Legend Biotech Corp (LEGN) 2024 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to Legend Biotech second-quarter 2024 earnings conference call.

(Operator instructions) Please be advised that today's conference is being recorded.

I would now like to turn the conference over to Jessie Yeung, Vice President of Investor Relations and Finance.

Please go ahead.

Good morning.

This is Jessie Yeung, VP of Investor Relations and Finance at Legend Biotech.

Thank you for joining our conference call today to review our second quarter of 2024 performance.

The second quarter has been an eventful one.

We are pleased to report 18.5% sequential growth in capacity sales.

More important to me, we received label expansion approvals from both FDA and EMA.

Lastly, we are most excited about the survival benefit demonstrated by complexity in a secondary analysis of positive four, nothing gives us more choice than helping patients with multiple myeloma live longer.

Joining me on today's call are Ying Huang, the company's Chief Executive Officer, and Lori Macomber number, the company's Chief Financial Officer.

Following the prepared remarks, we will open up the call for a Q&A.

We have Guowei Fang, Chief Scientific Officer, and Steve Gavel, Head of Commercial Development for the US 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.

Hello, and welcome to our second quarter earnings call.

I am pleased that you could join us.

Since our last earnings call, we have made progress on multiple fronts, which you can see in our earnings presentation or slides 5.

First, we announced positive top line results from CARTITUDE-4.

In the prespecified second interim analysis, our CARTITUDE demonstrated statistically significant and clinically meaningful improvement in overall survival compared to standard therapies.

We look forward to presenting this important data set at major medical meetings in the coming months.

Additionally, at ASCO in EHA, we provided new data from the Phase 2 CARTITUDE-2 study, a new and updated data from the Phase 3 CARTITUDE-4 study.

We would like to bring to our attention a recent paper published in nature.

As you will see on slide 6, data were reviewed from 339 multiple myeloma patients treated at Mayo Clinic with antibody drug conjugates, CAR-T and T-cell engagers targeting BCMA in the period of 2018 through 2023, with a median follow-up of 21 months.

The study found that CAR-T and T-cell engagers demonstrated superior efficacy in both PFS and OS to that of ADCs.

The authors also concluded that where feasible CAR-T should be the initial BCMA directed therapy.

We are encouraged by the real-world clinical evidence of CAR-T efficacy, particularly the insight it provides into strong efficacy of CARVYKTI.

As many of you know, our expansive CARVYKTI dataset enables us to continue building a strong foundation for our market penetration.

On this note, we recently added two regulatory approvals to global market opportunity you see on slide 7, the United Kingdom's Medicines and Healthcare products, Regulatory Agency approved CARVYKTI for second-line multiple myeloma and Health Canada approved CARVYKTI as well.

Our efforts to bring CARVYKTI to more patients globally translated into net trade sales for the second quarter of $186 million, which is a 50% increase year over year and 18.5% increase quarter-over-quarter.

As you will see on slide 9.

The increase in our second quarter performance versus the first quarter was a result of the ongoing launch of CARVYKTI and the share gains from capacity expansion and manufacturing efficiencies.

Importantly, we continue to see growth in patient demand, and we are reiterating our expectation for pronounced growth for CARVYKTI in the second half of the year, as we continue to add more slots and expand our capacity.

We remain laser focused on making more supply available to the market and reducing vein-to-vein time.

Turning to slide 11, our CMO, Novartis has begun clinical production of CARVYKTI the US.

This frees up production capacity for commercial production at our facility in Raritan, New Jersey.

We're on track to complete physical expansion of the Raritan site anticipate approval of the new section of route in the second half of 2025.

We continue to expect that our Obelisc facility in Ghent, Belgium will be approved for commercial production later this year.

We more than doubled our CARVYKTI production capacity in 2023 and are on track for continued expansion.

The increases to our production capacity will help us keep up with growing patient demand.

Our cash balance now stands at $1.3 billion, which we believe provides us the resources needed to increase production, as I just mentioned, and gives us financial runway into 2026, when we expect to begin to achieve an operating profit.

In other developments, we continue to bring more hospitals online as authorize treatment centers.

We now have a total of 77 US hospitals, 35 to treat CARVYKTI patients.

Outpatient treatment now comprises approximately 40% of our volume and remains an important medium for us as we expand our marketing efforts in the community setting for the second line and beyond.

Finally, turning to our pipeline on slide 13, I am pleased to share that we recently completed CARTITUDE-5 enrollment.

As you may recall, this randomized Phase 3 study evaluates patients with newly diagnosed multiple myeloma for whom stem cell transplant is not planned as initial therapy.

If we were to receive approvals based on CARTITUDE 5 and CARTITUDE-6, we would translate into an additional 52,000 patients annually.

I'm also pleased to share that we recently broke ground on the new state of the art Research Center in Philadelphia to advance our portfolio of next-generation cell therapies.

We are excited to expand our research presence in the US and attract top talent from the growing biotechnology innovation hub of Philadelphia, the birthplace of Gene and Cell Therapy.

In summary, we are executing against the substantial opportunity ahead of us as we expand our manufacturing capabilities and increase our earlier line commercial activities with an eye towards investment in future transformative cell therapies.

Now I would like to turn the call over to Lori, to walk you through the financials for the second quarter.

Lori?

Thank you, Ying, good morning, everyone.

As Jean mentioned, we generated approximately $186 million in total net sales for EBIT during the second quarter, an increase of 60% year over year, driven by the progress we have made with ongoing market launches, expanding market share and capacity improvements.

As a reminder, we share equally in all profits and losses occur, ex China, with our partner Johnson.

Turning to our revenue, as you'll see on slide 14, total revenues for the second quarter were $187 million, consisting of $93 million of collaboration revenue from the sale of gravity and license revenue of $91 million, driven by $75 million revenue recognized in connection with milestones achieved under the Johnson agreement for sit to sell $16 million in recognition of deferred revenue in connection with our agreement with Novartis to develop, manufacture and commercialize LB2102 and other potential CAR-T therapies selectively targeting DL3.

Net loss for the quarter ended June 30, 2024 was $18 million or a loss of $0.05 per share compared to a net loss of $199 million or a loss of $0.57 per share for the same period last year.

Moving on to expenses on slide 15.

Collaboration cost of revenue for the second quarter 2024 was $45 million compared to $33 million for the same period last year.

These are Legends portion of collaboration cost to sales in connection with the collaboration revenue under the Johnson agreement, along with expenditures to support the manufacturing capacity expansion.

Additionally, cost of license and other revenue for the second quarter of 2024 was $5 million compared to no cost of license or other revenue for the second quarter of 2023.

These costs are in connection with our agreement with Novartis to develop, manufacture and commercialize LV2102 and other potential CAR-T therapies selectively targeting DL3.

Research and development expenses for the second quarter 2024 for $113 million compared to $96 million for the same period last year, an increase of $17 million for the three months ended June 30, 2024 compared to three months ended June 30, 2023 was due primarily to research and development activities and to sell, including startup costs for clinical production in Belgium and continued investment in our solid tumor programs.

Administrative expenses for the three months ended June 30, 2024, were $35 million compared to $28 million for the same period last year.

The increase of $8 million year over year is primarily due to the expansion of administrative functions and infrastructure to support the increased manufacturing capacity.

Selling and distribution expense for three months ended June 30, 2024 was $30 million compared to $21 million for the same period last year.

The increase of $9 million year over year due to costs associated with commercialization activity, including the expansion of sales force and second line indication launch preparations.

To summarize, our spending remains on track, and we continue to maintain a strong balance sheet.

As of June 30, we have $1.3 billion in cash equivalents, deposits and investments.

Thus, we believe we have sufficient capital to fund our operating and capital expenditures into 2026 when we expect to begin to achieve an operating profit.

Thank you.

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

Thanks Lori.

To sum up, our team remains dedicated to our strategic priorities.

I am pleased to share that we recently surpassed 3,000 CARVYKTI patients treated to date, reflecting our deep commitment to multiple myeloma patients and their families.

I'd like to thank each of our employees for their dedication to the patients we serve as we steadfastly execute our capacity expansion and also our commercial launch in second line.

Before we open it up for Q&A, I'd like to assure you that our Board and management team have been taking a close look at our business to ensure we are best positioned to continue our growth and momentum as we advance our mission to help multiple myeloma patients.

We know there has been recent speculation about potential political risk, particularly given this being an election year, our board is active and engaged and continues to assess the potential impact of those risks.

We're not going to speculate on hypotheticals on this call.

But rest assured, we are focused on driving shareholder value as we consider our path forward.

If and when we have updates to share, we will provide them at the right time.

In the meantime, we appreciate if you can keep your questions focused on our earnings results.

And with that, we'd like to take your questions.

Operator, we're ready for the first question.

(Operator instructions)

Gena Wang, Barclays.

Thank you, I know you said we should not ask anything about speculative comments.

I know you also cannot comment too much, but I do wanted to ask because this is the number one, it is a major overhang on the stock regarding potential political country risk and biosecurity impact to the stock.

I know you cannot comment too much.

But, I don't know how much can you share some a little bit more color rather than very high level comments?

You'll have a little bit more color on what you could do or the company is in the process to prepare and to address this potential questions.

And the second is regarding the New Jersey Warrington site.

As of now, Novartis already has a clinical production in July 2024.

Is it fair to say now the warranty side is 100% commercial product?

Yes, sure, and thank you for your questions on.

Maybe I can address the second question first.

So you're right since some July, Novartis site in March, when New Jersey has initiated clinical production, the first patient was coming from car to six and that follows the IND clearance by the FDA.

So right now, we are in a process of shifting more clinical trial patients to the production side.

The Novartis are more cell sites however, we do still have certain production for clinical trials in the routing side and over the next few months with the cancer side going commercial and Novartis ramping up clinical trial production.

I think you should expect that the percentage of clinical production will go lower in bright.

So that's about routing.

And then your first question on and first of all, I can say that we have carefully evaluated the draft bill and also we have been engaging with certain stakeholders in Washington, DC, including on committee and house Vickers office.

So at this point, we do not believe there will be any direct impact to Legend and given how our operation model is and how in terms of data and also IP flow, we conduct the business.

So suffice to say that we are not too concerned that our target of the passenger appeal.

Thank you.

Jessica Fye, JPMorgan.

Hey, guys, good morning.

Thanks for taking my questions, which outpatient use now up the 40%, can you just remind us where that was last quarter and is the increase kind of coming across the board like as that proportion it is up?

Or is this more dynamic where new institutions coming on are say 100% outpatient, and that's what's driving the change.

And then I also wanted to follow up on in his question and recognizing that it doesn't look like you're directly impacted by bio secure, but the stock really did come under pressure in the first half of the year as a result.

Can you just talk about what you see as the best path forward for shareholder value creation.

And does it make sense for Legend you stand on company heading into a potentially contentious political period in the US?

Or should the Board be considering other alternatives?

It, Steve, why don't I take the first one, Jessica?

Your question has to do with outpatient outpatient trends where those patients are coming from.

So US also quarter over quarter.

So last quarter we reported that we were at 35% outpatient actually were trending closer right now to 45% as opposed to 40.

So there's a significant jump up in outpatient use in the US in terms of where is that coming from?

If you look at the US on volume in the sites that we serve is largely top-heavy.

So you see largely about the top 2015 to 20% of these hospitals driving the majority of the volume.

So the majority of the outpatient volume we see is in our large academic centers as opposed to evenly spread throughout our 77 sites right now.

Typically the rate limiter to get a site onboard or lease using, I should say, perfectly in the outpatient setting, just reps are patient rapid repetitions.

And and as we bring new sites onboard, that's the key thing that they are looking for is just trying to understand in the real-world setting is a toxicity profile, a profile similar to what we see in a registration study.

So that's how it spread out right now, but I just wanted to make sure we have the corrected percentage.

We're trending right at 45% right now for the quarter.

I'll turn it back over to Ying.

So we've been a public company for about four years.

And I think in that period as a company, Legend has made tremendous progress delivering for patients.

We also have achieved numerous milestones and data.

If you look at our recent second line approval in both the US and Europe and also the preliminary feedback from the field and what we can see from the order book and production data.

Clearly, there's a lot of potential in the new indication, and we just announced that we've completed enrollment for CARTITUDE-5.

That's another entry into the frontline.

So we certainly believe that there's a lot of growth ahead of us, and we remain confident in our current long-term strategy to realize the full potential of correctly and also advance our pipeline as we continue to develop innovative, but treat us shouldn't options.

So I think, you know, it's not a one answer or one way to create or maximize shareholder value, although as I mentioned on at this point, our bodies are engaged with investors and other stakeholders.

And obviously, we have the fiduciary responsibility of maximizing shareholder value.

And so that's pretty much what I can say about this.

Thank you.

Thank you.

Kelly Shi, Jefferies.

Thank you for taking my questions.

System approval in second line and for correct here, how do you see the demand and the use in second-line patients change over time?

And also one, only one patient received the curve if you treat them into what is the typical patient baseline characteristics regarding prior therapies, refractoriness and performance status either fashion?

Thank you.

Hi Kelly, it's Steve.

When I take the question in terms of how the launch is going and where we're seeing the use, et cetera.

And so just to remind folks that we launched early part of the quarter.

So you really didn't start to see the impact from a revenue perspective until late in the quarter.

We're starting to see it more pronounced.

The now in the third quarter.

So that's the first thing a lot of the performance we saw in the second quarter was off of CARTITUDE-1 indication as opposed to CARTITUDE-2.

However, you did see again some some uptick at the end of the quarter.

What we are seeing in terms of some of the leading indicators, and we're measuring this through the data that we are analyzing through our ordering portal.

We're seeing right now on average about between 50% to 60% of new patient orders coming into our portal is related to the CARTITUDE-4 indications.

So that's a very good demonstration of good leading indicator of hopefully what we see moving forward.

Now, again, these are not treated patients.

These are patients that are entering the quarter portal For scheduling purposes, but I did want to provide that data point on to you.

In terms of actual data, we won't be able to see the data coming through the claims and channels until towards the end of this month is when we'll start to start to see that.

And that will give us more objective evidence in terms of exactly what line of therapy these patients are are seeing the use.

But we're very, very excited by the fact that we're seeing over 50% of all inbound patients at least in our ordering quarter portal come coming through the CARTITUDE-4 indication.

Thank you

Ash Verma, UBS.

Good morning.

Thanks for taking our questions.

So maybe they go first one.

So you saw the Galapagos part, their BCMA CAR-T study on finding Parkinsonism.

Can you comment on how correctly binder compares to the Galapagos compound?

And does this make you believe that M&T's could be something that is more specific to chemically derived antibodies like yours?

And then just secondly, on the on the 2Q, the 3Q dynamic, so that the 9% price increase that you talked like, is that benefit mostly realized in 2Q sales already?

Or could that also be an additional tailwind for 3Q?

Thanks.

And as the senior, thanks for the questions up.

So on the first one on, yes, we did see what happened that the collateral collaborative program.

And I think, you know, obviously MNT or the movement and neurological on toxicity, it's not coming from just BCMA is not just coming from CAR-T either, although the mechanism of that action has not been well elucidated with our science experiments state.

We think, you know, obviously, you have to watch this in the clinic and that if you look at the data from our commercial launch of correctly, I'm sure everyone follows the same FDA our database in the first quarter.

We saw 21 cases reported for PBC patients and that went down to seven cases in the second quarter, while we dramatically increased the population of treated patients by carbon.

So we feel really confident about the safety profile demonstrated by corporate in the real world here.

And then secondly, we also believe that our risk mitigation strategy is working very well in the clinic and also in the trials.

So that's what I can say about the MNT and neurotox here.

On the second question, I believe in the second quarter, the last ramp-up was mostly reflected, although it's not fully 100% reflected in the second quarter.

So we continue to reap that benefit in the third quarter.

Thank you.

Leonid Timashev, RBC Capital Markets.

Thanks.

I shouldn't ask on them.

You mentioned that you recently hit overall survival and CARTITUDE-4 and obviously there was some discussion of the overall survival endpoint at the advisory committee.

So I guess some just curious on that.

I guess what are you hearing from physicians about the importance of this data.

I mean, did you sense that there were perhaps any physicians are waiting to continue to use cavity in earlier lines to see more overall survival data expectation of when you might see this on the label and sort of how this is going to impact your overall marketing strategy?

And maybe I'll take that, Steve.

The I mean, physicians are very excited with this data for actually, we have a pretty large study right now, fielded tested to look at different hazard ratios to see what perspective the the market has on that.

But generally speaking at all of our advisory board, as you can imagine, it's very, very positive from the question we have and I'm sure it may be that you have is does this data start to open up more the standard risk population in earlier earlier lines.

So we'll see we just don't have an answer for you yet, but we'll have that once we get this data to readout.

But generally speaking, as you can imagine, we're very enthusiastic by it.

I mean, you take the next question from.

Yeah, I'll talk about the other part of the question, which is are we and J&J teams are working on cleaning up the data.

And we do have plans to submit to the agencies, including FDA and EMA on survival on label expansion.

So hopefully the data will be published at a major medical meeting soon.

And you will see the magnitude of benefit for which you already had a preview at Kodak, and we see a statistically significant and also clinically meaningful separation here on survival benefit, which is very, very important, as you know, given that myeloma is still incurable many patients cycle through different therapies.

So it's been very difficult to show it a meaningful and also significant survival benefit in the clinical trials.

And I think Kartik is one of the few of trucks out there, which will have a survival benefit on the label.

So we think it's going to be a very powerful tool in the promotions and also when we explained the benefit to our physicians and patients are literally in the second line by not having the late-line.

So if you look at competition or upcoming competition, we think we may be the only one with that kind of benefit potentially on the label.

And again, that's a huge differentiation factor.

And obviously, if you talk to physicians in the field, right they care about certain things, but survival is one of the top considerations compared to also PFS and CR rate.

So we feel really, really good about a strong benefit demonstrated in such a global randomized active control trial without benefit.

Jonathan Miller, Evercore ISI.

I guess, thanks for taking my question and congrats on all the progress.

Your lots of manufacturing news and expansion expected second happening as you as you went through.

But could you walk us through what the delta is between all of that stuff that's coming on and in the second half and the guidance for end of '25, what is left to be done in '25 that's going to take you from end of this year to end of that year.

And then secondly, you mentioned the enormous market potential for newly diagnosed setting.

Obviously, there's a lot of patients there, but there's already so many more patients than you're even your manufacturing guidance covers is manufacturing ever going to be sufficient to cover the extensible market here, even even if you look out five or more years.

And Jonathan, thank you for the questions.

On the first one, I can layout of what we expect to have in between end of this year and have '25 or so of switching end of this year, by which time we should have commercial production in our first facility in Ghent, Belgium cause of risk.

Right now, we're expecting a commercial approval by end of next month in September.

And then we can start our first commercial production in Europe and then on by end of this year.

Also, we expect the construction activities to complete in the other facility in Belgium called tech land.

So by early next year in the first half, first, we do expect the clinical production to come from the tech land facility in Ghent, Belgium to start.

And then after that, on sometime in first half of '25, we expect Novartis our Morris Plains, New Jersey site to also start commercial production pending FDA approval.

And then after that, in the second half of 2025, we have two major milestones here first, we expect the expansion of resin side to gain FDA approval to start commercial production in the second half of '25.

And the other upcoming milestone is in the second half of 2025.

We also expect the tech land facility in Ghent, Belgium to start commercial production.

So this is a the cadence of all the different nodes that could happen between end of this year and of next year.

Now in terms of the on ongoing launch in second line and also future opportunities in first line, you're right, we and our partner.

J&J have already been having a lot of productive discussions about how we can satisfy the demand, especially given the very encouraging uptake in second line, only three months after launch.

I know there are many skeptics saying that.

Well, where's the second line demand?

We have a queue in Raritan.

We have acute in all the major hospital centers today for second line and we are being creative here and do we and J&J are trying to think out of box in terms of finding the future supply that includes internal notes, construction of greenfield or brownfield or alternative other route.

I can assure you that that is one of the highest priority of the partnership, and we have been engaging with our partners at J&J to discuss this and you should stay tuned.

Thank you.

Makes sense.

And then maybe can I ask just one question on the pipeline?

Since I know nobody's nobody's asked about that about that yet.

When do you anticipate beginning to show data from some of those early pipeline assets that are currently in drilling phase one, especially on those dual CARs where are they relative to the single targets?

And do you have expectations for the IND timing for autoimmune?

Thanks, Jonathan.

Yes, this is Guowei.

We are having multiple choice under IT, and we also have a US Phase one trial next year, we expect to see initial safety and efficacy data for Claudin 18.2 topics that are top of CAR-T, which is our US Phase 1 trial.

Currently, we have IT trial in China in autoimmune indications.

So this is the trial targeting CD19, CD20, CD22 tumor-targeting talks, CAR-T are being tested in a broad spectrum of different room with a logical and neurological autoimmune indication.

The first phase you have it does that towards Q4 this year we expect to see clinical readout in 2025, as you pointed out, that we also have multiple other generic product, some reserves or do targeting oncology indications.

We expect to readout data in 2025 in terms of other generic products for US R&D funding, we are activity of initiating IND-enabling studies this year, and we are projecting the R&D filing, and you asked around 2026.

Thank you.

Yaron Werber, TD Cowen.

Great.

Thanks for taking my question and nice growth this quarter.

And maybe just a couple of questions.

As you think about supply ramping in Q4 over Q3, can you give us a little bit of a sense, it looks like Q3 is going to have a meaningful jump over Q2, Q4, the same, meaningful jump and maybe slightly smaller.

And then as you think about you've said that you can double capacity next year, but not all of that is obviously commercial capacity, right?

Some of it is going to be for qualification lots and still some clinical.

Can you give us maybe a little bit of that sort of doubling how much can be commercial?

Thank you.

Hey Yaron, thanks for the questions.

Obviously, on the first one on.

I can tell you that we expect next ramp-up to happen probably around end of this year or early next year.

It's a little bit difficult for me to give you the exact timing now because obviously we need to run experiments when you collect the data, analyze data and submit to the FDA.

And then there's FDA review process as you can imagine.

And so it's going to be around that time, like I mentioned end of this year, beginning of next year.

We can not comment specifically on Q4, but in general I think we have said in the beginning of the year that throughout 2024, we do expect sequential growth every quarter.

So you have seen that our 18.5% sequential growth from Q1.

And now we do expect a much higher growth in Q3 and hopefully follow-up with the sequential growth again in Q4.

So that's where we stand on production.

And then on on the capacity, I will say in general, I'm going forward, right, given that our volume continues to increase higher the percentage of the clinical production and also the percentage of what we call non-revenue generating our runs will decline as a relative percentage.

So I wouldn't go into too much detail.

But if you look at that commercial production capacity.

If we say overall capacity is doubling, then that means roughly the commercial production will double as well because and next year, we're look at a much larger batch number compared to 2024.

James Shin, Deutsche Bank.

Good morning.

Thanks for the question on when the C4 data unveiled later this year, is it possible that you will have a post hoc crossover OS analysis?

And my second question, as it relates to doubling of capacity, should we expect a gross margin benefit as well as '25?

Thank you.

I'll answer you.

This is Lori.

I'll answer your second question and then I'll turn it over to Ying to answer your first question, as you can imagine, as we're bringing on the different nodes, you're going to see variability in your gross margins because as you're ramping up in each of those locations, you have to get to a certain level of volume to really keep the consistency in your gross margins.

But we do anticipate once all of our no other online that our gross margins will be in line with the industry standard.

Hey James, on survival question, I'm not going to be able to steal the thunder from the medical meeting presentation, but I'm sure you guys are in the survival curve from the hour that panel back in March.

So overall, the shape really did not change.

And in general we're encouraged by two things.

Number one, yes, there was a very small early imbalance of overall survival in the very beginning of the curve as you guys saw.

And but that never crossover again after that initial period rate.

And secondly, I think when you see the overall survival curves, you will see it's a wide separation between the two curves, not only that was very encouraged by the so-called tail, which is the flattening trend of survival after a certain period.

Again, we have consistently showed that in every single trial we conduct for correctly and in every setting.

So clearly, there's a portion of patients who will benefit does so in a lower in terms of PFS of CR and also overall survival.

And that is very, very consistent trend.

I think it's going to be hard for competition to beat.

Thank you.

Vikram Purohit, Morgan Stanley.

Good morning.

Thank you for taking our questions.

We had two both on carbon first on, I think last quarter you mentioned that there were 70 hospitals certified to treat patients with cardiac.

The I think this morning you reported 77 was just curious where you think that footprint could go by and of this year and also by end of 2025.

And then secondly, had a question on timing updates for some earlier line data sets.

So data from CARTITUDE-2 and F from Q2 to and now that CARTITUDE-5 has completed enrollment, when do you think you might be realistic to expect initial data there?

And then in the same vein of CARTITUDE-6, could you just give us an update on how enrollment is progressing versus your expectations?

Thank you.

We'll take the clinical questions.

Okay.

So why don't I take it, Steve, why don't I take the questions around site activation.

So for Q1, we have reported 71 sites.

And you're right, we're at 77 sites by year end.

We are forecasting to be right around 100 sites.

And again, I keep reminding during these calls, something to keep in mind is that on a per site basis because of the percentage of patients that we treat now in the outpatient setting, our throughput is very efficient versus competition in the sites that we sell into.

So please keep that in mind.

It's not so much of a site race.

It's really how many patients per site per site that we treat.

I'm going to turn it over to some of the clinical questions around some of the data releases that.

Yes, sure.

And so all CARTITUDE-4 survival.

Yes, we and also J&J are very excited about the survival benefit.

We also have consulted with certain physicians again for physicians who have innovated and very encouraged by the survival benefit.

Remember, this is actually our first interim survival analysis, and we already hit the prespecified high bar for statistical significance at this interim analysis.

So clearly that tells you the magnitude of the benefits in terms of early life on I guess you would have to wait until a later date of any medical meeting to see if we're planning to publish those data on that.

But given what we're seeing in car to six trial, I can tell you the enrollment is tracking way ahead of our expectation at this point, even though we only are enrolled our first patient in October of last year, right now, we fully expect that the enrollment of our two six will complete in the year of 2026.

So I think that's also a reflection of clinical benefit, the patients and physicians are seeing.

And that clarity, I think, helps the enrollment.

Justin Zelin, BTIG.

Thanks for taking the question.

Just on out of spec rates now that the threshold has been relaxed a bit.

Can you comment on how rates have decreased?

Thank you for the question of.

So it's still very early because as you recall, we received a wider release backed by FDA on April 5, along with the second line label.

So at this point, our if you compare the quarterly data the quality of the spec rate in second quarter was slightly lower than the OS. rate in the first quarter.

And I might take a little bit more time before we can start to see a more pronounced OS. because as you can imagine, we're in a very early launch of second line.

So you shouldn't be surprised to see that it is probably the sickest are on high-risk cytogenetics mutation patients who come online for second line at this point.

And therefore, we shouldn't expect to see the full benefit of second line or the wider release back anytime soon, but we should expect to continue to see that trend over time.

And I think eventually it will settle down to a point that is 5% to 10% lower than what we had before some enhancement.

That make sense, thanks for taking my question.

Mitchell Kapoor, H.C. Wainwright.

Thanks for taking the questions.

I wanted to ask on the I mentioned earlier of the queue at major medical centers for a second line demand.

Are you able to provide a little bit more color on the magnitude of demand that is in the queue.

And then also on on treating initially the patients in second line with the highest risk cytogenetics and who are the sickest of in your discussions with physicians on who they like to treat?

Can you tell me a little bit about, you know, would they like to transition all of their patients at this point, it's just a function of supply or is it where they want to test it out in their highest risk cytogenetics patients before migrating into, I guess, more mild restriction?

Yes, hi, it's Steve.

When I take that question, I'll take the last question maybe first, in terms of the patient characteristics, and this is true what we saw during the CARTITUDE-1 launch, and we're seeing it as well in Europe.

What you're seeing for all these indications is the sickest of the sick are treated first right.

So you're seeing the high risk takers right out of the gate bomb gets filled to sell, and we expect that to also happen with the CARTITUDE-4 launch.

So to a point earlier in earlier lines and were again, our research was was bearing out on that before we launch, we'll see how it goes once we actually see that the true data, but all the data was pointing in high-risk earlier lines that they would be the first candidates out that would be receiving cilta-cel under the new indication.

I'm trying to think without what was the other question here.

All physicians, yes, in terms of their how they plan on treating.

So that's generally speaking, right?

Academic centers, how they're looking at this the, um, the way I look at the market though, is kind of bifurcated by the academics within our sites.

But as you know, there's a large referring dynamic for these patients now.

So this is where we are deployed with our partner now in the outpatient clinics to work on the referral side of the equation.

And this is where in the standard risk population.

That's the one that we have probably our greatest work, quite frankly, in the earlier lines.

These are patients to the point that have a lot of different options.

But this is the area that we're currently deployed against to meet with these physicians and educate them and identifying the patients that would benefit the most.

Maybe Mitchell, I'll add that in terms of how they use this right.

Again, this is some of the feedback, early feedback from the field.

So yes, they are focusing on the roughly 25% of patients in second line who harbor a high-risk strategy that mutation.

But that's not the only population, for example, I'm sure you have seen our data presentation at [ASH] call rights.

There's a portion of patients what we call the young functional high-risk, which means they may not Harbor cytogenetic mutation, but they actually do progress within 18 months of the first line treatment of those patients are desperate and needing another acute nausea.

So that's also another population.

And then lastly, there's a population who is relatively young and these folks are still working.

They would like to get the once and done benefits from a CAR-T administration so that they can go back to their normal daily living activities.

So those are probably the three buckets of patients that likely will get a CAR-T in the second line at this point.

And so that's if you look at the numbers, it's roughly probably 35% of our second-line population if you add those three buckets here.

Great.

Thank you so much for that detail.

George Farmer, Scotiabank.

Hi, good morning.

Thanks for taking my questions.

A couple from me and let's see now getting back to the 52,000 patient number you threw out there, you're hearing about, you know, potentially the market potential and, you know, you're heavily focused on manufacturing, Spansion, you know, what kind of costs are we looking at and done?

And how should we think about putting those numbers in our model in out years out years?

That's number one.

Number two, I was wondering if you could comment on the belantamab results that were published in the New England Journal of Medicine.

That's the BCMA ADC.

It looks like you had some pretty good activity in frontline would be great to get your perspective on how that data compares to what you've seen with CAR-T.

And then finally, on this overall survival and balance that FDA was pounding on at Kodak now in the early early phases of follow-up, does that ever come up with physicians as in the real world?

I'd be helpful to get your comments on that?

Yes, George, thanks for your three-part questions on.

So on the first one on in terms of some on capital investment here.

So if you look at our capital plans we have decided upon with our partner, J&J, it's roughly $1 billion in total in this round.

And our first get us to the 10,000 of those capacity by end of next year and then next about two years after that two to three years after that, with somewhat very incremental investment, we can get to about 20,000 capacity.

And then in terms of the on in terms of the additional investment on.

So we think that it really depends on which mode we choose.

Right?

Is it going to be a greenfield facility we break ground from scratch or is it going to be a brownfield with the existing structure orders, some other modest.

So it's a little bit hard to on to say that at this point.

But obviously, we don't want to leave those markets done on the table here.

So we are having a very thoughtful discussion with our partner here in terms of how we actually unlock the potential and then tap into the frontline market or maybe even more penetration to secondary market with additional capacity on.

And then on ATC, I think there was a session right at ASCO, George, if you recall, there are a couple of chaos will discuss the data from T-cell engagers, CAR-T and also ADC.

And I think the consensus view from that panel and also through our recent channel checking from doctors in Alberta, is that on really CAR-T is considered to be the first option given the down benefit and also the durability of the response we see, including now survival benefit.

So I do think there is a position in the market for ATC, but we're not thinking that it will really change the dynamic or the landscape today.

And again, we just saw this publication from nature are that's coming from a large on real-world patient study at Mayo Clinic, clearly based on both PFS and overall survival party is better than T-cell engagers and T-cell engagers, a better name, etc.

I think that some very indisputable results from a large cohort study at Mayo Clinic.

I think that speaks volume of the benefit of CAR-T versus the other two modes of action.

So we feel really good about the long-term prospect of CapEx this year and based on the benefit we have seen in PFS, OS.

And then maybe on the last question on the OS imbalance?

No, we haven't encountered too many questions in the field on given that data because clearly that's actually before CAR-T was even administered rate and you saw some of that a similar phenomenon in some other CAR-T experiments that some you know, that is a I guess, a phenomena you see in the CAR-T experiments in the clinic.

On the other hand, we are doing a lot of work in terms of shrinking the vein-to-vein time.

And also today, there is an increasing on our momentum of bridging therapies available to the physicians.

So that could also address that issue as well.

But in short, no, we're not really encountering a lot of questions asked about that early imbalance.

Okay, thanks.

Rick Bienkowski, Cantor Fitzgerald.

Hey, good morning and thank you for taking the questions.

First, I just wanted to confirm it sounds like the initiation of clinical production by Novartis should immediately free up capacities for commercial production.

I was hoping if you could comment on if you do expect to should have an immediate effect on capacity for the third quarter.

And my second question, I also just wanted to ask about the downstream effects that an improved spec rate could have on operations.

And I guess I'm specifically thinking about cost of goods and how quickly patients get drug on average.

I'd like to hear your thoughts on how a 5% to 10% improvement in auto spec rate could impact P&L over time?

So I'll talk about the first and third question, Rick, on Novartis.

Yes, the first batch production initiated last month in the Novartis facility.

But as you can imagine, in any CAR-T facility, it's not a hockey stick.

It is typically a gradual up tick in current year.

So yes, if we have for example, 10 batches on that Novartis are producing for our card to six, then that does free up 10 batch of commercial capacity at route.

And so that is the direct impact but I wouldn't say it's a dramatic impact in Q3.

So yes, there's definitely some incremental positive impact on that.

And then on the third question, on the vein-to-vein time, I can give you the latest data.

So in the second quarter on our P90 or 90% of the inspect sample were shipped out within 42 days.

That is a freeze to delivery to a shipment.

And then if you look at the median, it was about 30 to 35 days, so it's less than six weeks.

So we're continuing to make progress in terms of our vein-to-vein time here.

And then the second part, I'll ask Lori to comment.

Hi Rick.

So in relation to the P&L, as you can imagine, if there is an improvement in the vein-to-vein time.

There's an improvement in the US that will help to drive down your COGS.

But I can't give you direct definitive on guidance on how much that would improve our COGS.

But yes, that would definitely be one of the influences to help bring and drive down our cost of goods sold.

Sean McCutcheon, Raymond James.

Hi, guys.

Thanks for taking the question.

And maybe to piggyback off of that last point can you speak to the progress in specific of any additional manufacturing efficiency efforts?

And separately, any update around your thinking for MRD as an intermediate endpoint for accelerated approval in your front-line studies?

Yes, Sean, this is Lori.

I'll take your first question regarding the additional manufacturing efficiencies that you're seeing.

That is why you saw in our Q2 earnings, you saw that there was pretty significant improvement over Q1 in our gross margins and as we continue to realize manufacturing efficiencies as we turn on a different note as well that you'll continue to see those costs go down and our gross margins improve on.

As I mentioned before, just to be a transparent, you will see variability in each of the quarters in your gross margin as we bring these additional dose online and we continue to invest in capital, but we saw really good strong gross margins for our product quarter over quarter, and we do expect to continue to see those.

Ying do you want to take the second question and frontline?

Yes, sure.

So on given the recent old recommendation, we and our partner to have plans to request a meeting and sit down with the agency to talk about using MRD negativity as a potential registration endpoint.

And so if you look at the clinical trial protocol we published on clinicaltrials gov.

You will see that in that continue six trial MRD negativity is already on a co-primary endpoint.

Now, could we use on just margin activity or a 12-month margin activity as a registration endpoint that remains to be discovered the agency.

If the agency agrees, certainly, we would welcome that and that could actually on significantly decreased the time to market entry for cardio six out of the first line indication.

Konstantinos Biliouris, BMO Capital Market.

Hi, this is Phil on for Konstantinos.

Congrats on the quarter and thanks for taking our questions.

So just one question from us regarding the labor, the current coverage to label.

So on Peter was recently mentioned that FDA may revisit the black box warning on secondary malignancy risk in the CAR-T labels.

Given that the notice, the incidence of such risk is order of magnitude lower versus the chemotherapies and with only a few cases will be positive for the consequences and inform us.

So we just wonder if you have any discussion with FDA on label updates that potentially can removed such wording?

And also if you can provide any additional color around that topic?

It was super helpful.

Thanks for the question.

I think last time when some of the SPM. on label was updated, it was a class label.

So basically FDA put in very similar, if not the same language in our six commercial CAR-T savo.

So we probably expect that potentially if there's any change that might be a cost level as well, but I wouldn't want to speculate on that at this point because we have not have any detailed discussion with the agency about that.

I think everything will be guided by the clinical data and also in the real world of data collection as well.

But regardless, we continue to believe that given the small incidence of those SPM and also the large clinical benefit we observed in both the clinical trials and also in the real world.

We continue to believe there's a very strong benefit over risk here.

And so that also has not been really a big concern from prescribing physicians either because, as you know in the field of multiple myeloma, this SPM issue has been out there for decades and physicians know very much about there's some adverse events associated with some of the treatments.

And I mean, just to call to one physician, we have discussed this topic with he said, Oh, I am in no way to Mark focused and concerned about treating the cancer the patient has rather than worrying about what other cancer the patient may have later.

Thank you.

Asthika Goonewardene, Truist.

Hey, guys, good morning.

Thanks for taking my question and congrats on the progress being made here and the question of going back to the onboarding process, the new 80 series on Gilead talks about making a strong push to a some of those larger community centers and in that in your target of 100 agencies by year end and what do we have for 2025?

I wanted to get your thoughts on how you're thinking about targeting some of these larger community centers, more what mix there would be.

Obviously you want to have the academics, but what makes with these larger community centers is can your priority list and what impact that would have on the inpatient side of things?

Thanks, it's Steve.

Why don't I take that question.

Thanks for bringing that up because that's an important part of the strategy for for this brand.

So as you said, we're basically deployed today and into the near term in our major academic centers.

However, we are running pilots today as well, where our major academic centers are partnering with their community referring centers to basically offload some of the capacity constraints that they have at the site level.

So we are already engaged in some pilot activity through our academic centers where they're working very closely with their community affiliates.

So that is that's been ongoing and that's been ongoing for the better part of a year because you're right, as we start moving into that early second line, which we are today, and we'll continue to broaden out our commercial footprint to include not only the large academic centers, but also with those centers to bring onboard the community of affiliates of that.

So it's very important that we bring on the academics with us as a because then it's much more coordinated.

And obviously, the key thing for us is always keeping patient safety first.

So we want to make sure that we do that in accordance with our large academics.

And then finally, the third leg of our strategy is that the right point in time because there was some earlier conversation around Frontline is ultimately getting out into the clinic.

And that's something downstream that we've had some initial conversations with some of the large retail clinic providers out there to see and then better understand what is their role and how does that dovetail with the role of the community hospitals as well as their referring large academic centers.

So that's something forthcoming.

It's something something that would be will be rolling out over the next couple of years as we prepare the market for our launch in frontline.

This concludes today's conference call.

Thank you for participating.

You may now disconnect.