Legend Biotech Corp (LEGN) 2023 Q2 法說會逐字稿

Good morning, and thank you for standing by. Welcome to the Legend Biotech Reports Second Quarter 2023 Financial Results. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to turn the conference over to Jessie Yeung, Head of Investor Relations and Public Relations. Please go ahead.

Good morning. This is Jessie Yeung, Head of Investor Relations and Public Relations at Legend Biotech. Thank you for joining our conference call today to review our second quarter 2023 performance.

Joining me on today's call are Ying Huang, our CEO; and Lori Macomber, Legend's CFO. Following the prepared remarks, we will open up the call for 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.

During today's call, we will be making forward-looking statements, which are subject to risks and uncertainties that may cause our actual results to differ materially from those expressed or implied here within. These forward-looking statements are discussed in greater detail in our SEC filings, which we encourage you to read and can be found under the Investors section of our company website.

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

Good morning, everyone. Thank you for joining us today. We have had a very busy first half of the year, and we're excited to be sharing our latest corporate developments with you on a quarterly basis, starting with today's call.

Over the past 6 months, our teams have worked incredibly hard to accomplish a number of critical milestones that have set the stage for decisive growth for our company for years to come. First and foremost, as you may have seen, reported by our partner J&J on July 20, our first approved therapy, CARVYKTI generated total sales of $170 million in the second quarter of 2023, amounting to $189 million in sales in the first half of 2023. The strong performance in the quarter exceeded our expectations, which was driven by continued strong demand for our product and a meaningful increase in our daily slot capacity. We were able to ramp up a lot more quickly than anticipated, and we made continued improvements in our manufacturing processes.

We're very pleased by the progress made in our commercial launch and remain committed to making CARVYKTI available and accessible to patients who are eligible for treatments through our ongoing investments to increase capacity and improve efficiency in the second half of 2023.

We continue to find success in our portfolio and pipeline including the CARTITUDE clinical development program that investigates CARVYKTI in additional patient populations. These results demonstrate the strength of our company and our relentless pursuit of novel therapies for patients with unmet needs.

This year, at the American Society of Clinical Oncology meeting in June, we presented new data from our Phase III CARTITUDE-4 study investigating CARVYKTI in relapsed and lenalidomide-refractory patients with 1 to 3 prior lines of treatment. In this study, CARVYKTI reduced the risk of disease progression or death by 74% compared to standard-of-care regimens. The data were also published in the New England Journal of Medicine and presented at the European Hematology Association 2023 Congress later that month.

Based on the CARTITUDE-4 data, our partner Janssen submitted a type II variation application to the European Medicines Agency and a supplemental Biologics License Application to the U.S. Food and Drug Administration to expand the indication for CARVYKTI for use in earlier lines of multiple myeloma treatment as early as after first relapse. We see CARVYKTI as the crux of the new myeloma landscape and have submitted regulatory applications for its expansion from 4 plus lines to 2 plus lines.

We're excited by the potential to provide treatment options to patients earlier in their treatment journey and are encouraged by the results of ongoing CARTITUDE-4 study. We look forward to working closely with regulatory authorities around the world as we seek to expand the indication.

As part of our efforts to expand manufacturing capacity, we signed a 3-year contract with Novartis to manufacture additional clinical doses of CARVYKTI in April and added additional certified treatment centers this quarter as part of our ongoing efforts to improve efficiencies while expanding capacity and access to this novel therapy.

In addition to our success with CARVYKTI, we're also advancing our pipeline of therapies for solid tumors. This quarter, the U.S. Food and Drug Administration granted LB2101, targeting DLL-3, our investigational therapy for small cell lung cancer, an orphan drug designation in which we were able to open a trial site in the U.S. to prepare for patient recruitment.

Another one of our solid tumor programs, LB1908, targeting Claudin 18.2 in gastric cancer, is also progressing on track. We recently opened 2 clinical trial sites in the U.S. for this program in the second quarter, and we anticipate dosing our first patient soon. We look forward to reporting on progress across both of these solid tumor programs in the future.

And finally, our financial outlook is equally promising and positions us to execute our plans through 2025. On the heels of our strong CARTITUDE-4 data, we were able to raise approximately $785 million in gross proceeds in the quarter through a registered direct offering, private placement and the exercise of a warrant, bringing our cash, cash equivalents, deposits and investments to $1.5 billion at quarter end.

Further, as part of our collaboration with Janssen for CARVYKTI and the CARTITUDE clinical development work, we received a $15 million milestone payment this quarter at the acceptance of the type II application for CARVYKTI and achieved another milestone for $20 million at the U.S. FDA acceptance of the sBLA of CARTITUDE-4. We continue to see additional revenue from CARVYKTI as we reach additional key data and regulatory milestones.

Turning to the next slide, Slide 6, a final analysis of data from the pivotal Phase Ib/II CARTITUDE-1 study was presented at the ASCO and EHA annual meetings this year that showed sustained, deep and durable responses in heavily pretreated patients with relapsed or refractory multiple myeloma. These data show that CARVYKTI continues to demonstrate both efficacy and safety years after treatment, which has made our therapy a leading option for adult patients with relapsed or refractory multiple myeloma.

In addition, 5-year follow-up data from LEGEND-2 were presented. It is the longest follow-up by any BCMA-targeted CAR-T cell therapy. At the 5-year follow-up, these data are encouraging and bolster our belief that cilta-cel or CARVYKTI is a paradigm-shifting therapy.

Moving on to Slide 7. As I mentioned earlier, we recently announced the submission of the supplemental Biologics License Application to the U.S. Food and Drug Administration to expand the label for CARVYKTI. The application for expansion includes the treatment of adult patients with relapse and lenalidomide-refractory multiple myeloma, who have received at least 1 prior line of therapy, including a protease inhibitor and an immunomodulatory agent.

With this filing, we hope to move CARVYKTI into the 2 to 4 prior lines of therapy study in multiple myeloma, subject to FDA approval. FDA has now accepted this sBLA signed -- and assigned a PDUFA date of April 5, 2024.

In the clinic, we plan to complete enrollment of the ongoing Phase III CARTITUDE-5 trial, which evaluates cilta-cel in newly diagnosed patients for whom transplant is not intended by end of this year. Furthermore, we're planning to initiate enrollment of our first-line CARTITUDE-6 study in fourth quarter of 2023.

Next slide, Slide 8. We're pleased to report that CARVYKTI continues market penetration with net sales of $117 million in the second quarter of 2023, consisting of $114 million in the U.S. and $3 million in EU. The 63% quarter-over-quarter sequential growth in the U.S. was primarily driven by high demand from physicians and patients, higher slot availability and lower out-of-spec rate. As of June 30, the number of activated U.S. treatment sites was 54.

On Slide 9, you will see our R&D team continues to advance our proprietary pipeline in the second quarter. In last quarter, we opened our first clinical trial site for our DLL-3 program in the U.S., our second ongoing clinical trial in the U.S. In addition, a number of patients are being enrolled and dosed in a number of Phase I IIT programs in China.

I'll now turn the call over to our CFO, Lori Macomber, to go over our second quarter financial performance in more detail.

Thank you, Ying, and good morning, everyone.

As Ying mentioned, we are very pleased with the performance of our commercial product CARVYKTI this quarter, which generated approximately $117 million in total sales, representing a 63% sequential growth, a 388% growth over the second quarter of 2022. As a reminder, we share equally in all profits and losses of CARVYKTI, ex-China, with our partner, Janssen.

Starting with revenue. Total revenues for the second quarter were $73.3 million, consisting of $58.2 million in collaboration revenue from the sales of CARVYKTI and $15.1 million in license revenue for the achievement of a milestone during the quarter as outlined in the global development plan under the Janssen agreement for cilta-cel.

Net loss for the 3 months ended June 30, 2023, was $199.1 million or a loss of $0.57 per share compared to the net loss of $193.2 million or $0.62 loss per share for the same period last year. For the 6 months ended June 30, 2023, net loss was $311.2 million or a loss of $0.91 per share compared to a net loss of $225.5 million or a loss of $0.73 per share for the 6 months ended June 30, 2022.

Moving on to expenses. Collaboration cost of revenue for the second quarter 2023 was $32.7 million compared to $16.9 million for the same period last year. These are Legends' portions of collaboration cost of sales in connection with collaboration revenue under the Janssen agreement along with expenditures to support the manufacturing capacity expansion.

Research and development expenses for the second quarter 2023 were $95.8 million compared to $68.8 million for the same period last year. The increase of $27 million year-over-year is due to higher patient enrollment for Phase III clinical development programs for cilta-cel and increases in R&D activities for our other pipeline programs.

Administrative expenses for the 3 months ended June 30, 2023, were $27.8 million compared to $18.1 million for the same period last year. The increase of $9.7 million year-over-year is primarily for the further build-out of administrative functions and continued investment in building our global IT infrastructure, along with non-reoccurring financial and legal fees related to the company's restatement of its historical financial statements.

Selling and distribution expense for the 3 months ended June 30, 2023, was $21.4 million compared to $27.4 million for the same period last year. The decrease year-over-year is primarily due to non-reoccurring launch expenses incurred in the first half of last year to support the U.S. launch of CARVYKTI.

To wrap up, our spending remains on track and we continue to maintain a strong balance sheet. As of June 30, we had $1.5 billion in cash and equivalents, deposits and investments, extending our cash runway through 2025.

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

Thanks, Lori. In closing, we're very encouraged by the performance in this year thus far. Our teams continue to execute, making tremendous progress to bring CARVYKTI to more patients while continuing to supply our clinical programs. We have a healthy cash balance to carry out our long-range plans across all areas of the business. We now have cash runway sufficient to fund operations throughout 2025.

Looking ahead, our priorities include increasing manufacturing capacity, which we will do by continuing to invest in our facilities and working with the FDA to ramp up; activating more treatment centers in the U.S. and ex-U.S.; progressing our front-line studies across CARTITUDE-5 and 6 studies; last but not least, advancing our pipeline programs.

We remain steadfast in our commitment to capturing the full potential of CARVYKTI. Our teams across the globe are working tirelessly to enable reliable and consistent product availability to continue with this momentum.

I would like to take this opportunity to thank the more than 1,500 Legend team members across the globe for their dedication and effort.

Before I close the earnings calls today, this is a picture of our [Obelisk] facilities in Ghent, Belgium, which we anticipate will be operational for clinical production by end of 2023.

We will now open up the call for your questions. Thank you.

(Operator Instructions) The first question comes from Kelly Shi with Jefferies.

Congrats on the progress. My first question is regarding the out-of-spec rate. I'm curious, is Legend expecting higher project specification limits when CARVYKTI gets approval in earlier lines from second to fourth line? And should we expect the out-of-spec rate improve accordingly for these early-line products?

Kelly, thanks for the question. So this is Ying. I'm going to answer your questions about out-of-spec.

First of all, after all the work we have done in the last 6 to 12 months, we're very happy to report that today, our current out-of-spec rate is trending down continuously, and it's very close to the label rate and not much really higher than our competition's out-of-spec rate. So we're happy. We have made a lot of progress over there, thanks to the efforts from our Raritan operations team.

And then secondly, to answer your question about the widening specs through the CARTITUDE-4 application. We did submit in our sBLA package to the FDA when we filed in June that a comprehensive correlated analysis that provides data to convince the agency, we believe, to widen our spec, pending FDA approval. So if we do get a wider spec from the agency when we receive the CARTITUDE-4 approval on the label, we expect the out-of-spec rate to be down another meaningful amount from the current out-of-spec ratio.

The next question comes from Terence Flynn with Morgan Stanley.

Maybe 2 for me. I was just wondering if you can comment at all about the cadence of slots in the second half of the year, if we should still expect an increase there? Or is it more steady state until 2024? And then my second one relates to the ASH conference. Obviously, always a big event in myeloma. Just wondering if you could give us a preview of any potential data that you guys might plan on submitting?

Terence, this is Lori. Thank you for the question.

So the cadence that you're going to see for the second half of the year, you will see a step-up from Q2. We -- as you know, we got the capacity ramp in Q2, but we didn't realize that for a full quarter. So you will see somewhat of a step-up in Q3. And in Q4, we'll continue with that ramp.

Regarding the ASH question, I'll turn that over to Ying.

Terence, thanks for the question.

So consistent with J&J's disclosure policy, we do not really comment on submitted abstracts. But I think given the CARTITUDE-4 data, the initial presentation was made at ASCO and EHA, you should probably expect some more subgroup analysis coming from CARTITUDE-4. Other than that, stay tuned until the ASH abstracts are published.

The next question comes from Gena Wang with Barclays.

The first question is regarding the manufacturing between -- the balance between clinical trial enrollment versus commercial patient. So I just want to make sure, the Belgian site, since active by the year-end '23, will CARTITUDE-6 manufacturing would be all at the Belgian site, initially? And then you will move to Novartis sites by second half 2024? And also regarding current active sites in the U.S., do you still have a slot limitation for each site? And quickly, another set of question regarding PDUFA. You announced April 5, 2024. Just want to confirm, this is a standard review? And you do not expect an AdCom?

Gena, thanks for the question. I'll answer the first and the third, and then I'll ask Steve to answer the second question.

So on your first question, yes, we do fully expect our first stage of our Ghent, Belgium facility to come online by end of this year. And we're planning to start the enrollment for CARTITUDE-6 basically around the timing of the coming up online for Ghent facility. So we will start clinical production for CARTITUDE-6 from our Ghent facility.

I can't comment on Novartis at this point. But suffice to say, everything is on track at this point in terms of tech transfer and related activities. And then on your third question on PDUFA date, yes, I can confirm that. The PDUFA date is April 5, 2024, under standard review. Steve?

Yes. Thanks, Gena. Yes. So the question had to do with allocation for sites.

So you're correct. So we launched on an allocated model here in the U.S., and we continue to be in an allocated model for the foreseeable future. However, what we did do recently as our out-of-spec continue to have significant improvements, we also added a pool concept into the U.S. We have additional slots that our sites can then go into providing they have, obviously, that level of patient demand. So right now, in the U.S., we have a bit of a hybrid where we have all sites being allocated as well as an open pool approach for some specific sites within the U.S.

The next question comes from Umer Raffat with Evercore.

Ying, first, can you remind us what's going on with the Board dynamics in GenScript and what changes may or may not be happening? If we can just understand what's happening on the Board front and governance front. Secondly, I know you have a DLL-3 CAR-T in your Phase I right now. Can you remind us, A, what did we learn from the DLL-3 CAR-T failure at Amgen? This was a 2019 program. And also, what was the lag between when your IND was filed or cleared back in fall last year versus about 7 or 8 months it took to actually get the first patient recruited?

Umer, thanks for the questions. This is Ying. So I'll answer first about the Board.

As you know, we have a 10-member Board and our shareholder, GenScript, actually had appointed 3 Board members. And this is consistent with the 48% equity ownership held by GenScript. I think in the Board, it's very productive because we do have a good mix of independent Board members, 6 of those, and 1 representative from the company, and 3 from our sizable shareholder, GenScript. So I think in terms of Board dynamics, it's a pretty good mix between a large shareholder and the 6 independent Board members. And as you can tell, in terms of CARVYKTI and the CAR-T program as well as our pipeline, the company is doing very well in terms of advancing on both fronts, and that is under the guidance of the Board of Directors. So that's the first question.

And what was your second question, Umer?

My second question was around the DLL-3 CAR-T therapy. What was...

This is Guowei Fang. I can comment on the second question that is with regard to Amgen's DLL-3 targeted CAR-T therapy. As we know that Amgen has 2 different DLL-3 targeted product in clinical trial, and one of them was autologous CAR-T therapy, second one is DLL-3 targeted CD3 bispecific. For the autologous CAR-T product, they tried in several patients in the second dose cohort. They tested in 2 patients. One patient actually gave a fairly durable response. Based on Amgen's communication, their decision on stopping the autologous CAR-T product development is certainly based on their portfolio prioritization. They want -- they decided to focus on the DLL-3 CD3 bispecific antibody.

We think that the DLL-3 target, the autologous CAR-T therapy, could provide a substantial benefit to the patient. First, from a disease perspective, this is a disease of a highly unmet medical need. From the targeted perspective, this is also an ideal target for autologous cell therapy in solid tumor indications because we know that DLL-3 is a lineage-specific biomarker for neuroendocrine cell lineage. And have -- in this respect, it's very similar to some of the very successful CAR-T target in breast cancer, all of them targeting a lineage-specific biomarker.

Our designs of the DLL-3 product is quite different from Amgen's product. First, we have a unique CAR design in terms of binder, in terms of overall architecture of the CAR structure. Secondly, we're adding a unique armor mechanism. And currently, this program is already being cleared by R&D, and we have 2 site activated and we are actively moving the program forward.

And Umer, this is Ying. Maybe I want to add the fact that you probably have noticed this. DLL-3 is the first-ever IND and clinical program. We moved into the U.S. without conducting a first-in-human study in China. So we do believe that the competitive data in DLL-3 from Amgen actually shows very promising data from the Phase II recently. And I think that's a somewhat clinically validated target. That's why we decided to bring this into IND at risk.

The next question comes from Yaron Werber with Cowen.

So Ying, it's a little bit about what we're seeing from some of your competitors that they had extra capacity for CAR-T in Q2. And it looks like it was demand driven exactly when you ramped up both your out-of-spec and your overall capacity. Can you talk a little bit what is your demand backlog looking like? Are you still seeing more demand than you actually have supply? And what are you seeing from TECVAYLI and now TALVEY as they're coming to the market? Have you seen any impact in your demand? And how is J&J going to position just sequencing wise?

Yaron, thanks for the question. I'll ask my colleague, Steve, to answer this question. Steve?

Thanks, Yaron. We've seen just the opposite, especially coming out of ASCO with the release of the CARTITUDE-4 data. We've done a lot of research, as you can imagine, in this space. And market demand has done nothing but increase for cilta-cel. So in terms of your question in terms of the backlog that we're seeing, we have seen a reduction for sure since launch in terms of the queue, especially in the later line population. And that's been largely driven to the fact of, like you mentioned, there has been bispecific entry into market.

But mostly, from our front, it's just in the near term, or I should say, when we launched, our inability, unfortunately, to meet that demand out of the gate. But for sure, we are not seeing any lessening at all in demand in these late lines of treatment in particular and just the opposite in these earlier lines of treatment, should we get this indication in second line, plus demand there has been very strong, especially in the high-risk population.

And maybe I want to add, Yaron, that I talked to our head of technical operations very frequently. I can confirm that starting from January of this year, we have not seen any meaningful change at all in our backlog in terms of the backlog for our manufacturing operation to process.

I think there was a second question though, Ying, on that around bispecifics. I didn't -- yes, so let me just address that.

So I think the question had to do what's happening with the bispecifics in market. And also, I think it was a question related to Janssen. So what we're seeing very clearly around the bispecifics is a bridge to get to the CAR-T therapies. Again, it's in reaction to our manufacturing constraints that we're working under. So for sure, and this is a good situation, obviously, for patients to be able to bridge to a CAR-T therapy, i.e., cilta-cel. And bridging from whatever that bispecific may be, you've seen recently a number of bispecifics being approved. Again, this is a very good situation for patients to have these different options.

And also, most importantly, I think this is a very key point, is that the commercial insurers in the U.S. continue to reimburse for CAR-T therapy once a bispecific or if a bispecific is used prior to cilta-cel. So that, again, speaks to the overwhelming efficacy that we're seeing for this program, even when a prior BCMA therapy is used.

The next question comes from Leonid Timashev with RBC Capital.

Congrats on the progress. I guess going back to the priority review and the potential launch in the second to fourth line, I guess, any impacts to the launch timing and readiness? Or will you be able to create a backlog of slots for the second through fourth line launch as well? And then, I guess, related to that, what are you hearing on the ground about how physicians are thinking about using CARVYKTI when it becomes available in this second to fourth line indication? Are they going to slowly move up starting in fourth line and third line? Or would you expect them to jump straight to second line given the strength of data, which might potentially require more supply?

Leo, it's Steve, why don't I go ahead and answer your question. It's the right question, right? So what our models have shown and what the research is showing, and I mentioned this in the earlier response I just made, is -- in particular, in the high-risk population, we're seeing very quick adoption regardless of line of therapy, right? So -- and I'm sure you're probably working in your models. In particular, in the second line setting, in particular, we noticed between anywhere between 15% to 20% of that second-line population is deemed to be at high risk. Our research is telling us very clearly based upon the data we presented, that is a population that our physicians in the U.S. is that's a very much of a treatable population for cilta-cel. And that's how we're modeling this as well. As you go in later lines of therapy, you see more aggressive use of cilta-cel. So that's how we are modeling it from our perspective, but you will see across the board use for this product. And like I said, in particular, in the high-risk population, you'll see very high use once we have this approval.

The next question comes from Kostas Biliouris with BMO Capital.

Congrats on the progress. A couple of questions from us. The first one for Lori. In the first quarter of 2023, ABECMA generated U.S. sales, which was similar to your sales in the second quarter 2023. Given that ABECMA was a profitable product in the first quarter of 2023, can you discuss your time line to profitability? And the second question is BMS and 2seventy bio announced recently a maintenance at one of their manufacturing sites, which has likely impacted their revenues. I was wondering, will you also need this type of maintenance at your manufacturing site? And how frequently would you need that, if at all?

Kostas, so regarding the question of our sales and profitability, as you know, we've been steadily ramping up. And as our volumes have been increasing, our profitability, particularly in our gross margin, is improving. Overall, from a collaboration standpoint, as you know, we continue to make significant investments into the front-line clinical trial studies as well as manufacturing capacity. So from a program standpoint, it will still be a while before we see overall profitability for the program. But as you saw in Q2, we're making significant strides on the gross margin side.

Regarding the second question, I'm sorry, can you repeat the second question?

The second question has to do with the maintenance, so 2seventy bio and BMS performed maintenance at one of their ABECMA manufacturing sites. And this slowed down the production and impacted the revenues of ABECMA. I was wondering whether you will also need to perform maintenance at your manufacturing site at some point for CARVYKTI and how frequently would you need that, if at all?

Kostas, this is Ying. I'll take this part of the question from you on maintenance.

So as you know, for any aseptic GMP manufacturer, every year, you are required by FDA to do this kind of maintenance. However, our operation from the Janssen and Legend teams in New Jersey, we have decided to take a very smart approach, which is we're not going to shut down the facility at all. Instead, we'll do a rotation from all the different suites. So yes, every 6 months, we will have to do these so called aseptic simulation [runs], but it really wouldn't affect the revenue so much that you're going to see a quarter-over-quarter decrease here. So we are planning for this smartly, and we will obviously conduct all the required aseptic processes for the rest of the year. But suffice to say, we're not planning a shutdown of the facility, just to confirm.

The next question comes from Justin Zelin with BTIG.

Congrats on the progress. Maybe for Steve. So just assuming you get approval in the earlier lines here, maybe you could help us understand how slots will be prioritized, whether the line of therapy will make an impact here or whether the high-risk patients may be prioritized for slots? And if you could just also comment on outpatient administration.

Justin, in terms of slot priorities or slot prioritizations, so a couple of things, just to kind of maybe rewind in terms of how we allocate and how things -- what happens at the site.

So we will make our allocations. And as I mentioned to you, as capacity increases, we'll actually be allocating higher amounts as well as increasing what we call this open pool for all sites to get into. In terms of what types of patients and the allocation in terms of patient type, in terms of who gets what slot, that is basically driven at the site. I know the sites now have different criteria that each of these sites are using in terms of who will be getting cilta-cel and other therapies, so that would be driven at the site level, not at our end.

In terms of -- I think you had a question on outpatient. Thanks for that question, right? So for those of you who've been following us for quite some times know that that's an important dynamic as -- especially as we get more -- larger and larger indications for this therapy. The -- so what we're seeing, and this is interesting, we've seen now quarter-over-quarter quite a bit of an increase in outpatient use. We've seen in the first quarter for cilta-cel, about 18% of the claims that we've analyzed have shown about 18% of the time that these patients are being treated in outpatient clinic within the hospitals. Now for the second quarter, we're seeing quite a bit of a jump now up to 30%. So you're seeing this really dynamic move from inpatient to outpatient for CAR-T therapy, which is exciting for a number of reasons, especially for patients and also keeping costs down.

But also, the follow-up question you might have is what's happening with the marketplace. Our competitor, you're seeing less than 10% of the time our competitors actually being used in the outpatient setting. So for sure, we believe we have more operational flexibility with cilta-cel. And more importantly, now you're starting to see this play out in the market. And we believe that's, again, a benefit to everyone, most importantly, the patient.

The next question comes from Mitchell Kapoor with H.C. Wainright.

Firstly, I just wanted you to comment broadly on the out-of-spec rate and when this could virtually not be an issue anymore. And then secondly, if you could just comment on the earlier pipeline, some of the catalysts and time lines we could expect for the next 12 to 24 months.

Mitchell, thank you for your question. This is Ying. So on out-of-spec, I'll quote one industry example, which is the KYMRIAH from Novartis, right? There's a paper out there in the public domain that describes, originally, the OS rate was probably in the high 20s or 30s. And then after about 1 to 2 years of improvement in work stream, Novartis was able to reduce that to now about 2%. So obviously, this can be done. And also from our own experience, the Janssen and Legend teams worked really hard in the last year or so, and we were also able to see a very meaningful and significant reduction in our OS from the beginning of the launch to now in the teens. And we continue to optimize our work stream, and there's a lot of work we can do.

As I mentioned previously in this call, we have submitted a lot of data to the agency as part of the sBLA, and we do expect that we can get a wider release back from the agency on the CARTITUDE-4 data. So when that happens, we expect a very meaningful reduction in the out-of-spec rate. And eventually, our goal is to reduce that to low single digits, low- to mid-single digit out-of-spec rate. So that's our expectation. That's what we're working towards to.

On your second part of the question, in terms of the next 6 to 12 months, obviously, our first priority is to get the FDA-approved increase in our capacity. We're planning for another one by end of this year. And then we plan to launch the second-line indication, pending on the FDA approval, by -- or on the PDUFA of April 5, 2024. And we continue to work in terms of increasing the number of facilities that will supply CARVYKTI.

So we're doing expansion work in Raritan, and we expect the capacity from Raritan will meaningful increase in '25. And then we're opening up our first stage of Belgium facility in Ghent. By end of next year, our large greenfield facility will be also coming online from Ghent. And as you know, we've been working with third-party CMO to expand our network.

So all these efforts will crystallize into a much higher capacity in the next couple of years. And we have said previously that we aspire to come up with an annual capacity of 10,000 doses or more by end of 2025. We're very much on track to achieve that goal at this point given our progress in the construction and also the other fronts. So that's probably what's really the most important catalyst or priorities for us in the next 6 to 12 months.

The next question comes from Sami Corwin with William Blair.

This is Brooke Schuster on for Sami. We were wondering if you could provide any color on reimbursement and if you saw any challenges in security reimbursement, like in comparison to inpatient versus outpatient or the academic versus community setting?

Brooke, it's Steve again. The short answer is no. As of to date, cilta-cel has really enjoyed quite open access from a reimbursement perspective. And as we lead into the second line plus indication, all indications are very positive. As a matter of fact, when you look at the value capture modeling that we've done, insurers love a drug like cilta-cel because of the potential it has in terms of cost containment, potentially long-term cost reduction.

So no, really, right now, we'll continue to monitor that area. Obviously, it's a very important one for us. But to date, reimbursement has not been a problem. We don't foresee any problems in the future.

The next question comes from Kelsey Goodwin with Guggenheim.

I guess, first, it's on CARTITUDE-4. The median time from apheresis to infusion was 79 days. I guess, what are you seeing in the commercial setting? And what can be done to speed that up? And then separately, maybe building off that last question, could you maybe just provide more color on what you're seeing in terms of community patient mix and referrals from the community?

Sure, I'll take the question around the commercial cycle time that you referenced. We're seeing the cycle time from receipt to release anywhere between 4 to 5 weeks on average, which I think is fairly consistent with what you're seeing in market today with most CAR-T therapies.

I think there's a second question I might refer over to Ying.

Kelsey, thanks for the question on CARTITUDE-4. So yes, I can confirm that the median time was 79 days cycle time in terms of end-to-end. There are 2 drivers behind that. Number one is that if you look at the trial sites we opened for CARTITUDE-4, the large majority, I believe, about 75% to 80% at least from CARTITUDE-4, were enrolled in Europe and the other international regions outside of the U.S. So if you recall, that was actually conducted during the peak of COVID outbreak. That contributes significantly to the cycle time because we had to clear the customs. And also, unfortunately, supply chain was severely disrupted during the COVID outbreak. That's really the major driver behind that.

And then secondly, obviously, if you look at the protocol, right, there's all this bridging therapy and the requirement of the standard of care, which is either PVd or DPd. So that's really the -- another reason why we see a higher than normal cycle time of end-to-end for CARTITUDE-4. But as you just heard from Steve, right, today, during our commercialization in the U.S., we can confirm that the typical -- the receipt to our release time is about 35 to 40 days in spec samples. And we continue to make improvement on that. And we hope that we can report shorter end-to-end time in the next quarter.

I show no further questions at this time. This concludes today's conference call, and thank you for participating. You may now disconnect.