argenx SE (ARGX) Earnings Call Transcript

Good morning. My name is Ryan, and I will be your conference operator today. I would like to welcome everyone to the call. [Operator Instructions]Thank you. I'd like to introduce Beth DelGiacco, Vice President of Corporate Affairs. You may now begin your call.

Thank you. A press release was issued earlier today with our third quarter 2026 financial results and 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 that forward-looking statements may be presented during this call. These may include statements about our future expectations, clinical development, 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 those statements in relation to actual results unless required by law. I'm joined on the call today by Karen Massey, Chief Executive Officer; Karl Gubitz, Chief Financial Officer; and Piret-Gerard, our Chief Commercialization Officer. Luc Truyen Chief Medical Officer, will be available during the Q&A. I'll now turn the call to Karen.

Thank you, Beth, and welcome, everyone. This has been another outstanding quarter for argenx. Nearly 5 years into launch, we're still early in realizing Zipcar's potential across MG and CIDP. And on the heels of positive Phase III LVA results, we're seeking to bring Vivgart into rheumatology for the first time with the goal of reaching an entirely new group of patients and prescribers. Beyond Vicat -- we're building what comes next for argenx. We're advancing in passive towards its first Phase III readout in MMN. And we had positive Phase III results for FB102 in celiac disease -- just months after the Forte acquisition, giving us another Phase III ready program. Across our broader pipeline, we expect to have 10 molecules in clinical development by the end of this year. This progress reflects something fundamental about how we innovated argenx. We pursue novel foundational biology that has the potential to make a meaningful difference across multiple diseases of high unmet need. This boldness often has us leading the way, shaping new markets like we have in MG and CIDP and exploring the boundaries of where target can have the greatest impact for patients. That's how we're building the next chapter of argenx, expanding the opportunity for Vivgart while creating new pillars of growth alongside it. It's what gives us confidence in our ability to deliver on Vision 2030 and sustained growth beyond that. As we look ahead, 2027 will be an important year in the evolution of argenx with 5 potential launches across our portfolio. Together, they would mark significant progress towards Vision 2030. In MG, our ambition is for Vivgart to become the treatment of choice across the spectrum of disease. We have a PDUFA date early next year for pediatric MG, and our recent filing in Ocular MG could extend Visca beyond generalized MG for the first time. In the second half of 20 -- we also expect to introduce the [indiscernible] autoinjector, continuing to elevate the treatment experience across approved indications. Autoimmune myositis is positioned to be the next major area of growth for Vivat. Al Kavia further validated the role of autoantibodies in myositis, demonstrating consistent and clinically meaningful results in both M&M and DM patients. IMNM is where we have the immediate opportunity and has the greatest unmet need. Patients lose their independence within months, and there are no approved treatments today. We will file an sBLA in IMNM by year-end -- for which we have breakthrough therapy designation. We remain committed to securing a label for people living with DM. And based on the strength of the [indiscernible]data, we are moving with urgency to start an additional registrational study. Now let me turn to impose a probate and MMN, where we are approaching the expected readout of the IMpassion study in December. MMN is a serious autoimmune disease that affects 12,000 patients across our key markets. Today, patients depend on IVIG, often spending hours in the infusion chair and many still experience worsening symptoms over time. We believe Impalsiprobat has the potential to offer a differentiated treatment option, both in the outcomes it could deliver for patients and in reducing treatment burden. We have good reasons for this conviction. We believe C2 is the right point in the complement pathway to intervene, above where the damage in MMN starts. And and pass approved out was engineered as a sweeping antibody to efficiently remove C2 and achieve sustained C2 suppression. The Phase II ADA data gave us meaningful clinical evidence to support this C2 targeting approach. We saw improvements in grip strength and function together with a substantial reduction in the need for IVIg retreatment. With longer-term treatment -- these improvements in grip strength were sustained through 64 weeks. We took those learnings into [indiscernible], our Phase III head-to-head study against IVIG. It's a bold choice to go directly against the current standard of care, but it's 1 that is grounded in what we know of the biology, the molecule and the ADA data. The study asked a very practical question. Can [indiscernible] approve deliver efficacy comparable to IVIg while reducing the treatment burden. If the answer is yes, that will be meaningful for patients. MMN is only the beginning for [indiscernible] . We believe C2 inhibition has the potential to address a broad range of complement-driven diseases, creating another opportunity to build a pipeline in a product. Beyond our FcRn portfolio and in passive probate, our pipeline continues to advance, and FB102 is the latest example of that progress. The positive Phase II results in Celiac reinforced our belief in CD122 as a target and gives us another asset ready to advance into Phase III. We FB102 has many of the characteristics we look for in a medicine, novel biology, the opportunity to be first in class in a disease that has seen little innovation and the potential to address multiple autoimmune diseases. Celiac is the most advanced opportunity and the consistency of the Phase II results across efficacy measures, including symptoms, together with this favorable safety profile, reinforce the potential we see in the molecule. In 2027, we plan to share more about how we will further unlock the broader pipeline in a product potential of FB 102. More broadly, our pipeline is becoming both deeper and more mature. At Amenabar, is advanced into Phase III in CMS, AGEX-121 is in Phase II in IgA nephropathy and additional first-in-class molecules are advancing across new mechanisms and disease areas. This breadth is important to our strategy, giving us multiple opportunities to deliver on Vision 2030 while building the foundation for sustainable growth beyond it. With that, I'll turn the call over to Karl.

Thank you, Karen. Next slide. I am pleased to review our third quarter 2026 financial results detailed in the this morning press release. Growth in the number of patients we serve continues to drive strong revenue performance, giving us the capacity to invest across our portfolio from a position of financial strength and with a clear focus on long-term value creation. Product net sales were $1.7 billion, representing growth of 54% year-over-year and 13% quarter-over-quarter. By region, product net sales were $1.5 billion in US, $81 million in Japan, $158 million across the rest of the world and $11 million from product supply to Zai Lab in China. U.S. product net sales grew 16% quarter-over-quarter with net pricing broadly consistent with prior quarters. Gross to net deductions were 22%, in line with our expectations. In Japan, sales grew 47% year-over-year. The quarter-over-quarter comparison is impacted by the onetime benefit of approximately $25 million in the second quarter associated with the dang in our distribution model. The markets in the rest of the world grew 70% year-over-year, reflecting strong underlying demand. Next slide. Our expenses this quarter reflects both of our additional 4 and the growing opportunity across our portfolio. Total operating expenses were $1.3 billion, Combined R&D and SG&A expenses were $1.1 billion, an increase of 22% quarter-over-quarter. These expenses included $150 million of transaction-related costs associated with the Forte acquisition. Excluding the transaction-related costs, the increase is 5%. Operating profit was $486 million, representing an operating margin of 28%. Adjusted for the for transaction-related costs, this is 37%. And Revenue growth continues to outpace expense growth, demonstrating the operating leverage in our business while supporting investment for future growth. Our year-to-date effective tax rate was 10%. We ended the quarter with $3.7 billion in cash, cash equivalents and current financial assets. after paying a net $2.1 billion for the Forte acquisition. Turning to our full year investment plans. These have evolved since we discussed expenses earlier in the year -- we now expect combined R&D and SG&A expenses of approximately $4 billion for 2020. The increased investments include the transaction-related cost of Forte, investment into FB 102 following the acquisition, continued progress across our pipeline and investment in our commercial infrastructure following the positive ARTERIA result. We are making these investments from a position of financial strength supporting the opportunities emerging from 10 assets in the clinic across our portfolio. We will continue to prioritize these investments with discipline. Our capital allocation priorities remain clear: strengthen the [indiscernible] franchise advance a diversified pipeline for future growth and maintain the financial flexibility to execute our strategy as we deliver on Vision 2030. I will now turn the call over to Sandrine.

Thank you, Karl. It has been an incredible quarter with tremendous energy as we engage with HCPs and patients. And the feedback is remarkably consistent. Deep gap continues to set a high bar for what treatment can deliver, and we are seeing the impact it can have for patients. That impact is translating into impressive growth. This was among our strongest quarters of patient growth since launch. In MG, we are moving this card into earlier lines of treatment, while our seronegative label expansion is lifting growth across all of MG. In CIDP, we continue to add new patients and new prescribers at the study pace. As HCPs gained experience with [indiscernible] and see outcomes in the patients, the confidence growth supporting continued adoption. Let me spend the next few slides discussing the drivers of performance in both MG and CIDP. In MG, our goal remains clear, to establish [indiscernible] as the treatment of choice for all MG patients. We aim to get there by broadening the label and reaching patients earlier in their treatment journey. Five months into the ER-negative launch, we are off to a strong start. PR-negative was a key contributor of growth this quarter. Our access teams have done an outstanding job securing coverage for approximately 96% of covered life. And most payers have removed Therapak testing from the Vicat policies. -- making it simpler to prescribe guard for gMG patients. Importantly, the launch is driving both breadth and depth. Approximately 10% of sero-negative prescribers are new to Lidgands and growing physician experience in seronegative patients is driving increased prescribing in acetylcholine receptor antibody-positive patients creating a halo effect across MG. The biggest opportunity ahead is reaching patients earlier and the evidence keeps building. At MGFA real-word data from more than 1,100 patients show that half of those will start [indiscernible] a year of diagnosis reached minimal symptom expression. Potential label expansion into ocular and pediatric MG could further extend the opportunity to reach patients earlier. We have submitted supplemental BLA for both indications with a pediatric Pdf of February 2027. We are moving closer to a future with lidgands may serve patients across the entire MG spectrum. In CIDP, we continue to see steady growth in new patients and prescribers quarter-over-quarter. More physicians are gaining experience with Big Guard, -- more patients are experiencing the different treatment can make in the daily lives and the prefilled syringe is offering patients greater convenience and flexibility in all treatment is administered. I recently heard a patient story that captures exactly why our work matters. [indiscernible] is a woman who CIDP has progressed to the point where seen receiving hospice care and Wisol was not expected to leave more than weeks. Our daughter had learned about [indiscernible] was she was in hospice care and as Giles HCP about it. After starting treatment, she returned to doing the things she lots, including using our hands to create artwork and she even recently go through drivers license back. For Gale, regaining grip strength was more than just a clinical measure. It's meant getting your life back. This is just 1 story that highlights the importance of reaching patients and family with information that can empower them to have meaningful conversations about treatment. Through ADHERE and ADHERE plus we have now followed patients for more than 5 years, building the most extensive long-term dataset in CIDP. But [indiscernible] we show that nearly 40% of patients who initially responded to , reached an NCAP score of 0 or 1 during the open label extension, reflecting little to no functional disability. We also continue to see evidence that patients can benefit from Zipcard early in their disease journey as seen in our treatment-naive dated assets. While our Phase IV SWITCH study data support the feasibility of a 1-week transition from IVIG. Together, this data and growing real-world evidence continue to build confidence in Vizard and support adoption across the CIDP community. Autoimmune myositis is where we plan to take the wildcard playbook next and IMNM is a perfect starting point. IMNM is 1 of the most urgent unmet need as patients can rapidly decline from their initial symptoms to needing a week chair in 3 to 6 months. Despite the severity of the disease, approximately 20,000 patients living with M&M in the U.S. today have no approved treatment options. The combination of profound unmet needs and IDP like size makes IMNM a compelling growth opportunity for argenx starting in 2027. As we advance towards the SBLA filing, we are leveraging the same playbook that for in MG and CIDP. This is education deep physician engagement, strong patient support, broad access, evidence generation and best-in-class execution. We have been engaging with KOLs who treat autoimmune myositis and the feedback has been consistently strong. Patients need more safe and effective treatments, and we believe the [indiscernible] profile meets the mark. Our medical team, including MSLs, is already in place bigger conversations are underway, and we are expanding on sales team. We look forward to connecting with the rheumatology community at ACR in November, where the Phase III [indiscernible] results will be presented during an oral session. To conclude, 2027 could bring up to 5 launches in a single year in the U.S. Our teams are ready, and I could not be more excited about what's ahead. With that, let me turn the call back to Karen for closing remarks.

Thank you, Sandrine. argenx SE continues to be defined by entrepreneurial science. We're developing medicines by pursuing bold biology, asking difficult scientific questions and challenging assumptions about what is possible for patients. There is so much to be proud of this year, and there is even more ahead as we approach 2027. From expanding the impact of [indiscernible] to advancing the next wave of innovation across our pipeline, we remain firmly on track towards Vision 2030. And with that, operator, we'll open the call for questions.

[Operator Instructions] Okay. Our first question will come from Tazeen Ahmad with Bank of America

This is Danielle on for Tazeen. Congrats on all the updates. Had a question on Alkabia.What additional data should we expect to see at the ACR presentation. And can you maybe comment a little more on the feedback you've been getting from physicians -- and then as you think about the DM trial, what are going to be the key considerations there? Do you think you'll just need a bigger trial? Or is there something else that will need to be changed from what you did before

Yes. Thanks for the question and the interest in DM. So yes, on the -- related to -- I'll start with your third question related to the DM trial. So we have the NSVLA meeting recently, and it gave us the clarity that we were looking for. So as you pull out, it confirms actually the base case that we've also been planning for. So we've been planning in parallel and designing what we think a DM trial will look like. The teams are working on that. You'll understand that until we finalize that and get further down the path, we won't be public on what that will look like -- but perhaps, Luc, you could share some of the considerations that the team has been looking at as we think about that potential DM trial. .

Yes. Thanks, Karen. And we will again use the Argenx playbook because we have significant data in Phase II and III that we will build upon that will inform this next design to make it the most efficient possible and to speed the path to patients with DM. And as you asked for the Alive results that will be presented at ACR as an oral late-breaker will contain a significant amount of data on the efficacy profile across Amanda.

Our next question will come from Derek Archila with Wells Fargo.

Congrats on the progress. I was just wondering if you could provide some color on how both MG and CIDP revenues are growing? Is it about the same rate quarter-over-quarter? And then ultimately, for that MG based business, how should we think about the impact on that current growth trajectory with ocular MG, pediatric MG and auto-injector launches in 2027.

Yes, Derek, thanks for the question. I think it's incredible that 5 years since launch, we continue to see momentum and sustained growth. And I think it just shows what that strategy of consistent and steady cadence of innovation coming to the market, how that can contribute to growth. But maybe Sandrine, you can comment on the MG and CIDP dynamics in the quarter.

Yes. Thank you, Karen. Thank you, Derek. So Both indications have been doing really well. So we don't see a slowdown of CIDP or we don't see MG just being the driver of growth this quarter, like the other quarter. So both continue to grow very nicely. As you mentioned, I mean, we have seen a great launch with seronegative. And 1 of your questions is to say what does it mean in terms of the trajectory, assuming we get approval for both betting and ocular MG. So -- we are very pleased about the ER-negative loans because not only access has been strong in removing some of the hurdle in terms of serotype testing that makes it very, very simple to prescribe. But what we have seen is the halo effect that seronegative MD has on the broader GMG population, both on the breadth of prescribers where we saw that 10% of the seronegative prescribers were completely new to regard but also on all the seropositive patients. And it's mostly driven by simplicity. If you put yourself in the shoes of a physician, you have a patient with GMG coming into your practice -- it's very easy to just have to remember about [indiscernible]. You don't have to do the serotype testing. It's a one-stop shop. And what we believe is that this halo effect is probably going to also be seen and replicated for both pediatric MG and Ocular MG, positioning [indiscernible] even earlier in the treatment paradigm and contributing to this aloeffect. So we are very excited about that. And just to be honest, we were a bit surprised by the magnitude of that halo effect. We knew there would be some, but this confirms that it really has an impact beyond just the indication itself. It's a role effect.

Our next question will come from Victor Floch with BNPP.

Question and congratulations for another strong quarter. My question is for Karl, if I may. Would you mind help us quantify the different moving parts beyond increasing your OpEx guidance this year. Is that fair to assume that only a small part of the increase comes from additional investment in our platform, while most of it is actually driven by the total position cost the OpEx rate 240 and the recent anumPhase III trial. And looking at next year, could you give us a sense of where OpEx could land? Is that fair to say there is now some headroom to consensus revenue expectations next year given that pediatric GMG, OMG, IMNM and potentially NN could all start contributing by midyear and the latest .

Victor, thank you for the question. I need to start with what Andre said, is the strength of the revenue 19 quarters in a row and it's that revenue growth, which allows us to invest from a position of strength. If you look at this quarter, operating expenses of $1.3 billion, SG&A and R&D were around $1.1 billion in that number is $150 million over Forte acquisition cost. That's basically the only forecast in the quarter and drove higher expenses from Q2 to Q3. on a full year basis -- sorry, $1.3 billion, of course, bring it to an operating margin of 28%. If you exclude the Forte transaction cost, operating margin is 37%. I think that's really important because it shows you that we continue to invest However, we also continue to drive margin expansion. That's really important. Looking to the full year, -- we now put the number out there of around $4 billion. The increase to what -- the Street was previously expecting can basically be attributed to Fort Forte being around half of that. That breaks down to $150 million, which is already in Q3, plus call it another $50 million, which is the FB102 operating cost for the rest of the year we plan to invest in that opportunity. The rest of, of course, includes the rate increase includes some commercial cost for Sandrine to following the successful Akebia results. As we're going to start to ramp up our M&M and rheumatology capabilities. And the remainder of those cost in 26 is largely driven by having 10 assets in the clinic. A lot of that driven by CMC type of work as we need to get those -- need to build those inventory and get that already. So that gets you to a $4 billion. If you compared to 2025, that translate to a 45% increase year-over-year from $25 million to $26 million. for 27, I think at JPMorgan will provide better guidance, but please do not assume another 45% increase into 2027. Yearly basis already lower. And also, we won't see the same jump -- think of about half of that 45%, if you need something few models now, but we'll give more guidance at JPMorgan. I think what's important is that we were going to invest in our opportunities, and we will continue to provide operating leverage going forward. Thank you for the question.

Our next question will come from Gavin Clark Gartner with Evercore.

Just on a passion for -- what is the noninferiority margin that's specified in the study? And can you just remind us what your expectations for the IBI GRM performance are ?

Gavin, thanks for the question. I'm really looking forward to the Phase III readout in December. -- this is potentially our second molecule and our next pillar of growth alongside [indiscernible], -- so it's an important moment for us. And before we get into discussing the inferiority margins and all of those details, I think if pothole take a step back and think about MMN and MMM patients, there's been no innovation in this space for decades actually. And I think it's important to say that even a placebo-controlled study would be groundbreaking for this market and for these patients. So the choice to go head-to-head, I think is a bold one, I think we set ourselves up for success with how we've designed the study. And obviously, we need to wait for the data to speak. But maybe, Luc, you could add some more color on how we thought about designing the head-to-head study.

Yes. Thank you, Karen. And just we are not public on the actual margin, but I can clearly explain why we chose noninferiority design. This was based on the learnings from [indiscernible]and thinking about how can we best define the potential of empasibrabard. So the head-to-head here against IVIG is based on the fact that in the Phase II, we largely avoided the need for IVIG in the active arm, whereas untreated patients in almost all cases, needed IVIG -- so the better to describe the effect is -- it goes straight to head to head. And we think that the performance of IVIG will be, as we've seen historically, both in [indiscernible] in external data, but we will even have a check on that within the study itself. So each patient can be on their cycles, 2 cycles of them before they get into the randomized part. So we will know very well what IVIG will do. Based on our data enhanced, the expectation is we can match that, and there is always opportunity to show superiority, but the data will ultimately tell that story.

Our next question will come from Akash Tewari with Jefferies.

So how confident is your team that you can deliver on Vision 2030 post the Shogan Smith and the update today? Our math suggest if you have consistent patient adds for CIDP and GMG, you'll approach around 40,000 patients on those 2 indications. But that would mean IMNM would represent the bulk of the additional patient adds you would have -- is that the right way to think about it, that those 3 indications alone could push you past the 50,000 patient target.

Thanks for the question, Akash. I always like to talk about Vision 2030, and we're well on track, and I think we have strong conviction that we'll hit Vision 2030, and we have multiple paths to get there. So just to lay it out, as you said, the first part of Vision 2030 is 50,000 patients by the end of the decade. We've always said that the bulk of those patients will come from MG and CIDP, just given the timing of launch and the continued growth that we expect -- and then obviously, the additional indications of IMNM also potentially if we get an approval and any other approvals before 2030 will contribute, but the majority would be MG and CIDP. In terms of the other parts of Vision 2030 that are important for our future growth, labeled indications. We're well on track with that and the 5 potential launches next year and obviously it significantly towards that goal. So I'd say we're well on track for 10 labeled indications -- and we want 5 molecules in Phase III development by the end of the decade. We're also well on track there. And Karl mentioned earlier, in fact, we'll have 10 clinical stage molecules by the end of this year, and those are all moving rapidly through into late-stage development, including SB 102 that's ready for Phase III. So I have strong conviction that we're well on track for Vision 2030. And I think we're setting ourselves up for growth for the next decade beyond as well. Thanks for the question.

Our next question will come from Yaron Werber with TD Cowen.

Great. Maybe a quick kind of 2 interrelated questions on MA. Number one, you've shown data that there's been obviously concerns about infections in the class, which really have not been an issue so far. But you've shown data that C2 and C1S are very similar on infection risk and they're low and they're much lower than C5. Can you discuss the biology in that? And then secondly, just on superiority, maybe for Luc, our understanding is that it's a 3-day moving average, whereas noninferiority is a 28-day moving average. Why is there a difference? It almost seems that the 3 days is sort of in a good way is a tailwind for superiority? .

Yes. Thanks for that question. And you are correct that given the selection of our molecule to target C2 was pretty purposefully aimed at maximizing our opportunity to have a across diseases that were caused by both classical or lectin pathway while not affecting the alternate pathway -- and that in studies we have conducted. It leads to our ability to kill encapsulate a bacteria that is maintained. The C1S, as you point out, has still a similar capability. but then maybe not the same breadth of indications it could target. Hence, our selection of that part of the complement pathway. With respect to the superiority endpoint -- the noninferiority one, where we have a 4-week moving average selected was based on the conversations with the FDA to ensure that it's a solid evaluation over that month. The 3-day moving average for the superiority was not further discussed and we felt that, that was the appropriate way to continue to test this hypothesis of superiority. So we didn't change that.

Our next question will come from Yatin Suneja from Guggenheim.

Maybe just a few on [indiscernible] -- could you just talk about the competitiveness of the data that you have generated internally in CD relative to the other approaches? And then for [indiscernible], it seems like you are definitely moving into Phase III. What about which like you already have that data in hand. So what are the future plans? And anything you can share on the upcoming alopecia data coming up .

Yes. Thanks for the interest in FB 102. Maybe I'll take the first question on Luc, if you want to comment on the clinical development. But yes, in terms of the competitiveness, I think on -- based on the Phase II data, it sort of confirms our hypothesis that we had with the acquisition just a few months ago. So I think we have a potential first-in-class and best-in-class assets with FB102 -- so the Phase II data was consistent with what we expected and was really exciting. I mean seeing the efficacy effect on the histology and the symptom outcomes as well as maintaining that safety profile. So I think we have a great molecule here. And as you said, we have strong Celiac data, but we also have the potential for additional indications -- 2 of them you mentioned, Vitiligo and Alopecia. I'll have Blucomment on those. But we're also looking beyond those indications to really build this as a pipeline in a product. But Luc, perhaps you can comment on the status of those indications.

Well, so for Senace, of course, fully and very busy in developing a Phase III plan that we will move forward with as fast as we can. Both Vitiligo, again, we've got data in hand again, showing this biology at work, we're doing the same. What is the most efficient path to patients. And we will roll that out as we get confirmatory conversations with authorities that it's the appropriate plan .

And I think the last thing that I'll say is we expect that JPMorgan or early part of next year to be able to provide a more holistic or more detailed update. Thanks for the question. .

Our next question will come from Alex Thompson with Stifel. .

I guess ours on futility analysis. I guess you've now had futility analysis have discontinued programs in Sjogren's and Ted, I guess looking forward, should we assume that all your pivotals have built-in futility analysis as we think about data next year in for CIDP. And potentially later for efgartigimod in grades?

Yes. Thanks for the question, Alex. It's an important one. As we pursue our strategy, which is novel biology and exploring the -- really the boundary of that biology. We continue to make bold choices about where we're going to invest. And we want to try to develop our assets by moving early, moving fast -- and then also stopping early. So to your point, we're very disciplined about making sure we have measures like futility analyses in our study. so that we can make disciplined choices at the right moment. And you saw that we show when we heard that data. So yes, you can expect that in our development programs, we always have built-in mechanisms to make sure that we're making the right choice and making the right disciplined investments without reducing the calculated risk that we're taking on the biology.