argenx SE

Good morning. My name is Andrew and I will be your conference operator today. Welcome to the Argenix full year and fourth quarter 2020 financial results conference call. At this time, I would like to welcome everyone to the call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star then two. If you require operator assistance, please press star then zero. Please note this conference is being recorded. Thank you. I'd like to introduce Beth DelGiaco, Vice President of Corporate Communications and Investor Relations. You may begin your conference.

Thank you. A press release was issued earlier today with our full year 2020 financial results and a business update. This can be found on our website along with the presentation for today's webcast. Before we begin, I'd like to remind you on slide two that forward-looking statements may be presented during this call. These may include statements about our future expectations, clinical developments, regulatory timelines, the potential success of our product candidates, financial projections, and upcoming milestones. Actual results may differ materially from those indicated by these statements. Argenix 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 Tim Van Hauermeren, Chief Executive Officer, Eric Castaldi, Chief Financial Officer, and Keith Woods, Chief Operating Officer. I will now turn the call over to Tim.

Thank you, Beth, and good morning to everyone on the call. We appreciate your joining. I'm proud of the exceptional progress we made in 2020, despite many unexpected global challenges. We believe we are closer than ever to reaching patients and strongly positioned to create long-term, sustainable value for our shareholders. I'd like to briefly highlight some recent milestones and then provide updates on our deep and differentiated pipeline. First, as we announced earlier this week, we are pleased that our BLA was accepted for review by the FDA. This decision is an achievement for us as a company, but more importantly, we are thinking about what this means for our patients. We see the very real unmet needs of people living with Mg. We hear about it from patients directly and from their supporters, and we are hopeful that FGT may provide a new treatment option for this community. The acceptance of our BLA serves as an obligating event on our path to our first commercial launch, and we remain sharply focused on execution at every level of the organization. Between now and the potential approval of FGF Digimod, we will be working in collaboration with the FDA to answer their questions and coordinate site inspections. I can tell you that we are planning to be ready well ahead of our December PDUFA date because we know that patients are waiting. Still, these are exceptional times with much uncertainty ahead. We are proactively planning for a launch in various scenarios, fully virtual for one or, now that we have more time for the COVID vaccine program to be implemented, only partially virtual. We continue to make progress in engaging with a large proportion of our target stakeholders in a digital environment, which Keith will discuss later in the call. With that said, we would welcome the opportunity for our field force to hold meetings in person. Regardless of scenario, we plan to use every day we have until launch to further implement these important campaigns. The US remains our priority for our first launch and our largest market, but we are also well underway with preparations in Japan, where we expect to file our marketing application in the first half of 2021. This sets us up for a potential additional approval shortly after the US. In the European Union, we are seeking scientific advice in the first half of this year, with plans to file our marketing authorization in the second half. Our European General Manager is very experienced in market access and is working on a strategic reimbursement plan in the highest priority countries. Secondly, we recently announced a goal decision to continue enrollment in the Registrational Adhere Trial, evaluating sub-Q FGATIGIMOPS in CIDP. With this update, Edgar Tijemot now has four out of four successful proof-of-concept trials under his belt. This further emphasizes the breadth and potential before us with Edgar Tijemot and validates our careful indication selection process and innovative trial design. we will continue to leverage the same comprehensive strategy with future indications, which we believe will strengthen our leadership in the FCRN class overall. Third, Argenix has a history of raising capital on the back of strong data, and the recent financing was no different. The $1.1 billion in gross proceeds strongly position us for the launch, and will facilitate the expansion of our diversified pipeline and the growth of our team. On that note, I would like to take this opportunity to thank and recognize the outstanding Argenix team. We have grown to over 450 colleagues over the past year and plan to increase to approximately 750 in 2021 across our four offices. In particular, I would like to thank our Chief Financial Officer, Eric Castaldi, who has been with Argenix since 2014. As stated in the press release from this morning, we have started a planned transition process to recruit a U.S.-based successor for Eric. This is part of our evolution to a commercial-stage company and will all happen in close coordination with Eric, our executive leadership team, and the Argenix board. We're very grateful for Eric's long tenure with the company and for its invaluable contributions. Moving on to the pipeline updates, starting with FGAT Digimod. We continue to believe that we have a first-in-class and potentially best-in-class FCRN antagonist. The structure and mechanism of action of FGAT Digimod are depicted on slide number four, and you can see that FGAT Digimod is unique due to our close collaboration with Dr. Sally Ward. Levgatigemot is the only IgG1 smart fragment which binds to FCRN in a way that mimics the natural ligands and preserves the pH-dependent binding of endogenous IgG to FCRN. In our studies, we have not observed an effect on other serum proteins like IgM, IgA, or a reduction of human serum albumin. To date, over 350 subjects have been dosed with Argatigemab, and we continue to observe a favorable tolerability profile, which has been observed to be consistent across indications. On slide number six, we also see a consistent PD effect across trials that has translated into promising clinical benefits. The phase three ADAPT trial demonstrated a response rate of almost 80% across two treatment cycles, a fast onset of action, depth of response, and the potential for individualized dosing. The consistent PD effect also enabled our ongoing sub-Q bridging strategy for MG as seen on slide number seven. The study is a registrational non-inferiority trial which compares the pharmacodynamic effect of 1,000 mg SubQ-Afgatidumab with 10 mg per kilogram IV-Afgatidumab and is expected to enroll approximately 50 patients. The primary endpoint will be taken at day 29, and thereafter we will continue to build a safety database to support the filing of the SubQ-BLA. Slide 8. CIDP is the second Edgar Teacher model indication within our neuromuscular franchise and the fourth established proof-of-concept indication. I covered the goal decision earlier in the call, so I will just mention a few key points. We believe we designed a very innovative trial with ADHIEV using screening criteria to identify patients with an active, confirmed diagnosis of CIDP. We also included a planned interim analysis. Before committing valuable time and resources to running a registration program, we wanted to be confident of the role of the autoantibody in the disease pathophysiology. We set the bar high using precedent trials to define our thresholds, and we matched the criteria. We can now move forward with confidence as we open new trial sites for enrollment in this registration trial. CIDP is an indication that there has been little innovation, and we are advancing the program as quickly as possible. Next, we are enrolling patients in our ITP trials, as well as our PV trial, which can be seen on slides 9 and 10. For ITP, We have brought forward our SUBQ strategy based on feedback from patients and physicians, and are running two concurrent advanced trials, one with IV and one with SUBQ. We expect these trials will support registration of both formulations. In PEMFIGUS, we are evaluating SUBQ-F-Gatigemot in the addressed registrational trial, and as part of this are specifically evaluating the ability to taper patients of steroids we listened to patients describe the ongoing burden of current treatments and incorporated this evaluation into our trial design as you can see we take a forward-thinking approach when designing our trials based on feedback from physicians and patients we will continue to infuse their feedback into future trial designs so that we're optimally positioning F-Gatigamot within current treatment paradigms. This is true for our fifth and sixth indications, which we will disclose closer to the start of clinical trials. Turning to slide 11. We believe that there is a broad landscape of IgG-mediated severe autoimmune diseases for which F-Gatigamot may provide clinical benefit to patients. We will continue to roll out indications ourselves and will also expand and accelerate the pace of F-Cartigemot development globally through our strategic agreement with Xylabs. Our MG launch in the US is just the beginning. Beyond F-Cartigemot, we look forward to sharing the first set of clinical data from Argenix 117, our second pipeline candidate with broad potential in severe autoimmunity. We remain on track to provide data mid-year from a phase one healthy volunteer study from both IV and sub-Q formulations of Argenix 117. We expect to provide information on safety and tolerability, PK and PD effects, bioavailability, and the selected phase two dose and dosing regimen based on three C2 levels. Slide 12. The first indication we have highlighted for ARGENIX 117 is Multifocal Motor Neuropathy, or MMN, which fits squarely into our neuromuscular franchise. You can see our neuromuscular focus taking shape with NG, CIDP, our Fisk-Abgaard-Dijamab indication, ARGENIX 117, and ARGENIX 119. We know that the investments we are making now in both neuromuscular and other franchises will benefit us over time as the franchises grow. Slide 13. Quickly on Cusatuzumab, for which we have a strategic collaboration with Janssen. We have shifted our priority for this program to the Elevate trial, evaluating a triple combination of Cusatuzumab, venetoclax, and azacitidine. This was based on one In trim phase two data from the colony trial and two, the shifting treatment landscape for newly diagnosed elderly AML patients where venetoclax has emerged as standard of care. In evaluating elevate data, we will look at overall response rate, durability of response, and safety and tolerability to consider where quesotuzumab could address unmet needs in this indication. With Elevate and the future of the program overall, we will continue to make data-based decisions on the path forward for cures of Tuzumab, as we do with all our clinical trials. Slide 14. We will not spend time on our broader pipeline today, but we are committed to providing updates as necessary. Investing in our Immunology Innovation Program continues to be a core part of our pipeline strategy. As we look towards commercialization, we seek to create optionality within our pipeline, whether through wholly owned candidates, founded programs, or asset-centric spin-off companies. We believe this is an important part of our growth story as we transition into an integrated immunology organization. I will now turn the call over to Eric for our financial results.

Thank you, Tim. On slide 15, you will find our full year 2020 operating results, which are detailed in today's press release and regulatory filings. Operating income decreased by 28.1 million for the year ended December 31st, 2020, to 54.5 million compared to 82.6 million euros for the year ended December 31st, 2019. The decrease was due to the milestone payments we achieved in 2019 for the start of the first in-human clinical trial under our ADVI collaboration, partly offset by revenue recognition of the transaction price related to the Janssen collaboration and the increase in other income. R&D expenses increased by €127.8 million for the year ended December 31, 2020, to €325.5 million compared to €197.7 million for the year ended December 31, 2019. The increase in 2020 resulted from higher external research and development expenses, primarily related to our FGAR-TDMOD, Krita-TDMAB, and other clinical and technical programs. Furthermore, the personal expenses increased due LGMA expenses total 149.4 million euros for the year ended December 31st 2020, compared to 64.6 million euros for the year ended December 31st 2019. The increase primarily resulted from higher personal expenses and consulting fees related to the preparation of the possible future commercialization of LGMA. For the year ended December 31st, 2020, financial expenses amounted to 1.4 million euros compared to a financial income of 14.3 million euros for the year ended December 31st, 2019. Financial expenses correspond mainly to the decrease in net asset value of money market funds following the impact of the COVID-19 outbreak on the financial markets. Based on our current operating plans, we expect our cash burn rate to increase significantly in 2021, approximately doubling compared to 2020. This will support our transition to an integrated immunology company, including the build-out of global infrastructure and drug product inventory ahead of our first expected commercial launch. the advancement of our clinical stage pipeline, and our continued investment in the immunology innovation program. I will now turn the call over to Keith to discuss our commercial preparations in more detail. Keith?

Thank you, Eric. Slide 16. I would first like to take a moment to highlight an important event for the MG community that occurred over this past weekend, Rare Disease Day, Its purpose is to raise awareness of the challenges that the rare disease community faces each day and to demonstrate our solidarity alongside them, including people living with MG. We at Ourgenics are united by our common purpose to pursue a better tomorrow alongside the MG community. We know that the best way we can do this is by listening and learning. We hear directly about the significant unmet need that still exists, the symptoms, treatment burden, strain on relationships and mental health, and struggles these patients face just to manage day-to-day activities. These stories motivate us every day in the work that we do. Slide 17. With this in mind, we are very excited to hear from the FDA this week that our BLA has been accepted for review. We are now working towards a PDUFA date of December 17, 2021, and I can assure you that we are working hard to be ready for a potential commercial launch well ahead of that time. We have been building out our commercial capabilities and personnel for almost two years, and we know what we have to do to prepare in these next several months. We also announced the opening of our pre-approval access program this week. We have been getting requests for EFGAR Tigamad from physicians, and we want to accommodate them where possible as part of our commitment to MG patients and their supporters. We also want to honor our commitment to the patients that participated in our global registration trial to keep them on therapy as long as possible. More than 75% of patients who entered our open label extension are still on study, some for over two years now. Slide 18. With the acceptance of our BLA, the clock has started, and we are accelerating preparation across multiple fronts, building out our field team, including the sales force, engaging with patients, physicians, and payers, and ensuring appropriate commercial drug supply at the time of launch. Let's start with our team. We now have over 100 colleagues working out of the Boston office or in the US field, including medical research liaisons, thought leader liaisons, and reimbursement account directors. We have launched a hiring process of our Salesforce with the plan of being fully staffed at least four months prior to the anticipated launch. Based on the interest and experience level we are seeing from candidates, we are confident we will have the right team in place. Moving to our patients, we launched several patient-centric efforts last year, including MG United, which is our digital platform to engage with the MG community and provide clear, credible information. We now have over 20,000 patients and caregivers who have opted to receive information from us on MG. We also launched a real-world evidence study, My Real World MG, where we have over 1,000 participants enrolled. We collaborated with global patient advocacy groups in launching this study with the goal to better quantify the real-world burden of MG, including hospital visits, loss of productivity, direct and indirect medical costs, treatment side effects, and psychological implications. Moving to our physician education and engagement efforts, which we are rolling out through disease state awareness campaigns and CME programs. This will be critical to our launch success because FCRN as a target in MG is not yet well understood. Specifically, details on our multi-channel approach include the launch of our disease state awareness campaign called GMG Cycle, The purpose of this campaign is to educate healthcare professionals on the role of the antibody in MG and on FCRN as an integral pathway to disease. We have had significant engagement from this campaign reaching 62% of the target physician audience to date. We're also planning peer to peer marketing programs to start once we launch. We have been learning from our peers who have had precedent launches in a COVID environment and they emphasize the growing importance of this channel. Physicians are faced with new challenges treating patients virtually, and because of this, there's an increasing reliance on input from peers and neurology thought leaders for new treatment considerations. In planning for our various launch scenarios, we're also using market research to learn more about physician preferences and to tailor our engagement approach. With our December PDUFA date, We have, we may have the option to offer both virtual and in-person engagement with healthcare professionals, because even in a post COVID environment, we know that not one size fits all. FGAR Chigamod being a first in class FCRN antagonist, which means we have the opportunity to be a thought leader to help to the healthcare community on this new modality. But it also means we may face a more gradual uptake as our education efforts take effect. In terms of payers, we continue to have valuable discussions with both national and regional payers. We know that at launch, we will not have a permanent J code and that payers will not have a dedicated policy in place for FGAR-Tigamot. We are working on building out the patient support system to help patients and providers navigate the complexities of the reimbursement environment. We still know that early in the launch, that early in the launch reimbursement challenges will be a potential hurdle to adoption. We have a strong manufacturing strategy in place with our best in class partner, Lonza. We currently have facilities in the UK and Singapore and have plans to open a third site in the future to accommodate growth from our planned expansion into new territories and indications. In addition, we have partnered with Better for fill and finish and Cardinal Health for third party logistics. We recognized ahead of the global pandemic that ramping up supply chain efforts would be prudent given the broad potential of F-Gar-Tigamod and our plans to open a pre-approval access program. We are glad that we did so, particularly as we've seen continued pressure on the global supply chain in supporting the vaccination campaign. We are in full preparation mode for our launch. and we plan to use every day that we have to further engage with our stakeholders and build out our inventory. On slide 19, before I hand the call back to Tim, I would like to reemphasize the point that we made earlier on the call. MG is just the beginning. We are building a solid foundation which we can leverage across indications and molecules in the future. This will allow us to benefit from certain economies of scale as the resources we are investing in today and relationships we are building now will be advantageous for the rest of our pipeline and in the long term. With that, I will now turn the call back over to Tim.

Tim? Thanks, Keith. Turning to slide 20. In summary, 2020 has been an outstanding year for Argenix, and we look forward to building on our accomplishments in 2021. We are proud of what we have achieved, including The acceptance of our BLA for abgartigemot in MG. Demonstrated proof of concept in four indications and an ambitious global development plan for abgartigemot. A second autoimmune asset from which we will show the first set of clinical data this year. Continued expansion of our differentiated pipeline through our IIP. and our team which continues to grow across our four global offices to support our success. 2021 stands to be another pivotal year for the company, and we are strongly positioned to create long-term shareholder value. As we continue to grow, we aim to stay true to what makes us Argenix. We are firmly rooted in groundbreaking immunology research, which enables us to innovate, We are committed to growing through co-creation because diverse opinions and experience challenge us to do better, and our patients humble us and are at the core of all we do. With that, I would like now to hand back the call to the operator to begin the Q&A.

We will now begin the question and answer session. To ask a question, you may press star, then 1, on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. We ask that you keep to one question to allow enough time for everyone. At this time, we will pause momentarily to assemble our roster. The first question comes from Yaron Verber of Cowan. Please go ahead.

Hi, guys. This is Brendan. I'm for Yaron. Thanks very much for taking the question. And congrats again on a great quarter and all the great progress.

Just a couple quick ones from us. I guess first on ITP, the study is ongoing here. Can you just give us kind of a quick update on your thinking for the expected treatment regimen? Obviously, the two phase three should support registration for both. But are you kind of thinking of induction dosing with IV and then transitioning to sub-Q? And do you think any additional studies would be required for that? And then I think just quickly on AML, can you give us a sense of where you're thinking the bar is for improvement with the triple combo treatment over the double that would kind of encourage you to expand development? Thanks very much.

Thank you, Brendan. Thank you for joining us today. I'm going to hand over question number one to my colleague, Keith. Just for clarification, the streamline the phase three global registration campaign to now run an IV-only study next to a sub-Q-only study. Remember, this is the T-lining which we did last year into COVID time. So these two studies together, I think, have the right to qualify for registration. Keith, can I invite you to comment on our views on the treatment regimen which we have in mind, please?

Sure. Happy to do so, Tim. The sub-Q study that we're running in ITP is utilizing the halazine-enabled sub-Q. So it is the same dose that we use in the CIDP trial. And remember that 1,000 milligram flat dose is non-inferior to 10 milligram per kilogram IV. So there's no induction dose needed. The one trial is pure IV with 10 milligram per kilogram, and the other one is sub-Q with 1,000 milligram flat dose. So we expect both of them to be able to stand alone and be registration enabling.

Thank you, Keith. And then on the EML question, I think there's a firm new bar set by the Fiali study. I think the Fiali study tested the combination of venetoclax and azacitidine. And what we saw was approximately a 37% CR rate, a 66.7% cumulative CR rate, and an overall survival going up to 15 months. So we believe this is the new standard of care in the newly diagnosed elderly AML population, which is unfit for intensive chemotherapy and bone marrow transplants. So this is the path to beat. And of course, the other dimension which is important in this study is safety. can we safely add Cusatizumab on top of a combination of two drugs, which, of course, commit some significant safety burden for the patient. Thank you.

Great. Thank you. The next question comes from David Merengarten of Wedbush. Please go ahead.

All right. Thanks for taking my question. I had a question. Now that you have additional experience, growing experience with patients on the open-label extension, could you describe the number of treatment cycles that you're beginning to see in some of the patients who have been treated the longest? Thank you.

David, your wife, I mean, as Keith alluded to, more than 75% of the patients are still in the open-navel extension study, which I think is very exciting. And we start to see the shaping of what is likely going to be the real-world distribution of the dosing cadence. So in the first portion of the open-navel extension, We have patients which still followed the mandatory cycles of the lab study with the ability to take the background medication. And in the second portion of the OLE, it's really hands-off, and we can see the real-world utilization of the product. It's too early to comment on what we've seen, but we are planning on regular updates at clinical conferences of the opioid extension studies. So stay tuned. Information is on its way this year.

Okay, thank you. Congrats, Eric.

Thank you, David. The next question comes from Matthew Harrison of Morgan Stanley. Please go ahead.

Hi, this is Max Goron for Matthew. Thank you for taking our questions. We were wondering if the FDA provided any rationale for the standard review in their letter, and do you expect the agency to hold an advisory committee meeting? Thank you.

Max, good to hear from you. Thanks for joining us today. So we can only guess what the motivation was of the FDA. However, if you look at the overall landscape, I think it's fair to say that this is a reasonable outcome of an FDA, which is, of course, heavily burdened and focused on the COVID pandemic. I think in the letter, the FDA states that they're currently not planning on a panel, which we think is encouraging news. Of course, the FDA will always reserve the right to organize a panel, even when they deem it necessary during the review of the file. So, so far, so good. But please stay cautiously attentive. Thank you.

Thank you. The next question comes from Kazin Akhman of Bank of America. Please go ahead.

Hi, good morning. Thanks for taking my question. Tim, just wanted to ask you, just given on the back of your announcement that you will be moving forward with CIDP, we saw that a competitor, UCB, decided to discontinue their program. Obviously, it's good in the sense that there is less competition imminently. Are there any other obvious conclusions to come to with their decision to discontinue their program in terms of superior profile of your product perhaps to theirs? Thanks.

Thank you, Tazi, and thanks for joining us today. Look, I believe that in their press release or earnings call, UCB alluded to the fact that they will disclose the data of the Phase 2 CRDP trial later this year, so that's something which we will be eagerly awaiting. You know that we like to study data and make data-based decisions. First of all, I think both molecules are, of course, fundamentally different. I think there's a distinctly different design, molecular design, between a gratitude mod and the full-size high affinity monoclonal antibody. But we also believe that our innovative study design really contributed to a strong, positive goal decision in our case. So we're confident in our data. We're confident in the path forward. And, of course, we're going to study the data if they become available.

Okay, thank you. The next question comes from Danielle Brill of Raymond James. Please go ahead.

Good morning. Thanks so much for the question. Um, can you just remind us what is required in terms of data for sub Q filing beyond showing PK PD equivalents? Uh, what? Look what types of data are gating any long term safety requirements or that sort of thing? Thank you.

Thank you for joining us today. I think it's spot on. As you can see from the disclosure today, primary endpoint is taken on day 29, and that constitutes a percentage of IgG reduction at that point in time. So that's relatively straightforward. We're getting data, of course, from a timing point of view will be the safety data. What we have been saying publicly there is that, you know, we would be quite pleased with the outcome, with the expectations of the MDA and the size and magnitude of the safety database that we have not given any further details. So stay tuned that this may be useful to disclose later.

Okay, got it. Thank you.

Thank you. The next question comes from Greg Sivanovich of Goldman Sachs. Please go ahead. Good morning. Good afternoon. Thanks for taking my questions. If I could maybe squeeze in two. The first, maybe this is for Keith. Keith, I think in the last call you seemed to be walking down launch expectations, and I just wanted to get a sense of – You know, where you are in the process of building awareness for FGAR-Tijamad, you clearly walk through the different initiatives that you've got going. But maybe to use a baseball analogy, like what inning do you think that, you know, Argenix is in in terms of success? building up awareness for not only the FCRN mechanism of action, but also for F-Cartigiamon itself. And then maybe a second question is maybe for Eric, if I could ask a financial question. But given the doubling of cash burn expected this year, could you perhaps provide some comments around Is that equally distributed between R&D and SG&A, but more heavily weighted towards R&D, given that you've got so many late-stage trials that are ongoing? And in terms of CapEx, what should the expectation be for 2021 relative to 2020? Thanks.

Great, Greg. Thank you for the question. I want you to first know that my overall view on efcar-tigamod in treating MG patients has not wavered. We believe that of the 65,000 patients in the U.S., 20,000 of them will be appropriate patients for efcar-tigamod. But what we do believe, and I've said, is a gradual, steady launch. And the reason being is this is a first-in-class mechanism of action. And this is a mechanism of action that really hasn't been taught in medical school. And so many of the physicians that treat MG were not previously familiar with FCRN. So we've got a great deal of healthcare professional education to do. I think that we also look at this of happening during COVID times where a lot of the education was taking place virtually. I'm actually quite encouraged with our PDUPA date that we may have the opportunity to launch, as I said in the prepared statements, not only virtually but also in person. So I think that benefits our ability to be able to get this message across. It's also going to benefit patients being able to see their physician in person because, as we spoke the last time, so many of these calls are taking place, so many of these appointments are taking place via telemedicine with physicians. So, look, remember, at the beginning, we will not have a J code. There will not be policies in place at most of the payers, and so this will take a little bit of time. As far as what inning, you know, for your baseball analogy, all I can say is that, you know, I think we feel pretty fortunate that J-code is no longer something that you apply for once a year. Now you can on a quarterly basis. And so I'd expect this to be really hitting our groove here sometime towards that six to seven month when we get that J-code. Eric?

Yes. So... With regard to your question on the distribution between R&D and SG&E and commercial expenses, clearly in 2021, you will continue to see a step increase in R&D expenses. We're going to have seven phase three control trials ongoing. So clearly, I mean, this is going to be impacting directly the operational expenses. And obviously, with the preparation of the launch, commercial expenses also are going to increase significantly. What we gave as an indication is that the burn rate for 2021 is going to double compared to last year.

So last year, we had a burn rate of about $400 million. So you could expect something around $800 million for this year.

In terms of capital expenditure, this is not going to be important, and we don't plan to invest a lot in capex. What we're going to have of this facility on the balance sheet is inventory for Edgar Tigimod. Already at the end of 2020, we had an amount of $20 million, and this is going to increase significantly as we prepare the launch of Edgar Tigimod.

Okay, thank you very much. The next question comes from Yatin Sinega of Guggenheim. Please go ahead.

Hey, guys, this is Eddie on for you. Thanks for taking my question and congrats on the year. Can you give us your thoughts on the lipid changes that we're seeing with one of your competitors and if it's possible that the FDA might require some sort of monitoring for that class? And did you provide any data to them to like convince them that you're confident that you won't need any monitoring? And then just quickly for the pre-approval access program that you just initiated, can you give us a sense of how many patients you expect to be on that by the time you launch commercially? Thanks.

Thank you for the question. So I'm going to give question two to my colleague, but let me start with the first one. Let me repeat that not all S-serum antagonists are made equal. I think they have distinctly different molecular designs. The fate of the antibody S-serum complex is fundamentally different, as we have published. And you also see an emerging differentiated clinical profile between the molecules. So in our DLA file, there's an extensive data set discussing all these parameters in detail. And we have been able to look at the data and make data-based observations and Q&A. We do not think this is a class effect. We also did not get any specific comment or question on that so far. So let it continue to be a data-based conversation. We're confident in our own data sets. Keith, would you mind taking questions to a number of patients?

Sure, I'm happy to. We're really excited to announce our pre-approval access program because we have been getting requests from physicians if they could get access to Epidartigamide to treat their MG patients. So we're really pleased to be able to do so at this point. We have set aside a certain amount of clinical supply to be able to treat those patients. But for me to speculate with an actual number of what I think the number of patients we will enroll, you know, between now and the PDUPA date, it would be a guess. So that wouldn't really be valuable to you. The one thing that I do want to call out is this pre-approval access program is for patients in the U.S. and also in Europe. So we're really excited for the patients who will be able to benefit from F-Gar-Tigamon.

Thank you. The next question comes from Akash Tavari of Wolf Research. Please go ahead.

Hi, this is Amy Lee on for Akash. Thanks so much for taking our questions. So first on the NG launch, how much interest have you gotten in your pre-approval program and how quickly can you convert these patients on top of any patients currently in your open legal expansion trial to commercial patients upon approval? And then another one, just wanted to hear your thoughts on the kidney disease market for anti-FDRNs, specifically in conditions like ANCA-associated renal vasculitis, where we see a relatively large patient pool, the disease is predominantly IgG autoantibody driven, and we've seen recently promising efficacy data from complement inhibitors. And then finally, would love to hear the current in-house take on what's causing the albumin drop in competitors, and if the mean advanced LDL increases are due to albumin drops, are specific to thyroid eye disease, or if there's another reason. Thank you so much.

Thank you, Monique. Keith, why don't you take question number one on the pre-proof program, and then I will continue with the question on kidney opportunities and the albumin story, okay?

Happy to do so, Tim. So first of all, uh, this week is the first time we've actually gone public with the pre-approval access program. I can tell you that the requests that we have had over the, in the past have been from physicians that most of them participated in our trials because they're the ones that are educated about the FCRN and the mechanism of action and how F-Card Tigamod really works as well as they have, some of them have seen a firsthand experience of how F-Card Tigamod has benefited their patients. Now, since we put this out publicly, and I can tell you that the patient advocacy organizations are aware of this program, that the increase of the number of physicians reaching out to us has gone up. But we're in early days here. So, again, I don't want to make any projections, but there definitely is an unmet medical need in MG. And Our ADAPT trial data has been pretty impressive, so I expect to get quite a bit of attention towards this. Thank you.

Thanks, Keith. With regards to opportunity, we believe there's a vast opportunity in front of ADAPT-GMAP. So we continue to talk about at least 10 to 15 high conviction indications. High conviction meaning solid biology rationale, clear cut feasibility for running clinical trials and registration trials based on known clinical endpoints and approvable endpoints. And then, of course, substantial commercial opportunities. So we're not going to comment yet on, you know, where we think kidney indication sits in the priority list. We will be disclosing fifth and sixth indication for epithelial disease. And you also remember that in the ZEI lab collaboration, Zai is now going to join us in adding new indications in an accelerated fashion. So you will see the strategy going forward on how we have been prioritizing indications, but I agree with you that it's a substantial opportunity, including in the kidney area. On the albumin drops, we have consistently told you that we do not see any drops in serum albumin. We have also published that. And we have also in our phase one manuscript disclosed experiments where you can clearly see under the microscope an infection experiment that Gratijumov is mainly residing in the recycling endosome, in the recycling loop. and is able to leave the cells, to exit the cells. So, Garticumab is basically mimicking wild-type IgGs through the cycling pathway, and therefore not fundamentally impacting the fate of FCRN or driving FCRN into the lysosome. But that explains, we believe, why serum albumin levels are intact upon dose, and even the high doses I believe, from the high affinity monoclonal antibodies. And look at the cholesterol data. and only correlate to the indication of TUD, or that they're being aggravated by drops in serum albumin, as seen by some of the competitors. But that remains to be seen. You need to wait for that data. And when you mine the literature, you will see that serum albumin levels inversely correlate with cholesterol levels. I mean, albumin is a very important carrier for many things, including cholesterol. So there could be a combination of both forces, both factors here. But let's wait for the data before we make further comments on that. Thank you.

Thank you so much.

The next question comes from Lenny Van Steenhuis of KBC Securities. Please go ahead. Hi, good afternoon. Some questions as well on the pre-approval access program, which is, of course, great news for patients and an opportunity as well to invest in market share by sponsoring therapy before the official starting gun is fired. I was just wondering if there's a material cost as well related to the PPAA, given the fact that it will likely run for roughly nine months in the U.S. and likely longer in Europe. Thank you.

Could you take this question, please?

Yeah, in regard to the support, we are working with a corporate partner, Clinigen, to be able to run this program. So our material costs are involved with the contract that we have with Clinigen and them handling this, as well as the cost of goods sold. So it's nine months, but in the long run, this is a commitment to patients that we think is the right thing to do for them.

All right, thanks for that. The next question comes from Yanan Zhu of Wells Fargo. Please go ahead.

Thanks for taking my question. It's mainly related to the PEMFIGUS program. In the Phase III IV study, the population is moderate to severe, which is different from the mild to moderate population in Phase II, I believe. So could you comment on what have contributed to the change in the patient population in Phase III? And also, what about the IV dose? I don't think you have disclosed that will be used in the Phase III study. and whether that could be compatible with a future subcutaneous strategy. Thank you.

Thank you, Yanen. So, your right-of-face T trial for pancreatic is done with the subcutaneous product. um patients in the patient panels were very excited about the ability to access sub-q products for treating pemphigus you're also right in observing that the patient population is broad in the phase three we aim for a broad label and it's a moderate to severe patient population which is the bulk of the patients that definition has shifted a little bit if you look at the pvi cutoffs to define what is mild what is moderate what is severe Actually, in our phase two study, we had patients which you would qualify today as actually severe Dental Digest patients. So the patient populations overlap to a certain degree. And based on the PD and the efficacy data, we have seen a few confidence that GraptogenMod will be able to make a difference in this broader patient population.

Got it. Thank you.

The next question. comes from Alex Kogut of Kempen. Please go ahead.

Hi. Thanks for taking the question. I have a question about your fifth indication. If I look on the slide where you list the opportunities, it looks like there are just a handful of indications that would fit number five. So I think the question is, will you keep with the strategy of going for offering indications, or does it mean and that it could also be a larger indication.

Would you mind commenting on that question, you know, open versus larger?

Yeah, I would say at this time we continue on our path, which was our strategic plan that, you know, we when we select indication, it's based on the biology rationale. That is the first hurdle that we need to get through. And we work on this with academic experts. And we have indeed, again, for this fifth indication to determine it as our target. We do like to work in orphan and rare disease, and so we continue down that path, and that is part of the plan. It's sticking to this formula that has allowed us to hit four for four on our proof of concept, and so we're going to stick with that plan. In the event that there comes a time later that we need to expand outside of rare disease and orphan, we will cross that bridge when we get there.

I guess the follow-up question is, out of the bigger indications you have listed on the slides, which ones do you see the most compelling biology for?

Yes, some of them do have a relatively compelling biology, and I would be also very careful with concluding that it's going to be orphan versus big indications. For some of these larger indications which you list on the slides, you will probably find subtypes or subsegments of patients where the pathogenic IgG is really driving the disease. For example, in MS that could clearly be the case. So even if and when we would address larger indications, potentially the real target patient population would still qualify as orphan. So let's pad the bridge when we're there. There's plenty of work on the table in the space which Keith just described.

OK. All right. Thanks.

Thank you.

The next question comes from Douglas Tasso of HC Wainwright. Please go ahead. Hi. Good morning. Thanks for taking the question. So I'm just curious in terms of the early sort of experience from the trials and obviously from the Early Access Program, it's maybe a little challenging, but just in terms of educating physicians about the F-serum mechanism and F-Gard Chittagma as a therapy, are there any particular challenges or is it, you know, in terms of the actual therapy, in terms of establishing dosing, monitoring patients, or is it really just about understanding how the mechanism works and the treatment?

Keith, would you mind taking this question, please?

Yeah, happy to, Tim. actually when you look at the mechanism of action for F-Glartigamide and explain what it's actually doing, it's fairly simplistic to understand and how that effect of the autoantibody at the neuromuscular junction and the fact that we're removing it, which is why you're seeing the clinical efficacy. So that part I don't view as big of a hurdle. When I talk about the education of healthcare professionals, It's because of the fact that we cannot speak about the mechanism of action except when we're in market research or in some type of a Congress. We can't go out and speak about it at this time because that would be perceived as pre-promotion. So that's why I talk about our overall success in MG. I feel very good about. It's the gradual uptake because that's when we can begin the education. I can tell you that when we've done this in advisory boards, we can start at the beginning of the day, and there's an interest to learn about it, and by the end of the day, there's an enthusiasm of what this therapy could mean to MG patients. So it's really about testing these physicians with the right messages.

And then I guess just more broadly, I'm just curious in terms of, obviously, between 117 and obviously, you have a really strong franchise in neuromuscular. I'm just curious, are there other mechanisms that you're looking into either for internal development or development programs or potentially through business development to bring into the company? Thank you.

Yeah, we already disclosed that Algenics 119 is a neuromuscular asset. It fits clearly into the neuromuscular franchise which we're building. And yes, we are, of course, also looking to the outside world for complementary mechanisms of action, you know, molecules which could actually fit very nicely. Although I must say that we're pretty busy developing our own innovation from the IIP program, the Immunology Innovation Program, that seems to be a very rich hunting ground for opportunity. But that being said, we're looking holistically at building out a viable long-term neuromuscular franchise. Thank you.

Great, thank you.

The last question will come from Rosie Turner of Barclays. Please go ahead.

Hi, thanks very much for taking my question. Yeah, just one left for me. So in the presentation and in the release this morning, you mentioned that Xilabs are going to be discussing accelerated approval in China. And I just wondered what this actually could mean in terms of timings. and kind of your base case assumption for a launch over in China, because obviously you've got some pretty chunky royalties over there. Thank you.

I would like to comment on that question later in the year, because frankly speaking, there are two possible scenarios. There would be a classical scenario where on the back of a DLA approval, you would basically have to do a small PK study in order then to file for approval in China. There is a potential fast path, where actually you would skip that PK study and actually you could go straight into registration. One of the many, many reasons why we did part with Xilab is because of the proven track ethic in navigating the regulatory landscape in China. But I leave that to Xilab to comment on that. I think we need to navigate it step by step and we will keep you informed, okay?

Thank you, Sarek.

Thank you. This concludes our question and answer session and the Argenix full year and fourth quarter 2020 financial results conference call. Thank you for attending today's presentation. You may now disconnect.