Q2 2024 Legend Biotech Corp Earnings Call
Hello, I'm Lori Macomber,
Speaker Change: Ladies and gentlemen, thank you for standing by. Welcome to Legend Biotech's 2nd Quarter 2024 Earnings Conference Call.
Speaker Change: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone.
Speaker Change: You will then hear an automated message advising your hand is raised.
Speaker Change: To withdraw your question, please press star 11 again.
Speaker Change: Please be advised that today's conference is being recorded. I would now like to turn the conference over to Jessie Yeung, Vice President of Investor Relations and Finance. Please go ahead.
Jessie Yeung: Good morning, this is Jessie Yeung, VP of Investor Relations and Finance at Legend Biotech. Thank you for joining our conference call today to review our second quarter of 2024 performance.
Jessie Yeung: The second quarter has been an eventful one. We are pleased to report 18.5% sequential growth in convective cells. More importantly, we received label expansion approvals from both FDA and EMA.
Jessie Yeung: Lastly, we are most excited about the survival benefits demonstrated by CAFIC-T in the second analysis of COSITU-4. Nothing gives us more joy than helping patients with multiple myeloma live longer.
Speaker Change: Joining me on today's call are Ying Huang, the Communist Chief Executive Officer, and Lori Macomber, the Communist Chief Financial Officer.
Speaker Change: Following the prepared remarks, we will open up the call for a Q&A. We have Guowei Fang, Chief Scientific Officer, and Steve Gavel, Head of Commercial Development for the U.S. and Europe , joining the Q&A session.
Speaker Change: 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 herewithin.
Speaker Change: 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 Change: Hello and welcome to our second quarter earnings call. I am pleased that you could join us. Since our last earnings call, we have made progress on multiple fronts, which you can see in our earnings presentation on slide 5.
Speaker Change: First, we announced positive top-line results from CAR-TUFOR. In the pre-specified second interim analysis, CAR-VIC-T demonstrated statistically significant and clinically meaningful improvement in overall survival compared to standard therapies.
Speaker Change: We look forward to presenting this important data set at major medical meetings in the coming months.
Speaker Change: Additionally, at ASCO and EHA, we provided new data from the Phase 2, Cardio Tube 2 study, and new and updated data from the Phase 3, Cardio Tube 4 study.
Speaker Change: We would like to bring to your attention a recent paper published in Nature.
Speaker Change: as you will see on slide 6.
Speaker Change: Data were reviewed from 339 multiple myeloma patients treated at Mayo Clinic with antibody drug conjugates, CAR-T, and T-cell engagers targeting BCMA in the period of 2018 through 2023, with a median follow-up of 21 months.
Speaker Change: The study found that CAR-T and T cell engages demonstrate superior efficacy in both PFS and OS to that of ADCs.
Speaker Change: The authors also concluded that, where feasible, CAR-T should be the initial BCMA directive therapy. We are encouraged by the real-world clinical evidence of CAR-T advocacy.
Speaker Change: Particularly the insight it provides into the strong efficacy of Corvictin.
Speaker Change: As many of you know, our expansive CARB-X data set enables us to continue building a strong foundation for our market penetration.
Speaker Change: On this note, we recently added two regulatory approvals to the Global Market Opportunity you see on slide 7.
Speaker Change: The United Kingdom's Medicines and Healthcare Products Regulatory Agency approved CARVICTI for second-line multiple myeloma, and Health Canada approved CARVICTI as well.
Speaker Change: Our efforts to bring CARVICTI to more patients globally translated into net trade sales for the second quarter of 186 million dollars.
Speaker Change: which is a 60% increase year-over-year and 18.5% increase quarter-over-quarter as you will see on slide 9.
Speaker Change: The increase in our second quarter performance versus the first quarter was a result of the ongoing launch of CARVICTY and a share against from capacity expansion and manufacturing efficiencies.
Speaker Change: Importantly, we continue to see growth in patient demand, and we are reiterating our expectation for pronounced growth for Curvictin in the second half of the year, as we continue to add more slots and expand our capacity.
Speaker Change: We remain laser-focused on making more supply available to the market and reducing vent-to-vent time.
Speaker Change: Turning to slide 11, our CMO Novartis has begun clinical production of Corvectin in the U.S. This frees up production capacity for commercial production at our facility in Ryerson, New Jersey.
Speaker Change: We're on track to complete physical expansion of the Raritan site and anticipate approval of the new section of Raritan in the second half of 2025.
Speaker Change: We continue to expect that our Obelisk facility in Ghent, Belgium, will be approved for commercial production later this year.
Speaker Change: We more than doubled our predictive production capacity in 2023 and are on track for continued expansion. The increases to our production capacity will help us keep up with growing patient demand.
Speaker Change: Our cash balance now stands at $1.3 billion, which we believe provides us the resources needed to increase production, as I just mentioned, and gives us financial runway into 2026, when we expect to begin to achieve an operating profit.
Speaker Change: In other developments, we continue to bring more hospitals online as authorized treatment centers. We now have a total of 77 U.S. hospitals certified to treat cardiac care patients.
Speaker Change: Outpatient treatment now comprises approximately 40% of our volume and remains an important medium for us as we expand our marketing efforts in the community setting for the second line and beyond.
Speaker Change: Finally, turning to our pipeline on slide 13, I am pleased to share that we recently completed CARTITUDE 5 enrollment.
Speaker Change: As you might recall, this randomized phase 3 study evaluates patients with newly diagnosed multiple myeloma for whom stem cell transplant is not planned as initial therapy.
Speaker Change: If we were to receive approvals based on CAR-T5 and CAR-T6, it would translate into an additional 52,000 patients annually.
Speaker Change: I'm also pleased to share that we recently broke ground on a new state-of-the-art research center in Philadelphia to advance our portfolio of next-generation cell therapies.
Speaker Change: We are excited to expand our research presence in the U.S. and attract top talent from the growing biotechnology innovation hub of Philadelphia, the birthplace of gene and cell therapy.
Speaker Change: In summary, we are executing against the substantial opportunity ahead of us as we expand our manufacturing capabilities and increase our earlier line commercial activities with an eye towards investment in future transformative cell therapies.
Speaker Change: Now, I would like to turn the call over to Lori to walk you through the financials for the second quarter. Lori?
Lori: Thank you, Ying, and good morning, everyone. As Ying mentioned, we generated approximately $186 million in total net sales for COVID-19 during the second quarter, an increase of 60% year-over-year.
Speaker Change: Driven by the progress we have made with ongoing market launches, expanding market share, and capacity improvements. As a reminder, we share equally in all profits and losses of Curvicti x China with our partner Janssen.
Speaker Change: Turning to our revenue.
Speaker Change: As you'll see on slide 14, total revenues for the second quarter were $187 million.
Speaker Change: Consisting of $93 million of collaboration revenue from the Selo Karvikdi.
Speaker Change: and licensed revenue of $91 million, driven by $75 million revenue recognized in connection with milestones achieved
Speaker Change: under the Janssen Agreement for Cytosel, and $16 million in recognition of deferred revenue in connection with our agreement with Novartis to develop, manufacture, and commercialize LV2102 and other potential CAR T therapies selectively targeting DL3.
Speaker Change: Net loss for the quarter ended June 30, 2024 as $18 million, or a loss of $0.05 per share, compared to a net loss of $199 million, or a loss of $0.57 per share for the same period last year.
Speaker Change: Moving on to expenses on slide 15. Collaboration cost of revenue for the second quarter 2024 was $45 million, compared to $33 million for the same period last year.
Speaker Change: These are Legend's portion of Collaboration Cost of Sales in connection with the Collaboration Revenue under the Janssen Agreement, along with expenditures to support the Manufacturing Capacity Expansion.
Speaker Change: Additionally, cost of license and other revenue for the second quarter of 2024 was $5 million, compared to no cost of license or other revenue for the second quarter of 2023.
Speaker Change: These costs are in connection with our agreement with Novartis to develop, manufacture and commercialize LV2102 and other potential CAR T therapies selectively targeting DL3.
Speaker Change: Research and development expenses for the second quarter 2024 were $113 million compared to $96 million for the same period last year.
Speaker Change: The increase of $17 million for the three months ended June 30, 2024, compared to three months ended June 30, 2023, was due primarily to research and development activities in SITSSL, including start-up costs for clinical production in Belgium and continued investment in our solid tumor programs.
Speaker Change: Administrative expenses for the three months ended June 30, 2024 were $35 million, compared to $28 million for the same period last year. The increase of $8 million year-over-year is primarily due to the expansion of administrative functions and infrastructure to support the increased manufacturing capacity.
Speaker Change: Selling and distribution expense for three months ended June 30, 2024 was $30 million, compared to $21 million for the same period last year.
Speaker Change: The increase of $9 million year-over-year due to costs associated with the commercialization of Carvicti, including the expansion of Salesforce and second-line indication launch preparation.
Speaker Change: To summarize, our spending remains on track and we continue to maintain a strong balance sheet. As of June 30th, we have $1.3 billion in cash equivalents, deposits and investments.
Speaker Change: 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.
Speaker Change: Thank you. I will now pass it back to Ying for closing remarks.
Yeung: Thanks, Lori. To sum up, our team remains dedicated to our strategic priorities. I am pleased to share that we recently surpassed 3,000 CAR B-T patients treated to date, reflecting our deep commitment to multiple myeloma patients and their families.
Speaker Change: I would like to thank each of our employees for their dedication to the patients we serve as we steadfastly execute on capacity expansion and also our commercial launch in the second line.
Speaker Change: Before we open it up for Q&A, I would like to assure you that our board and management team have been taking a close look at our business to ensure we are in the best position to continue our growth and momentum as we advance our mission to help multiple myeloma patients.
Speaker Change: We know there has been recent speculation about potential political risk, particularly given this being an election year. Our board is active and engaged, and continues to assess the potential impact of those risks.
Speaker Change: We're not going to speculate on hypotheticals on this call, but rest assured, we are focused on driving shareholder value as we consider our path forward.
Speaker Change: If and when we have updates to share, we will provide them at the right time. In the meantime, we appreciate if you can keep your questions focused on our earnings results. And with that, we'd like to take your questions. Operator, we're ready for the first question.
Speaker Change: Thank you. As a reminder to ask a question please press star 1 1 on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question, please press star 11 again.
Speaker Change: Please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Gina Wang from Barclays.
Speaker Change: Thank you. Ying, I know you said we should not ask anything about speculative.
Gina Wang: comments. I know you also cannot comment too much but I do wanted to ask because this is the number one you know major overhang on the stock regarding potential political country risk and a biosecure act impact to the stock. I know you cannot comment too much but yeah I don't know how much you know can you share some a little bit more color rather than very high-level comments you know a little bit more color on what you could do or the company is in the process to prepare to address this potential questions.
Speaker Change: And the second is regarding the New Jersey Raritan site. Since now Novartis already has a clinical production in July , 2024, is it fair to say now the Raritan site is 100% commercial production?
Speaker Change: Sure. Gina, thank you for your questions. Maybe I can address the second question first.
Speaker Change: So you're right. Since July , Novartis Society in Morris Plain, New Jersey, has initiated clinical production. The first patient was coming from CAR T6.
Speaker Change: and that follows the IND clearance by the FDA.
Speaker Change: So right now, we are in the process of shifting more clinical trial patients to the production site, the non-ovaries marching site.
Speaker Change: However, we do still have certain production for clinical trials in the Ryerson site.
Speaker Change: Over the next few months, with the gandecite going commercial and Novartis ramping up clinical trial production, I think you should expect that the percentage of clinical production will go lower in Briard.
Speaker Change: So that's about Raritan.
Speaker Change: And then on your first question,
Speaker Change: I mean, first of all, I can say that we have carefully evaluated the draft bill.
Speaker Change: Also, we have been engaging with certain stakeholders in Washington, D.C., including committee and House Speaker's Office. So, at this point, we do not believe there will be any direct impact to Legend.
Speaker Change: Given how our operation model is and how in terms of data and also IP flow we conduct the business. So suffice to say that we're not too concerned that we're the target of the biosecurity bill.
Speaker Change: Thank you.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Jessica Fye from J.P. Morgan.
Jessica Fye: Hey guys, good morning. Thanks for taking my questions.
Jessica Fye: With outpatient use now up at 40%, can you just remind us where that was last quarter, and is the increase kind of coming across the board, like, as that proportion edges up, or is this more a dynamic where new institutions coming on are, say, 100% outpatient, and that's what's driving the change?
Gina Wang: And then I also wanted to follow up on Gina's question, recognizing that it doesn't look like you're directly impacted by Biosecure, but the stock really did come under pressure in the first half of the year as a result.
Speaker Change: Can you just talk about what you see as the best path forward for shareholder value creation and does it make sense for Legend to be a stand-alone company heading into a potentially contentious political period in the U.S. or should the board be considering other alternatives?
Speaker Change: Episode 2
Speaker Change: Why don't I take, it's the, why don't I take the first one, Jessica, your question has to do with outpatient, outpatient trends, where those patients are coming from.
Speaker Change: So you asked also quarter over quarter. So last quarter, we reported that we were at 35% outpatient. Actually, we're trending closer right now to 45% as opposed to 40. So there's a significant jump up in outpatient use in the U.S.
Speaker Change: In terms of where is that coming from, if you look at the U.S. volume in the sites that we serve, it is largely top-heavy. So you see largely about the top 20, 15 to 20 percent of these hospitals driving the majority of the volume.
Speaker Change: So the majority of the outpatient volume you see is in our large academic centers, as opposed to evenly spread throughout our 77 sites right now.
Speaker Change: Typically, the rate limiter to get a site on board, or at least...
Speaker Change: using, I should say, Carvicti in the outpatient setting.
Speaker Change: And as we bring new sites on board, the key thing that they are looking for is just trying to understand in the real world setting is a toxicity profile similar to what we see in.
Speaker Change: and Registration Studies. So that's how it's spread out right now but I just wanted to make sure we have the corrected percentage. We're trending right at 45% right now for the quarter. I'll turn it back over to Ying.
Ying: Hey Jess, so we've been a public company for about four years and I think in that period as a company, Legend has made tremendous progress delivering for patients. We also have achieved numerous milestones and if you look at our recent second line approval in both the U.S. and in Europe and also the preliminary feedback from the field.
Ying: And what we can see from the ordering book and production data, clearly there's a lot of potential in the new indication.
Ying: And we just announced that we're completing enrollment for CARTU 5.
Speaker Change: That's another entry into the fraud line. So, we certainly believe that there's a lot of...
Speaker Change: Growth ahead of us and we remain confident in our current long-term strategy to realize the full potential of Curvicti and also advance our pipeline as we continue to develop innovative treatment options.
Speaker Change: So, I think, you know, it's not a one answer or one way to create or maximize shareholder value. Although, as I mentioned, at this point, our board is engaged with investors and other stakeholders and obviously we have the fiduciary responsibility of maximizing shareholder value.
Speaker Change: So that's pretty much what I can say about this. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Kelly Shea from Jeffries.
Kelly Shea: Thank you for taking my questions.
Kelly Shea: Since the approval in second line for COVID-19 care, how do you see the demand and the use?
Speaker Change: in second lung patients change over time.
Speaker Change: and also one early-on patient who received the CARVIC-T treatment. What is the typical patient baseline characteristics regarding prior therapies, refractoriness, and performance status this afternoon? Thank you.
Speaker Change: Yeah, so, hi Kelly, it's Steve. Why don't I take the question in terms of how the launch is going, where we're seeing the use, etc.
Speaker Change: So, just to remind folks, we launched early part of the quarter, so you really didn't start to see the impact from a revenue perspective until late in the quarter. We're starting to see it more pronouncedly now in the third quarter.
Speaker Change: So, that's the first thing. A lot of the performance we saw in the second quarter was off of Cartitude 1 indication as opposed to Cartitude 4. However, you did see, again, some uptick at the end of the quarter. What we are seeing in terms of some of the leading indicators, and we're measuring this...
Speaker Change: through the data that we are analyzing through our ordering portal. We're seeing right now on average about between 50 to 60 percent.
Speaker Change: of new patient orders coming into our portal is related to the CARTITUDE 4
Speaker Change: It's a very good demonstration, a good leading indicator of hopefully what we see moving forward. Now, again, these are not treated patients. These are patients that are entering the portal for scheduling purposes, but I did want to provide that data point on to you. In terms of actual data, we won't be able to see the data coming through the claims.
Speaker Change: channels until towards the end of this month is when we'll start to start to see that and that'll give us more objective evidence.
Speaker Change: in terms of exactly what line of therapy these patients are seeing the use. But we're very, very excited by the fact that we're seeing over 50% of all inbound patients, at least in our ordering portal, coming through the Carter 2.4 indication.
Speaker Change: Thank you.
Speaker Change: Siobhan.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Ash Verma from UBS.
Ash Verma: Hi, good morning. Thanks for taking our questions. So maybe like a first one.
Ash Verma: So we saw the Galapagos, the post-air BCMA CAR-T study on finding Parkinsonism. Can you comment on how CARVIC-T binder compares to the Galapagos compound?
Speaker Change: And does this make you believe that MNTs could be something that is more specific to camelid-derived antibodies like yours?
Speaker Change: And then just secondly, on the 2Q to 3Q dynamics, so the 9% price increase that you took, like is that benefit mostly realized in 2Q sales already, or could that also be an additional tailwind for 3Q? Thanks.
Speaker Change: Ash, this is Ying. Thanks for the questions. So, on the first one, yes, we did have some
Speaker Change: see what happens at the Calabasas program.
Speaker Change: And I think, you know, obviously MNT or the movement of neurological toxicity, it's not coming from just BCMA, it's not just...
Speaker Change: Coming from Carkey Eater.
Speaker Change: Although the mechanism of that action has not been well elucidated with science experiments.
Speaker Change: Stayed.
Speaker Change: We think, you know, obviously you have to watch this in a clinic.
Speaker Change: And if you look at the data from our commercial launch of CARVICTI, I'm sure everyone follows the same FDA AER database. In the first quarter, we saw 21 cases reported for CARVICTI patients, and that went down to 7 cases in the second quarter. Well, we dramatically increased the population of treated patients by CARVICTI. So, we feel really confident about the safety profile demonstrated by CARVICTI in the real world here.
Speaker Change: And then secondly, we also believe that our risk mitigation strategy is working very well in the clinic and also in the trials.
Speaker Change: So that's all I can say about the MNT and Neurotox here. On the second question, I believe in the second quarter, the last ramp-up was mostly reflected, although it's not fully 100% reflected in the second quarter. So we continue to reap that benefit in the third quarter.
Speaker Change: Thank you.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Leonid Timashev from RBC Capital Markets.
Leonid Timashev: Thanks. I just want to ask on, you mentioned that you recently hit overall survival in CARTITUDE IV, and obviously there was some discussion of the overall survival endpoint at the advisory committee. So I guess I'm just curious on that. I guess
Speaker Change: What are you hearing from physicians about the importance of this data? You know, did you sense that there were perhaps any physicians who are waiting to continue to use CAR-VIC-D in earlier lines to see more overall survival data? Do you have a...
Speaker Change: Expectation for when you might see this on on the label and sort of how this is going to impact your overall marketing strategy. Thanks.
Speaker Change: Yeah, maybe I'll take that. The, the, I mean, physicians are very excited with this data.
Speaker Change: We're actually, we have a pretty large study right now, fielded, tested, to look at different hazard ratios to see what perspective the...
Speaker Change: The market has on that. But generally speaking, at all of our advisory boards, as you can imagine, it's very, very positive. The question we have, and I'm sure it may be that you have, is, you know, does this data start to open up more of the standard risk population in earlier lines?
Speaker Change: So we'll see. We just don't have an answer for you yet. We'll have that once we get this data to read out, but generally speaking, as you can imagine, we're very enthusiastic by it.
Speaker Change: I'll talk about the other part of the question, which is we and J&J teams are working on cleaning up the data, and we do have plans to submit to the agencies, including FDA and EMA, on survival label expansion. So hopefully the data will be published at a major medical meeting soon, and you will see the magnitude of benefits, for which you already had a preview at ODAC.
Speaker Change: And we see a statistically significant and also clinically meaningful separation here on survival benefit, which is very, very important. As you know, given that myeloma is still incurable, many patients cycle through different therapies. So it's been very difficult to show a meaningful and also significant survival benefit in the clinical trials.
Speaker Change: And I think Carb-A-Q is one of the few drugs out there which will have a survival benefit on the label. So we think it's going to be a very powerful tool in the promotion and also when we explain the benefit to physicians and patients.
Speaker Change: This is the second line, by the way, not even the late line. So if you look at competition or upcoming competition, we think we might be the only one with that kind of benefit potentially on the label. And again, that's a huge differentiation factor.
Speaker Change: And obviously, if you talk to physicians in the field, right, they care about certain things, but survival is one of the top considerations compared to also PFS and CR rate. So we feel really, really good about the strong benefits demonstrated in such a global, randomized, active control trial with survival benefits.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Jonathan Miller from Evercore ISI.
Jonathan Miller: Hi guys, thanks for taking my question and congrats on all the progress here. Lots of manufacturing news and expansion expected second half being as you went through, but could you walk us through what the delta is between all of that stuff that's coming on in the second half and the guidance for end of 25? What is left to be done in 25 that's going to take you from end of this year to end of that year?
Speaker Change: and then
Speaker Change: Secondly, you know, you mentioned the enormous...
Speaker Change: Market potential for a newly diagnosed setting, obviously a lot of patients there, but there's already so many more patients than even your manufacturing guidance covers. Is manufacturing ever going to be sufficient to cover the ostensible market here, even if you look out five or more years?
Speaker Change: [inaudible]
Speaker Change: Hey Jonathan, thank you for the questions. On the first one, I can lay out what we expect to happen between the end of this year and the end of 2025.
Speaker Change: So between end of this year, you know, by which time we should have commercial production in our first facility in Ghent, Belgium called Obelisk.
Speaker Change: Right now we're expecting commercial approval by the end of next month, in September , and then we can start our first commercial production in Europe .
Speaker Change: And then by end of this year, also we expect the construction activities to complete in the other facility in Belgium called TechLens.
Speaker Change: By early next year in the first half, first, we do expect the clinical production to come from the Techland facility in Ghent, Belgium to start.
Speaker Change: And then after that, sometime in the first half of 2025,
Speaker Change: We expect Novartis, Morris Plain, New Jersey site to also start.
Speaker Change: Commercial Production pending FDA approval, and then after that, in the second half of 2025, we have two major milestones here. First,
Speaker Change: We expect the expansion of radio sites to gain FDA approval to start commercial production in the second half of 2025. And the other upcoming milestone is in the second half of 2025, we also expect the TechLand facility in Ghent, Belgium to start commercial production.
Speaker Change: So this is the cadence of, you know, all the different nodes.
Speaker Change: That could happen between end of this year and end of next year.
Speaker Change: Now, in terms of the ongoing launch in second line and also future opportunities in first line, you're right.
Speaker Change: We and our partner J&J have already been having a lot of productive discussions about how we can satisfy the demand, especially given the very encouraging uptake in the second line only three months after launch.
Speaker Change: I know there are many skeptics saying that, well, where's the second line of demand?
Speaker Change: We have a queue in Raritan. We have a queue in all the major hospital centers today for second line.
Speaker Change: And we are being creative here, and we are trying to think out of the box in terms of...
Speaker Change: Finding the Future Supply
Speaker Change: That includes internal nodes, construction of greenfields or brownfields, or alternative to other routes. I can assure you that that is one of the highest priorities for the partnership, and we have been engaging with our partners at J&J to discuss this, and you should stay tuned. Thank you.
Speaker Change: Makes sense.
Speaker Change: And then maybe could I ask just one question on the pipeline, since I know nobody's asked about that yet.
Speaker Change: When do you anticipate beginning to show data from some of those early pipeline assets that are currently in phase one, especially on those dual cars, where are they relative to the single targets, and do you have expectations for the IND timing for autoimmune?
Speaker Change: Thanks, Johnson. Yeah, this is Guowei.
Speaker Change: We are having multiple tries under RIT and we also have a US Phase I try. Next year we expect to see initial safety and efficacy result for CAUTI 18.2 target on top of CAUTI, which is a US Phase I try.
Speaker Change: Currently we have IIT CHI in China in autoimmune indications. This is the triple targeting CD19, CD20, CD22 triple targeting.
Speaker Change: Autologous CAR-T are being tested in a broad spectrum of different rheumatological and neurological autoimmune indications.
Speaker Change: The first patient will be dosed towards Q4 this year. We expect to see clinical readout in 2025. As you pointed out that we also have multiple allogeneic product.
Speaker Change: Some of those are due targeting in oncology indication. We expect to read out data in 2025.
Speaker Change: In terms of other generic products for U.S. R&D findings, we are actively initiating R&D abling studies this year, and we are projecting the R&D findings in the U.S. around 2026.
Speaker Change: Thank you.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Yaron Werber from TD Cowen.
Yaron Werber: Great, thanks for taking my question and nice growth this quarter.
Speaker Change: Maybe just a couple of questions. As you think about supply ramping in Q4 over Q3,
Yaron Werber: Can you give us a little bit of a sense, it looks like Q3 is going to have a meaningful jump over Q2. Is Q4 the same meaningful jump or maybe smaller? And then as you think about, you said that you can double capacity next year.
Speaker Change: But not all of that is obviously commercial capacity, right? Some of it's going to be for qualification lots and still some clinical. Can you give us maybe a little bit of that sort of doubling, how much can be commercial? Thank you.
Lori Macomber: Hello, I'm Lori Macomber
Speaker Change: Hey Aaron, thanks for the questions. So on the first one, I can tell you that
Speaker Change: We expect the next ramp-up to happen probably around the end of this year or early next year. It's a little bit difficult for me to give you the exact timing now, because obviously we need to run experiments, we need to collect the data, analyze data, and then submit to the FDA. And then there's the FDA review process, as you can imagine.
Speaker Change: So, it's going to be around that time, like I mentioned, end of this year, beginning of next year. We cannot comment specifically on Q4, but in general, I think we have said at the beginning of the year that
Speaker Change: Throughout 2024, we do expect sequential growth every quarter. So you have seen that 18.5% sequential growth from Q1. And now we do expect much higher growth in Q3 and hopefully follow up with sequential growth again in Q4.
Speaker Change: So that's where we stand on production. And then...
Speaker Change: on the capacity, I would say, in general, going forward, right, given that our volume continues to increase higher, the percentage of the clinical production and also the percentage of what we call non-revenue generating rounds will decline.
Speaker Change: as a relative percentage.
Speaker Change: So, I wouldn't, you know, go into too much detail, but if you look at that commercial production capacity, if we say overall capacity is doubling, then that means roughly the commercial production will double as well, because next year we're looking at a much larger batch number compared to 2024.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes in the line of James Shin from Deutsche Bank.
Speaker Change: Good morning. Thank you for the question.
James Shin: When the C4 data is unveiled later this year, is it possible that you will have a post-hoc crossover OS analysis? And my second question, as it relates to doubling of capacity, should we expect a gross margin benefit as well in 2025? Thank you.
Lori Macomber: I'll answer your, this is Lori, I'll answer your second question and then I'll turn it over to Ying to answer your first question. As you can imagine, as we're bringing on the different nodes, you're going to see variability in your growth margins, because as you're ramping up in each of those locations,
Yeung: You have to get to a certain level of volume to really keep the consistency in your growth margin. But we do anticipate, once all of our nodes are online, that our growth margins will be in line with industry standards.
Speaker Change: Hey James, on a survival question, I'm not going to be able to steal the thunder from the medical meeting presentation, but I'm sure you guys all have seen the survival curve from the ODAC panel back in March.
Speaker Change: So, overall, the shape really did not change. I mean, in general, we're encouraged by two things. Number one, yes, there was a very small early imbalance of overall survival in the very beginning of the curve, as you guys saw.
Speaker Change: But that never crossed over again after that initial period, right? And secondly, I think when you see the overall survival curve, you will see it's a wide separation between the two curves. Not only that, we're also very encouraged by the so-called tail, which is the flattening trend of survival after certain periods. Again, we have consistently showed this in every single trial we conduct for CAR-VIC-T and in every setting.
Speaker Change: So, clearly, there's a portion of patients who will benefit in the long run in terms of PFS, CR, and also overall survival. And that is a very, very consistent trend. I think it's going to be hard for competition to beat.
Speaker Change: Thank you.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Vikram Purohit from Morgan Stanley .
Vikram Purohit: Hi, good morning. Thank you for taking our questions. We had two both on CARBIC-D. First, I think last quarter you mentioned that there were 70 hospitals certified.
Speaker Change: to treat patients with heart failure. I think this morning you reported 77, which is curious.
Speaker Change: where you think that footprint could go by.
Speaker Change: End of this year and also by end of 2025. And then secondly, had a question on timing updates for
Speaker Change: Earlier line data sets, so data from cohorts E and F from CARTITUDE 2, and now that CARTITUDE 5 has completed enrollment, when you think it might be realistic to expect initial data there. And then, in the same vein, CARTITUDE 6, could you just give us an update on how enrollment's progressing versus your expectations? Thank you.
Speaker Change: We'll take the clinical questions.
Speaker Change: Okay, so why don't I take it, Steve, why don't I take the questions around site activation. So for 2.1, we had reported 71 sites and you're right, we're at 77 sites.
Speaker Change: By year-end we are forecasting to be right around a hundred sites.
Speaker Change: Again, I keep reminding during these calls, something to keep in mind is that on a per site basis, because of the percentage of patients that we treat now,
Speaker Change: In the outpatient setting, our throughput is very efficient versus competition in the sites that we sell into, so please keep that in mind. It's not so much of a site race, it's really how many patients per site that we treat.
Speaker Change: I'm going to turn it over to some of the clinical questions around some of the data releases.
Speaker Change #100: Yeah, sure. So, regarding for survival, yes, we and also J&J are very excited about the survival benefit. We also have consulted with certain physicians. Again, for physicians who have seen the data, they're very encouraged by the survival benefit.
Speaker Change #100: Remember, this is actually our first interim survival analysis, and we already hit the pre-specified high bar for statistical significance at this interim analysis. So clearly, that tells you the magnitude of the benefits.
Speaker Change #100: In terms of early lines, I guess you would have to wait until a later date for any medical meeting to see if we plan to publish those data or not.
Speaker Change #100: But given what we're seeing in the CAR-T6 trial, I can tell you...
Speaker Change #100: The enrollment is tracking way ahead of our expectation at this point, even though we only enrolled our first patient in October of last year. Right now, we fully expect that the enrollment of CAR-T6 will complete in the year of 2026.
Speaker Change #100: So, I think that's also a reflection of the clinical benefit the patients and physicians are seeing. That clearly, I think, helps the enrollment.
Speaker Change #101: Thank you. One moment for our next question.
Speaker Change #101: Hello, I'm Lori Macomber, Unknown Executive,
Lori Macomber: Our next question comes from the line of Justin Zelin from BTIG.
Justin Zillin: Thanks for taking the question. Just out of spec rates, now that the threshold has been relaxed a bit, can you comment on how rates have decreased?
Speaker Change #103: Hey Justin, thank you for the question. So it's still very early because as you would
Speaker Change #104: We received a wider release back by FDA on April 5th, along with the second line label. So, at this point, if you compare the quarterly data, the quarterly out-of-spec rate in second quarter was slightly lower than the OOS rate in first quarter. And it might take a little bit more time before we can start to see a more pronounced OOS. Because, as you can imagine, we're in a very early launch of second line.
Speaker Change #104: So, you shouldn't be surprised to see that it is probably the sickest or high-risk cytogenetics mutation patients who come online for a second line at this point. And therefore, we shouldn't expect to see the full benefit of second line or the wider release back anytime soon. But we should expect to continue to see that trend over time. And I think eventually, it will settle down to a point that is, you know, 5 to 10 percentage lower than what we had before.
Speaker Change #105: That makes sense to me. Thanks for taking the question.
Speaker Change #105: Thank you.
Speaker Change #105: Our next question comes from the line of Michelle Kapoor from H.C. Wainwright.
Michelle Kapoor: Alright, thanks for taking the questions.
Michelle Kapoor: I wanted to ask on the mention earlier of the queue at major medical centers for second-line demand. Are you able to provide a little bit more color on the magnitude of demand that is in the queue?
Speaker Change #107: and then also on treating initially the E.E. patients in second line with
Speaker Change #108: the highest risk cytogenetics and who are the sickest. In your discussions with physicians on who they'd like to treat,
Speaker Change #109: Can you tell me a little bit about, you know, would they like to transition all of their patients at this point? It's just a function of supply, or is it where they want to test it out in their highest risk cytogenetics patients before migrating into, I guess, more mild risk patients?
Speaker Change #109: Yeah, hi, it's Steve. When I take that question, I'll take the last question maybe first in terms of the patient characteristics.
Speaker Change #109: And this is true of what we saw during the CARTITUDE I launch, and we're seeing it as well in Europe .
Speaker Change #109: What we're seeing for all these indications is the sickest of the sick are treated first, right? So you're seeing the high riskers...
Ains: Right out of the gate, get filled to sell, and we expect that to also happen with the Carta 2.4 launch, so to Ying's point earlier.
Speaker Change #111: In earlier lines, and again, our research was bearing out on that before we launched. We'll see how it goes once we actually see the true data. But all the data was pointing in high-risk, earlier lines, that they would be the first candidates out that would be receiving cell-to-cell under the new indication.
Speaker Change #112: I'm trying to think, what was the other question here? Let me look here. Oh, physicians, yeah. In terms of how they plan on treating. So that's, generally speaking, academic centers, how they're looking at this. The way I look at the market, though, is trying to bifurcate it by the academics.
Speaker Change #112: Within our sites, but as you know, there's a large referring dynamic for these.
Speaker Change #112: Patients Now. So this is where, you know, we are deployed with our partner now in the outpatient clinics to work on the referral side of the equation. And this is where, in the standard risk population, that's the one that, you know, we have probably our greatest work.
Speaker Change #112: Quite frankly, in the earlier lines, these are patients, to your point, that have a lot of different options. But this is the area that we're currently deployed against to meet with these physicians and educate them in identifying the patients who would benefit the most for cell to cell.
Speaker Change #113: L.H.B.
Mitchell: Maybe, Mitchell, I'll add that in terms of how they use this, right, again, this is the feedback, early feedback from the field. So yes, they are focusing on the roughly 25% of patients in the second line who harbor a high-risk cytogenetic mutation, but that's not the only population. For example, I'm sure you have seen our data presentation at ASCO, right? There's a portion of patients, what we call the functional high-risk, which means they may not harbor a cytogenetic mutation, but they actually do progress within 18 months of the first-line treatment. So those patients are definitely needing another treatment option. So that's also another population. And then lastly, there's a population who is relatively young, and these folks are still working.
Speaker Change #115: on, you know, get the once and done benefits from a CAR-T administration so that they can go back to their, you know, normal daily living activities.
Speaker Change #115: So those are probably the three buckets of patients that likely will get a CAR T in the second line at this point. So that's if you look at the numbers, it's roughly probably, you know, 35% of our second line population if you add those three buckets here.
Speaker Change #116: Great, thank you so much for that detail.
Speaker Change #117: Thank you. One moment for our next question.
Speaker Change #117: Our next question comes from the line of George Farmer from Scotia Bank.
George Farmer: Hi, good morning. Thanks for taking my questions. A couple from the...
George Farmer: Let's see, you know, getting back to, you know, this 52,000 patient number you threw out there, Ying, about, you know, potential, the market potential and, you know,
Speaker Change #119: heavily focused on manufacturing.
Speaker Change #120: Expansion. You know, what kind of costs are we looking at?
Speaker Change #121: How should we think about, you know, putting those numbers in our model in out years? That's number one. Number two, I was wondering if you could comment on the belantamab results that were published in the New England Journal of Medicine, that's the BCMA ADC.
Speaker Change #122: that looks like it had some pretty good activity in front line would be great to get your perspective on how that data compares to what you've seen with CAR-VIC-D and then finally this overall survival imbalance that
Speaker Change #123: FDA was pounding on at ODAC, you know, in the early phases of follow-up. Does that ever come up with physicians as in the real world? I'd be helpful to get your comments on that.
Speaker Change #124: Yeah George, thanks for your three-part questions. So on the first one in terms of
Speaker Change #125: Capital Investment here.
Speaker Change #126: So if you look at our capital plans we have you know decided upon with our partner J&J it's roughly 1 billion dollars in total in this round
Speaker Change #126: And that will first get us to the 10,000-dose capacity by end of next year. And then in the next about two years after that, or two to three years after that, with somewhat very incremental investment, we can get to about 20,000-dose capacity. And then...
Speaker Change #126: in terms of the additional investment.
Speaker Change #127: So we think that it really depends on which mode we choose, right? Is it going to be a greenfield facility we break ground from scratch? Or is it going to be a brownfield with existing structure or there's some other model? So it's a little bit hard to, you know...
Speaker Change #127: to say that at this point. But obviously, we don't want to leave those market...
Speaker Change #127: on the table here. So we are having a very thoughtful discussion with our partner here in terms of how we actually unlock the potential and then tap into the frontline market or maybe even more penetration the second line market with additional capacity.
George Farmer: And then on ADC, I think there was a session, right, at ASCO, George, if you recall. There were a couple of KOs who discussed the data from T-cell engagers, CAR-T, and also ADC. And I think the consensus view from that panel, and also our recent channel checking from doctors in AdWords is that
George Farmer: Really, CAR-T is considered to be the first option, given the once-and-done benefit and also the durability of the response we see, including now survival benefit.
Speaker Change #128: So I do think there is a position in the market for ADC.
Speaker Change #128: But we're not, you know, thinking that it will really change the dynamic or the landscape today. And again, we just saw this publication from Nature that's coming from a large real-world patient study at Mayo Clinic.
Speaker Change #129: Clearly, based on both PFS and overall survival, Part T is better than T cell engagers, and T cell engagers are better than ADC. I think that's a very indisputable result from a large cohort study at Mayo Clinic.
Speaker Change #129: I think that speaks volumes on the benefit of CAR-T versus the other two methods of action. So we feel really good about the long-term prospect of CAR-VIC-T here, based on the benefit we have seen in PFS-OS.
Speaker Change #130: And then maybe the last question on the OS imbalance.
Speaker Change #130: No, we haven't encountered too many questions in the field, you know, given that data, because
Speaker Change #131: Clearly, that's actually before CAR-T was even administered, right? And you saw some of the similar phenomena in some other CAR-T experiments. That's, you know, that is a, I guess, a phenomena you see in the CAR-T experiments in the clinic. On the other hand...
Speaker Change #132: We are doing a lot of work in terms of shrinking the vent-to-vent time, and also, today, there's an increasing momentum of breathing therapies available to the physicians. So that could also address that issue as well. But in short, no, we're not really encountering a lot of questions or skepticism about that early imbalance.
Ian: Okay. Thanks, Ian.
Speaker Change #134: Thank you. One moment for our next question.
Ian: Our next question comes from the line of Rich Bienkowski from Cantor Fitzgerald.
Rich Biankowski: Hey, good morning, and thank you for taking the questions. First, I just wanted to confirm, it sounds like the initiation of clinical production by Novartis should immediately free up capacity for commercial production, but I was hoping if you could comment on if you expect this should have an immediate effect on capacity for the third quarter.
Rich Biankowski: And my second question, I also just wanted to ask about the downstream effects that an improved out-of-spec rate could have on operations. And I guess I'm specifically thinking about cost of goods and how quickly patients get drug on average.
Speaker Change #136: I'd like to hear your thoughts on how a 5-10% improvement in out-of-spec rate could impact the P&L over time.
Speaker Change #137: So I'll talk about the first and third question, Rick. On Novartis, yes.
Rick: The first batch production initiated last month in a Novartis facility, but as you can imagine, in any CAR-T facility, it's not a hockey stick. It is typically a gradual up-ticking curve here.
Rick: If we have, for example, 10 batches that Novartis is producing for CAR-26, then that does free up 10 batch commercial capacity at Raritan. So that is the direct impact. But I wouldn't say it's a dramatic impact in third quarter, right? So yes, there's definitely some incremental positive impact on that. And then on the third question on the vent-to-vent time, I can give you the latest data. So in the second quarter...
Speaker Change #139: Our P90 or 90% of the InSpec sample were shipped out within 42 days. That is if it is to delivery to a shipment.
Speaker Change #140: And then if you look at the median, it was about 30 to 35 days, so it's less than six weeks. So we'll continue to make progress in terms of our event span time here. And then the second part, I'll ask Lori to comment.
Lori Macomber: Hi Rick, so in relation to the P&L, as you can imagine, if there is an improvement in the vein-to-vein time, there's an improvement in the OOS, that will help to drive down your COGS, but I can't give you direct definitive
Lori Macomber: guidance on how much that would improve our COGS but yes that would definitely be one of the influences to help bring and drive down our cost of goods sold.
Speaker Change #141: Thank you. One moment for our next question.
Speaker Change #142: Our next question comes from the line of Sean McCutcheon from Raymond James.
Sean McCutcheon: Hi guys, thanks for taking the question. Maybe to piggyback off of that last point, can you speak to the progress in specific of any additional...
Sean McCutcheon: Manufacturing Efficiency Efforts. And separately, any update around your thinking for MRD as an intermediate endpoint for accelerated approval in your frontline studies?
Sean McCutcheon: Hi Sean, this is Lori. I'll take your first question regarding the additional manufacturing efficiencies that you're seeing. That is why you saw in our Q2 earnings, you saw that there was pretty significant improvement over Q1 in our growth margins. And as we continue to realize those manufacturing efficiencies,
Sean McCutcheon: As we turn on our different notes as well, you'll continue to see those costs go down and our gross margins improve.
Speaker Change #144: As I mentioned before, just to be...
Speaker Change #144: Transparent, you will see variability in each of the quarters in your growth margin as we bring these additional those online and we continue to invest in capital, but we saw really good strong growth margins for our product quarter over quarter and we do expect to continue to see those.
Speaker Change #145: Do you want to take the second question in the front line? Yeah, sure. So, given the recent ODAP recommendation, we and our partner do have plans to request a meeting and sit down with the agency to talk about using MRD inactivity as a potential registration endpoint.
Speaker Change #146: So if you look at the clinical trial protocol we published on the clinicaltrial.gov, you will see that in the CAR-TU6 trial.
Speaker Change #146: MRD is already a co-primary endpoint.
Speaker Change #146: Now, could we use just MRD inactivity or, you know, a 12-month MRD inactivity as a registration endpoint? That remains to be discussed with the agency. If the agency agrees, certainly we would welcome that, and that could actually significantly
Speaker Change #146: Decreases the time to market entry for Cardio VI as a first-line indication.
Speaker Change #146: Thank you.
Speaker Change #147: Thank you. One moment for our next question.
Speaker Change #147: Our next question comes from the line of Konstantinos Biliouris from BMO Capital Markets.
Speaker Change #147: Hi, this is Theo on FACASTAS. Congrats on the quarter and thanks for taking our questions. So just one question from us regarding...
Speaker Change #148: on the Carbic T-label.
Speaker Change #149: So, Peterbox recently mentioned that FDA may revisit the black box warning on secondary malignancy risk in the CAR T labels, given that they noticed the incidence of such risk is order of magnitudes lower versus the chemotherapies.
Speaker Change #149: and with only a few cases were being positive for the car sequences and lymphomas. So we just wonder if you have any discussion with the FDA on label updates that potentially can remove such wording. And also if you can provide any additional comment around that topic, that would be super helpful. Thank you.
Trio: Trio, thanks for the question. I think...
Speaker Change #151: Last time when some of the SPM label was updated, it was a class label. So basically, FDA put in very similar, if not the same language, in all six commercial cartridge labels.
Speaker Change #152: We probably expect that potentially, if there's any change, that might be a class label as well, but I wouldn't want to speculate on that at this point.
Speaker Change #152: because we have not had any detailed discussion with the agency about that.
Speaker Change #152: I think everything will be guided by the clinical data and also in the real-world data collection as well.
Speaker Change #152: Regardless, we continue to believe that given the small incidence of those SPM and also the large clinical benefit we observe in both the clinical trials and also in the real world.
Speaker Change #152: We continue to believe there's a very strong benefit over risk here. So that also has not been really a big concern from prescribing physicians either, because as you know,
Speaker Change #152: in the field of multiple myeloma. This SPM issue has been out there for decades.
Speaker Change #152: and physicians know very much about this adverse events associated with some of the treatments.
Speaker Change #153: And, I mean, just to quote one physician we have discussed this topic with, he said, oh, I am, you know, way too more focused and concerned about treating the cancer the patient has rather than worrying about what other cancer the patient may have later.
Speaker Change #153: Thank you.
Speaker Change #154: Thank you. One moment for our next question.
Speaker Change #154: Our next question comes from the line of Astika Goonwarden from Truist.
Astika Goonwarden: Hey guys, good morning. Thanks for taking my question and congrats on the progress being made here. I have a question going back to the onboarding process with the new ATCs. You know, Gilead talks about making a strong push to accredit some of those larger community centers.
Astika Goonwarden: And in your target of 100 AGTs by year-end, and what do we have for 2025, I want to get your thoughts on how you're thinking about targeting some of these larger community centers, what mix they would be. Obviously, you want to have the academics,
Astika Goonwarden: But what makes for these larger community centers is in your priority list and what impact it would have on patient flow. Thanks.
Steve Gavel: Yeah, thanks. It's Steve. Why don't I take that question? Thanks for bringing that up because that's an important part of the strategy for this brand. So, as you said, you know, we're basically deployed today and into the near term in our major academic centers. However, we are running pilots today as well, where our major academic centers are partnering with their community referring centers.
Steve Gavel: to basically offload some of the...
Steve Gavel: Capacity Constraints that they have at the site level.
Steve Gavel: So we are already engaged in some pilot activity through our academic centers, where they're working very closely with their community affiliates. So that's been ongoing, and that's been ongoing for the better part of a year. Because you're right, as we start moving into that early second line, which we are today,
Steve Gavel: You know we'll continue to broaden out our commercial footprint to include not only the large academic centers
Steve Gavel: but also with those centers to bring on board the community.
Steve Gavel: affiliates of that. So it's very important that we bring on the academics with us as they because then it's much more coordinated and obviously the key thing for us is always keeping patient safety first.
Steve Gavel: So we want to make sure that we do that in accordance with our large academics. And then finally, the third leg of our strategy.
Steve Gavel: is at the right point in time, since there was some earlier conversation around frontline, is ultimately getting out into the clinic. And that's something downstream that we've
Steve Gavel: We've had some initial conversations with some of the large retail clinic providers out there to see and better understand what is their role.
Steve Gavel: And how does that dovetail with the role of the community hospitals as well as the referring large academic centers? So that's something forthcoming. It's something that we'll be rolling out over the next couple of years as we prepare the market for our launch in frontline.
Steve Gavel: Thank you.
Speaker Change #157: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change #158: www.microsoft.com.ca www.microsoft.com.ca
Speaker Change #159: Hello, I'm Lori Macomber, Unknown Executive, Jessie Yeung Hello, I'm Lori Macomber, Unknown Executive, Jessie Yeung
Speaker Change #159: Music
Speaker Change #160: Ladies and gentlemen, thank you for standing by. Welcome to Legend Biotech's second quarter 2024 earnings conference call.
Speaker Change #161: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.
Speaker Change #162: To ask a question during the session you will need to press star 1 1 on your telephone You will then hear an automated message advising your hand is raised
Speaker Change #162: To withdraw your question, please press star 11 again.
Speaker Change #162: Please be advised that today's conference is being recorded.
Speaker Change #162: I would now like to turn the conference over to Jessie Yeung, Vice President of Investor Relations and Finance. Please go ahead.
Speaker Change #162: Good morning. This is Jessie Yeung, VP of Investment Relations and Finance at Legend Biotech.
Speaker Change #162: Thank you for joining our conference call today to review our second quarter of 2024 performance.
Speaker Change #162: The second quarter has been an eventful one. We are pleased to report 18.5% sequential growth in convective cells. More importantly, we received label expansion approvals from both FDA and EMA.
Speaker Change #162: Lastly, we are most excited about the survival benefits demonstrated by CAFIC-T in the second analysis of COSITU-4. Nothing gives us more joy than helping patients with multiple myeloma live longer.
Speaker Change #163: Joining me on today's call are Ying Huang, the Communist Chief Executive Officer, and Lori Macomber, the Communist Chief Financial Officer.
Speaker Change #164: Following the prepared remarks, we will open up the call for a Q&A. We have Guowei Fang, Chief Scientific Officer, and Steve Gavel, Head of Commercial Development for the U.S. and Europe , joining the Q&A session.
Speaker Change #164: 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 herewithin.
Speaker Change #164: These forward-looking statements are discussed in greater detail in our FEC filings, which we encourage you to read and can be found under the investor section of our company website. Thank you.
Speaker Change #165: Hello and welcome to our second quarter earnings call.
Speaker Change #166: I am pleased that you could join us.
Speaker Change #167: Since our last earnings call, we have made progress on multiple fronts, which you can see in our earnings presentation on slide 5.
Speaker Change #168: First, we announced positive top-line results from CAR-T4. In the pre-specified second interim analysis, CAR-VIC-T demonstrated statistically significant and clinically meaningful improvement in overall survival, compared to standard therapies.
Speaker Change #168: We look forward to presenting this important data set at major medical meetings in the coming months.
Speaker Change #168: Additionally, at ASCO and EHA, we provided new data from the Phase 2, Cardio Tube 2 study, and new and updated data from the Phase 3, Cardio Tube 4 study.
Speaker Change #168: We would like to bring to your attention a recent paper published in Nature.
Speaker Change #168: as you will see on slide 6.
Speaker Change #169: Data were reviewed from 339 multiple myeloma patients treated at Mayo Clinic with antibody drug conjugates, CAR-T, and T-cell engagers targeting BCMA in the period of 2018 through 2023, with a median follow-up of 21 months.
Speaker Change #169: The study found that CAR-T and T cell engages demonstrate superior efficacy in both PFS and OS to that of ADCs.
Speaker Change #170: The authors also concluded that, where feasible, CAR-T should be the initial BCMA directive therapy. We are encouraged by the real-world clinical evidence of CAR-T advocacy.
Speaker Change #171: Particularly the insight it provides into the strong efficacy of Corvikine.
Speaker Change #172: As many of you know, our expansive CARB-X data set enables us to continue building a strong foundation for our market penetration.
Speaker Change #173: On this note, we recently added two regulatory approvals to the Global Market Opportunity you see on slide 7.
Speaker Change #173: The United Kingdom's Medicines and Healthcare Products Regulatory Agency approved CARVICTI for second-line multiple myeloma, and Health Canada approved CARVICTI as well.
Speaker Change #173: Our efforts to bring CAR-VIC-T to more patients globally translated into net trade sales for the second quarter of 186 million dollars.
Speaker Change #173: which is a 60% increase year-over-year and 18.5% increase quarter-over-quarter as you will see on slide 9.
Speaker Change #173: The increase in our second quarter performance versus the first quarter was a result of the ongoing launch of CARVICTY and share gains from capacity expansion and manufacturing efficiencies.
Speaker Change #173: Importantly, we continue to see growth in patient demand, and we are reiterating our expectation for pronounced growth for Curvictin in the second half of the year, as we continue to add more slots and expand our capacity.
Speaker Change #173: We remain laser-focused on making more supply available to the market and reducing van-to-van time.
Speaker Change #173: Turning to slide 11, our CMO Novartis has begun clinical production of Corvectin in the U.S. This frees up production capacity for commercial production at our facility in Ryerson, New Jersey.
Speaker Change #173: We're on track to complete physical expansion of the Raritan site and anticipate approval of the new section of Raritan in the second half of 2025.
Speaker Change #173: We continue to expect that our Obelisk facility in Ghent, Belgium, will be approved for commercial production later this year.
Speaker Change #173: We more than doubled our predicted production capacity in 2023 and are on track for continued expansion.
Speaker Change #173: The increases to our production capacity will help us keep up with growing patient demand.
Speaker Change #173: Our cash balance now stands at $1.3 billion, which we believe provides us the resources needed to increase production as I just mentioned, and gives us financial runway into 2026, when we expect to begin to achieve an operating profit.
Speaker Change #173: In other developments, we continue to bring more hospitals online as authorized treatment centers.
Speaker Change #173: We now have a total of 77 U.S. hospitals certified to treat cardiac patients.
Speaker Change #174: Outpatient treatment now comprises approximately 40% of our volume and remains an important medium for us as we expand our marketing efforts in the community setting for the second line and beyond.
Speaker Change #175: Finally, turning to our pipeline on slide 13, I am pleased to share that we recently completed CARTITUDE 5 enrollment. As you might recall, this randomized phase 3 study evaluates patients with newly diagnosed multiple myeloma for whom stem cell transplant is not planned as initial therapy.
Speaker Change #176: If we were to receive approvals based on CAR-T5 and CAR-T6, it would translate into an additional 52,000 patients annually.
Speaker Change #176: I'm also pleased to share that we recently broke ground on a new state-of-the-art research center in Philadelphia to advance our portfolio of next-generation cell therapies.
Speaker Change #176: We are excited to expand our research presence in the U.S. and attract top talent from the growing biotechnology innovation hub of Philadelphia, the birthplace of gene and cell therapy.
Speaker Change #176: In summary, we are executing against the substantial opportunity ahead of us as we expand our manufacturing capabilities and increase our early-aligned commercial activities with an eye towards investment in future transformative cell therapies.
Speaker Change #176: Now, I would like to turn the call over to Lori to walk you through the financials for the second quarter.
Speaker Change #176: Lauren
Lori Macomber: Thank you, Ying, and good morning, everyone. As Ying mentioned, we generated approximately $186 million in total net sales for COVID-19 during the second quarter.
Lori Macomber: An increase of 60% year-over-year, driven by the progress we have made with ongoing market launches, expanding market share, and capacity improvements. As a reminder, we share equally in all profits and losses of Carvicti x China with our partner Janssen.
Lori Macomber: Turning to our revenue.
Lori Macomber: As you'll see on slide 14, total revenues for the second quarter were $187 million.
Lori Macomber: Consisting of $93 million of collaboration revenue from the sale of Carvicti and licensed revenue of $91 million Driven by $75 million revenue recognized in connection with milestones achieved under the Janssen Agreement for CitiCel and $60 million in recognition of deferred revenue in connection with our agreement with Novartis
Lori Macomber: to develop, manufacture, and commercialize LV2102 and other potential CAR T therapy selectively targeting DL3.
Speaker Change #177: Net loss for the quarter ended June 30, 2024 as $18 million or a loss of $0.05 per share compared to a net loss of $199 million or a loss of $0.57 per share for the same period last year.
Speaker Change #177: Moving on to expenses on slide 15, collaboration cost of revenue for the second quarter 2024 was $45 million, compared to $33 million for the same period last year.
Speaker Change #177: These are Legend's portion of Collaboration Cost of Sales in connection with the Collaboration Revenue under the Janssen Agreement, along with expenditures to support the Manufacturing Capacity Expansion.
Speaker Change #177: Additionally, cost of license and other revenue for the second quarter of 2024 was $5 million, compared to no cost of license or other revenue for the second quarter of 2023.
Speaker Change #177: These costs are in connection with our agreement with Novartis to develop, manufacture and commercialize LV2102 and other potential CAR T therapies selectively targeting DL3.
Speaker Change #177: Research and development expenses for the second quarter 2024 were $113 million, compared to $96 million for the same period last year.
Speaker Change #177: The increase of $17 million for the three months ended June 30, 2024, compared to three months ended June 30, 2023, was due primarily to research and development activities in SITSSL, including start-up costs for clinical production in Belgium.
Speaker Change #177: and continued investment in our solid tumor programs.
Speaker Change #177: Administrative expenses for the three months ended June 30, 2024, were $35 million, compared to $28 million for the same period last year.
Speaker Change #177: The increase of $8 million year-over-year is primarily due to the expansion of administrative functions and infrastructure to support the increased manufacturing capacity.
Speaker Change #177: Selling and distribution expense for three months ended June 30, 2024 was $30 million, compared to $21 million for the same period last year.
Speaker Change #177: The increase of $9 million year-over-year due to costs associated with the commercialization of CARVIC-E, including the expansion of Salesforce and second-line indication launch preparation.
Speaker Change #177: To summarize, our spending remains on track and we continue to maintain a strong balance sheet.
Speaker Change #177: As of June 30th, we have $1.3 billion in cash equivalents, deposits, and investments.
Speaker Change #177: 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.
Speaker Change #177: Thank you. I will now pass it back to Ying for closing remarks.
Ying: Thanks, Lori. To sum up, our team remains dedicated to our strategic priorities. I am pleased to share that we recently surpassed 3,000 CAR-VT patients treated to date, reflecting our deep commitment to multiple myeloma patients and their families.
Speaker Change #178: I would like to thank each of our employees for their dedication to the patients we serve as we steadfastly execute on capacity expansion and also our commercial launch in the second line.
Speaker Change #178: Before we open it up for Q&A, I would like to assure you that our board and management team have been taking a close look at our business to ensure we are best positioned to continue our growth and momentum as we advance our mission to help multiple myeloma patients.
Speaker Change #178: We know there has been recent speculation about potential political risk, particularly given this being an election year. Our board is active and engaged, and continues to assess the potential impact of those risks.
Speaker Change #179: We're not going to speculate on hypotheticals on this call, but rest assured, we are focused on driving shareholder value as we consider our path forward.
Speaker Change #180: If and when we have updates to share, we will provide them at the right time. In the meantime, we appreciate if you can keep your questions focused on our earnings results.
Speaker Change #180: And with that, we'd like to take your questions. Operator, we're ready for the first question.
Speaker Change #182: Thank you. As a reminder to ask a question, please press star 1 1 on your telephone and wait for your name to be announced.
Speaker Change #182: To withdraw your question, please press star 11 again.
Speaker Change #183: Please stand by while we compile the Q&A roster.
Speaker Change #184: Our first question comes from the line of Gina Wang from Barclays.
Gina Wang: Thank you. Ying, I know you said we should not ask anything about speculative.
Gina Wang: comments. I know you also cannot comment too much but I do wanted to ask because this is the number one you know major overhang on the stock regarding potential political country risk and a biosecure act impact to the stock. I know you cannot comment too much but yeah I don't know how much you know can you share some a little bit more color rather than very high-level comments you know a little bit more color on what you could do or the company is in the process to prepare to address this potential questions.
Speaker Change #185: And the second is regarding the New Jersey Raritan site. Since now Novartis already has a clinical production in July , 2024, is it fair to say now the Raritan site is 100% commercial production?
Speaker Change #186: Sure. Gina, thank you for your questions. Maybe I can address the second question first.
Speaker Change #186: So, you're right. Since July , Novartis site in Marston, New Jersey, has initiated clinical production. The first patient was coming from CAR T6.
Speaker Change #186: And that follows the IND clearance by the FDA.
Speaker Change #186: So right now, we are in the process of shifting more clinical trial patients to the production site, the non-ovaries marcipan site.
Speaker Change #186: However, we do still have certain production for clinical trials in the Ryerson site.
Speaker Change #187: Over the next few months, with the Gantt site going commercial and Novartis ramping up clinical trial production, I think you should expect that the percentage of clinical production will go lower in Briard.
Speaker Change #188: So that's about Riordan.
Speaker Change #189: And then on your first question,
Speaker Change #190: I mean, first of all, I can say that we have carefully evaluated the draft bill, and also we have been engaging with certain stakeholders in Washington, D.C., including committee and House Speaker's Office. So at this point, we do not believe there will be any direct impact to Legend.
Speaker Change #190: Given how our operation model is and how in terms of data and also IP flow we conduct the business. So suffice to say that we're not too concerned that we're the target of the biosecurity bill.
Speaker Change #190: Thank you.
Speaker Change #191: Thank you. One moment for our next question.
Speaker Change #191: Our next question comes from the line of Jessica Fye from J.P. Morgan.
Jessica Fye: Hey guys, good morning. Thanks for taking my questions.
Jessica Fye: With outpatient use now up at 40%, can you just remind us where that was last quarter, and is the increase kind of coming across the board, like, as that proportion edges up, or is this more a dynamic where new institutions coming on are, say, 100% outpatient, and that's what's driving the change?
Gina Wang: And then I also wanted to follow up on Gina's question, recognizing that it doesn't look like you're directly impacted by Biosecure, but the stock really did come under pressure in the first half of the year as a result.
Speaker Change #192: Can you just talk about what you see as the best path forward for shareholder value creation and does it make sense for Legend to be a stand-alone company heading into a potentially contentious political period in the U.S. or should the board be considering other alternatives?
Speaker Change #193: Episode 2
Speaker Change #193: Why don't I take, it's the, why don't I take the first one, Jessica, your question has to do with outpatient, outpatient trends, where those patients are coming from.
Speaker Change #194: So, you asked also quarter over quarter. So, last quarter, we reported that we were at 35% outpatient. Actually, we're trending closer right now to 45% as opposed to 40%. So, there's a significant jump up in outpatient use in the U.S.
Speaker Change #195: In terms of where is that coming from, if you look at the U.S. volume in the sites that we serve, it is largely top-heavy.
Speaker Change #195: So you see largely about the top 20, 15 to 20 percent of these hospitals driving the majority of the volume.
Speaker Change #195: So the majority of the outpatient volume you see is in our large academic centers, as opposed to evenly spread throughout our 77 sites right now.
Speaker Change #196: Typically, the rate limiter to get a site on board, or at least using, I should say, CARVIC-D in the outpatient setting, is just reps, patient repetitions.
Speaker Change #197: And as we bring new sites on board, the key thing that they are looking for is just trying to understand in the real world setting is a toxicity profile similar to what we see in.
Ing: and Registration Studies. So that's how it's spread out right now, but I just wanted to make sure we have the corrected percentage. We're trending right at 45% right now for the quarter. I'll turn it back over to Ying.
Ying: Hey Jess, so we've been a public company for about four years and I think in that period as a company, Legend has made tremendous progress delivering for patients. We also have achieved numerous milestones and if you look at our recent second line approval in both the US and in Europe and also the preliminary feedback from the field and what we can see from the ordering book and production data, clearly there's a lot of potential in the new indication.
Ying: And we just announced that we're completing enrollment for CARTU 5.
Speaker Change #199: That's another entry into the fraud line. So, we certainly believe that there's a lot of...
Speaker Change #199: growth ahead of us.
Speaker Change #199: and we remain confident in our current long-term strategy to realize the full potential of Curvicti and also advance our pipeline as we continue to develop innovative treatment options.
Speaker Change #200: So, I think, you know, it's not a one answer or one way to create or maximize shareholder value. Although, as I mentioned, at this point, our board is engaged with investors and other stakeholders and, obviously, we have the fiduciary responsibility of maximizing shareholder value.
Speaker Change #200: So that's pretty much what I can say about this. Thank you.
Speaker Change #200: Thank you.
Speaker Change #201: Thank you. One moment for our next question.
Speaker Change #202: Our next question comes from the line of Kelly Shea from Jeffries.
Kelly Shea: Thank you for taking my questions.
Kelly Shea: Since the approval in second line for COVID-19 care, how do you see the demand and the use?
Speaker Change #203: in second line patients change over time. And also one early line patient that received the CARVIC-T treatment. What is the typical patient baseline characteristics regarding prior therapies, refractoriness, and performance status this afternoon? Thank you.
Speaker Change #203: Yeah, so, hi Kelly, it's Steve. Why don't I take the question in terms of how the launch is going, where we're seeing the use, etc.
Speaker Change #204: So, just to remind folks, we launched early part of the quarter, so you really didn't start to see the impact from a revenue perspective until late in the quarter. We're starting to see it more pronouncedly now in the third quarter.
Speaker Change #204: So that's the first thing. A lot of the performance we saw in the second quarter was off of Cartitude 1 indication as opposed to Cartitude 4. However, you did see, again, some uptick at the end of the quarter. What we are seeing in terms of some of the leading indicators, and we're measuring this...
Speaker Change #204: through the data that we are analyzing through our ordering portal, we're seeing right now on average about between 50 to 60 percent.
Speaker Change #204: of new patient orders coming into our portal is related to the CARTITUDE IV
Speaker Change #204: It's a very good demonstration, a good leading indicator of hopefully what we see moving forward. Now, again, these are not treated patients. These are patients that are entering the portal for scheduling purposes, but I did want to provide that data point on to you. In terms of actual data, we won't be able to see the data coming through the claims.
Speaker Change #204: channels until towards the end of this month is when we'll start to start to see that and that'll give us more objective evidence.
Speaker Change #204: In terms of exactly what line of therapy these patients are seeing the use, but we're very, very excited by the fact that we're seeing over 50% of all inbound patients, at least in our ordering portal, coming through the Carter-2-4 indication.
Speaker Change #204: Thank you.
Speaker Change #205: Siobhan,
Speaker Change #205: Thank you.
Speaker Change #205: Our next question comes from the line of Ash Verma from UBS.
Ash Verma: Hi, good morning. Thanks for taking our questions. So maybe like first one.
Ash Verma: So we saw the Galapagos, the post-air BCMA CAR T study on finding Parkinsonism. Can you comment on how Carvic T binder compares to the Galapagos compound? And does this make you believe that MNTs could be something that is more specific to camelid-derived antibodies like yours?
Speaker Change #206: And then just secondly, on the 2Q to 3Q dynamics, so the 9% price increase that you took, like is that benefit mostly realized in 2Q sales already or could that also be an additional tailwind for 3Q? Thanks.
Speaker Change #206: Ash, this is Ying. Thanks for the question.
Speaker Change #207: See what happened at the Kalopolis program.
Speaker Change #208: And I think, you know, obviously, MNT or the movement of neurological toxicity, it's not coming from just BCMA, it's not just...
Speaker Change #209: Coming from Carkey Eater.
Speaker Change #210: Although the mechanism of that action has not been well elucidated with science experiments.
Speaker Change #210: stayed.
Speaker Change #210: We think, you know, obviously you have to watch that in the clinic.
Speaker Change #211: And if you look at the data from our commercial launch of CARVICTY, I'm sure everyone follows the same FDA-AER database. In the first quarter, we saw 21 cases reported for CARVICTY patients, and that went down to 7 cases in the second quarter. Well, we dramatically increased the population of treated patients by CARVICTY. So, we feel really confident about the safety profile demonstrated by CARVICTY in the real world here.
Speaker Change #211: And then secondly, we also believe that our risk mitigation strategy is working very well in the clinic and also in the trials.
Speaker Change #211: So that's all I can say about the MNT and Neurotox here. On the second question, I believe in the second quarter, the last ramp-up was mostly reflected, although it's not fully 100% reflected in the second quarter. So we continue to reap that benefit in the third quarter.
Speaker Change #212: Thank you. One moment for our next question.
Speaker Change #212: Our next question comes from the line of Leonid Timashev from RBC Capital Markets.
Leonid Timashev: Thanks. I just want to ask on, you mentioned that you recently hit overall survival in CARTITUDE IV, and obviously there was some discussion of the overall survival endpoint at the advisory committee. So I guess I'm just curious on that. I guess
Speaker Change #213: What are you hearing from physicians about the importance of this data? You know, did you sense that there were perhaps any physicians who were waiting to continue to use CAR-VIC-D in earlier lines to see more overall survival data? Do you have a...
Speaker Change #214: Expectation for when you might see this on on the label and sort of how this is going to impact your overall marketing strategy. Thanks.
Speaker Change #215: Yeah, maybe I'll take that. The, I mean, physicians are very excited with this data.
Speaker Change #216: We're actually, we have a pretty large study right now, fielded, tested to look at different hazard ratios to see what perspective the...
Speaker Change #216: The market has on that. But generally speaking, at all of our advisory boards, as you can imagine, it's very, very positive. The question we have, and I'm sure it may be that you have, is, you know, does this data start to open up more of the standard risk population in earlier lines?