line multiple myeloma in accordance with the Janssen agreement. 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 3

Thank you, Lori. To sum up, 2024 has already been a monumental year for Legend with a string of regulatory successes. CARVICTI continues to be the fastest launched CAR T therapy and now we have new opportunities to serve even more patients. I want to thank each of our 1900 employees for their commitment and dedication that will ensure patients who need CARVICTI are able to access it. And with that, we'd like to take your questions.

Speaker 3

Operator, we're ready for the first question.

Operator

Thank Now first question coming from the line of Jessica Fye with JPMorgan. Your line is open.

Speaker 4

Hey, guys. Good morning. Thanks so much for taking my questions.

Speaker 5

I have 2 please sort of related. First, I know 1Q was impacted by a number of nonrevenue batches for comparability work. And then second, when you talk about, And then second, when you talk about doubling capacity from the end of 'twenty three to the end of 'twenty four, But I think you mentioned that the Obelisk commercial production was going to be kind of back half weighted or back end plated. What does that mean for how we should think about revenue year over year in 2024 relative to 2023? Just trying to figure out kind of is it 1 to 1 on that doubling year end of from year end to year end capacity?

Speaker 5

Or are there other factors we should think about when we're thinking about revenue this year? Thank you.

Speaker 3

Hey, good morning, Jess. Thanks for the questions. This is Ying. I'll help answer those 2. So first, on the manufacturing investments.

Speaker 3

I would tell you that qualitatively, in Q1 of this year, we did have a number of nonrevenue generating loans, and that includes bringing up the CMO from Novartis and also bringing up a couple of other additional notes, including our facilities in Ghent, up for production, including clinical and then in the future also for commercial production. So I cannot disclose exactly the number of the nonrevenue generating runs, but it is on a similar order of magnitude compared to, for example, clinical runs. And we do expect that for the rest of the year, in the next three quarters, that number will come down. The reason is we are pretty much complete in terms of the work we're doing with Novartis. So we believe that Novartis is in a position to file IND very soon.

Speaker 3

And assuming the IND is cleared by the FDA, we expect Novartis to start clinical trial production in the Q3 and then followed by commercial production Q1 of next year. And then of course, we also have 2 other facilities in Ghent. The first one, Phase 1, is called Obelisk. And Obelisk is already producing for CARTA-two-six as we speak, and we expect pending regulatory approval probably around late Q3 or early Q4 this year. Obelisk will start commercial production.

Speaker 3

And then followed by our much larger facility in Belgium called Techland. Techland right now is on track to complete physical construction and validation by end of this year. So we expect that facility to start clinical trial production early next year, followed by commercial production in the second half of twenty twenty five. So that's kind of like the cadence. And then to address your second question, as I just mentioned, Obelisk is expected to start commercial production late 3Q or early 4Q this year.

Speaker 3

So in general, I think we have said that we are looking at a roughly doubling of our capacity from 2023 to 2024. We don't provide guidance for the product itself, but I think the capacity expansion gives you a good idea of where the revenue would lie, Consistent with our policy to have similar or same closure disclosure from J and J, which does not provide product specific guidance. We cannot guide the product itself. But I think that doubling of expansion gives you confidence that where the revenue would be in terms of growth year over year. Thank you.

Speaker 5

Can I just clarify, when you say doubling of capacity, there's other factors as it relates to revenue, whether it's kind of like in spec, out of spec, the amount going to clinical trials, the amount going to these comparability batches or what have you? So when you say doubling of capacity, is that just like total, total capacity inclusive of all these other things that may not generate revenue? Or is that commercial capacity?

Speaker 3

That is correct. When we talk about That is correct. When we talk about capacity, that includes the number of total slots from all nodes of production. That includes clinical production. That includes nonrevenue manufacturing investment front.

Speaker 3

That includes commercial production. And then when you think about commercial production, Jeff, of course, you have to make assumption of the inspect success rate, right? I mean, we're encouraged by the trend so far this year because given what we're seeing in Q1 and now in Q2, that continues to improve. So then there's, of course, the net pricing. So all this will figure into the revenues.

Speaker 3

But when we talk about total capacity, we're talking about all the capacity, all the slots from different nodes, and that includes everything.

Operator

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

Speaker 1

Thank you for taking my questions. Maybe I'll just follow Jessica's questions. So should we still expect revenue growth in 2nd quarter 2024 or should we wait into second half twenty twenty four when a Bliss commercial production onboard in 3Q, 4Q? And another related question is regarding CARTA Q5 and 6, now mainly 6. But you still have maybe roughly 700 patients that need to be enrolled.

Speaker 1

Where do you expect these 700 patient enrollment mainly at? Would that be in New Jersey side or would that be in Belgium side?

Speaker 4

Hi, Gina. This is Laurie. I'll take your first question on revenue. We do expect to see some growth in Q2, but as we've talked about, we expect pronounced growth in the second half of the year. As Jean mentioned, we have different factors coming into play in the second half of the year with the Raritan ramp, we expect a second capacity ramp coming on there.

Speaker 4

Our Ghent facility is the largest driver, but that coming online in order to do some commercial production. And then we do have a CMO that we anticipate clinical production can shift there that will free up some commercial capacity at Raritan. So in addition to that, as we start to get these additional nodes that come online, we will have some multiple country launches we anticipate in the back half of the year. And as you know, with the complexity in cell therapy, some of the achieving those sales will depend upon how those launches go. And you've seen in prior launches, we tend to get a lot of the acute patients first.

Speaker 4

So we want to be conservative, but we do anticipate a more pronounced growth in the second half of the year. Ying, do you want to take the CAR T2-five and CAR T2-six question?

Speaker 3

Yes, Gina. So on CAR T2-five, we have completed all international enrollment already for CAR T2-five, And that's actually above our preplanned number. Right now, we're just enrolling additional U. S.-based patients so that we the minimum of the U. S.

Speaker 3

Patient representation by the FDA. So by now, we have manufactured a significant portion of CAR T5 patients. Now on CAR T6, since we opened enrollment in October last year, right now, it's enrolling really fast. It's actually faster than our plan. So in terms of where we're manufacturing for those trials, I can tell you that right now, Rylatin, New Jersey is the main site For CAR II VI, right now, actually, Ghent, our first facility called Obelisk, is the main site for that trial now.

Speaker 3

And it will shift to other sources. But we're trying to really save the Rheatin facility for commercial production for the rest of 2024. So that's where we're manufacturing for CAR T5 and CAR T6 for now.

Operator

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

Speaker 2

Thank you. Congrats on achieving great milestone in early line approval. So for the launch in the U. S, could you talk about the current launch activities? Have you started treating patients in second to first line?

Speaker 2

And do you see switch from last line? And I also have a follow-up. Thank you.

Speaker 6

Yes. Why don't I take that question? This is Steve Gabel. So I think the question had to do with, PARTICIPANT for the status of it and patients and so forth and so on. One of the things I do want to just piggyback a little bit to Lori's response earlier concerning the second half component of this year.

Speaker 6

Even though the product was approved in earlier lines in April, there's just a natural lag in the market, especially with a CARTITU-four launch where we are looking for getting patients referred into our institutions.

Speaker 3

So I think this is some one

Speaker 6

of the key differences with the CARTITUDE 1 launch versus 4 that there will be a natural lag in it just because of the referral piece of this. Now, also to Laurie's point, there are a number of patients that meet the eligibility criteria today in our hospitals that are moving very quickly through the approval processes and so forth. So again, we continue to move very quickly in terms of patient identification and apheresis. But I did want to caution you all that it's just a natural phenomenon of referrals and manufacturing and ultimately to revenue recognition. That's why we're basing our assumption on a really strong second half.

Speaker 2

Thanks. And also to reach the goal of the 10,000 doses by year end for 2025, would you need to consider to sign up for additional CDMO contract? Also, what percentage of the patients would be needed to treat it in all patient settings to reach the 10,000 doses goal, if we're assuming like on the hospital side, there's also capacity constraints?

Speaker 3

So Kelly, let me take the first part of the question, and then I'll ask Steve to talk about the outpatient administration of COPIKTI. So when we look at the goal of reaching 10,000 annualized capacity by end of 2025, we believe that with existing nodes, our 4 nodes, right, that includes our own site in Ryerson, New Jersey, our two sites in Ghent, Obelisk and Techland, plus Novartis site here. That should be pretty much give us the reach to that number. Of course, we're continuing to evaluate the CDMO of other companies. That could potentially give us a boost as well.

Speaker 3

So stay tuned on that front. And then I'll ask Steve to talk about the outpatient administration of Corvicti.

Speaker 6

All right. Thanks, Sing. So you heard Ying at the top talking about roughly about onethree of all patients now being treated in the outpatient setting. And that's grown quite a bit. I mean, that's to give you a comparator versus other CAR Ts in the market that we compete with is they're right around 15%.

Speaker 6

So I think the question was what from an outpatient perspective, what would we need to see in order to achieve the target doses that you referenced earlier. We expect by the end of 2025 to be at least double to where we are today. And it's reflective in the growth in the outpatient sector that we are seeing today. So we are relatively confident that we are going to be there. I think the one wrinkle and you're seeing now a number of our sites investigating this today is the partnerships that they are going to be and they're currently embarking with other outpatient players, whether it be in the community setting, I'm talking now pure community retail setting.

Speaker 6

And actually, if you haven't seen, a good example of that is back in 2022, ACA Healthcare announced a partnership with McKesson, which is U. S. Oncology. And I know that they are very interested in leveraging assets outside of their own hospitals to bring these therapies out to as many patients that are eligible to receive them. So you'll see the definition of outpatient will change quite a bit over the next couple of years, not just hospital outpatient, but in the next few years, you will start to see community administration of our program.

Speaker 1

Terrific. Thanks.

Operator

Thank you. And our next question coming from the line of John Miller with Evercore ISI. Your line is open.

Speaker 7

Hi, guys. This is Omar filling in for John. Ying, I don't have any single question on CAR VICTI today. And instead, I want to focus on a very important area in CAR T space, which I don't think has come up in the Legend conversations. So you have this triple targeted CAR T ongoing in China since March 22.

Speaker 7

I think it's wrapping up now, that CD19, CD20, CD22 on autologous. And separately, you have this LUCAR G39P, which is the dual targeting CD19, CD20 allo that I think you just started Phase 1, both of these in China. My question is, shouldn't those trials have been an autoimmune and or is that a plan that you're intending to do near term?

Speaker 3

Umer, good morning. I will ask our

Speaker 8

And our disease focused area are both oncology and autoimmune diseases. For both assets, we have plans to develop those autoimmune disease indication as well, and it's in process.

Speaker 7

And when would that start Ying? And would it be a U. S. Trial? I think that's the other very important question obviously.

Speaker 8

Currently, All in One is in the process of initiating the autoimmune IIT study in China across multiple disease indications. For the U. S. Autoimmune diseases asset, our kind of strategy is focusing on the allogeneic approach given some of the key challenges associated with the autologous treatment options. So for example, the requirement of lymphodepletion and the requirement of manufacturing at the individual patient level high cost, etcetera.

Speaker 8

We have, as said, in the process of initiating the U. S. IND enabling study. And we will disclose additional information in the future. Thank you.

Speaker 7

And if I may clarify sorry, one last one. If I may just clarify, in that ALLO trial for U. S, I'm assuming that's your CD19, CD20 dual targeting. Is it safe to assume that you would not need the flu sci loading, the preconditioning for autoimmune?

Speaker 8

That's an open question. And I think we will make a decision based on the clinical data we are collecting. In terms of targeting mechanism, we have we think that autoimmune disease cover a very broad spectrum of different diseases, and we want to have option and the choice for patients. In terms of targeting mechanism, CD19, CD20 certainly are valid targeting mechanism. I think the plasma cell may also play a major component in BCI driven disease pathology.

Speaker 8

So we're also considering the BCMA as additional type of opportunities. And Umer, I know you

Speaker 3

had a question about the CD19, CD22, 2023 clinical CD19, CD2320, the clinic program, and it will probably start dosing for autoimmune by end of this year. So based on that clinical data, we will make the decision when and how to move assets into the U. S. IND process. And of course, like Doctor.

Speaker 3

Feng just mentioned, we are very interested in whether we can either bypass or lower the dose intensity for FluCy lymphodepitation regimen. That is one go of our IIT trials in China. So it's also the trial we're conducting for the dual targeting allo CD19, CD20, gamma T program.

Speaker 7

Sounds great. Thank you very much. So Ying, it sounds like you could have some autoimmune data next year. Is that a reasonable conclusion from all of this?

Speaker 3

Without officially guiding, yes, that is a possibility.

Speaker 7

Sure. Excellent. Thank you so much for this.

Operator

Thank you. And our next question coming from the line of Yaron Weber with TD Colony. Your line is open.

Speaker 9

Great. Let me maybe just follow Umer's last question and then I have a question on Corvecti. Can you just discuss a little bit the concept of autologous with the triple CD19, CD20 and CD22 versus with allo, it looks like you're doing dual targeting. Can you just help us understand kind of your thoughts, why not do triple on both? And then I have a follow-up on Correvictin.

Speaker 8

So for tumor targeting, it's the design principle is to drive a deeper response by targeting multiple B cell biomarkers. And so for that, we are currently initiating the IT study and the collecting data. For the allode, we are going to have different targeting mechanism. And based on the IT study, we will have additional insight in terms of which disease we should target among different autoimmune indications.

Speaker 9

Okay. With the dual, but you'll keep that as a dual, 'nineteen, 'twenty only, because you don't need to drive deeper responses. Is that the thinking? You just need to reset the immune system?

Speaker 8

Yes. So we are targeting both CD19 and CD20 as well as with different assets targeting CD19 and BCMA, having different asset specs.

Speaker 9

Okay. Got it. Okay. Maybe just to move back, I have a quick question on Corvicti. Can you give us

Speaker 10

a little bit of a

Speaker 9

sense now that second line is approved? Is the out of specs now different pretty much and easier across the board? Or is the FDA still keeping a certain bar sort of on 4th line onwards and a different bar in the second line?

Speaker 3

Yes. Hey, Rong. Good morning. This is Ying. I'll answer your question.

Speaker 3

So the answer is that when we received FDA approval on April 5 for second line, we did receive one label with 1 SPAC. So as of today, right, if we treat any patient on label, the release SPAC is the same for second line patients versus the 5th line and beyond. And also, by the way, it is a wider release back. So I know it's early days, but based on the data from the full month of March production, which we tested in the April, So far, we're seeing encouraging trend in OS so far based on either probably the wider release back approved by the FDA and also potentially once we start to see more second line patients rolling in, the natural evolution of better baseline for those patients.

Speaker 9

And those release specs, how do they compare with the Beqma and maybe Kymriah and Yescarta as far as you can tell?

Speaker 3

Without disclosing a number, I can tell you that based on latest data we have on auto spec, I think our success rate is approaching that of our competition at this point. Of course, like I said, it's very early days. We have only March production data. We have only a little bit partial of the April production data.

Speaker 9

Okay. Maybe just final, I think you talked about 100 ATC target for the year. What's the gating kind of rate to open all of those? Is it capacity or are there other factors as well? Thank you.

Speaker 6

Yes. No, it's Steve Caball. Mean the gating element is really the site certification process. One thing to take note and I've talked about this on previous calls is as we add more and more sites, you don't see nearly the volume that you see in our initial Phase 1 site. So but we will continue to certify sites and our intent is to get between 90 to 100 this year.

Speaker 6

The key metric, just so you know what we look at is because there's so much outpatient now administration of CARVICTI in our facilities on a per site basis, we're seeing much more throughput per site versus what you would see, for example, with the Beqma. So I just wanted to make sure we're kind of viewing this the same way.

Operator

Thank you. And our next question coming from the line of Zhi Chen with Goldman Sachs. Your line is open.

Speaker 11

Hey, thank you for taking my questions. Just two questions. One is on the EU launch. Well, I think the U. S.

Speaker 11

Has been down quarter over quarter, but you have been increased 23%, which is still growing nicely. So could you share a bit more color on the Europe pricing and also how's the reimbursement coverage in Europe countries? And also any updates on a commercial launch in UK and in Japan? And a small financial question is really regarding the DIL3 partnerships. So we understand that for the upfront payment, you just recognize about US12 $1,000,000 in the Q1 out of the US100 $1,000,000 upfront payment.

Speaker 11

So is that the specific accounting trend for that? So it's going to be spread out over the next few quarters. And secondly, there is a cost of license related in connection to that. So could you help me helping us to understand a bit more about where does this cost coming from? Thank you.

Speaker 6

Yes, we're going to try to unpack this, a lot of things from that. Why don't I take the first the European question. So I think folks on the line are aware of a partner who's responsible for all ex U. S. Promotional activities specifically in Europe.

Speaker 6

I can tell you, I think you're aware of this already, if you're into a partner in Germany and Austria in both CARTA-two I and IV. The other thing to take note from a global allocation, even though we are in those countries, the majority of the global slot allocation is coming into the United States. I indicated a question around pricing. Pricing has not been disclosed as of yet in Europe. So we can't unfortunately provide information around that until it becomes publicly disclosed.

Speaker 6

I'm trying to think of the other European questions that were out there. Let me get it. Let's see here. Up on the pricing and reimbursement piece. Yes.

Speaker 6

So we're not commenting again, we aren't commenting yet in terms we have received approvals obviously in Japan, but we have to launch there. And again, I'm going to defer to my partner on that one because they have not disclosed their intention on timing there nor as far as in the UPay as well. So Laurie, in the given, excellent.

Speaker 4

So for deal 3, as you guys saw on the how we recognize on the P and L, there's actually 3 different locations of what we're recognizing there and then on our balance sheet. As you guys remember and we disclosed, we received $100,000,000 upfront payment. However, we have to defer that recognition of that $100,000,000 over time for the activities that we're performing that we're obligated to perform as part of the collaboration agreement. So to your question of how will that spread out, yes, that will spread out over various quarters in the future as we continue to do our activities that we're obligated to perform for that study. Now we do have a pass through.

Speaker 4

There are certain material costs that we will pass through those costs to our collaboration partner. So we recognize that as other income. So that is actually separated out. And then the cost of the license is the actual what triggers that revenue recognition is the cost that we've incurred based upon those obligations that we have to perform. So that's the actual cost that we're incurring for the clinical study.

Speaker 11

Great. Thank you, Stephen and Laurie. Thank you.

Operator

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

Speaker 12

Hey guys, thanks for taking my question. I wanted to maybe talk ask on sort of cadence of data that we should expect for the rest of the year. And specifically, I'm curious on cohorts E and F, when we might see that data, what level of follow-up and what sort of efficacy measures we should be focusing on? And then related to that, I guess, what in your mind is the PFS benchmark that we should be looking for there and for Cartitude 5 as a whole? Thanks.

Speaker 3

Leo, this is Ning. So first, maybe I can just give you a quick preview of ASCO. We expect to present some data from one cohort, Cohort D. These are the patients who did not achieve an optimal response to the standard care regimen in the frontline. And then for Cohort E and F, we enrolled and dosed a total of roughly 60 patients in newly diagnosed multiple myeloma.

Speaker 3

So right now, we're expecting to release and publish the data at a major medical meeting towards the end of the year. So that's roughly the timing for cohorts E and F. And in terms of the level of follow-up, I think you should expect to see a year of follow-up or maybe even longer than that. If you talk about the PFS benchmark, so for CAR T5, as you know, the standard of care regimen we use here is RVD or Revlimid, Velcade and dexamethasone. If you look at the registration study for that regimen in frontline, the median PFS is about 34, 35 months.

Speaker 3

And that is the benchmark we're looking at to beat, right? I just want to remind you that this is a superiority trial. And then for CARTTITUDE 6, I think you've got the answer from the PERSUSE trial that was presented at ASH last year. That is DRVD regimen in combination of stem cell transplant. So there, you're looking at the 4 year PFS rate of 84%, and that's the benchmark we're looking at, right?

Speaker 3

Again, we are looking at superiority in PFS as a primary endpoint. Now given the recent ODAC vote, we will be engaging with the agency to talk about potential of using MRD as endpoint to accelerate the approval time line. So if you look at CAR T5, MRD activity is already a secondary endpoint. And then for CAR T6, if you look at our clinicaltrials dot gov, actually the co prime endpoint is PFS and MR gene activity. So we will follow all the patients with MR gene activity.

Speaker 3

And at the same time, we plan to engage the FDA and the EMA to talk about the potential of using MRD as endpoint as well. Very helpful. Thank you.

Operator

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

Speaker 13

Hi, good morning. Thanks for taking our questions. We just had 2 on CARVICTI. The first on the topic of future disclosures. Ying and team, do you anticipate providing kind of a split of patients by line of therapy or any directional sense of how kind of patient use in the quarter is kind of between earlier line versus later line in the coming quarters of performance data?

Speaker 13

And then secondly, I know you don't provide long term guidance, but looking a couple of years out, how do you expect the CARBICD sales base to kind of trend U. S.

Speaker 3

Versus ex U. S? Thanks. So I'll ask Steve to take your first question. Yes.

Speaker 6

So thanks for that question. And it's an important metric because it's your question around looking at line of therapy use. It's an important question. It's a very difficult question to track from. So just because of the available data that's in the public domain right now around that.

Speaker 6

So let me give you a way how we're thinking about this. So we're assuming in a year plus time about 70% of our product use is going to be in earlier line therapies earlier line treatments, I should say. And that's going to increase over time. It's because the market is so large and obviously there's high demand to use this in patients that are doing quite well. But we will not be per se teasing that out by line of therapy, not because we don't want to, but like I said, you get that data through different sources.

Speaker 6

1 of the big sources is claims data, but the source information is a bit choppy. So, no, to answer your question directly, we will not be disclosing that by line.

Speaker 3

Yes. So Vikram, on your second question, I mean, again, we're not in a position to provide guidance for CARVICTI. But as you know, typically, when you launch a new indication, it takes about 3 years to get to that peak sales. And as of now, we are not changing the projection that CARVICTIVE will peak at $5,000,000,000 plus And by the way, that is really on stipulation that we'll have a healthy market share in second line, for which we already have received official approval from both FDA in the U. S.

Speaker 3

And EMA in Europe. So we feel confident about the growth potential for CARVICTI in the second line in the next few years. Got it. Thank you.

Operator

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

Speaker 14

One question from us on the guidance around the 10,000 slot production by year end 2025. Can you maybe provide some color around the number of FDA approvals on manufacturing cap increase you will need to be able to manufacture these slots by year end 2025? Thank you.

Speaker 3

Good morning, Konstantin. Thanks for the question. So let me just give you the little bit more details about how we think about all the different nodes, right? So obviously, right now, the only commercial production site is Ryerson, New Jersey facility. And we are implementing an FDA approved increase as of now, and then we expect to have another increase towards the second half of the year.

Speaker 3

So that's what we're doing with Raritan. And then meanwhile, we and our partner, Johnson and Johnson, are conducting a physical expansion of the Ryerson facility. So that expansion should complete by end of this year. So over the course of next year, we are going to validate the equipment and then bring all the briefs up to the GMP facility standards. So sometime next year towards the second half, we expect that doubling of the manufacturing area in Raritan to start to contribute to additional capacity.

Speaker 3

So that's what we're doing for Raritan. And then for the 2 facilities in Ghent, the first one, Obelisk, right now is already manufacturing for clinical trial. And I just said in the call that towards probably late 3Q or early 4Q, we expect that facility to receive the regulatory approval for commercial production. The much larger Techland facility in Ghent, right now, we're on track to complete all the validation work by end of this year so that we expect clinical trial production to start early next year in 2025. And in the second half of next year, that facility will also come online pending regulatory approval for commercial production.

Speaker 3

And then of course, we talked about Novartis as CMO. Again, we expect the commercial production to start early next year. So if you look at those four nodes, right, we're adding 3 additional nodes for commercial production starting second half of this year and then throughout 2025. That's how we can achieve the 10,000 dose capacity by end of next year, all these four nodes together. And I can tell you that without disclosing all the technical details, if we track as of last Friday, we're on track to achieve that 10,000 total capacity by end of next year given where we are in Raritan, where we are in the GaN facilities and where we are with Novartis.

Speaker 14

Thank you. Very helpful.

Operator

Thank you. And our next question coming from the line of George Farmer with Scotiabank. Your line is open.

Speaker 15

Hi, thanks for taking the question. Ying, can you comment a little bit about how the wider release spec approval translates may translate into top line sales, number 1. Number 2, also recognize that CARVICTI is moving into 2nd line primarily, at least in the relapsed refractory, 4th line plus. Can you talk a little bit about the dynamics between how Perviqti is being positioned against bispecifics? It looked like that there was a bit of a surprise number from J and J when they reported.

Speaker 15

And then also finally, can you go into a little bit more detail on how you get to your cash usage spend out to 2026? Thanks.

Speaker 3

Good morning, Josh. I'll take the first question and then I'll ask Steve and Laurie to provide answers for the second and third one. So on the wider release back granted by the FDA in April, I think what we have said previously is that based on our modeling and also the data from Cartitude clinical program, we believe this widened spec should result in additionally 5% to 10% points lower OS compared to before the wider release spec was approved by the FDA. So right now, like I said, it's still very early days. But based on what we are seeing so far, the OS is already coming down by roughly 5% last month.

Speaker 3

So that is very encouraging, and we're going to have to have a little bit longer follow-up data to provide you with better confidence about where exactly the OS will be. But so far, things are trending very positively. Steve?

Speaker 7

Yes.

Speaker 6

So why don't I take the question around how we're positioning the assets specifically for the CARTITU-four launch in second line and then I'll get into a little bit around later lines in bispecific. So it is our number one promotional focus to launch Cartitude 4 in the 2nd line plus setting. There's clearly a clear differential there versus standard of care and it's going to be basically a single-minded focus for my team.

Speaker 3

The

Speaker 6

other thing though in terms of the bispecific question because it's the appropriate one, in later lines of therapy, you heard Ing in the opening talk about speed. One of the things that is clearly apparent to us and you mentioned I think a Janssen surprise and render bispecific. What's happening there and this is honestly something that we could foresee coming, is that one of the things that's a key focus for us, you heard Ying talking about it, is not only generate more slots in the market, but get faster into the market. And that's extremely important in later line disease where patients are progressing very rapidly. So that's where you saw the growth happening with the bispecifics as the eclistimab hit the market and then was followed by TAL.

Speaker 6

One of the things I do want to point out to you and it's something we talked to our partner quite a bit about is as now TAKE has entered into the market in 5th line plus in the U. S, what you're starting to see is a shift in the dynamic in terms of what bispecific is used in front of one another. What we're seeing and it makes sense is with talc coming on board now, you're seeing a shift where talc is actually being used first in front of TALC. And the reason for that, and this is during our research, is this is a very effective bridging strategy to also get the SIL to sell. So in the past, with Tafenov being around, obviously, the market had no other option but to use ceclistimab if they needed to bridge a patient.

Speaker 6

The challenge there is you're also targeting the same BCMA target. We know there's efficacy there, but by using talc instead, you're obviously targeting a different target. So they want to preserve the BCMA target to get to CARVICTI. So maybe it's a little bit more than you had asked for, but I did want to just point that out to you that even though in this case, tauf might be used with some of these quicker progressing patients, we anticipate them to get to silica cel at a later point in time. Laurie?

Speaker 4

So I'll take the question on cash and the runway into 2026. As you guys know, we ended Q1 with $1,300,000,000 in cash. If we take a look over the next 2 to 3 years, that will be adequate cash to bridge us until we get to profitability from the BCMA program. But what I do want to say is that doesn't preclude us from potentially looking at additional capital raises. And that's really going to be dependent upon pipeline advancement, if we if there's something that we want to do on a business development perspective, and also if there's a certain level of working capital that we want to maintain.

Speaker 4

So yes, we do see us having adequate cash to get to profitability, but there are other factors that will come into play if we decide that we do want to raise additional capital.

Speaker 15

Okay. Thanks very much.

Operator

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

Speaker 6

Thanks for taking the question. And it's great to see the outpatient administration usage here pick up. Steve, can you talk about some of the factors that are constraining outpatient administration and just the dynamic that centers decide on whether to offer outpatient administration? Thanks. Yes, sure.

Speaker 6

Thanks for that question. There's a number of different factors. The challenge in later line disease is the fact that you're dealing with a very difficult to treat patient to begin with, right? So I think just from a patient perspective, it's a challenge. However, as we see in our trends, we're seeing almost 30% of the time, our facilities are working quite effectively to treat those very difficult to treat patients.

Speaker 6

What you're going to see though in an earlier line more mobile patient, often many of these patients are often working is it become much easier for the sites. And that's what we are projecting as well, right. So from a patient selection, these are more mobile patients and some of the patient related issues that the sites were challenged with will get a bit easier for them. So that's the first thing. The other thing that we keep an eye on is their intent to move forward.

Speaker 6

The question was asked earlier around capacity, right? So the sites recognize this and they also want to use outpatient CAR T administration as a strategy to reduce the amount of resources to treat the numbers of patients that are eligible for this therapy. So just from a resource perspective, sites also look at this as a very effective strategy to do so. So we're very excited about this and you heard me talk about a little bit on the back end of one of the questions around outpatient. You will see with this program a very different type of migration to full outpatient use.

Speaker 6

Our strategy, we've been very deliberate on how we went to market with this program. And I think I'm proud in terms of how what's gone in the marketplace in terms of introducing this into the hospitals, having the hospitals move it to their outpatient clinics. And like I said, over time, our hospitals are looking at other third party partners on how to take this even further out to the community to ensure that these numbers that we talked about earlier, 10,000 doses, etcetera, we can meet that potential. So it's very exciting stuff. Great.

Speaker 6

Thanks for taking the question.

Operator

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

Speaker 16

Hi, good morning. Thanks for taking our questions. So in terms of this like double the capacity by year end 2024 versus 2023, like what is the respective annualized dose goal for this? Just to make sure we understand the apples to apples comparison to your year end 'twenty five goal of 10,000 doses capacity? And then second, I wanted to ask like this Perseus quad regimen adoption in the first line setting eventually, do you think that this delays or shrinks the second line pool of patient for CARVICTI in the long run effectively, these patients can have several years of progression free survival, which could arguably impact the downstream market opportunity for CARVICT?

Speaker 16

Thanks.

Speaker 3

Yes. So Ash, let me help with your first question. So yes, by end of 2025, we have this goal of reaching 10,000 annualized dose capacity, right? But that is when we exit 2025. So I just want to remind you that when we go into 2025, right, we are not going to be at the 10,000.

Speaker 3

But then because of the introduction of additional sites into the commercial production mode, we'll be able to end the year in 2025 with that capacity. And it doesn't stop there because we'll continue to maximize the capacity from each of those nodes I mentioned. So we believe that we'll be able to actually get to a much higher number than that 10,000 dose once we complete all the expansion from the additional nodes with the investment here. So it's going to be hard for me to give you any quantitative distribution among the 3 I'm sorry, the 4 different notes we mentioned. But I can tell you that Raritan, New Jersey remains our biggest facility.

Speaker 3

And in the foreseeable future, Raritan will be the most productive site in terms of total output, probably followed by our site in Techland, Belgium. So that is how we think about the total peak capacity and then how we would plan to distribute the capacity among the different nodes. With regarding your second question, how DRVD getting into the front line would potentially affect the second opportunity? I'll ask Steve to answer.

Speaker 6

Yes. So thanks for the question. So we've just so you know, we've been we've modeled certain assumptions in terms of how in terms of eligible patient populations progressing on the quad. So I guess from an eligible patient population, it's been accounted for in our forecast. And that forecast then we've obviously communicated that with the manufacturing counterpart.

Speaker 6

So I guess from my perspective, again, we've accounted for that and we've accounted for it in our supply plan.

Speaker 3

And then Ash, maybe I'll just add to Steve's answer to that. Number 1, you do have this 20%, 25% so called patients with a high risk phenokinetics mutation. And those patients unfortunately do not respond well. So they'll relapse. And that is why we are releasing the data at ASCO for Cohort D.

Speaker 3

These patients do not achieve a suboptimal or a complete response from DRBD. They need a second line therapy, right? That is your early adoption market. And then obviously, we are conducting CAR T5 trial. If you look at clinicaltrials dotgovdisclosure, we expect the primary position in the year of 2026.

Speaker 3

So hopefully, within a couple of years, we'll have the first line label. And then obviously, we are going to pivot from second line to front line when that happens.

Speaker 4

Thank you.

Operator

Thank you. And our next question coming from the line of Sean Meckton with Raymond James. Your line is open.

Speaker 10

Hey guys, thanks for taking the question. Maybe to put a finer point on that MRD negativity outcome, do you think are the implications here for, I guess, Partitude 5 and Partitude 6 timelines? And do you suppose the official draft guidelines will come in time to be impactful there or a bit too late? And what's your view on what the details for that MRD negativity requirement could be? So in Partitude 6 is a 12 month sustained MRD negative CR, do you think that's likely to be the bar or do you think maybe an earlier landmark could be informative or acceptable?

Speaker 10

And then just as a follow on to that, what do you think is the impact on the competitive dynamic for your earlier competitors if they're able to utilize MRD in across different lines of therapy?

Speaker 3

Amish, thanks for all the questions about MRD. So first of all, we have all along worked with the MRD endpoint, right? If you look at all the CAR II program trials, everyone has MRD measurement in the trial built in. Like I mentioned just on the call today, in CAR T2-six, we actually have already designed the trial with MR gene activity as a co prime endpoint with all this in our mind. So if you look at the ODAC recommendation, right, the ODAC voted to recommend a 12 month MR gene activity as a potential endpoint.

Speaker 3

Right now, we don't expect FDA to publish official guidance documents, but we do plan to engage with the agency to talk about the endpoints for CAR T5 and 612. And for CAR T5, it probably would make a small difference because anyway, we expect the readout to be in 2026. Now for CAR T2 VI, it could make a big difference because if you look at our disclosure on clinicaltrials dot gov, primary completion is estimated at 2,033. Now if FDA does agree upon the 12 month MRD inactivity in combination, for example, with CRO or any other endpoint as a potential endpoint for accelerated approval, then we can make that much, much faster in terms of the process, right? Because if we can complete all the enrollments for CAR T6 by end of next year, which is end of 'twenty five, then if the 12 month MR gene activity is amenable as endpoint, that means potentially by end of 2026, we could have that kind of readout, right?

Speaker 3

So it does help a lot for frontline trials. Now if you look at competition, I mean, I think in second line based on our experience, it doesn't change too much, right, because the median PFS for our control arm was about 12 months. So once you complete the enrollment, the readout shouldn't take that much longer. So I don't think there's a huge difference if you look at the 2nd line or third line. But for front line, it does make a significant difference here.

Speaker 3

In terms of the bar, I don't think there is a quantitative bar here that the regulators have already determined at this point. But you can follow our disclosure from CARTUDE IV, CARTUDE II, CARTUDE I trial, right? In general, we achieved a very high MRD negativity rate. In fact, at ASH last year, we even published the data from CAR T2I. If you look at patients who achieved 6 12 months or even longer than 12 months MRD negativity in combination of CR, those patients tend to have a very good prognosis in terms of longer term PFS and survival.

Speaker 3

So we do have data from the CAR T2 program to show that if a patient can achieve complete response in combination with some sort of longer term MR gene activity, that is a very good predict marker for long term outcome here. Thank you.

Operator

Thank you. And our next question coming from the line of Mitchell Kapoor with H. C. Wainwright. Your line is open.

Speaker 17

Hi, everyone. Thanks for taking the questions. I have 2. The first one I wanted to ask a bit on the 2nd line launch and the payer discussions. Can you just talk about kind of the color of payer discussions in the second line population?

Speaker 17

And how do those 2nd line reimbursement discussions compare to those that you have had previously for later line reimbursement discussions? And then the second question is on COGS. Could you just talk about the trend in COGS and any impacting factors or levers that could influence the COGS in the future?

Speaker 3

Yes, it's Steve. So why don't I Okay, good.

Speaker 6

Why don't I take the first question around payer and contrast part of 2, 4 versus 1. So it all comes down with these payer conversations around the value proposition associated with treatment pre interval. Obviously, the CARTA Q4 data is significant in terms of our PFS improvement. The so payers the net of this in an earlier line setting, payers love a product like silicacell in terms of the benefit that we are able to give not only from a financial perspective, but also from a patient perspective in terms of the patient related metrics. So, all systems are a go in terms of early line approvals, in terms of from a reimbursement perspective, we have had no issues at all.

Speaker 6

As a matter of fact, the payers, the privates in particular are one of our biggest advocates out there. Gloria, I think

Speaker 4

I'll take the COGS actually. So as you move into the second line and the payer structure changes, to your question, where you're going to see that is in the gross to net adjustment. On the COGS line, the reason that you see variability actually has to do with the manufacturing capacity investments that we're making. So you will continue to see the COGS variability as we start to bring these in, finalize the capital investments and bring these nodes online in 2024 and actually 2025. So you will continue to see that noise.

Speaker 4

It's the revenue line and the gross to net where you'll see the impact for the 2nd line launch.

Speaker 6

Well, do you mind if I come back to that first point because it just occurred to me one more thing around the payers piece of this. It ties back into the issue around outpatient administration as well. I mean, other than treatment for the interval component of this, as you could imagine, private insurers love the fact of a now CAR T therapy that could be given by hospitals very safely in the outpatient setting, just purely from a cost reduction as opposed to admitting these patients, keeping them in sometimes for weeks to reduce costs and continue to maintain these patients safely and then also benefit from that long term treatment free interval is a very good and very compelling story to private insurers.

Speaker 17

Great. Thank you for taking the questions.

Operator

Thank you. And our next question coming from the line of Rick Biancoskie with Cantor Fitzgerald. Your line is open.

Speaker 18

Hey, good morning everyone and thanks for taking our questions. For the CARVICTI launch in Europe, could you comment on the number of certified treatment centers that are open in Germany and Austria? And how many are expected to be certified by the end of the year? And as a second question, Ying, I was hoping you could expand on the prepared comments around reducing the Correvictivank of in time. Could you talk about the work that's being done here and if there are any internal targets for how much this could be improved?

Speaker 6

Why don't I take the first question around Germany around sites. Unfortunately, I cannot get into the details around sites and the rollout plan in Germany. I know it's I could tell you this, it's very robust. And I could also tell you the fact that in any country, the site certification process is often somewhat lengthy. So, I'm bringing that up because I know our partners working very hard to bring more and more sites on board, But I can't unfortunately get into specifics around numbers of sites.

Speaker 3

Okay. So on the question about van to van, I can tell you that our goal is to get to a median of less than 4 weeks by end of this year. And also, we have a new metric to measure, which is P90. That means 90% of all the sellbacks we shipped out will fall into the what we call, AIFRIS is to receipt to less than 5 weeks. So that is our goal by end of this year.

Speaker 3

That means average, 4 weeks or shorter and then pretty much all the patients will be able to receive that within 5 weeks. That is our goal here.

Speaker 18

All right, great. Thanks for taking the questions.

Operator

Thank you. I'm showing no further questions at this time. Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation and you may now disconnect.

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Earnings Conference Call
Legend Biotech Q1 2024
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