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spk03: call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Jessie Young, Vice President of Investor Relations and Finance. Please go ahead.
spk04: Good morning. This is Jessie Young, VP of Investor Relations and
spk44: Finance at Legend Biotech. Thank you for joining our conference call today to review our second quarter of 2024 performance. The second quarter has been an eventful one. We are pleased to report .5% sequential growth in cafecti cells. More importantly we received label expansion approvals from both FDA and EMA. Lastly we are most excited about the survival benefits demonstrated by cafecti in the second analysis of Cas2-4. Nothing gives us more joy than helping patients with multiple myeloma live longer. Joining me on today's call are Ying Huang, the communist chief executive officer and Laurie McCumber, the communist chief financial officer. Following the prepared remarks we will open up the call for a Q&A. We have Guo Wei Fan, chief scientific officer and Steve Gaville, head of commercial development for the US and Europe joining the Q&A session. During today's call we will be making forward-looking statements which are subject to risks and uncertainties that may cause our actual results to differ materially from those expressed or implied herewithin. These forward-looking statements are discussed in greater detail in our SEC filing which we encourage you to read and can be found under the investor's session of our company website. Thank you.
spk24: Hello and welcome to our second quarter earnings call. I am pleased that you could join us. Since our last earnings call we have made progress on multiple fronts which you can see in our earnings presentation on slide 5.
spk34: First
spk24: we announced positive top-line results from Carvitews 4. In the pre-specified second interim analysis Carvitews demonstrated statistically significant and clinically meaningful improvement in overall survival compared to standard therapies. We look forward to presenting this important data set at major medical meetings in the coming months. Additionally at ASCO and EHA we provided new data from the phase 2 Carvitews 2 study and new and updated data from the phase 3 Carvitews 4 study. We would like to bring to our attention a recent paper published in Nature. As you will see on slide 6 data were reviewed from 339 multiple myeloma patients treated at Mayo Clinic with antibody drug conjugates CAR-T and T cell engagers targeting BCMA in the period of 2018 through 2023 with a median follow-up of 21 months. The study found that CAR-T and T cell engagers demonstrate superior efficacy in both PFS and OS to that of The authors also concluded that where feasible CAR-T should be the initial BCMA derivative therapy we're encouraged by the real-world clinical evidence of CAR-T efficacy particularly the insight it provides into the strong efficacy of Carvitew. As many of you know our expansive Carvitews data set enables us to continue building a strong foundation for our market penetration. On this note we recently added two regulatory approvals to global market opportunity you see on slide 7. The United Kingdom's medicines and the health care products regulatory agency approved Carvitew for second line multiple myeloma and Health Canada approved Carvitew as well. Our efforts to bring Carvitew to more patients globally translated into net trade sales for the second quarter of 186 million dollars which is a 60% increase year over year and .5% increase quarter over quarter as you will see on slide 9. The increase in our second quarter performance versus the first quarter was a result of the ongoing launch of Carvitew and share gains from capacity expansion and manufacturing efficiencies. Importantly we continue to see growth in patient demand and we're reiterating our expectation for pronounced growth for Carvitew in the second half of the year as we continue to add more slots and expand our capacity. We remain laser focused on making more supply available to the market and reducing van to van time. Turning to slide 11 our CMO Novartis has begun clinical production of Carvitew in the US. This frees up production capacity for commercial production at our facility in Raritan, New Jersey. We're on track to complete physical expansion of the Raritan site and anticipate approval of the new section of Raritan in the second half of 2025. We continue to expect that our Obelisk facility in Ghent, Belgium will be approved for commercial production later this year. We more than doubled our Carvitew production capacity in 2023 and are on track for continued expansion. The increases to our production capacity will help us keep up with growing patient demand. Our cash balance now stands at 1.3 billion dollars which we believe provides us the resources needed to increase production as I just mentioned and gives us financial runway into 2026 when we expect to begin to achieve an operating profit. In other developments we continue to bring more hospitals online as authorized treatment centers. We now have a total of 77 US hospitals certified to treat Carvitew patients. Our patient treatment now comprises approximately 40% of our volume and remains an important medium for us as we expand our marketing efforts in the community setting for the second line and the out. Finally, turning to our pipeline on slide 13, I am pleased to share that we recently completed Carvitew 5 enrollment. As you might recall this randomized phase 3 study evaluates patients with newly diagnosed multiple myeloma for whom stem cell transplant is not planned as initial therapy. If we were to receive approvals based on Carvitew 5 and Carvitew 6, we translated into an additional 52,000 patients annually. I'm also pleased to share that we recently broke ground on the new -the-art research center in Philadelphia to advance our portfolio of next-generation cell therapies. We are excited to expand our research presence in the US and attract top talent from the growing biotechnology innovation hub of Philadelphia, the birthplace of gene and cell therapy. In summary, we are executing against this substantial opportunity ahead of us as we expand our manufacturing capabilities and increase our earlier line commercial activities with an eye towards investment in future transformative cell therapies. Now I would like to turn the call over to Laurie to walk you through the financials for the second quarter. Laurie?
spk48: Thank you Ying and good morning everyone. As Ying mentioned, we generated approximately 186 million in total net sales for Carvitew during the second quarter, an increase of 60% -over-year driven by the progress we have made with ongoing market launches, expanding market share, and capacity improvements. As a reminder, we share equally in all profits and losses of the cell of Carvitew ex-China with our partner Janssen. Turning to our revenue, as you'll see on slide 14, total revenues for the second quarter were 187 million, consisting of 93 million of collaboration revenue from the cell of Carvitew and license revenue of 91 million, driven by 75 million revenue recognized in connection with milestones achieved under the Janssen agreement for sit to sell, and 16 million in recognition of deferred revenue in connection with our agreement with Novartis to develop, manufacture, and commercialize LV2102 and other potential CAR T therapies selectively targeting DL3. Net loss for the quarter ended June 30, 2024, with 18 million or a loss of 5 cents per share compared to a $1.37 per share for the same period last year. Moving on to expenses on slide 15, collaboration cost of revenue for the second quarter 2024 was 45 million compared to 33 million for the same period last year. These are legends portion of collaboration cost of sales in connection with the collaboration revenue under the Janssen agreement, along with expenditures to support the manufacturing capacity expansion. Additionally, cost of license and other revenue for the second quarter of 2024 was 5 million compared to no cost of license or other revenue for the second quarter of 2023. These costs are in connection with our agreement with Novartis to develop, manufacture, and commercialize LV2102 and other potential CAR T therapies selectively targeting DL3. Research and development expenses for the second quarter 2024 for 113 million compared to 96 million for the same period last year. The increase of 17 million for the three months ended June 30, 2024, compared to three months ended June 30, 2023, was due primarily to research and development activities and sit to sell, including startup costs for clinical production in Belgium and continued investment in our solid tumor programs. Administrative expenses for the three months ended June 30, 2024, were 35 million compared to 28 million for the same period last year. The increase of 8 million year over year is primarily due to the expansion of administrative functions and infrastructure to support the increased manufacturing capacity. Selling and distribution expense for three months ended June 30, 2024, was 30 million compared to 21 million for the same period last year. The increase of 9 million year over year due to costs associated with commercialization of CAR Vicky, including the expansion of Salesforce and second line indication launch preparation. To summarize, our spending remains on track and we continue to maintain a strong balance sheet. As of June 30, we have 1.3 billion in cash and we have a total of $1.3 billion in capital, which is equivalent to the equivalent of the equivalent of deposits and investments. Thus, we believe we have sufficient capital to fund our operating capital expenditures into 2026 when we expect to begin to achieve an operating profit. Thank you. I will now pass it back to Ying for closing remarks.
spk24: Thanks, Laurie. To sum up, our team remains dedicated to our strategic priorities. I am pleased to share that we recently surpassed 3,000 CAR Vicky patients treated to date, reflecting our deep commitment to multiple myeloma patients and their families. I would like to thank each of our employees for their dedication to the patients we serve as we steadfastly execute on capacity expansion and also our commercial launch in second line. Before we open it up for Q&A, I would like to assure you that our board and management team have been taking a close look at our business to ensure we are in the best position to continue our growth and momentum as we advance our mission to help multiple myeloma patients. We know there has been recent speculation about potential political risk, particularly given this being an election year. Our board is active and engaged and continues to assess the potential impact of those risks. We're not going to speculate on hypotheticals on this call, but rest assured we are focused on driving shareholder value as we consider our path forward. If and when we have updates to share, we will provide them at the right time. In the meantime, we appreciate if you can keep your questions focused on our earnings results. And with that, we would like to take your questions. Operator, we're
spk03: ready. Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Gina Wang from Barclays. Thank you.
spk46: Ying, I know you said we should not ask anything about speculative comments. I know you also cannot comment too much, but I do want to ask because this is the number one major overhang on the stock regarding potential political or country risk and the Bio Secure Act impact to the stock. I know you cannot comment too much, but I don't know how much, can you share a little bit more color rather than very high level comments, a little bit more color on what you could do or the company is in the process to prepare to address these potential questions. And the second is regarding the New Jersey Raritan site. Since now, Novartis already has a clinical production in July 2024. Is it fair to say now the Raritan site is 100% commercial production?
spk31: Sure. Gina, thank you for your questions. Maybe I can address
spk24: the second question first. So you're right. Since July, Novartis site in Morris Plains, New Jersey has initiated clinical production. The first patient was coming from Cartoon 6, and that followed the IND clearance by the FDA. So right now we are in the process of shifting more clinical trial patients to the production site, the Novartis, Morris Plains site. However, we do still have certain production for clinical trials in the Raritan site. Over the next few months with the Gantt site going commercial and Novartis ramping up clinical trial production, I think you should expect that the percentage of clinical production will go lower in Raritan. So that's about Raritan. And then on your first question, first of all, I can say that we have carefully evaluated the draft biosecure bill and also we have been engaging with certain stakeholders in Washington, D.C., including committee and House Speaker's office. So at this point, we do not believe there will be any direct impact to Legend, given how our operation model is and how in terms of data and also IP flow we conduct the business. So suffice to say that we're not too concerned that we're the target of the biosecure bill. Thank you.
spk03: Thank you. One moment for our next question. Our next question comes from the line of Jessica Fai from JP Morgan.
spk50: Hey, guys. Good morning. Thanks for taking my questions. With outpatient use now up at 40%, can you just remind us where that was last quarter and is the increase kind of coming across the board as that proportion edges up or is this more dynamic where new institutions coming on are say 100% outpatient and that's what's driving the change? And then I also wanted to follow up on Gina's question, recognizing that it doesn't look like you're directly impacted by biosecure, but the stock really did come under pressure in the first half of the year as a result. Can you just talk about what you see as the best path forward for shareholder value creation and does it make sense for Legend to be a standalone company heading into a potentially contentious political period in the U.S. or should the board be considering other alternatives?
spk31: Why don't I take the
spk28: first one, Jessica? Your question has to do with outpatient trends where those patients are and the U.S. is a major player in the market for the last quarter. So last quarter we reported that we were at 35% outpatient. Actually, we're trending closer right now to 45% as opposed to 40. So there's a significant jump up in outpatient use in the U.S. In terms of where is that coming from, if you look at the U.S. we're seeing 15 to 20% of these hospitals driving the majority of the volume. So the majority of the outpatient volume you see is in our large academic centers as opposed to evenly spread throughout our 77 sites right now. Typically the rate limiter to get a site on board or at least using, I should say, CARVICTI in the outpatient setting, it just reps patient repetitions and as we bring new sites on board, the key thing that they are looking for is just trying to understand in the real world setting is the toxicity profile similar to what we see in registration studies. So that's how it's spread out right now, but I just wanted to make sure we have the corrected percentage. We're trending right at 45% right now for the quarter. I'll turn it back over to Ang.
spk24: Thank you. Hey Jess. So we've been a public company for about four years and I think in that period as a company, Legend has made tremendous progress delivering for patients. We also have achieved numerous milestones and if you look at our recent second line approval in both the U.S. and in Europe and also the preliminary feedback from the field and what we can see from the ordering book and production data, clearly there's a lot of potential in the new indication. And we just announced that we're completing enrollment for CARVICTI 5. That's another entry into the front line. So we certainly believe that there's a lot of growth ahead of us and we remain confident in our current long-term strategy to realize the full potential of CARVICTI and also advance our pipeline as we continue to develop innovative treatment options. So I think it's not a one answer or one way to create or maximize shareholder value. Although as I mentioned, at this point our board is engaged with investors and other stakeholders and obviously we have the fiduciary responsibility of maximizing shareholder value. So that's pretty much what I can say about this. Thank you.
spk23: Thank you.
spk03: Thank you. One moment for our next question. Our next question comes from the line of Kelly Shea from Jeffreys.
spk02: Thank you for taking my questions. Since the approval in second line for CARVICTI, how do you see the demand and the use in second line patients change over time? And also one early on patient received CARVICTI treatment. What is the typical patient baseline characteristics regarding prior therapies, refractoriness, and performance data, etc.? Thank you.
spk28: Yeah, so hi Kelly. It's Steve. Why don't I take the question in terms of how the launch is going, where we're seeing the use, etc. So just to remind folks, we launched early part of the quarter. So you really didn't start to see the impact from a revenue perspective until late in the quarter. We're starting to see it more pronouncedly now in the third quarter. So that's the first thing. A lot of the performance we saw in the second quarter was off of Cartitude 1 indication as opposed to Cartitude 4. However, you did see again some uptick at the end of the quarter. What we are seeing in terms of some of the leading indicators, and we're measuring this through the data that we are analyzing through our ordering portal. We're seeing right now on average about between 50 to 60 percent of new patient orders coming into our portal is related to the Cartitude 4 indication. So that's a very good demonstration, a good leading indicator of hopefully what we see moving forward. Now again, these are not treated patients. These are patients that are entering the portal for scheduling purposes, but I did want to provide that data point on to you. In terms of actual data, we won't be able to see the data coming through the claims channels until towards the end of this month is when we'll start to see that. And that will give us more objective evidence in terms of exactly what line of therapy these patients are seeing the use. But we're very, very excited by the fact that we're seeing over 50 percent of all inbound patients, at least in our ordering portal, coming through the Cartitude 4 indication.
spk03: Thank you.
spk07: You're welcome.
spk03: Thank you. Our next question comes from the line of Ash Verma from UBS.
spk08: Good morning. Thanks for taking our questions. So maybe like first one, we saw the Galapagos pause their BCMA CAR-T study on finding Parkinsonism. Can you comment on how Cardbic-T binder compares to the Galapagos compound? And does this make you believe that MNT's could be something that is more specific to camellia-derived antibodies like yours? And then just secondly, on the 2Q to 3Q dynamic, so the 9 percent pricing freeze that you took, is that benefit mostly realized in 2Q sales already or could that also be an additional tailwind for 3Q?
spk31: Thanks. Ash, this is Yini. Thanks for the questions. So on
spk24: the first one, yes, we did see what happened at the Galapagos program. And I think obviously MNT or the movement of neurological toxicity, it's not coming from just BCMA. It's not just coming from CAR-T either. Although the mechanism of that action has not been well illustrated with science experiments to date, we think obviously you have to watch this in the clinic. And if you look at the data from our commercial launch of CAR-VicT, I'm sure everyone follows the same FDA AER database. In the first quarter we saw 21 cases reported for CAR-VicT patients and that went down to seven cases in the second quarter. Well, we dramatically increased the population of treated patients by CAR-VicT. So we feel really confident about the safety profile demonstrated by CAR-VicT in the real world here. And then secondly, we also believe that our risk mitigation strategy is working very well in the clinic and also in the trials. So that's what I can say about the MNT and neurotoxin here. On the second question, I believe in the second quarter the last ramp-up was mostly reflected, although it's not fully 100% reflected in the second quarter. So we continue to reap that benefit in the third quarter. Thank you.
spk03: Thank you. One moment for our next question. Our next question comes from the line of Leonid Timashev from RBC Capital Markets.
spk49: Thanks. I just want to ask on, you mentioned that you recently hit overall survival in Cartitude IV and obviously there was some discussion of the overall survival at one point at the advisory committee. I guess I'm just curious on that. What are you hearing from physicians about the importance of this data? Did you sense that there were perhaps any physicians who were waiting to continue to use CAR-VicT in earlier lines to see more overall survival data? Do you have an expectation for when you might see this on the label and sort of how this is going to impact your overall marketing strategy? Thanks.
spk28: Yeah, maybe I'll take that. The physicians are very excited with this data. We're actually, we have a pretty large study right now fielded, tested to look at different hazard ratios to see what perspective the market has on that. But generally speaking at all of our advisory boards, as you can imagine, it's very positive. The question we have, and I'm sure it may be that you have, is does this data start to open up more of the standard risk population in earlier lines? So we'll see. We just don't have an answer for you yet. We'll have that once we get this data to read out. But generally speaking, as you can imagine, we're very enthusiastic by it. I mean, you take the next question.
spk24: Yeah, I'll talk about the other part of the question, which is we and J&J teams are working on cleaning up the data. And we do have plans to submit to the agencies, including FDA and EMA on survival label expansion. So hopefully the data will be published at a major medical meeting soon and you will see the magnitude of benefits for which you already had a preview at ODAC. And we see a statistically significant and also clinically meaningful separation here on survival benefit, which is very, very important. As you know, given that myeloma is still incurable, many patients cycle through different therapies. So it's been very difficult to show it a meaningful and also significant survival benefit in the clinical trials. And I think Carbic P is one of the few drugs out there which will have its survival benefit on the label. So we think it's going to be a very powerful tool in the promotion and also when we explain the benefit to physicians and physicians. This is in the second line, by the way, not even the late line. So if you look at competition or upcoming competition, we think we might be the only one with that kind of benefit potentially on the label. And again, that's a huge differentiation factor. And obviously if you talk to physicians in the field, right, they care about certain things, but survival is one of the top considerations compared to also PFS and CR rate. So we feel really, really good about the strong benefit demonstrated in such a global, randomized active control trial with
spk31: survival benefit.
spk03: Thank you. One moment for our next question. Our next question comes from the line of Jonathan Miller from Evercore ISI.
spk29: I guess thanks for taking my question and congrats on all the progress here. Lots of manufacturing news and expansion expected second half being as you went through, but could you walk us through what the delta is between all of that stuff that's coming on in the second half and the guidance for end of 25. What is left to be done in 25 that's going to take you from end of this year to end of that year? Secondly, you mentioned the enormous market potential for a newly diagnosed setting. Obviously there are a lot of patients there, but there's already so many more patients than even your manufacturing guidance covers. Is manufacturing ever going to be sufficient to cover the global market here, even if you look out five or more years?
spk31: Hey, Jonathan. Thank you for the question. On the first one, I
spk24: can lay out what we expect to happen between end of this year and end of 25. So between end of this year, by which time we should have commercial production in our first facility in Belgium called Obelisk. Right now we're expecting commercial approval by end of next month in September. And then we can start our first commercial production in Europe. And then by end of this year, also we expect the construction activity to complete in the other facility in Belgium called Techland. So by early next year in the first half, first we do expect the clinical production to come from the Techland facility in Belgium to start. And then after that, sometime in the first half of 25, we expect Novartis, Morris Plain, New Jersey site to also start commercial production pending FDA approval. And then after that, in the second half of 2025, we have two major milestones here. First, we expect the expansion of Brighton site to gain FDA approval to start commercial production in the second half of 25. And the other upcoming milestone is in the second half of 2025, we also expect the Techland facility in Ghent, Belgium to start commercial production. So this is the cadence of all the different nodes that could happen between end of this year and end of next year. Now in terms of the ongoing launch in second line and also future opportunities in first line, you're right. We and our partner J&J have already been having a lot of productive discussions about how we can satisfy the demand, especially given the very encouraging uptake in the second line only three months after launch. I know there are many skeptics saying that, well, where's the second line met? We have a queue in Raritan. We have a queue in all the major hospital centers today for second line. And we are being creative here and we and J&J are trying to think out of the box in terms of finding the future supply. That includes internal nodes, construction of greenfield or brownfield or alternative other routes. I can assure you that that is one of the highest priority for the partnership and we are being engaging with our partners at J&J to discuss this and you should stay tuned. Thank you.
spk29: Makes sense. And then maybe could I ask just one question on the pipeline since I know nobody's asked about that yet. When do you anticipate beginning to show data from some of those early pipeline assets that are currently in phase one, especially on those dual cars, where are they relative to the single targets and do you have expectations for the IND timing for autoimmune?
spk06: Thanks, Jonathan. Yeah, this is Huawei.
spk09: We are having multiple trials and IT and we also have the US phase one trial. Next year we expect to see initial safety and advocacy result for COVID-19 18.2 targeted autophagy, which is US phase one trial. Currently we have IT trial in China in autoimmune indications. This is the triple targeting CD19, CD20, CD22 triple targeting autophagy being tested in a broad spectrum of different rheumatological and neurological autoimmune indications. The first patient we have towards Q4 this year we expect to see clinical readout in 2025. As you pointed out, we also have multiple allergenic products. Some of those are dual targeting in oncology indications. We expect to read out data in 2025. In terms of allergenic products for US IND finding, we are actively initiating -a-ableing studies this year and we are projecting the IND finding in the US around 2026. Thank you.
spk03: Thank you. One moment for our next question. Our next question comes from the line of Yaron Werber from TD Cowan.
spk25: Thanks for taking my question. Nice growth this quarter. As you think about supply ramping in Q4 over Q3, can you give us a little bit of a sense? It looks like Q3 is going to have a meaningful jump over Q2. Is Q4 the same meaningful jump or maybe smaller? You said you can double capacity next year, but not all of that is commercial capacity. Some of it is going to be for qualification lots and still some clinical. Can you give us a little bit of
spk31: that doubling, how much can be commercial? Thank you. Thanks for the questions. On the first one,
spk24: I can tell you that we expect next ramp up to happen probably around end of this year or early next year. It's a little bit difficult for me to give you the exact timing now because obviously we need to run experiments, we need to collect the data, analyze data and then submit to the FDA. And then there's the FDA review process as you can imagine. It's going to be around that time like I mentioned, end of this year, beginning of next year. We cannot comment on Q4, but in general I think we have said at the beginning of the year that throughout 2024 we do expect sequential growth every quarter. You have seen that .5% sequential growth from Q1 and now we do expect much higher growth in Q3 and hopefully follow up with sequential growth again in Q4. So that's where we stand on production. And then on the capacity, I would say in general going forward, given that our volume continues to increase higher, the percentage of the clinical revenue generating rounds will decline as a relative percentage. So I wouldn't go into too much detail, but if you look at that commercial production capacity, if we say overall capacity is doubling, then that means roughly the commercial production will double as well because next year we're looking at a much
spk31: larger batch number compared to 2024.
spk03: Thank you. One moment for our next question. Our next question comes in the line of James Shin from Deutsche Bank.
spk32: Good morning. Thank you for the question. When the C4 data is unveiled later this year, is it possible that you will have a post-Hoc crossover OS analysis? And my second question, as it relates to doubling of capacity, should we expect a gross margin benefit as well in 2025? Thank you.
spk05: I'll answer your... This is Lori. I'll answer your second question
spk48: and then I'll turn it over to Ying to answer your first question. As you can imagine, as we're bringing on the different nodes, you're going to see variability in your gross margins because as you're ramping up in each of those locations, you have to get to a certain level of volume to really keep the consistency in your gross margin. But we do anticipate once all of our nodes are online that our gross margins will be in line with industry standards.
spk24: Hi, James. On the survival question, I'm not going to be able to steal this sound there from the medical meeting because I'm not going to be able to do that in the presentation. But I'm sure you guys all have seen the survival curve from the ODAC panel back in March. So overall, the shape really did not change. In general, we're encouraged by two things. Number one, yes, there was a very small early imbalance of overall survival in the very beginning of the curve, as you guys saw. But that never crossed over again after that initial period, right? And secondly, I think when you see the overall survival curve, you will see it's a wide separation between the two curves. Not only that, we're also very encouraged by the so-called tail, which is the flattening trend of survival after a certain period. Again, we have consistently showed this in every single trial we conduct for CAR-VCT and in every setting. So clearly, there's a portion of patients who benefit in a long run in terms of PFS, CR, and also overall survival. And that is a very, very consistent trend. I think it's going to be hard for competition to beat. Thank you.
spk03: Thank you. One moment for our next question. Our next question comes from the line of
spk37: Hi, good morning. Thank you for taking our questions. We had two, both on CAR-VCT. First, I think last quarter you mentioned that there were 70 hospitals certified to treat patients with CAR-VCT. I think this morning you reported 77. I was just curious where you think that footprint could go by end of this year and also by end of 2025. And then secondly, I had a question on timing updates for earlier line data sets. So data from cohorts ENF from CARTITUDE 2 and now that CARTITUDE 5 has completed enrollment, when you think it might be realistic to expect initial data there? And then in the same vein, CARTITUDE 6, could you just give us an update on how enrollment is progressing versus your expectations? Thank you.
spk19: I'll take the clinical questions.
spk28: Okay, so why don't I take the questions around site activation? So for Q1 we had reported 71 sites and you're right, we're at 77 sites. By year end we are forecasting to be right around 100 sites. Again, I keep reminding during these calls something to keep in mind is on a per site basis because of the percentage of patients that we treat now in the outpatient setting, our throughput is very efficient versus competition in the sites that we sell into. So please keep that in mind. It's not so much of a site race, it's really how many patients per site that we treat. I'm going to turn it over to some of the clinical questions around some of the data releases.
spk24: So CARTITUDE 4 survival, yes. We and also J&J are very excited about the survival benefit. We also have consulted with certain physicians. Again, for physicians who have seen the data, they're very encouraged by the survival benefit. Remember, this is actually our first interim survival analysis and we already hit the pre-specified high bar for statistical significance at this interim analysis. So clearly that tells you the magnitude of the benefit. In terms of early lines, I guess you would have to wait until later date for any medical meeting to see if we have plans to publish those data or not. But given what we're seeing in CARTITUDE 6 trial, I can tell you the enrollment is tracking way ahead of our expectation at this point. Even though we only enrolled our first patient in October of last year, right now we fully expect that the enrollment of CARTITUDE 6 will complete in the year of 2026. So I think that's also a reflection of clinical benefits the patients and physicians are seeing. That clearly I think helps the enrollment.
spk03: Thank you. One moment for our next question. Our next question comes from the line of Justin Zillin from BTIG.
spk26: Thanks for taking the question. Just out of spec rates now that the threshold has been relaxed a bit, can you comment on how rates have decreased?
spk31: Hey, Justin. Thank you for the question.
spk24: So it's still very early because as you recall, we received a wider release back by FDA on April 6th along with the second line label. So at this point, if you compare the quality data, the quality out of spec rate in second quarter was slightly lower than the OOS rate in first quarter. And it might take a little bit more time before we can start to see a more pronounced OOS. Because as you can imagine, we're in a very early launch of second line, so you shouldn't be surprised to see that it is probably the sickest or high-risk of cytogenetics mutation patients who come online for a second line at this point. And therefore, we shouldn't expect to see the full benefit of second line or the wider release back anytime soon. But we should expect to continue to see that trend over time. And I think eventually it will settle down to a point that is five to 10% lower than what we had before.
spk27: That makes sense to me. Thanks for taking the question.
spk03: Thank you. Our next question comes from the line of Michelle Kapoor from HC Wainwright.
spk33: Hi. Thanks for taking the questions. I wanted to ask on the mention earlier of the QIT at major medical centers for second line demand, are you able to provide a little bit more color on the magnitude of demand that is in the queue? And then also on treating initially the patients in second line with the highest risk cytogenetics and who are the sickest, in your discussions with physicians on who they'd like to treat, can you tell me a little bit about, you know, would they like to transition all of their patients at this point? I mean, it's just a function of supply or is it where they want to test it out in their highest risk cytogenetics patients before migrating into, I guess, more mild risk patients? Yeah, hi. It's Steve. Why don't I
spk28: take that question. I'll take the last question maybe first in terms of the patient characteristics. And this is true what we saw during the Cartitude 1 launch and we're seeing it for all these indications is the sickest of the sick are treated first, right? So you're seeing the high riskers right out of the gate get silt to sell and we expect that to also happen with the Cartitude 4 launch. So to Aims point earlier, in earlier lines, and again, our research was bearing out on that before we launched. We'll see how it goes once we actually see the true data. But all the data was pointing in high risk earlier lines that they would be the first candidates out that would be receiving silt to sell under the new indication. I'm trying to think, what was the other question here? Let me look here. Oh, physicians, yeah. In terms of their, how they plan on treating. So that's generally speaking, our academic centers, how they're looking at this. The way I look at the market though is try to bifurcate it by the academics within our sites. But as you know, there's a large referring dynamic for these patients now. So this is where we are deployed with our partner now in the outpatient clinics to work on the referral side of the equation. And this is where in the standard risk population, that's the one that we have probably our greatest work, quite frankly, in the earlier lines. These are patients to your point that have a lot of different options. But this is the area that we're currently deployed against to meet with these physicians and educate them in identifying the patients who would benefit the most for silt to sell.
spk24: I'll add that in terms of how they use this, right, again, this is the feedback, early feedback from the field. So yes, they are focusing on the roughly 25 percent of patients in the second line who harbor a high risk cytogenetic mutation, but that's not the only population. For example, I'm sure you have seen our data presentation at ASCO, right? There's a portion of patients what we call the functional high risk, which means they may not harbor cytogenetic mutation, but they actually do progress within 18 months of the first line treatment. So those patients are definitely needing another treatment option. So that's also another population. And then lastly, there's a population who is relatively young and these folks are still working. They would like to get the once and done benefits from the CAR T administration so that they can go back to their normal daily living activities. So those are probably the three buckets of patients that likely will get a CAR T in the second line at this point. So that's if you look at the numbers, it's roughly probably, you know, 35 percent of our second line population if you add those three buckets here.
spk33: Great. Thank you so much for that detail.
spk03: Thank you. One moment for our next question. Our next question comes from the line of George Farmer from Scotia Bank.
spk35: Hi, good morning. Thanks for taking my questions. A couple from me. Let's see, you know, getting back to, you know, this 52,000 patient number you threw out there, Yang, about, you know, the market potential and, you know, heavily focused on manufacturing expansion. You know, what kind of costs are we looking at and how should we think about putting those numbers in our model in the out years? That's number one. Number two, I was wondering if you could comment on the Bilanthumab results that were published in the New England Journal of Medicine. That's the BCMA ADC that looks like it had some pretty good activity in front line. It would be great to get your perspective on how that data compares to what you've seen with -VIC-D. And then finally, this overall survival imbalance that FDA was pounding on at the early phases of follow-up. Does that ever come up with physicians in the real world? It would be helpful if you could get your comments on that.
spk31: Yeah, George, thanks for your three-part questions. So on
spk24: the first one, in terms of capital investment here. So if you look at our partner J&J, it's roughly $1 billion in total in this round and that will first get us to the $10,000 capacity by end of next year. And then in the next about two years after that, or two to three years after that, with somewhat very incremental investment, we can get to about $20,000 capacity. And then in terms of the additional investment, so we think that it really depends on which mode we choose. Is it going to be a greenfield facility? We break ground from scratch. Or is it going to be a brownfield with existing structure or some other model? So it's a little bit hard to say that at this point. But obviously, we don't want to leave those markets on the table here. So we are having a very thoughtful discussion with our partners here in terms of how we actually unlock the potential and then tap into the front-line market or maybe even more penetration in the second-line market with additional capacity. And then on ADC, I think there was a session at ASCO, George, if you recall. There were a couple of KOs who discussed the data from T-cell Engagers, CAR-T, and also ADC. And I think the consensus view from that panel and also our recent channel checking from doctors in AdWords is that really CAR-T is considered to be the first option given the -and-done benefit and also the durability of the response we see, including now the survival benefit. So I do think there is a position in the market for ADC, but we're not thinking that it will really change the dynamic or the landscape today. And again, we just saw this publication from Nature that's coming from a large real-world patient study at Mayo Clinic. Clearly, based on both PFS and overall survival, CAR-T is better than T-cell Engagers and T-cell Engagers. And then the last question on the OS imbalance. No, we haven't encountered too many questions in the field given that data because clearly that's actually before CAR-T was even administered. So I think that's the right. And you saw some similar phenomena in some other CAR-T experiments. That is a phenomena you see in CAR-T experiments in the clinic. On the other hand, we are doing a lot of work in terms of shrinking the -to-vent time, and also today there is an increasing momentum of bridging therapies available to the physicians. So that could also address that issue as well. But in short, no, we're not really encountering a lot of questions or skeptics about that early imbalance.
spk36: Okay. Thanks, Dan.
spk03: Thank you. One moment for our next question. Our next question comes from the line of Rich Biankowski from Cantor Fitzgerald.
spk43: Hey, good morning and thank you for taking the questions. First, I just wanted to confirm it sounds like the initiation of clinical production by Novartis should immediately free up capacity for commercial production, but I was hoping if you could comment on if you'd expect this should have an immediate effect on capacity for the third quarter. And my second question, I also just wanted to ask about the downstream effects that an improved -of-spec rate could have on operations. And I guess I'm specifically thinking about cost of goods and how quickly patients get drug on average, but I'd like to hear your thoughts on how a 5 to 10 percent improvement in -of-spec rate could impact the
spk42: P&L over time.
spk31: So I'll talk about the first and
spk24: third question, Rick. On Novartis, yes. The first batch production initiated last month in Novartis facility, but as you can imagine in any CAR T facility, it's not a hockey stick. It is typically a gradual uptick in curve here. So yes, if we have, for example, 10 batches that Novartis are producing for CAR T6, then that does free up 10 batch commercial capacity at Ryerson. So that is the direct impact, but I wouldn't say it's a dramatic impact in third quarter, right? So yes, there's definitely some incremental positive impact on that. And then on the third question on the -to-van time, I can give you the latest data. So in the second quarter, our P90 or 90 percent of the InSpec sample were shipped out within 42 days. That is a freeze to shipment. And then if you look at the median, it was about 30 to 30 days, so it's less than six weeks. So we'll continue to make progress in terms of our -to-van time here. And then the second part, I'll ask Laurie to come back.
spk48: Hi, Rick. So in relation to the P&L, as you can imagine, if there is an improvement in the -to-van time, there's an improvement in the OOS. That will help to drive down your COG, but I can't give you direct definitive guidance on how much that would improve our COG. But yes, that would definitely be one of the influences to help
spk05: bring and drive down our cost of goods sold.
spk03: Thank you. One moment for our next question. Well, our next question comes from the line of Sean McCutcheon from Raymond James.
spk30: Hi, guys. Thanks for taking the question. Maybe to piggyback off of
spk20: that last point, can you speak to the progress in specific of any additional manufacturing efficiency efforts and separately any update around your thinking for MRD as an intermediate endpoint for accelerated approval in your frontline studies?
spk48: Thanks. Hi, Sean. This is Laurie. I'll take your first question regarding the additional manufacturing efficiencies that you're seeing. That is why you saw in our Q2 earnings, you saw that there was pretty significant improvement over Q1 in our gross margins. And as we continue to realize those manufacturing efficiencies, as we turn on our different notes as well, you'll continue to see those costs go down and our gross margins improve. As I mentioned before, just to be transparent, you will see variability in each of the quarters in your gross margin as we bring these additional notes online and we continue to invest in capital. But we saw really good, strong gross margins for our product quarter over quarter, and we do expect to continue to see those. Do you want to take the second question on the frontline?
spk24: Yeah, sure. So given the recent old application recommendation, we and our partner do have plans to request a meeting and sit down with the agency to talk about using MRD connectivity as a potential registration endpoint. So if you look at the clinical trial protocol we published on clinicaltrial.gov, you will see that in the Q2-6 trial, MRD connectivity is already a co-prime endpoint. Now, could we use just MRD connectivity or a 12-month MRD connectivity as a registration endpoint? That remains to be discussed with the agency. If the agency agrees, certainly we would welcome that and that could actually significantly decrease the time to market entry for
spk31: Cardio 6 as a first line indication.
spk03: Thank you. Thank you. One moment for our next question. Our next question comes from the line of Costas Biluris from BMO Capital Markets.
spk40: Hi, this is Theo for Costas.
spk41: Congrats on the quarter and thanks for taking our questions. So just one question from us regarding the COVID-19 label. So Peterbox recently mentioned that FDA may revisit the black box wording on secondary malignancy risk in the CAR T labels given that they noticed the incidence of such risk is in order of magnitude lower versus the CREMO therapies. And with only a few cases being positive for the CAR sequences in FOMAS. So we just wonder if you have any discussion with FDA on labeled updates that potentially can remove such wording. And also if you can provide any additional color around that topic, that was super helpful. Thank you.
spk24: Theo, thanks for the question. I think last time when some of the SPM labels updated, it was a class label. So basically FDA put in very similar if not the same language in all six commercial CAR T labels. So we probably expect that potentially if there's any change, that might be a class label as well. But I wouldn't want to speculate on that at this point because we have not have any detailed discussion with the agency about that. I think everything will be guided by the clinical data and also in the real world data collection as well. But regardless, we continue to believe that given the small incidence of those SPM and also the large clinical benefit we observed in both the clinical trials and also in real world, we continue to believe there's a very strong benefit over risk here. So that also has not been really a big concern from prescribing physicians either because as you know, in the field of multiple myeloma, this SPM issue has been out there for decades and physicians know very much about this adverse events associated with some of the treatments. And I mean just to quote one physician we have discussed this topic with. He said, oh, I am way too more focused and concerned about treating the cancer the patient has rather than worrying about what other cancer the
spk31: patient may have later.
spk07: Thank you.
spk03: Thank you. One moment for our next question. Our next question comes from the line of Astika Gunwarden from Truist.
spk38: Hey guys. Good morning. Thanks for taking my question and congrats on the progress being made here. Going back to the onboarding process of the new ATC, Gilead talks about making a strong posture credit some of those larger community centers. And in your target of 100 ATCs by year end and whatever you have for 2025, I want to get your thoughts on how you're thinking about targeting some of these larger community centers. Obviously you want to have the academics, but what makes these larger community centers in your priority list and what impact they would have on patient flow. Thanks.
spk28: Thanks for bringing that up because that's an important part of the strategy for this brand. So as you said, we're basically deployed today and into the near term in our major academic centers. However, we are running pilots today as well where our major academic centers are partnering with their community referring centers to basically offload some of the capacity constraints that they have at the site level. So we are already engaged in some pilot activity through our academic centers where they're working very closely with their community affiliates. So that's been ongoing and that's been ongoing for the better part of a year because you're right. As we start moving into that early second line which we are today, we'll continue to broaden out our commercial footprint to include not only the large academic centers, but also with those centers to bring on board the community affiliates of that. So it's very important that we bring on the academics with us because then it's much more coordinated. And obviously the key thing for us is always keeping patient safety first. So we want to make sure that we do that in accordance with our large academics. And then finally the third leg of our strategy is at the right point in time, since there was some earlier conversation around frontline, is ultimately getting out into the clinic. And that's something downstream that we've had some initial conversations with some of the large retail clinic providers out there to see and better understand what is their role and how does that dovetail with the role of the community hospitals as well as the referring large academic centers. So that's something forthcoming. It's something that will be rolling out over the next couple of years as we prepare the market for our launch in frontline.
spk03: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
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