argenx SE (ARGX) 2021 Q4 法說會逐字稿

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the argenx Fourth Quarter and Full Year 2021 Conference Call. (Operator Instructions) Beth DelGiacco, Vice President, Investor Relations and Corporate Communications, you may begin your conference.

Thank you, operator. A press release was issued earlier today with our full year 2021 financial results and the recent business update. This can be found on our website along with the presentation for today's webcast.

Before we begin, I'd like to remind you on Slide 2 that forward-looking statements may be presented during this call. These may include statements about our future expectations, clinical developments, regulatory time lines, the potential success of our product candidates, financial projections and upcoming milestones. Actual results may differ materially from those indicated by these statements. argenx is not under any obligation to update statements regarding the future or to conform these statements in relation to actual results unless required by law.

I'm joined on the call today by Tim Van Hauwermeiren, Chief Executive Officer; Karl Gubitz, Chief Financial Officer; and Keith Woods, Chief Operating Officer. I'll now turn the call over to Tim.

Good morning, and thank you for joining our call today. We had a truly monumental 2021 and ended the year with the FDA approval of VYVGART, a first of its kind FcRn blocker for the treatment of generalized myasthenia gravis in adult patients who are acetylcholine receptor antibody positive. It was a milestone we have been working towards for many years, and we were so gratified to be able to honor our commitment to patients by bringing them a new treatment option. The regulatory momentum continued into 2022 with the subsequent approval of VYVGART in Japan just 34 days later. I cannot emphasize enough the work it took for our teams to make this happen seamlessly.

I want to start our call today talking about our launch. During these first weeks, we have focused primarily on demand generation through education and awareness efforts. Keith will share some metrics later in the call, but we still have a lot to learn about our launch trajectory in the coming quarters. We are doing our best to characterize the state of the launch today, though it's fair to say it's still very early and these are not necessarily metrics we will share on an ongoing basis, especially as we start to provide revenues during our Q1 earnings call in May. I have had a privilege of being on the road with many members of our field team since the start of the launch. At a high level, we are encouraged by the initial demand in our launch. We know that it is still early days and that we face the same challenges that we described at approval: COVID restrictions, the lack of a J code, the need for physician education and better awareness. But 8 weeks into the launch, we are cautiously optimistic and trending well against our plans.

I have also been encouraged by the feedback I am hearing firsthand from our physicians, all of which is consistent with many of the messages we shared leading up to approval. On Slide 4, for example, the unmet needs faced by gMG patients for new therapies is significant and we've seen real demand. The challenge for our sales force has been demonstrating its sense of urgency during a time when patients do not see their doctors regularly. We also see physicians rethinking how to treat their patients based on the efficacy and safety profile we demonstrated in ADAPT. And finally doctors [applaud] the individualized dosing in the VYVGART label, which allows them the flexibility to dose based on clinical evaluation. In MG, where every patient is unique and experienced the disease course differently, an individualized approach makes sense to physicians. We believe that the treatment cycle approach will accommodate the majority of our patients. We also want to consider the individual needs of patients that may require alternative or more continuous dosing and to have data should we get questions from providers on this topic.

We started a Phase IIIb trial called ADAPT-NXT to evaluate additional dosing schedules that physicians could use to further individualize the VYVGART treatment approach. As this is a typical Phase IIIb trial, we will not be providing additional updates on the study outside of an upcoming medical meeting. In general, we want to have the most complete offering for patients and physicians, whether on a dosing schedule or around formulation, IV or subcu. We continue to believe that having both an IV and subcu option will be important to capture variability in patients' and physicians' preferences.

Slide 5. Our Phase III ADAPT subcu non-inferiority trial is on track to readout this month, evaluating subcu efgartigimod, which is co-formulated with Halozyme's validated ENHANZE technology. In this trial, we aim to bridge IV to subcu based on PD effect, specifically IgG reduction at day 29. We designed our innovative bridging trial based on a few key points. First, we observed in our clinical trials a linear correlation between IgG reduction and clinical benefits in gMG. We also see a consistent PD effect with efgartigimod, whether in healthy volunteers or gMG patients. The disease biology of gMG does not affect PD. And actually, we have seen this in all indications we have studied so far. And finally in our Phase I study of subcu efgartigimod, we observed an identical PD effect with a fixed dose of 1,000 milligram subcu as with 10 milligram per kilogram IV. Beyond the non-inferiority primary endpoint, ADAPT subcu will capture additional safety, efficacy and PK/PD data in the secondary endpoint analysis, which will be important for our commercial team. ADAPT subcu also serves to satisfy our safety database requirements for subcu efgartigimod. We enrolled more than the 50 patients required for the primary endpoint analysis and allowed ADAPT open-label extension patients to roll over to the ADAPT subcu trial. We expect to be able to give you an update on timing of our BLA filing when we report top line results.

ADAPT subcu is the first of our near-term data milestones. We also are on track to share results in the second quarter from the ADVANCE trial evaluating IV efgartigimod in primary immune thrombocytopenia. Slide 6. We designed our Phase III ADVANCE trial based on the results from our Phase II and benchmarking of peer ITP trials. In our Phase II, we had ambitiously dosed patients for just 4 weeks while monitoring platelet counts out to 21 weeks. We learned from this trial that more chronic dosing is required in this population.

Even with a limited drug exposure, we saw responses across patient types in a very refractory ITP population. These results are published in the American Journal of Hematology. We also saw a high placebo response in our Phase II, which in looking at peer trials is very common in ITP given the fluctuating nature of platelets. In our Phase III, we are dosing patients weekly for 26 weeks with the potential to push the cadence to biweekly dosing based on a stable platelet count. We are measuring the primary endpoint between weeks 19 and 24 where a patient has to have a stable platelet count, meaning over 50,000 platelets per microliter, in at least 4 of those 6 visits. By managing placebo response with this stringent endpoint, we are also setting the efficacy bar high for our treated patients. It will be important to focus on the delta between response in the active and placebo groups.

The secondary endpoints will also be important with the ADVANCE readout, including safety and tolerability, cumulative platelet counts, bleeding events and quality of life data. This will show a more complete picture of where efgartigimod could play a role in ITP. We hear from physicians that there remains a high unmet need in ITP and that long-term response rates are not satisfactory. Patients typically cycle through treatment options, including through multiple TPOs, in order to maintain a stable platelet count. Our hope is that we can break this cycle. And if an ITP patient fails or relapses on an initial TPO, they will be in a position to try efgartigimod before his second or third TPO.

You can see that we have a catalyst-rich first half of the year between our launch progress and these 2 data readouts. It's a busy time, but also a very exciting time to finally have our teams in the field engaging with physician customers and serving patients.

I'm going to turn the call to Keith, who will provide more details on the VYVGART launch in the U.S.

Thanks, Tim. Good morning. I'm happy to provide an update on the state of our commercial business. Our sales force has been in the field for 8 weeks now, so we are still in the very early stages. But overall, we are seeing encouraging progress in engaging with our key stakeholders.

Slide 7, please. On our approval call, we talked about our strategic imperatives to empower patients, to provide best-in-class patient support, to ensure rapid adoption from health care professionals and to enable appropriate access. I'm going to share some data from each of these. First, on the patient. We're not going to share patient numbers today, but we are comfortable sharing that we are currently in front of our own projections. We designed our Phase III ADAPT study to enroll a broad patient population, some patients who were on Mestinon alone and very early in their disease, while others were much more severe relapsed/refractory. With the initial scripts coming in, we see a breadth of patient profile reflective of the ADAPT population. In the first weeks of launch, we have also seen what we believe is pent-up demand for a new therapy in patients refractory to all other available treatment options. It is too early to know whether or not this is a onetime bolus of patients, but we see these patients contributing to our initial demand.

Slide 8, please. We launched our unbranded DTC campaign in January to create awareness about gMG. The impact of the commercial in empowering patients is clear. The commercial is encouraging patients to learn about new treatment options, including VYVGART, by speaking with their neurologist or downloading resources from the website. Based on early assessments, approximately 25% of website visits and 50% of phone call inquiries can be tracked back to the DTC campaign.

Slide 9, please. Our patient support program has also been serving our patients and health care professionals very well and approximately 90% of our scripts have come in through My VYVGART Path. We are now seeing scripts translate into infusions and My VYVGART Path has been crucial to this effort.

Our second strategic imperative is with the physician community. Slide 10, please. Our sales force has done a great job of engaging with neurologists. The goal was to focus on our top group of targets, which includes about 1,000 neurologists. These neurologists are tiered based on the number of gMG patients that they treat, their likelihood to try a new biologic and their influence amongst other neurologists. So far our sales team has reached about 60% of this top target group. Among physicians, we have also seen impressive breadth and depth of prescribers. Scripts are not just coming in from our physician champions but from a broad group and equally from academic settings as well as the community. We have also seen depth amongst physician prescribers with many writing scripts for 2 or more patients. About 60% of our prescribers have been from the top 1,000 neurologist targets. Our peer-to-peer marketing efforts launched in January and so far, we have held 6 national broadcasts and 57 local speaker programs. We have 74 fully trained physician speakers in these first crucial quarters to launch and raise awareness and increase the education on VYVGART.

Finally, our work with payers. Slide 11, please. We announced at approval that we had reached agreements in principle with several national and regional payers to structure a value-based agreement. As of this week, VYVGART-specific policies have been published in plans covering approximately 25% of U.S. commercial lives. We are on track to have broad coverage in place by the end of the second quarter. So far, almost all the policies are aligned to our label. Patients can gain access if they have previously been treated ineffectively with one or more standard of care options, whether it's mestinon, steroids or a broad immunosuppressive. We are also seeing encouraging prior authorization language approving for 6 to 12 months of treatment at a time rather than based on a specific cycle. All in all, we are optimistic after the first 8 weeks of launch, but it is still too early for us to understand how this will play out into future quarters. We look forward to updating you again during our first quarter earnings call.

Before I turn the call over to Karl, I'd like to quickly discuss our global launch strategies. Slide 12, please. The upcoming regulatory milestones are covered in our press release. With Japan, we received approval in January, but the official launch will not start until we have a price. This is typically listed in the months following our approval. Our sales team has been active with neurologists talking about VYVGART and the mechanism of action. They can line up patients before we have a price, but we will not be able to start booking revenues until after the official launch. In Europe, we expect approval in the second half of the year and of course, regulatory approval is just the beginning. For the most part, outside of Germany, we will not be able to start our promotional efforts until we have secured reimbursement on a country-by-country basis.

With that, I will turn the call over to Karl.

Thank you, Keith. Slide 13, please. Our 2021 financial results are detailed in our press release from this morning, so I will only highlight some of the key points here. We ended the year with cash, cash equivalents and current financial assets totaling $2.3 billion. This puts us in a very strong position for our first commercial launch and to execute our plan in 2022. Based on your current plans to fund the business and assuming successful retails for each of these programs, we expect to utilize up to half of our available cash this year. From a utilization perspective, we think about it in the following way.

First, R&D and our ongoing clinical trials. We will be in 10 efgartigimod indications by the end of the year and 2 ARGX-117 indications. Their development continues to be the largest proportion of our spend. Second, our inventory build and supply chain to support our global launch and global trials we are building for success to ensure continuity of drug supply to patients. Third, the infrastructure of our global launch, first in the U.S., then Japan, Europe and Canada. And finally our continued investment in our discovery engine and the expansion of our pipeline through our immunology innovation program.

For the full year 2021, we had total revenues of $497.3 million. A large majority of this was due to income from collaborations, primarily the onetime recognition of $315.1 million following the termination of a Janssen collaboration agreement and the cost sharing and milestone payments from Zai Lab totaling $177.5 million. There were no product revenues in 2021. Our operating income was $42.1 million. In 2021, our total R&D expenses was $580.5 million and our SG&A expenses was $307.6 million. As I mentioned at the start, you can find additional details behind these numbers in the press release we issued this morning.

I'll now turn the call back to Tim.

Thanks, Karl. Before I conclude, I'd like to call out a few personnel updates. You saw in our press release that Yvonne Greenstreet will be leaving our Board following her promotion to CEO at Alnylam. We are very excited for Yvonne and want to express our gratitude for the contributions she made as a Board member. We also announced the appointment of Malini Moorthy as General Counsel at argenx. This was a planned transition and aligns closely with our evolution to a commercial company. Malini has worked in large commercial organizations for almost 2 decades and has the perfect experience to help us navigate this new stage of our developments. And finally, we are nearing April 1 and our planned CMO transition from Wim Parys to Luc Truyen. Wim has transformed our development organization over the past 3 years, so we are grateful that he will continue with argenx as an Adviser on our Board's R&D Committee. Luc joined argenx 6 months ago from J&J and brings significant development experience in the neuromuscular space. We are excited to have him in this leadership role.

Last year was a remarkable year for the company, and we are off to a great start in 2022. Slide 14. We have 2 near-term data readouts: first, ADAPT subcu this month and then ADVANCE in ITP in the second quarter. By the end of the first quarter of 2023, we also expect top line data from our CIDP trial and our second trial in ITP. So we're not short of upcoming catalysts. We announced in our press release this morning that the timing of the top line data from the pemphigus trial is currently under review in light of the geopolitical situation in Ukraine. While exposure is limited, given the global nature of the trial, we cannot reiterate our time lines until we have time to assess the situation more closely. The BALLAD trial of efgartigimod in BP started late last year and ALKIVIA in myositis will start imminently. We also announced 4 new efgartigimod indications that we will start evaluating this year including Sjogren's and COVID-19-mediated POTS through our collaboration with IQVIA and membranous nephropathy and lupus nephritis through our collaboration with Zai. ARGX-117 is now in our first patient study in MMN and we are excited to launch a trial in delayed graft function later this year. You can see how our kidney franchise is taking shape.

Overall, we are planning for success and building out commercial franchises that will enable us to have economies of scale as we prepare for future launches. And we would not be argenx if we did not continue to invest in our science. Slide 15. We will be advancing ARGX-119 into a Phase I trial after our CTAs filed later this year, and through our IP there are more programs to come.

Before we open the call for questions, I really want to applaud our field teams. I have been on the road with them and I'm very impressed. It is thanks to their teamwork and dedication that we have a strong start to our launch. Keith shared the state of our launch in these early days and we look forward to sharing more in May. Mostly, I'm excited to finally be reaching patients and bringing them a new treatment option. This is honoring a commitment we have long made to the gMG community.

Thank you all for the time today. We will now take your questions.

(Operator Instructions) Your first question comes from the line of Derek Archila from Wells Fargo..

Congrats on the progress. Just 2 quick questions from us. I guess, first, based on what you guys are seeing and hearing on the VYVGART launch in myasthenia gravis, I guess are you still pretty comfortable where consensus estimates are right now? And then just a quick follow-up on the ITP study that's expected in the second quarter. Maybe you can just kind of frame out for us what your expectations are there in terms of the primary endpoint and where you see the market opportunity for efgartigimod in ITP?

Derek, thank you for the question. In terms of revenue projections, we are not going to comment on the revenue projections at the moment. We don't provide our own forecast. It really is too early in the launch and we will provide guidance later on. In terms of analyst consensus, as you know, the revenue numbers are $97 million for the full year for U.S. revenues and $6 million for the quarter. Those are the analyst consensus and we are increasingly comfortable with those numbers.

So on the second question, Derek, and thank you for joining us today, remember what we learned in the Phase II clinical trial, but also we could see in all the ITP trials, right, there is a significant placebo effect going on in ITP patients. So the primary endpoint is a very tough endpoint. It's an endpoint designed to completely control placebo. Having in 4 out of 6 consecutive visits a platelet count of 50,000 platelets per microliter is a very tall bar. So the primary endpoint is really designed to create a statistically significant delta between active and placebo. The full color on the qualities of the molecule in ITP and its potential to have a competitive position there will really come from the secondary endpoints where we will study things like cumulative platelet counts, total platelet counts of the period, bleeding effects, quality of life and the likes. And that should basically tell us where we could fit in the treatment paradigm. Maybe, Keith, you can comment briefly on how we look at the opportunity.

Yes. So Derek, as far as the market opportunity, I guess I would call out that TPOs themselves are doing more than $2 billion in revenue a year globally. And really where we feel the opportunity is, is we're not going to displace TPO. We would like to play, as Tim said in the prepared remarks, right after the first TPO. So about 60% of patients respond to TPO and about 50% of them are going to then relapse. That's where we feel that efgartigimod can potentially play into because of its impact on the disease from multiple mechanisms of action. So it's not just about creating more platelets. It's also about managing the clearance, the function of the platelets. So it should be a better option than patients rotating through 1, 2 or 3 TPOs.

Your next question comes from the line of Tazeen Ahmad from Bank of America.

Just a clarification one for the upcoming subcu data set that's due this quarter. Assuming that the data shows what you wanted to show, can you just walk us through what the next steps would be in terms of going to FDA and when you think you could file for what I'm assuming would be an sNDA. Just to clarify that -- or an sBLA.

Tazeen, this is Tim speaking. Thanks for joining us today and thank you for your questions. So in the United States specifically, the situation with the FDA is that the subcu product, which is in combination with Halozyme's ENHANZE technology, is considered to be a separate product. So this is not going to be an sBLA, it will be its own BLA. Therefore, we think it's also -- its own distinct product presentation we will be able to position in the marketplace. Now that's great news from a commercial point of view. From a workstream point of view towards submission, we still anticipate that we will be able to reuse big sections of the IV BLA into that dedicated subcu BLA. Thanks for the question.

Your next question comes from the line of Akash Tewari from Jefferies.

So, a, the bolus of response that you mentioned, what percent of early scripts have been these ultra-refractory patients? And is there any color you can give us on sizing up that market opportunity? Are we talking about 1,000, 2,000 patients here or something more? And then maybe on the Principia BTK, which missed its primary and secondary endpoint in pemphigus, Sanofi hinted that was due to the high placebo response given the placebo arm also received steroids.

Yes, I'll take the first question. So Akash, in regard to what we referenced in the prepared remarks -- did we lose? Okay. Akash, in response to the severe relapsed/refractory that we've seen start in -- so far in this first 8 weeks, I think it was a little bit of a surprise. These are patients that have experienced really all other therapies that are available including and up to C5 and they have not responded and so they have come on to VYVGART. So I think that was a little bit of pent-up demand that was a surprise to us. The question is, is this just going to be in the early days because these are the patients that have had no success with any other therapy.

Okay. Sorry, can you guys hear me?

Yes.

Yes.

Okay. Sorry about that. So look, on the Sanofi, the BTK failing in pemphigus, can you just comment on in the primary endpoint, patients in the placebo arm got tapered down to minimal steroids, they didn't go completely off the drug. Do you feel like that's a risk for your studies given it looks like steroids in combination with VYVGART was kind of driving some of the complete responses in your Phase II data?

Thank you, Akash. So difficult for us to comment on why the Phase III trial of Principia failed. Mind you, they failed over the entire line, right; not just the primary endpoint but also the secondary endpoints. I think we did our homework well. When we designed our clinical trial, we have been talking to typically those KOLs who are deeply involved in pemphigus trials including the Principia trial and rituximab trial. So we think we have been avoiding some of the classical pitfalls in clinical trial design in pemphigus.

We are in a steroid tapering protocol that is a notoriously difficult protocol, but we're on top of it. So we carefully monitor the steroid tapering so that goes according to protocol. Mind you that the mode of action between the BTK inhibitors and efgartigimod are totally different, right? I mean we're not impacting a B-cell repertoire hoping to see a downstream effect on IgGs and disease states. We're really hitting the disease biology in its heart. So we have pretty exciting data from the Phase II study that if you eliminate these pathogenic IgGs, you can put patients into complete remission. Actually, a number of them very durable remissions. And stay tuned, I think at the upcoming SSID conference later this year, we will continue to show very strong data for our molecule in pemphigus. Thanks for the question.

Your next question comes from the line of Yaron Werber from Cowen.

I got an interrelated question on the upcoming data for ADAPT subcu. We're getting a lot of questions on it. Perhaps the first one, you've overenrolled that study. I think you've closed enrollment with 111 patients. So you only needed 50 really to support the BLA filing. Are all 111 going to be included in the primary and the secondary endpoints? That's the first question, at day 29 and IgG reduction.

And then secondly, for the secondary endpoint on MG-ADL, which you're looking at 12 weeks, are you going to -- do you think you're statistically powered now with 111 patients to show a difference?

Thanks, Yaron. I'm happy we can clarify this. So there are 2 objectives we need to meet, right, in this study. First is we need to hit the primary endpoint, which is all about demonstrating non-inferiority between IV and subcu. And in order to do that we believe that with 50 patients, we are sufficiently powered. Now the second objective we need to meet is to basically collect the minimum database size, which we require for this separate BLA submission. And in that context, you need to see what you call that over-recruitment to 111 patients. These patients together with the patients we rolled over from the open-label extension study from IV to subcu, together will be a sufficient number of patients to go into that safety database. So once we have both data points, the primary endpoint and the safety data point, we will be able to go into submission.

On the secondary endpoints in the trial, yes, we are collecting information on ADL and QMG, but this will be more qualitative information because, you're right, this study is only powered to hit its primary endpoint. We are collecting, of course, further color and evidence on both the ADL and the QMG score, but it's all about showing a non-inferior IgG reduction. Thank you for the question.

Your next question comes from the line of Joon Lee from Truist Securities.

Congrats on all the progress. Is ADDRESS study for pemphigus the only study that's exposed to Eastern European sites, including in Ukraine, or other studies such ADVANCE or ADHERE also enroll from Ukrainian sites but maybe not impacted due to the broader geographic enrollment? And I have a quick follow-up.

Thank you, Joon. So all of our trials, by definition, are global trials. These are all rare indications that are all spread over the globe and that turns out to be a strength when things hit you like COVID pandemic or in this case a geopolitical issue. So exposure is always going to be relatively limited, whatever study you're talking about. For pemphigus, we're in a slightly different position because the incidence and prevalence is a little bit tied to geography. I mean you see different pockets of patients. And therefore, we have a slightly higher exposure in Ukraine and Russia. And that's also why we felt compelled to give you a heads-up on the data readout for pemphigus.

In the ITP subcu and the CIDP study, exposure is minimal and we have time to rebalance without having to change anything concerning time lines. For pemphigus, we're currently going through the risk analysis and we will be able to give you an update probably in the next quarterly earnings call. Please, your second question?

Yes. You have a lot of trials underway, which is obviously reflected in your R&D spend. Hopefully many will succeed, but it's unlikely that all will succeed, similar to what happened with the most MG population. So do you have any plans to partner with an AI company to analyze the rich clinical data set you're generating and to identify certain biological signatures to improve the odds of your clinical success? And we're just asking because we've been talking to a lot of AI companies with autoimmune focus, and reducing clinical risks using AI seems to be the focus of many companies. I'm just curious your thoughts on that since you have a lot of trials ongoing.

It's a great question, Joon. And whilst we're not deeply engaged in AI, we're following similar strategies. So first of all, these are all rare diseases. And there are not too many precedent trials out there or too many data you could mine in an intelligent way. That is the challenge. So we do talk to experts extensively when we design our clinical trials, trying to make the studies as de-risked as possible when it comes to inclusion/exclusion criteria. Also, when it comes to our go/no-go decision points somewhere in these trials where you have the ability, for example, to further tweak certain aspects of the registrational part of the studies. Similar to what we did in CIDP, we're doing that in the BP trial. We're doing that in the basket trial in myositis. So I think we find our ways to risk mitigate these studies in an intelligent way. Still, I think -- I like your comment. These are still clinical experiments, which all have their own intrinsic risk associated. Thanks for the question.

Your next question comes from the line of Yatin Suneja from Guggenheim Partners.

So question is on the patient population. So when you talk about the 17,000 gMG patients that you are targeting, can you maybe help us subcategorize these patients? It is our understanding that there are different categories within these 17,000 and some might be more -- or might be easier patient to get early in the launch curve, like patients who are on chronic IVIg, maybe Soliris nonresponder. So if you can just give us a flavor of what exactly you are seeing in these buckets? How big are these buckets? And how should we expect some of these buckets that are maybe first to come to your therapy? So that's first question.

And the second one, I'll ask right now, is on the J code. Can you also talk about what limitation it might be having, if any, at this point and how that dynamic could change once you get it in Q3? So 2 questions for me.

Great. Well, thank you for the question, Yatin. First of all, what I'd say is the patient population that we are seeing that is adapting VYVGART in this early period this first 8 weeks is really aligned with the ADAPT trial. It is really across the treatment spectrum. As I mentioned, we are getting some relapsed/refractory patients. We've also had some from IVIg. But typically, when you look at that target population of 17,000, these are patients that have tried Mestinon. Many times, they've had a steroid added and many of them have also gone on an off-label broad IST. And we have seen each of those types of patients experience VYVGART here in the early stages of the launch.

As far as your second question on the J code and the limitations, what the J code basically does, it's in the buy-and-bill situation and it is putting more work on the office to get reimbursed. It's not that it makes it where it cannot be reimbursed because we are having product reimbursed in a buy-and-bill setting. It just may add an extra step of going through an appeal process and it puts more work on the office staff. You also have a limited number of offices that actually elect not to prescribe a product while they don't have a J code because they don't want to put the extra work on the office. I think the last thing that we need to remember is unlike an oncology setting, your buy-and-bill market in neurology is smaller than what you see in hem/onc. And it's really in that buy-and-bill where you see the J code impact. But we expect to have our own individualized J code in quarter 3.

Your next question comes from the line of James Gordon from JPMorgan.

James Gordon, JPMorgan. The first question was just, in terms of VYVGART and MG, how important do you think the first-mover status is and formulation relative to other FcRns in MG? And I ask because I know UCB is going to present their roza FcRn Phase III data in next month. And they talk very confidently about how they're going to present data that shows it's very competitive versus VYVGART. So do you think there are areas where they can actually be competitive? Or given your first-mover advantage formulation and other aspects, et cetera, are there areas where there could be a risk factor? How are you feeling about that is the first question?

I'll ask a follow-up now, which was just on Russia/Ukraine disruption. I noted the comment on PV and potential delays there. But the ITP subcu trial, looks like it's got quite a lot of Russian sites. I think about 1/3 of the sites are like there in Russia. So is there a risk that, that study is also significantly disrupted and then delayed? Or is it more an issue if it's Ukranian versus Russia?

Yes. Let me start with the second question first, and I'm happy to hand over to Keith to talk about our competitive position in the MG landscape. It's all just about the sites, which you can see on clinicaltrials.gov, but it's about the actual number of patients which actually have been enrolled through these sites. So when we look at the real situation, which is actual number of patients, we feel that the subcu study for efgartigimod in ITP is perfectly under control. I would say that, indeed, that is somewhat more exposure in the pemphigus trial. So maybe we will have to overcompensate that in some of the sites. That is analysis which is ongoing. So I don't think there is any reason to change the guidance on readout timing for the ITP subcu study or the CIDP subcu study. Maybe, Keith, you want to comment on how we look at our competitive position in the MG landscape?

Sure. So James, first of all, I think it's premature to comment anything on UCB Phase III data because we haven't seen any specific data at all. As far as the first-mover advantage, I think that the opportunity that exists with VYVGART is based on the data itself. Let's start with efficacy. Between the first and second cycle, almost 8 out of every 10 patients that experience VYVGART are going to have a clinically meaningful response. We also have a very rapid onset of action with 84% of them responding within the first 2 weeks. And the minimal symptom expression sending these patients to where they have no symptoms at all, right now it's the highest number that's been recorded in a clinical trial.

Secondly, take a look at the package insert that we have. It is very clean. The safety profile, this is one of the things that we're hearing from the physicians that are prescribing. They're impressed about this. There's no premedication. There's no black box warning and the safety is riding up through all of our studies.

The last thing I would say is individualized dosing. We are providing convenience to patients when they can take advantage of the individualized dosing. And so I guess what I would say is we've set the bar high, but let's wait and see data.

Next question comes from the line of Matthew Harrison from Morgan Stanley.

Great. I guess 2 for me. One, I don't know if you're willing, but it would be interesting to hear what you're sort of seeing on a month-over-month basis. Are you seeing patients accelerate or not? Just so we can get some sense of how you're thinking about the bolus.

And then a second question, just because I think a lot of us haven't seen a Japan launch before. Can you give us some sense of whether or not you think Japan could be a meaningful contributor this year and just given the commentary around when you get the price, but the fact that it sounds like you can already start to line up patients?

Yes. Matthew, thanks very much for the question. So as far as what we're seeing on a month-over-month basis, we've only had 8 weeks. So it's really tough to give you a month-over-month basis. I can tell you that what we're seeing in patient demand, it's been gradual and it's been consistent. I think that we have prepared well in advance on each of those strategic imperatives and I think the team is out there executing on each of the areas, whether it's the patient awareness, the health care professionals or the payers. I'm also really pleased with the progress that we have through My VYVGART Path because when you have a brand-new first-in-class product with a brand-new mechanism of action, there does take some pull-through to turn demand into actual infused patients. So we can talk a little bit more about patient trends when we actually get to a first quarter earnings call.

As far as your second question about the Japan launch. Again, I'm going to advise on a very gradual, consistent growth because we run into the same issue that exists in the United States and that is education on a first-ever mechanism of action. And also, I would call out to you that the number of clinical trial sites that we had in Japan is smaller than what we even experienced in the U.S. So I wouldn't think of you have a bolus of patients that are set to go. Now one thing that we do have different in Japan, I remind you that in the approval that we received in January, the Japan label will include seronegative patients.

Your next question comes from the line of Allison Bratzel from Piper Sandler.

So just one on the source of VYVGART patients. Having stopped at some of the gMG patient webinars about VYVGART, it seems like there's definite interest not just in switching from IVIg but surprisingly in switching from Soliris as well. So I know it's early days, but does that match what you're seeing in the field?

And then I guess, just to the extent that you are seeing patients having an interest in switching from Soliris to VYVGART, what's the primary driver or reason behind that from a patient and neurologist point of view? And just how do you expect that dynamic to evolve when Ultomiris gets a gMG label midyear?

Yes. So thank you for the question, Allison. I guess the first thing that I would say is it's too early to predict a trend because we're talking about individual patients. And, as you know, in rare disease every single patient is different. And we also know just from the data that you're not going to get every single patient to respond to a therapy. You can go back and look at the REGAIN study or the data that was released on Ultomiris. So regardless of what product a patient has gone on, you're going to have a part of that population that is not going to respond. And when they have not responded, they're going to look for other options and that's what's happened with VYVGART becoming another tool to place in the box of the health care professionals.

Your next question comes from the line of Douglas Tsao from H.C. Wainwright.

Just curious on the ADAPT-NXT trial. Did you start that sort of based on any sort of questions from providers to provide clarity in terms of the sort of dosing regimens? And have you gotten an early sense about how physicians are going to implement the individualized dosing that you have in the label?

Yes. So Douglas, we have been working with a group of KOLs for better than 2 years now. It's been since the Phase II data that we discussed the concept of individualized dosing. It first came from the patients when we shared with them the Phase II data, and they love the idea of the cycles and they love the idea of having the time off therapy. We then went and discussed this with the KOLs and they've seen the data and they're very pleased with it. The question that they had is what if I require somebody that might need a little bit more consistent dosing? And what we always aim to do is to be able to have data-based answers and that's basically what this trial has been set up for.

I think the other way to look at it is, look, we have a long-term commitment to the MG space. And what we want to offer MG patients around the globe is the most complete offering. And the way you have to understand the most complete offering is maximum flexibility from a dosing point of view. This is a snowflake disease. Every MG patient is different. You cannot basically take them through the same standard approach. And we also want to have flexibility from a product presentation point of view. There are different preferences and needs out there in the market for both an IV product and the subcu products. So look at it through this lens.

Okay. Great. And again, one follow-up, just in the early days have you any sort of color on how docs are implementing the individualized dosing?

Yes. So I mean, first of all, they like the idea of the individualized dosing. They like the idea of only treating a patient when they need therapy. They also like the idea of the data that they've seen of what percentage of patients -- as you know, during the launch, we shared with you that 58% of patients require 5 cycles or fewer. The questions that they've had is, how should they start the patient? And how do I figure out how to get to the individualized dose that my patient needs? And a lot of them have taken a look at how they utilize off-label IVIg to treat MG and that is basically, let's get our patient into response and get that patient to the maximum response that we can have. And then as we have the patient in response based on the label, it's their clinical evaluation and their discussion with the patient on how they stretch that interval out. And that's what we've seen happen in the open-label extension and that's what we'll see happen in the real world.

Your next question comes from the line of Danielle Brill from Raymond James.

Congrats on the progress. I have a couple on ITP. Tim, you mentioned placebo responses are common, but I believe placebo response rate was actually pretty low in Rigel's program. Are there specific differences in the population they enrolled versus those in ADVANCE that might explain this? And then in their Phase III publication, they showed efficacy is much lower in patients who are antibody negative. I'm just wondering how we should think about potential risk of including antibody-negative patients in ADVANCE.

Thank you, Danielle. These are 2 excellent questions. So first of all, the reason the placebo response was slow in the Rigel trial is because they basically have used a similar endpoint as the one we are using. So we have been studying that trial in detail. They also had a durable platelet response requirement. So unlike the TPO registration trials, where after a certain period of treatment it was sufficient to be at 50,000 platelets or higher on a specific day, they built in that durability requirement. And you can indeed see how effective that has been in knocking down the placebo. I think in one trial they had 0% response and then in another trial they had something like a 1% response in placebo. And basically, we're trying to achieve similar numbers on placebo by applying similarly stringent endpoints.

Now this story on antibody-negative patients, I don't think that exists. I mean all ITP patients, primary ITP patients, do have autoantibodies [styling] the platelets. The issue is what test you use to analyze the antibody levels and what the sensitivity is, what the detection limit is for these patients. So for example, in our Phase II trial, we use a more sophisticated method where we basically harvest platelets. We stripped autoantibodies from the platelets and then we semi-quantify them. 100% of the patients actually is autoantibody positive. So if you have a true primary ITP patient, that patient will have platelet-associated autoantibodies. Thank you for the questions.

Your next question comes from the line of Jason Butler from JMP Securities.

Just one for me on reimbursement. Just looking forward to the subcu product, given that, that product and VYVGART will be distinct, will the value-based agreements in place for VYVGART expand immediately on approval for the subgroup products? Or do you need to go through another process because they're distinct products?

And then same question essentially for the J code part of the equation. Will you need to get a separate J code for the subcu products? And while you wait for it, will the J code you have in place for VYVGART help in any way?

Yes. Jason, thank you for the questions. So first of all you know the work that we did with payers in advance by putting them under CDA prior to even having approval of VYVGART and that's when we discussed all of the data with them, including what we saw on the distribution on the number of cycles per year. We looked at the patient population. We know that the IV was weight-based dosed. And so we really discussed with them what would make sense in regard to a value-based agreement with them. We have not yet made the decision on exactly how we will handle as we have the approval for subcu. But in a true collaboration goal that we've had with our IV launch, we will be out with these same payers in advance of a subcu approval to determine what will be the best method to take considering it will be a separately branded product.

Secondly, you asked the question about the J code. I think that once you have a subcu product that would be available for patients to give themselves a simple single injection at home, you're going to see by far the majority of that subcu product acquired through specialty pharmacy. And so that's not going to come into play with the J code to the same level that you're seeing with a buy-and-bill infusion IV product.

Your next question comes from the line of Joel Beatty from Baird.

First one is, can you describe how the patient experience has been from the time of prescription of VYVGART to actually starting on therapy, such as what percent of prescriptions are being filled right now and how long it takes to start on drug?

And then the second question is, what is the status of VYVGART being added to treatment guidelines for gMG?

Yes. So first, let's talk about the experience from the time that the script was wrote to the time that the patient is infused and the reality of it is you have a brand-new product that's out and available and what we're seeing is on a patient-by-patient basis. It completely depends upon who their insurer is. What we do know is, as we don't have a J code, as you've heard in the prepared remarks, the policies that are being prepared by the payers, we have about 25% of covered lives that have policies in place right now. So the process going from demand to actual infusions in some cases is longer. We expect this to shorten over time. But I'm really proud of the team at My VYVGART Path, our nurse case managers, our case coordinators and our field reimbursement managers, who are working on every single case to make sure that we can shorten the time to the best of our ability.

So what was the second question, please?

VYVGART being incorporated in the treatment guidelines for gMG.

We're 8 weeks into this initial launch, and really it's too early to say. Right now, the only thing I can say is the treatment guidelines of where we are seeing patients that are being prescribed VYVGART is aligned with ADAPT. So it's not necessarily severe relapsed/refractory. In some cases, it's much earlier in the treatment paradigm. But I'm sure we will see more treatment guidelines over time as the market matures.

Your next question comes from the line of Manos Mastorakis from Deutsche Bank.

So yes, you alluded to that already very briefly, but I just want to better understand your latest perspective on clinical differentiation to competitors such as rozanolixizumab and nipocalimab may be coming in the future as well as competitive risk from broader use of C5 inhibitors in MG if ULTOMIRIS is approved. And a follow-up question is what would your expectations be for the Phase III ITP data and the clinical positioning as well in ITP.

The elements we mentioned. So let's start with the biology, right? I mean we're science based, we follow biology. Myasthenia gravis is truly an IgG-mediated disease. So the pathogenic IgG antibodies are very well known. We also know what they do at the neuromuscular junction. By binding acetylcholine receptors or all the building blocks of the junction, they will basically prevent signaling to the acetylcholine receptors. They will basically cross-link, internalize and make the receptor unavailable for signaling and they will also recruit complement. So definitely complement is one of the several pathogenic modes of action of these autoantibodies. And by nature of the disease biology, if you clear the autoantibody, you will, of course, eliminate complement recruitment to the junction but you will also effectively take care of the other pathogenic modes of action of these autoantibodies. So with upstream of any complement blocker and I think we have a more complete blockade of the disease biology, I think the clinical data support that efgartigimod has shown the highest-ever clinical efficacy in any clinical trial.

What about the differentiation within the FcRn class? I think it's extremely important. You guys remember that not all FcRns are made equal. I think during our R&D Day in the July session last year, we articulated key elements of differentiation. This is not just a high-affinity monoclonal antibody targeting a target like FcRn. This is a uniquely designed ligand of FcRn coming with its own unique properties in complex with FcRn. I think we demonstrated some pretty fundamental biological differentiation, which again has the potential to translate into best-in-class efficacy, best-in-class safety and convenience. So as Keith said, let's wait for the data. I think we've put the bar very high with close to 80% response rate over the first 2 treatment cycles. And by the way, response is a very stringent definition, right: in 4 consecutive visits having a delta of 2 points or more on the ADL scale.

I think if you look at the safety profile, we have shown a unique interaction with FcRn and therefore also probably a very clean safety profile, which can be unique and differentiated. And then on the topic of convenience, the individualized dosing, that's where we're going in this space. Also the offering with both IV and subcu, I think, is giving maximum flexibility to patients. So I think we are well positioned to compete in the FcRn class.

With regards to ITP, what to expect. The way we talk about the first of the 2 registration trials is the primary endpoint is truly designed to create a statistically meaningful difference between active arm and placebo arm. There's not much more to it than that. But we have gone at great lengths to craft secondary endpoints, which will give the full opportunity to efgartigimod to shine in an ITP indication. We will learn a lot about cumulative platelet counts in these patients, platelet counts over the entire study period, the resulting bleeding events, quality of life. Do not forget, this is a severe autoimmune disease; it's much worse than just a platelet count and bleeding issue. These patients suffer from debilitating fatigue, depression, anxiety. And then, of course, we want to get some further safety information on efgartigimod in these patients. So there's a lot of stuff to read out in this trial, but the primary endpoint is all about hitting statistically significant differentiation from placebo.

And your final question comes from the line of Charles Pitman from Redburn.

Charles Pitman from Redburn. Just sneaking in the end here. So first is a clarifying question for Keith. Could you provide a little more detail on your definition of broad coverage for the U.S. payers? Can we assume this could mean over 50% of covered lives?

And then just secondly, a question for Karl. Could you give us just a little bit more guidance on how you're thinking about the COGS for VYVGART and the split between your operating expense lines for 2022? Or should we expect guidance to be provided at 1Q once the launch has progressed a little more?

Yes, Charles. Thanks for the question. So when we talk about broad coverage, remember, we work already with the 6 national payers and we were before the launch, but you also have large regional payers that we're working with. And so that's why we said by end of Q2 because the team is out working with the regional payers on the policies that are being put in place there. So quite frankly, giving the metric this early of 25% of covered lives -- covered commercial lives at 8 weeks in is pretty good. So when I think of broad coverage, I'm not prepared to give you a target, but I do feel safe enough to say I'm talking about greater than 50% of commercial lives.

Thank you, Charles, for the question. In terms of guidance, we do not plan to give guidance in 2022. So don't expect anything in Q1. In terms of COGS, we're not specific on the COGS, but you can expect it to be the same as a typical biologic. And in terms of a split on our expenses, again we're not going to give any more details, but I would -- but we -- R&D will continue to be the bulk of our spend. Thanks, Charles.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.