Legend Biotech Corporation

Ladies and gentlemen, thank you for standing by. Welcome to Legend Biotech's second quarter 2024 earnings conference 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.

Good morning. This is Jessie Young, VP of Investor Relations and Finance at Legend Biotech. Thank you for joining our conference call today to review our second quarter of 2024 performance. The second quarter has been an eventful one. We are pleased to report 18.5% sequential growth in Cavic-T cells. More importantly, we received label expansion approvals from both FDA and EMA. Lastly, we are most excited about the survival benefits demonstrated by Cavic-T in the second analysis of Casetil-4. Nothing gives us more joy than helping patients with multiple myeloma live longer. Joining me on today's call are Ying Huang, the company's chief executive officer, and Laurie McComber, the company's 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 Gavell, head of commercial development for the US and Europe, joining the Q&A session. During today's call, we will be making forward-looking statements, which are subject to risks and uncertainties that may cause our actual results to differ materially from those expressed or implied here within. These forward-looking statements are discussed in greater detail in our SEC filings, which we encourage you to read and can be found under the Investors section of our company website. Thank you.

Hello and welcome to our second quarter earnings call. I am pleased that you could join us. Since our last earnings call, we have made progress on multiple fronts, which you can see in our earnings presentation on slide 5. First, we announced positive top-line results from CAR 2-4. In the pre-specified second interim analysis, CAR-VICTi 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 the EHA, we provided new data from the phase two CART2 study and new and updated data from the phase three CART4 study. We would like to bring to your attention a recent paper published in Nature. As you will see on slide six, 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 ADCs. The authors also concluded that, where feasible, CAR-T should be the initial BCMA-directed therapy. We're encouraged by the real-world clinical evidence of CAR-T advocacy, particularly the insight it provides into the strong efficacy of CAR-VT. As many of you know, our expansive CAR-VT dataset enables us to continue building a strong foundation for our market penetration. On this note, we recently added two regulatory approvals to the global market opportunity you see on slide 7. The United Kingdom's Medicines and Healthcare Products Regulatory Agency approved CARVICTI for second-line multiple myeloma, and Health Canada approved CARVICTI as well. Our efforts to bring CARVICTI to more patients globally translated into net trade sales for the second quarter of $186 million. which is a 60% increase year over year and 18.5% increase quarter over quarter, as you will see on slide 9. The increase in our second quarter performance versus the first quarter was a result of the ongoing launch of Carvicti and share gains from capacity expansion and manufacturing efficiencies. Importantly, We continue to see growth in patient demand and we are reiterating our expectation for pronounced growth for Curvicti 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 Curvicti in the US. This frees up production capacity for commercial production at our facility in Ryerton, New Jersey. We're on track to complete physical expansion of the Ryerton site and anticipate approval of the new section of Ryerton 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 predictive production capacity in 2023 and are on track for continued expansion. The increases to our production capacity will help us keep up with growing patient demand. Our cash balance now stands at $1.3 billion, which we believe provides us the resources needed to increase production, as I just mentioned, and gives us financial runway into 2026. when we expect to begin to achieve an operating profit. In other developments, we continue to bring more hospitals online as authorized treatment centers. We now have a total of 77 US hospitals certified to treat cardiovascular patients. Outpatient treatment now comprises approximately 40% of our volume. and remains an important medium for us as we expand our marketing efforts in the community setting for the second line and beyond. Finally, turning to our pipeline on slide 13, I am pleased to share that we recently completed Carditude 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 CAR T5 and CAR T6, it would translate into an additional 52,000 patients annually. I'm also pleased to share that we recently broke ground on the new state-of-the-art research center in Philadelphia to advance our portfolio of next-generation cell therapies. We are excited to expand our research presence in the U.S. and attract top talent from the growing biotechnology innovation hub Philadelphia, the birthplace of gene and cell therapy. In summary, we are executing against the substantial opportunity ahead of us as we expand our manufacturing capabilities and increase our earlier line commercial activities with an eye towards investment in future transformative cell therapies. Now, I would like to turn the call over to Laurie to walk you through the financials for the second quarter. Laurie,

Thank you, Ying, and good morning, everyone. As Ying mentioned, we generated approximately 186 million in total net sales for Kervicti during the second quarter, an increase of 60% year-over-year, driven by the progress we have made with ongoing market launches, expanding market share, and capacity improvements. As a reminder, we share equally in all profits and losses of Kervicti x 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 sale of Carvicti 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 30th, 2024 of 18 million or a loss of 5 cents per share compared to a net loss of 199 million or a loss of 57 cents per share for the same period last year. Moving on to expenses on slide 15, Collaboration cost of revenue for the second quarter of 2024 was $45 million, compared to $33 million for the same period last year. These are Legend's 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 of 2024 were $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 in 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, with $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 Carvicti 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 30th, we have $1.3 billion in cash equivalents, 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.

Thanks, Laurie. To sum up, our team remains dedicated to our strategic priorities. I am pleased to share that we recently surpassed 3,000 COVID 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 best positioned to continue our growth and momentum as we advance our mission to help multiple myeloma patients. We know there has been recent speculation about potential political risk, particularly given this being an election year. Our board is active and engaged and continues to assess the potential impact of those risks. We're not going to speculate on hypotheticals on this call, but rest assured, we are focused on driving shareholder value as we consider our path forward. If and when we have updates to share, we will provide them at the right time. In the meantime, we appreciate if you can keep your questions focused on our earnings results. And with that, we'd like to take your questions. Operator, we're ready for the first question.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 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.

Ying, I know you said we should not ask anything about speculative comments. I know you also cannot comment too much, but I do wanted to ask because this is the number one major overhang on the stock regarding potential political or country risk and the BioSecure Act impact to the stock. I know you cannot comment too much, but I don't know how much, you know, can you share some a little bit more color rather than very high level comments, you know, a little bit more color on what you could do or the company is in the process to prepare to address this potential questions. And the second is regarding the New Jersey Rarrington 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?

Sure. Gina, thank you for your questions. Maybe I can address the second question first. So you're right. Since July, Novartis site in Morris Plain, New Jersey, has initiated clinical production. The first patient was coming from CAR2-6, 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 in Novartis, Morris-Van Syne. 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 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 biosphere bill. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Jessica Fai from JP Morgan.

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 a 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 US? Or should the board be considering other alternatives?

Why don't I take the first one, Jessica? Your question has to do with outpatient, outpatient trends, where those patients are coming from. So you asked also quarter over 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 US volume in the sites that we serve, it is largely top heavy. So you see largely about the top 20, 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 a toxicity profile similar to what we see in antiregistration 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 him.

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 CAR-25. 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 CAR-VICTI. and also advance our pipeline as we continue to develop innovative treatment options. So I think, you know, it's not a one answer or one way to create or maximize shareholder value, although, as I mentioned, 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.

Thank you. Thank you. One moment for our next question. Our next question comes from the line of Kelly Shea from Jefferies.

Thank you for taking my questions. Since the approval in second line for Carvac-T, how do you see the demand and the use in second line patients change over time? And also one early line patient received Carvac-T treatment, what is the Kelly Nye-Lengerman PhD.: : Typical patient a baseline characteristics regarding prior therapies refractor in is and performance data data session. Thank you.

Steve Czajka- Yeah. So, Kelly, it's the when 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 Carditude 1 indication as opposed to Carditude 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% 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'll 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% of all inbound patients, at least in our watering portal, coming through the CAR2-4 indication.

Thank you.

You're welcome.

Thank you. Our next question comes from the line of Ash Verma from UBS.

Hi, good morning. Thanks for taking our questions. So maybe like a first one. We saw the Galapagos positive BCMA CAR-T study on finding Parkinsonism. Can you comment on how CARVIC-T binder compares to the Galapagos compound? And does this make you believe that MNTs could be something that is more specific to camelid-derived antibodies like yours? And then just secondly, on the 2Q to 3Q dynamic, so the 9% price increase that you took, is that benefit mostly realized in 2Q sales already, or could that also be an additional tailwind for 3Q? Thanks.

Ash, this is Yinyu. Thanks for the question. So on the first one, yes, we did see what happened at the Colopolis program. And I think, you know, 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 elucidated with science experiments to date, we think, you know, obviously, you have to watch this in a clinic. And if you look at the data from our commercial launch of CARVICTI, I'm sure everyone follows the same FDA AER database. In the first quarter, we saw 21 cases reported for CARVICT patients, and that went down to seven cases in the second quarter. Well, we dramatically increased the population of treated patients by CARVICT. So we feel really confident about the safety profile demonstrated by CARVICT 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 all I can say about the M&T and Neurotox here. On the second question, I believe in the second quarter, the last ramp-up was mostly reflected, although it's not fully 100% reflected in the second quarter. So we continue to reap that benefit in the third quarter. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Leonid Timoshev from RBC Capital Markets.

Thanks. I just want to ask on, you mentioned that you recently hit overall survival in CARTITUDE 4, and obviously there was some discussion of the overall survival endpoint at the advisory committee. So I guess I'm just curious on that. I guess, what are you hearing from physicians about the importance of this data You know, did you sense that there were perhaps any physicians who were waiting to continue to use Carvicti 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.

Yeah, maybe I'll take that, Steve. I mean, 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 the market has on that. But generally speaking, at all of our advisory boards, as you can imagine, it's very, very positive. The question we have, and I'm sure it may be that you have, is, you know, 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. Did you take the next question?

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 benefit, 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 Carvix is one of the few drugs out there which will have a survival benefit on the label. So we think it's going to be a very powerful tool in the promotion and also when we plan the benefit to physicians and patients. 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 survival benefit.

Thank you. One moment for our next question. Our next question comes from the line of Jonathan Miller from Evercore ISI.

Hi, guys. Thanks for taking my question. 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 what what is left to be done in 25 that's going to take you from end of this year to end of that year uh and then secondly you know you mentioned the enormous market potential for a newly diagnosed setting obviously a lot of patients there but there's already so many more patients than you know even your manufacturing guidance covers Is manufacturing ever going to be sufficient to cover the extensible market here, you know, even if you look out five or more years?

Hey, Jonathan, thank you for the question. On the first one, I 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 Ghent, 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 activities 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 Ghent, Belgium to start. And then after that, sometime in 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 2025. 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 demand? We have a queue in Ryerson. 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 greenfields or brownfields, or alternative other routes. I can assure you that that is one of the highest priority for the partnership. And we have been engaging with our partners at J&J to discuss this, and you should stay tuned. Thank you.

Makes sense. And then maybe can I ask just one question on the pipeline, since I know nobody's 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?

Thanks, Johnson. Yeah, this is Guowei. We are having multiple tries under IIT, and we also have the IUS Phase I trial. Next year, we expect to see initial safety and efficacy result for CAUDIN 18.2 target autophagy CAR T. which is a U.S. phase one trial. Currently, we have an IIT trial in China in autoimmune indications. This is the triple targeting CD19, CD20, CD22 triple targeting autoxicity being tested in a broad spectrum of different rheumatological and neurological autoimmune indications. The first patient will be dosed towards Q4 this year. We expect to see clinical results in 2025. As you pointed out, we also have multiple allogeneric products. Some of those are due targeting in oncology indication. We expect to read our data in 2025. In terms of allogeneric products for US R&D funding, We are actively initiating R&D enabling studies this year, and we are projecting the R&D findings in the U.S. around 2026. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Yaron Werber from TD Cowen.

Great. Thanks for taking my question and nice growth this quarter. Maybe just a couple of questions. As you think about supply ramping in Q4 over Q3, can you give us a little bit of a sense? It looks like Q3 is going to have a meaningful jump over Q2. Is Q4 the same meaningful jump or maybe smaller? And then as you think about, you said that you can double capacity next year. But not all of that is obviously commercial capacity, right? Some of it's going to be for qualification lots and still some clinical. Can you give us maybe a little bit of that sort of doubling how much can be commercial? Thank you.

Hey, Aron. Thanks for the questions. So on the first one, 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. So it's going to be around that time, like I mentioned, end of this year, beginning of next year. We cannot comment specifically 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 18.5% 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 production and also the percentage of what we call non-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 larger batch number compared to 2024.

Thank you. One moment for our next question. Our next question comes from the line of James Shin from Deutsche Bank.

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 25?

Thank you. This is Lori. I'll answer your second question and then I'll turn it over to Ying to answer your first question. As you can imagine, as we're bringing on the different nodes, you're going to see variability in your gross margins because as you're ramping up in each of those locations, you have to get to a certain level of volume to really keep the consistency in your growth margin. But we do anticipate, once all of our nodes are online, that our growth margins will be in line with industry standards.

Hey, James. On the survival question, I'm not going to be able to steal the thunder from the medical meeting 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. I mean, 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 certain periods. Again, we have consistently showed this in every single trial we conduct for CARB-VT and in every setting. So clearly, there's a portion of patients who benefit this in the 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.

Thank you. One moment for our next question. Our next question comes from the line of Vikram Purohit from Morgan Stanley.

Hi, good morning. Thank you for taking our questions. We had two both on CARB-ICT. First, I think last quarter you mentioned that there were 70 hospitals certified to treat patients with CARB-ICT. I think this morning you reported 77, which is 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 E and F 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's progressing versus your expectations? Thank you.

the clinical questions.

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. Yeah, sure.

So on Cardio4 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 benefits. 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 benefits. 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 CAR2-6 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 CAR2-6 will complete in the year of 2026. So I think that's also a reflection of the clinical benefit the patients and physicians are seeing. That clearly, I think, helps the enrollment.

Thank you. One moment for our next question. Our next question comes from the line of Justin Zillin from BTIG.

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?

Hey Justin, thank you for the question. 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 quarterly data, the quarterly out of spec rate in second quarter was slightly lower than the OS rate in first quarter. And it might take a little bit more time before we can start to see a more pronounced OS because as you can imagine, We're in a very early launch of second line, so you shouldn't be surprised to see that it is probably the sickest 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 wide 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.

That makes sense to me. Thanks for taking the question.

Thank you. Our next question comes from the line of Michelle Kapur from HC Wainwright.

Hi, thanks for taking the questions. I wanted to ask on the mention earlier of the queue 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? 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 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 CARTITUDE1 launch, and we're seeing it as well in Europe. What we're seeing 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 filled to sell. And we expect that to also happen with the CARTITUDE 4 launch. So to AIM's 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 cell-to-cell under the new indication. I'm trying to think, what was the other question here? Let me look here. Physicians, yeah, in terms of how they plan on treating. So that's, generally speaking, academic centers, how they're looking at this. The way I look at the market, though, is trying 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 cell to cell.

Maybe, Mitchell, 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% of patients in the second line who harbor a high-risk cytogenetic mutation, but that's not the only population. 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 important. another population. And then lastly, there's a population who is relatively young, and these folks are still working. They would like to, you know, get the once and done benefits from a CAR T administration so that they can go back to their, you know, normal daily living activities. So those are probably 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% of our second line population if you add those three buckets here.

Great, thank you so much for that detail.

Thank you. One moment for our next question. Our next question comes from the line of George Farmer from Scotiabank.

Hi, good morning. Thanks for taking my questions. A couple from me. Let's see, getting back to this 52,000 patient number you threw out there, Yang, about the market potential and heavily focused on manufacturing expansion. What kind of costs are we looking at and how should we think about putting those numbers in our model in out years? That's number one. Number two, I was wondering if you could comment on on the Belantamab 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 Frontline. It would be great to get your perspective on how that data compares to what you've seen with Carvicti. And then finally, this overall survival imbalance that FDA was pounding on at ODAC, you know, in the early phases of follow-up. Does that ever come up with physicians in the real world?

be helpful you get your comments on that yeah George thanks for your three-part questions so on the first one in terms of capital investment here so if you look at our capital plans we have you know decided upon with our partner J&J it's roughly 1 billion dollars in total in this round And that will first get us to the 10,000 dose capacity by end of next year. And then in the next about two years after that, two to three years after that, with somewhat very incremental investment, we can get to about 20,000 dose capacity. And then in terms of the additional investment, um so we think that um it really depends on which mode we choose right is it going to be a greenfield facility we break ground from scratch or is it going to be a brownfield with existing structure orders some other models so it's a little bit hard to um you know to say that at this point uh but obviously we don't want to um leave those uh market um on the table here. So we are having a very thoughtful discussion with our partner here in terms of how we actually unlock the potential and then tap into the front-line market or maybe even more penetration to the second-line market with additional capacity. And then on ADC, I think there was a session, right, 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 once and done benefit and also durability of the response we see, including now 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 are better than ADC. I think that's a very indisputable result from a large cohort study at Mayo Clinic. I think that speaks volumes on the benefit of CAR-T versus the other two methods of action. We feel really good about the long-term prospect of CAR-VT here based on the benefit we have seen in PFS OS. And then maybe the last question on the OS imbalance. No, we haven't encountered too many questions in the field, you know, given that data, because clearly that's actually before CAR-T was even administered, right? And you saw some similar phenomena in some other CAR-T experiments. That's, you know, That is, I guess, a phenomenon you see in the CAR T experiments in the clinic. On the other hand, we are doing a lot of work in terms of shrinking the van-to-van time, and also today there is an increasing momentum of breathing 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 skepticism about that early imbalance.

Okay. Thanks, Ian.

Thank you. One moment for our next question. Our next question comes from the line of Rich Bienkowski from Cantor Fitzgerald.

Hey, good morning, and thank you for taking the questions. First, I just wanted to confirm, it sounds like the initiation of clinical production by Novartis should immediately free up capacity for commercial production, but I was hoping if you could comment on if you 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 out-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% improvement in out-of-spec rate could impact the P&L over time.

So I'll talk about the first and third question, Rick. On Novartis, yes. The first batch production initiated last month in a Novartis facility. But as you can imagine, in any CAR-T facility, it's not a hockey stick. It is typically a gradual up ticking curve here. So yes, if we have, for example, 10 batches that Novartis is producing for CAR-T6, then that does free up 10 batch commercial capacity at Ryerson. That is the direct impact, but I wouldn't say it's a dramatic impact in the third quarter, right? So yes, there's definitely some incremental positive impact on that. And then on the third question on the van-to-van time, I can give you the latest data. So in the second quarter, our P90 or 90% of the InSpec sample were shipped out within 42 days. That is, if this is to delivery to a shipment. And then if you look at a median it was about 30 to 35 days, so it's less than six weeks So we'll continue to make progress in terms of our event van time here.

And then the second part I'll ask Laurie to comment I Reckon so in relation to the P&L as you can imagine if there is an improvement in the vein to vein time There's an improvement in the OS that will help to drive down your cog But I can't give you direct definitive guidance on how much that would improve our COGS, but yes, that would definitely be one of the influences to help bring and drive down our cost of goods sold.

Thank you. One moment for our next question. Our next question comes from the line of Sean McCutcheon from Raymond James.

Hi, guys. Thanks for taking the question. Maybe to piggyback off of that last point, can you speak to the progress and specifics 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? Thanks.

Hi, Sean. This is Lori. I'll take your first question regarding the additional manufacturing efficiencies that you're seeing. That is why you saw in our Q2 earnings, you saw that there was pretty significant improvement over Q1 in our gross margins. And as we continue to realize those manufacturing efficiencies, as we turn on our different nodes 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 nodes online. and we continue to invest in capital, but we saw really good, strong growth margins for our product, quarter over quarter, and we do expect to continue to see those. Dean, do you want to take the second question on Frontline?

Yeah, sure. So, given the recent ODAP recommendation, we and our partner do have plans to request a meeting and sit down with the agency to talk about using MRD inactivity 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 CART2-6 trial, MRD negativity is already a co-prime endpoint. Now, could we use just MRD negativity or a 12-month MRD negativity as a registration endpoint? That remains to be discovered by the agency. If the agency agrees, certainly we would welcome that, and that could actually significantly decrease the time to market entry for Cardio 6 as a first-line indication.

Thank you. Thank you. One moment for our next question. Our next question comes from the line of Costas Biluris from BMO Capital Markets.

Hi, this is Theo on Falcustas. Congrats on the quarter and thanks for taking our questions. So just one question from us regarding the COVID-T label. So Peter Box recently mentioned that FDA may revisit the black box warning on secondary malignancy risk in the CAR T labels, given that they noticed the incidence of such risk is in order of magnitudes lower versus the chemotherapies. And with only a few cases were being positive for the CAR sequences and lymphomas. So we just wonder if you have any discussion with FDA on label updates that potentially can remove such wording. And also, if you can provide any additional color around that topic, that would be super helpful. Thank you.

Phil, thanks for the question. I think last time when some of the SPM label was updated, it was a class label. So basically, FDA put in very similar, if not the same language in all six commercial CAR TIS labels. We probably expect that potentially if there's any change that might be a cost label as well, but I wouldn't want to speculate on that at this point because we have not had 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. 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, you know, way too more focused and concerned about treating the cancer the patient has rather than worrying about what other cancer the patient may have later.

Thank you. Thank you. One moment for our next question. Our next question comes from the line of Astika Goonwarden from Truist.

Hey, guys. Good morning. Thanks for taking my question and congrats on the progress being made here. I have a question going back to the onboarding process, the new ATC. You know, Gilead talks about making a strong push to accredit 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, what mix they would be. Obviously, you want to have the academics, but what mix would these larger community centers is in your priority list and what impact it would have on patient flow?

Thanks. Yeah, thanks. It's Steve. Why don't I take that question? Thanks for bringing that up because that's an important part of the strategy for this brand. So as you said, you know, 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 affiliate to 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 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 we'll be rolling out over the next couple of years as we prepare the market for our launch in frontline.

Thank you. this concludes today's conference call thank you for participating you may now disconnect