argenx SE (ARGX) Earnings Call Transcript

The press release can be found on our website, along with a slide presentation that you can follow as you listen to the call. I'm joined today by Karen Matthew, Chief Executive Officer; -- are Lemon, Vice President of Corporate Development and Strategy; and Peter Ulrich, Chief Scientific Officer. Paul Gubitz, our Chief Financial Officer, will be available during the Q&A. Before we begin on Slide 2, 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, upcoming milestones and the anticipated benefits and timing of transaction. Actual results may differ materially from those indicated by these statements. Argenx is not under any obligation to update statements regarding the future or to conform these statements in relation to actual results unless required by law. I'll now turn it over to Karen.

Thank you, Beth, and welcome, everyone. I'll begin on Slide 3. We -- today's announcement is an important milestone for IGEC and an important investment in our next chapter of growth. It's also an important day for patients and our commitment to raise expectations of water treatment can deliver in autoimmune disease. We have entered into an agreement to acquire Forte Biosciences, adding SB 102 of first-in-class anti-CD122 antibody to our immunology pipeline. SB12 has demonstrated clinical prudent concepts in diseases that have lacked meaningful innovation like vitiligo and Celiac disease, and we believe there is broader potential across multiple autoimmune diseases. Before I talk about our conviction in FB102 and recognize the impressive work the team has done to advance the program through proof of concept. I want to start with our strategy. Our Vision 2030 strategy is well defined and on track. Last week, we shared our second quarter results. Bigard continues to reach more patients around the world as we progress towards our goal of treating 50,000 patients. With the approval of discard and sero-negative GMG, we now have 4 labeled indications on our path to 10% by 2030. And we continue investing in our innovation engine to advance 5 new molecules to late stage that we believe can become the future growth drivers of argenx and shape the future of immunology. It is the success of this strategy that makes today possible. Over the last several years, we have built an incredible foundation pioneering the SCR in cost. And we've demonstrated that we can translate promising biology into transformational outcomes and new treatment paradigms for patients. And now we have an opportunity and a responsibility to build on that foundation. Our ambition has never been limited to a single molecule, a single target or a single therapeutic area. Our ambition is to become the leading immunology innovator, building a pipeline across multiple targets and multiple dimensions of the immune system. The acquisition of Forte fits directly into this ambition and is a continuation of a strategy that has guided argenx from the beginning. Stay close to great science, to do the best ideas wherever they originate and build conviction conviction through data, all to bring immunology breakthrough to patients. This principle helps create argenx and this principle brought us to 4 Biosciences. It will continue to guide how we build our next chapter, Slide 4. At argenx, innovation has never been limited to what happens inside our own walls. We pursue the best science through our immunology innovation program and partnering with leading academic collaborators and research institutions and with biotech partners through partnering deals, strategic investments and now an acquisition. This is how our pipeline has been built and it's proof that breakthrough innovation does not happen alone. It is how we discovered and developed [indiscernible]. It's how we're advancing in passive bad and the rest of our pipeline. And it's also how we came to know about SB102. We've been following closely CD122 biology for several years and this year in April, we made a strategic investment in based on our belief in the science. More recently, with the positive Phase Ib data in vitiligo, we saw the opportunity to bring FB102 into our argenx. The [indiscernible] team has done an impressive job in advancing this program. We believe great science and great people go hand-in-hand, which is why we are excited not only about B02 but also to continuing to work alongside the team that helps bring the asset thus far. So with that, I'll turn the call over to Arjan to discuss the transaction and why Forte and SB 102 are such a natural fit for argenx. Arjen?

Thank you, Karen. Slide 5. When we think about bringing in new pipeline programs, we always start with the same questions. Is the biology and mechanism of action differentiated? Is there evidence that it can translate into meaningful benefits for patients and can Argenx help realize its full potential. AB-102 stands out across all these dimensions. What initially attracted us was the combination of novel biology, a targeted mechanism and early clinical validation. We're also attracted to the broader potential of the program to be a pipeline in the product opportunity across CitiGo, celiac disease, alopecia areata and other autoimmune diseases. Just as important is why we believe FB102 is a strong fit for argenx. . First, AB-102 complements our existing portfolio. Our strategy as an immunology leader is to play across important pathways of the immune system. For example, we have cartigumod and ARGENX-121 in the antibody compartment targeting FcRn and IGA and apacepobroad addressing complement activation at 2. AB-102 as another important dimension, targeting pathogenic T cell and NK cells through activity through CD-122 biology while preserving beneficial regulatory T cells. Second, we believe this is the right moment to bring the molecule into argenx. The program has generated clinical validation in 2 indications, while still leaving meaningful opportunity for us to shape development strategy, expand the indication footprint and built the full value of the program alongside [indiscernible] 8. And third, we believe argenx is uniquely positioned to help realize the full potential of [indiscernible]. We are specifically organized to execute and maximize pipeline in the product development programs. We have an established product presentation, playbook and strategy and we have demonstrated that when we enter underserved markets, we established leadership and shape treatment paradigms. We believe these capabilities can expand the impact of FP102 for patients and maximize the opportunity. Slide 6. Turning briefly to the transaction. Under the terms of the agreement, Argenx will commence a cash tender offer to acquire all outstanding shares of Forte or $77 per share representing a total equity value of approximately $2.2 billion. The transaction is not subject to a financing condition and will be funded entirely from cash on hand. The Board of Directors of both companies have approved the transaction, and we expect it to close in the third quarter, subject to customary closing conditions. This transaction also reflects how we think about investing for the future. We've always taken a disciplined approach to capital allocation and our priorities remain clear. First, we continue to maximize the opportunity for [indiscernible] and build the future of FcRn medicine. Second, we continue to advance our broad and growing pipeline. And third, we continue to pursue differentiated biology wherever we find it. to strengthen our future growth trajectory and expand what we can deliver for patients. Ultimately, this transaction reflects the simple belief that science should set the base for investment, where we find an opportunity of raising the bar for patients and strengthening the future of Hergenx, we have the flexibility and the conviction to act. We found this with Forte. Now I'll turn the call to Peter to walk through the science behind the program.

Thank you, Adan. Slide 7 building on what you said, our interest in FB 102 begins with the biology and has anti-bot engineers with the quality of the molecule. AB-102 is uniquely designed to inhibit L2 and IL-15 mediated activation and proliferation of pathogenic T cells and NK cells are sparing beneficial IL-2 signaling on regulatory T cell. The scientific question we seek to answer is whether we can reduce the activity of the cells driving diseases like filial and stack disease while preventing the immune preserving the immune regulation we want to keep. argenx, our goal is not brought immunesuppression. Our goal is to target the underlying drivers of disease in a precise way. 102 gives us the potential to do that to a differentiated approach, leveraging CD122 biology. The clinical data that generated today have been important in building our conviction on FB 102. Let me briefly walk through those data before turning the call back to Karen slides. First on vitiligo. In the study, FB-102 demonstrate a rapid and sustained benefit with statistical significance reached by day 64. Patients continue to show improvement through 24 12 weeks after the last dose. On the slide, I would like to show the week 24 result. 29.6% means FR improvement for FB 102 compared with 7.9% for placebo. These data provides early evidence that targeting CD122 may address the underlying immune activity and reinforce our conviction in the mechanism. Celiac disease provides another example. This is a systemic autoimmune disease driven by T cell mediated response to gluten. VR-102 has a strong mechanistic rationale in [indiscernible] disease because CD122 blockade simultaneously suppresses IL-15 driven epithelial damage and an IL-2 driven gluten specific T cell activation. The slide shows that the Phase Ib study met the primary BCL endpoints and showed fewer gluten induced GI symptoms versus placebo. 102 is now being studied in a Phase II trial in pediacdisease, which will read out before the end of the year. Together, the biology, the translational evidence and the clinical data provides a strong foundation for continued development of FP 102. And with that, I'll turn the call back to Garo.

Thank you, Peter. Slide 9. The biology Peter described is what first attracted us to FB 102. The opportunity to bring that science to patients at scale is what excites us about the future. Bedge has too often been misunderstood as a cosmetic condition. It is not. It is a chronic autoimmune disease driven by pathogenic immune activity. Current treatment is limited to a cell population and many patients do not achieve complete or lasting resegmentation with these options. More than 2 million people in the United States live with [indiscernible] while awareness of Vitiligo has increased and new therapies have emerged, outcomes are far from where patients want them to be. Celiac disease represents another significant opportunity. More than 2.5 million in the patients in the United States lipophilic, yet they have no approved treatments beyond a strict gluten-free diet. Even with careful management, many patients continue to experience symptoms and anxiety around accidential exposure. In addition, there are long-term complications beyond the digestive tract and an increased chance of other autoimmune diseases. We believe these are diseases where argenx can play an important role. We have demonstrated with Biggar that we can successfully establish leadership and transform on the served market. so that patients can spend less time managing their disease and more time living their lives. That experience gives us confidence not only in the opportunity ahead for SB 102, but in our ability to execute expand its potential and maximize impact for patients. Slide 10. Before we start Q&A, I want to leave you with 3 key takeaways. First, this transaction is firmly aligned with our strategy. Vision 2030 is on track. Our conviction in Zipcar and our existing pipeline remains unchanged. We builds on that foundation and supports our ambition to be a leading immunology innovator. Second, we believe SB-102 is the right molecule. It combines novel biology, a targeted mechanism and an elegant design with potential across multiple autoimmune diseases. Third, these are serious systemic diseases where patients need better outcomes and where agents can help shape the future standard of care, just as we have done with this car. Forte has advanced impressive science. Our role is to build on that foundation and work alongside the team as we advance FB 102. This is an important milestone for argenx, supporting and most importantly, for patients. Thank you for joining us today. And operator, we'll now open for questions.

[Operator Instructions] Our first question will come from Yatin Suneja with Guggenheim Securities.

One congratulations on bringing this important mechanism into your portfolio. Always good to see 1 of your companies getting acquired by another company that you cover -- so the question that I have is mostly around the indication. So if you could frame for us how much weight you are putting on the areas where we're already seeing proof of concept like vitiligo, EoE and CDC. What about other areas that are opening up with this mechanism, whether it's opiate or to interact that other companies are going after? And how much visibility you had into some of the ongoing study that Fotis running. So just basically frame to us the investment you're going to make across the indications that might open up in this indication?

Yes. Thank you for the question. And I like starting with that question. because I think it really makes us 0 in on the value that FB-102 can bring to a broad range of patients and very much aligned with our mission. So One of the things the parts of genic strategy and one of the reasons that this looks like an argenx molecule is that it is a pipeline in a product molecule. We like molecules where we can pursue multiple indications, One of the reasons for that is that it gives us multiple paths to success and multiple parts to growth. With this molecule when we looked at it, one of the key ungating factors for us was the recent data -- Phase Ib data in Vitiligo and obviously, also the data -- the Phase II data in [indiscernible]. So those will be 2 of the lead indications. But exactly as you say, we think that this target has the opportunity to open up more indications beyond that. We're not in a position today to share what those indications would be. But what we can say is that we'll take that same approach with SB 102 that we've taken with our other pipeline product assets like [indiscernible] and we have a very clear and disciplined approach to indication selection. So we always start with a strong biology rationale, and we like to see indications of a derisked with preclinical or translational data -- we like it when there's a clear development and regulatory pathway and always use that as a gate. And last but not least, there needs to be a high unmet need and a high commercial potential. So over the coming months, we'll be looking at a broad range of indications for SB 102 through these lenses. But as you point out, I think what we'll find is that there's opportunity beyond Celiac and Vitalia for 102. Thanks for the question.

Our next question will come from Tazeen Ahmad with Bank of America.

Karen, I just wanted to get your thoughts about what you mentioned about Vitiligo. So Insight does have a product available currently. They have had a bit of a slower-than-expected launch into that space. Is it your view that it still because it's viewed as a cosmetic indication of the post to something that needs medical treatment? And then can you just remind us what specifically gives you confidence at this juncture that this could be differentiated from what's already out there? .

Yes. Thanks for the question, Tazeen. I will just touch on it. I mentioned it in the script, We do not believe that Vitiligo is simply a cosmetic skin condition. It is a chronic and systemic autoimmune disease. And I think the opportunity ahead is to make that clear to the health care system and to treating physicians. What we see is that Vitiligo impacts quality of life especially where there's significant body area that's impacted and when symptoms like to be photosensitivity are involved. So we think that there is a clear opportunity to elevate expectations for patients with that condition. And I think we have some learnings for how we've done that from elevating expectations and transforming markets in some areas we did got. But perhaps, Peter, you could talk to what -- the strength of the data that we see in vitiligo?

Yes. First and foremost, of course, there is the Ib data, which shows the clear effect. And I think also from a biology point of view, the molecule is hitting 2 parts, which are well established to be active in vitiligo, the IL-15 arm and the IL-2. So that combined with favorable safety profile, which we've seen to date, which we obviously need to confirm, give us some differentiated angles as compared to what's out there. And that's why we are quite bullish on this biology.

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

Congrats on the transaction. Just wondering if you could discuss your view on FB 102's rationale and opportunity in alopecia. I was wondering if reviewing the blinded data from the ongoing trial as part of the diligence process.

Yes. Look, for -- in terms of when we're looking at SB102, we had the opportunity, obviously, to look at all of the data, the public data -- and we look forward to seeing the alopecia data that for later this year that will also inform our position -- and as part of diligence, we were able to work closely with the Forte team. I would say, while I have the opportunity right now that we are very impressed with the Forte team, the quality of the science, the quality of the execution and how they're bringing this asset forward. And so we were able to look at all of the standard types of data that you can look at through due diligence, and that really gave us confidence in this asset and in the data package behind it. Thank you.

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

Yes. Congrats on really a terrific deal based on really good data. especially given this is your first deal. So maybe, Karen, for you, the ILIAD data, Phase II data is expected to come pretty soon. The Phase Ib as noted, was really positive. There's going to be even more of a gluten challenge in this Phase II? Does the potential to even show more outsized effect. Can you maybe frame kind of your expectations for this data? And maybe give us a little bit of a sense, how big do you think Silia gives us an indication?

Yes. Thanks for the question. We're looking forward to seeing the CLIA data as well. Obviously, with the Phase Ib proof of biology we have confidence going into the data, but you're always turning a data card. And I think it's important that we note that this is a Phase II study. So Phase II study, they are all a learning study. So what we'll be looking for alongside the forte is to make sure that we can get really good insight into cilia, including, as you said, with the gluten challenge and the impact of FB-102 so that we can design a strong Phase III development program moving forward. And I think the way that the clinical trial is designed the insights that we'll get, including the primary and secondary endpoints, will give us the information that we need to design a good Phase III clinical development program. So let's wait and see. The data from that program will be coming in Q4 and when we turn that data card, we'll be able to share those top line results and what the future program looks like. Thank you.

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

Congrats on the deal. So you definitely talked through the pipeline in a potential in a lot of detail. if you were to pick 1 indication where you see the largest commercial opportunity, what would that be? Just from an investor point of view, I think it's Celiac at the moment. And I'm curious if you share that perspective.

Yes. I think one of the strengths of this molecule is that it is a pipeline in a product. And what I would say is that we see the opportunity from multiple blockbuster indications. And it's one of the reasons that we like this molecule is that we have multiple paths to success with -- across the indications. So -- like you, we're certainly looking forward to the iliac data, but I wouldn't underestimate the opportunity in vitiligo and some of those other indications as well.

Our next question will come from Samantha Semenkow with Citi.

Congratulations on the deal. I wanted to ask just about these indications being significantly larger than the typical rare disease indications that you've gone off here for GiftCard and some of your other molecules. Just how are you thinking about evolving the commercial engine to really work into your playbook for building these meaningful indication?

Yes. Thanks for the question. It's an important part of our consideration when we were thinking about these indications. I mean we do see these indications as very genic like indications. They are severe autoimmune conditions and there is significant unmet need. But as you say, we will need to continue to augment our commercialization capabilities. I think we've built a strong commercialization engine, and we continue to build that we've got -- of course, we'll start a pending positive data with Sjogren's disease, for example, will start entering larger markets with FCR as well. I think the key to that will be to continue on the path that we've been launching our medicines on with our commercial engine that's focused on a patient-centric approach. So what's going to be really important here is making sure that we are empowering patients to expect and to ask more from their medicines. And that's something we already do with Bidkar very actively. The second piece that will be important is continued evidence generation even post approval or post launch. These are markets that need to be built and where the real world evidence needs to be generated to [indiscernible] the impact of expanding treatment and expanding treatment with biologics. And we have experience also with that most recently in MG, expanding, for example, into ocular MG. And last but not least, I think in these markets, proven payer execution will be key. And what we've seen is that that's a core capability here at argenx and we think that we can redeploy that capability indication by indication with SB102 as well. So there's a long way to go before we get to commercialization of this asset, but we think we're well positioned and have the commercialization capabilities to do it.

Your next question will come from Akash Tewari with Jeffries.

So for Vitiligo, what's your confidence 102 that data holds up in a larger data set, particularly for patients with less spatial involvement? And will those under 0.75 patients be excluded from your further trials? And then can you talk about the delta between the protocol-defined versus ITT data and what imputation method you're going to be using in your further studies? And then finally, did Sport measure total Viag area scoring, not just spatial -- and if so, what did that data look like? .

Yes. Thanks for the question. So what I will say is the call today, we're focused on the -- our initial insights on the program. And what we'll be working on over the next couple of months is going much deeper with Forte and also being able to define the program in the future. So we'll refrain from commenting on all of the detailed questions that you have. But maybe, Peter, you could share why you have confidence in [indiscernible] and what you see the benefit of the program.

Yes. Again, I think the biology fits nicely with the pathophysiology of BT ligand to comment we have at least 1 element on your question, indeed, you do see related activity at the high end of the disease severity. I think what we're going to do now is indeed the deep dive in all these data and define what potential next steps could be, including the question on which patients to include yes or no in future counts.

Your next question will come from Alex Thompson with Stifel.

Congrats on the deal. Maybe another question for Peter. Could you talk a little bit about your confidence in the therapeutic index here with sort of the blockade of the effector and natural killer cell activity and that were maybe out of the woods for infection risk at this point? .

I think that is indeed a concern of the biology of targeting a broad targeting of NK cells and some of the T cells. I think first and foremost, based on the current exposure which is 3 months, we don't see any increase in infectious risk. So far, the safety profile looks good. Secondly, it is not a total NK cell depletion and a specific subset of and cells, which are depleted with this mode of action, which gives also some confidence on the safety element. Obviously, we need to see longer certain treatment data to fully explore the benefit profile of this molecule. Thank you for the question.

Our next question will come from the line of Suzanne van Voorthuizen with Kempen. -- muted, free go ahead. Well, we'll then later. Our next question will come from Matt Phipps with William Blair.

Congrats on the deal. There was a mining data at the recent study for investigator dermatology conference with an IL-15 antibody, showing a lot of benefit when combined with UVB and bile patients. sign that you would look to explore. Just curious if you're familiar with that data. .

Yes. I'll let Peter comment on the data. But I think in general, what you bring up is something interesting in the immunology space, which is combination therapy. And certainly, we haven't started down that path yet, given where we are with 102 -- but as you know, it's a key and core part of our strategy in -- with the rest of our pipeline and I think an area of -- that will continue to emerge of importance in the future. But Peter, I don't know if you want to comment on...

Yes, I think we obviously are also ahead of these data and is an element which we are considering or will be considering when drafting plans for the next phases of clinical development.

Our next question will come from Douglas Toll with H.C. Wainright.

Just -- maybe as a follow-up to Matthew's question in terms of this representing a little bit of a shift for the company in terms of its focus on sort of more common prevalent diseases than orphan indications. I guess I'm just curious, is that going to be reflected in the business development strategy and how you're prioritizing things? Or is it going to still be sort of through a lens of biology? .

Yes. Thanks for the question, and I'll let [indiscernible] comment in a moment. But I would say at the highest level, our strategy, full building our pipeline and for becoming an immunology -- a leading immunology innovator is to focus on novel biology in areas of high unmet need and our capital allocation priority internal as well as business development follow that strategy. But Ari, maybe you want to talk in a little more detail about how we think about business development within that context.