argenx SE

XBRU:ARGX

Earnings Call Analysis

Strong Quarter with Revenue Growth and Expansion Plans

In Q3 2023, the company reported a 22% growth in global product sales reaching $329 million, driven majorly by U.S. sales. The quarter's total revenue was $340 million, resulting in an $81 million operating loss but leaving the company with a solid liquidity position of $3.2 billion. The VYVGART product suite, particularly VYVGART Hytrulo, shows a successful trajectory in the U.S. with an innovative patient treatment experience and expansion across new global markets. Launch and reimbursement strategies are well-underway in EMEA and Canada, with China showing early adoption since its June approval. Upcoming catalysts include promising pipeline developments such as MMN top-line results, and the company is set to leverage MG launch learnings for the CIDP indication.

Upcoming Catalysts and Financial Strength

Looking into 2024, the company anticipates a series of pivotal developments in their pipeline. With top line results expected for the MMN indication next year, the company is poised for growth in a domain that aligns well with their existing infrastructure for gMG and CIDP treatments. Additionally, key Go/No-Go decisions for pemphigus and myositis are scheduled, with Phase 2 POTS results and Sjogren's results also on the horizon within the first half of 2024.

Robust Revenue Growth

The third quarter of 2023 saw a revenue increase to $340 million, including $329 million in global net product sales—a 22% growth from the second quarter. Significant contributions came from the U.S. with $280 million, EMEA at $26 million, Japan with $15 million, and China at $7 million. The company's financial results reflect the momentum of their product launches and their expanding global reach.

Strategic Focus on CIDP and Expansion

The company is preparing for a robust launch in CIDP next year, backed by impressive trial results, and plans to file an application with a priority review voucher, underlining the urgency and innovation they intend to bring to CIDP patients.

Strategic Position and Vision for the Future

The company maintains a position of strength, continually delivering on their commitment to provide transformative treatments. Their focus is on strategic launches and expansion into new indications and regions, anticipating the potential to lead in what is foreseen as one of the largest drug classes. This forward-looking vision is driven by their commitment to innovation and patient care.

Earnings Call Transcript 2023-Q3

[Operator]

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

[Beth DelGiacco, executive]

Thank you, operator. A press release was issued earlier today with our third quarter 2023 financial results and business update. This can be found on our website along with the presentation for today's webcast. Before we begin, I'd like to remind you on Slide 2 that forward-looking statements may be presented during this call. These may include statements about our future expectations, clinical development, regulatory time lines, the potential success of our product candidates, financial projections and upcoming milestones. Actual results may differ materially from those indicated by these statements. Argenx is not under any obligation to update statements regarding the future or to conform these statements in relation to actual results unless required by law. I'm joined on the call today by Timothy Van Hauwermeiren, Chief Executive Officer; Karl Gubitz, Chief Financial Officer; and Karen Massey, Chief Operating Officer. I will now turn the call over to Tim.

[Tim Van Hauwermeiren, executive]

Thank you, Beth, and welcome, everyone. Slide 3. It is incredible to see what the Argenx team has accomplished this year, meticulously delivering on the ambitious plan we laid out in January. We are reaching more and more gMG patients around the world and brought a subcutaneous product to the market only 18 months after the IV launch. We reported Stellar CIDP data and now have a path forward to approval next year. We advanced our pipeline with an important co-decision in MMN with empasiprubart and are also keeping our promise to invest in the next generation of exciting preclinical assets, which we will talk about next year. Stepping back, we are working on 13 indications for VYVGART alone with more slated to begin before 2025. We have accumulated extensive clinical trial and rebuild experience with our first-in-class FCL inhibitors and continue to publish and present on its differentiated efficacy and safety profile. All of this is furthering our leadership in the space and broadening our understanding of the potential of VYVGART to change how we view autoimmunity. I would first like to share key highlights from the quarter and then move on to milestones ahead for the remainder of the year. The strength of our launch continues with double-digit growth quarter-over-quarter. Karen will share additional details later in the call, but at a high level, I'm really pleased with where we are today. We continue to hear countless patient stories and testimonials about VYVGART, and this is motivating our teams to drive further growth. We focused our VYVGART expansion goals across 3 key areas: expanding within the gMG treatment paradigm, expanding geographically and expanding into new indications. First, on expanding within gMG, we are already seeing traction with new patients and new prescribers 3 months into the Hytrulo launch. We are the only mMG treatment that is available as an IV and a simple sub-Q injection, both offering a consistently strong clinical benefit. This choice in how and where patients want to be treated will help us move into earlier lines. Looking to our geographic expansion. We received VYVGART approval in Canada, have our first patients in Italy and China and moved another step closer to bringing Hytrulo to patients in Europe with a positive CHMP opinion, including self-administration on the label. In addition to our commercial success, we achieved a key win for the CIDP community over the quarter and are planning ahead for indication expansion. We had a positive meeting with the FDA and can confirm we are on track to file our SBLA before the end of the year. As you will recall, the top line results from our trial were nothing short of game changing. This was the largest global clinical trial for CIDP to date, and we not only confirmed CIDP and IgG-mediated disease, but also set a new standard for CIDP trials in the future. Efficacy was apart of cross patient subtypes, and we saw a phenomenal 99% rollover into the open-label extension study. Given the high unmet need for a safe and effective treatment alternative, we feel a strong sense of urgency to bring our therapy to CIDP patients as quickly as possible. Therefore, I'm also pleased to tell you that we have notified the FDA of our intention to use our PRD with the CIDP submission. Slide 4. Today, I'm speaking to you from Phoenix, Arizona, where the Argenx team is presenting a significant amount of data on VYVGART. We have now dosed more than 1,400 patients, generating more than 1,000 patient years of data across all clinical trials. And in MG, we now have almost 2 years of reword experience in approximately 6,000 patients. This has provided us confidence in the consistency of the data and a deep understanding of the clinical profile of our Fc fragment and why the way Argenx applies to CRM can lead to differentiated results. At the conference, we are presenting aggregated data from ADAPT. ADAPT sub-Q and the associated open-label extension studies, which extend out beyond 3 weeks and 19 treatment cycles. We see that responses are repeatable cycle over cycle and that clinical benefit improvements are consistent magnitude. We also see consistent results on minimal symptom expression. In every data set, we are able to achieve approximately 40% MSC, which is an important part of our value proposition to patients. We also show in our data that patients who are able to achieve MSC as quality of life measurements comparable to healthy populations, which is why we believe this metric should be the goal that physicians seek to maintain with RNG patients. Safety continues to be a key differentiator, and we show that across all indications and all dosing schedules, treatment-emergent adverse events are mild to moderate and do not increase with longer exposure, and we do not see a reduction in albumin or increase in cholesterol. The unique clinical profile that we confirm with this data can be linked to the unique design of efgartigimod, which, of course, was born out of Dr. Sally’s wards groundbreaking immunology research on FcRn biology. Since that time, we have generated a new understanding of the role of FcRn beyond a regulator of IgG levels in circulation. We know that FcRn is important in the trafficking of antibodies into tissues and that by binding FcRn, our fragment can reach the tissues and site of disease very fast. It is also involved in the autoantigen presentation process, which may explain the data we saw in Pemphigus in reducing autoreactive T cells. Lastly, given the natural way in which we find a FcRn, we can uniquely modulate the targets, blocking IgGs from binding, but not derailing as setting itself into the lysosome for degradation. This has allowed us to select doses and dosing regimens that optimize the clinical benefit of efgartigimod without having to manage for dose-related adverse events. Our leadership in FcRn presents itself through our business from the efforts of our commercial and medical affairs teams to the ongoing translational work of our scientists who are rewriting the textbooks of immunology. Slide 5. Looking ahead, we are excited to advance our pipeline with 2 upcoming Phase III readouts. The first readout will be the top line results from our ITP Advanced Sub-Q study followed by our pemphigus address study around year-end. Let's begin with a high-level overview of Hytrulo in ITP. Our goal for the sub-Q study is to replicate the Phase III IV results, which were recently published in the Lancet. The study has the same design and endpoints, although we increased enrollment to give ourselves more room for success with a highly refractory patient population. The primary endpoint is challenging. So in terms of the threshold for success, we will be focused on the delta between treated and placebo. This endpoint is designed to meet the regulatory requirements, but we also will be looking at the fast onset of action, the IWG score and safety. The IWG score is what we view as the most clinically meaningful endpoint as it is based on how clinicians make treatment decisions in the real world. ITP patients are often very fit, but suffer from fatigue and anxiety due to the risk associated with an unexpected bleed. They typically cycle through multiple treatments in the trial and error approach, including through multiple TPOs. But we have learned to have conversations with the ITP medical community is that there is a real need for a new modality to treat ITP, particularly in new modalities that come with a favorable safety profile, which is potentially where VYVGART could step in. Slide 6. Next we can expect to see data from the addressed study in pemphigus around year-end, meaning the data readout will follow right before or after the year end as we navigate the data analysis and communication around the holiday period. The Phase III trial for pemphigus was built on the adaptive Phase II results, where we saw a fast onset of action with 90% of patients achieving disease control after just 1 to 2 infusions and a quick time to see us on a low dose of steroids. In the Phase III study, we implemented an official steroid taping protocol, and this is integrated in our primary endpoint. Similar to ITP, the primary endpoint is a challenging one, defined as the proportion of patients achieving complete remission on a minimum dose of steroids within 30 weeks. It combines reaching complete clinical remission, saving 2 and maintaining a low dose of steroids and sustaining this for 8 weeks. The current standard of care, including steroid empasiprubart, leaves ample of room for a fast, new, durable treatment with few side effects. This will be especially important in the post-COVID setting now that we have a better understanding of the detriments of long-term immunosuppression. Slide 7. In 2024, we have multiple catalysts from our pipeline to look forward to. I'm particularly excited for the MMN top line results to be shared next year. This is the first indication for our second pipeline in a product, empa and is a very serious disease, which fits perfectly within the infrastructure we are building for gMG and CIDP. We also have 2 upcoming GO/NO GO decisions, first in both pemphigoid around the end of this year and also in myositis, which is expected in the second half of 2024. Phase II POS results are expected in the first quarter of 2024 and has the potential to be a sizable opportunity. This is a study where we will learn a lot about the role of IgGs in this growing indication, and Cuban's results are expected to be shared in the first half of 2024. This is an exciting opportunity within rheumatology, where we believe strongly in the role of IgGs as a disease driver. Lastly, we are focused on long-term sustainable innovation and in order to achieve this, we need to invest in the growth of our early-stage pipeline. We have several exciting programs through our IIP, which we will communicate as we get closer to INDs, but we are working from a strong track record of success. Every program in our pipeline, including those that we are developing ourselves and those that are in the hands of others, have all been co-created with a top-notch academic collaborators and are grounded in the breakthrough immunology innovation. The new programs will also have this characteristic feature of assets from our IIP.I will now turn the call over to Karl.

[Karl Gubitz, executive]

Thank you, Tim. Slide 8. Our third quarter 2023 financial results are detailed in the press release from this morning. I will highlight the key points here. The continued momentum of our launch is reflected in your third quarter revenues. We generated $340 million total revenues, including $329 million in global net product sales and $11 million in collaboration and other revenues. Other revenues include $700,000 in royalty revenues from gross cross sales in China. For quarter 3 global product net sales of $329 million represents growth of 22% versus quarter 2. The breakdown is as follows: the U.S. sales is $280 million, Japan $15 million, EMEA $26 million and China $7 million. It is important to note 2 points on the [Indiscernible] net product sales. First, in EMEA Net sales include a one-off positive impact of approximately $6 million as a result of a true-up of the German price. But remember that beginning in March, we started to accrue revenue in Germany at the projected negotiated price. The price was finalized in September and the true-up reflected in the quarter 3 results. Second, the product net sales to China of $7 million is revenue generated on the supply of commercial vials to Zai Lab, our first-party collaborator in China. The sales to Zai Lab are a cost plus a nominal management fee. When Zai Lab sell survived organics received the royalty, which is reflected in the $700,000 mentioned earlier. Our total expenses of $420 million for the third quarter, resulting in an operating loss of $81 million for the quarter. We ended the quarter with $3.2 billion in cash, cash equivalents and current financial assets. This includes the net proceeds of approximately $1.2 billion from the global offering completed in July. I will now turn the call over to Karen, who will provide detail on the commercial front.

[Karen Massey, executive]

Thank you, Karl. Slide 9. I'm really happy where we are with our VYVGART launch having rapidly and successfully brought a first-in-class medicine to patients across multiple markets. Today, I will share the details around the current launch dynamics and then highlight the ambitious plan ahead. Our goal is to continue to reach the bar for patients globally in what they can expect from a treatment for their autoimmune disease, changing what well controlled means so that they don't have to weigh the trade-offs between efficacy and safety and can experience a low treatment burden that allows them to get back to their lives. Before we discuss the performance over the quarter, I want to bias the multidimensional growth strategy we have in place. We have a bold vision for VYVGART, bringing innovative therapy in new patients, expanding our geographic reach and maximizing the impact of new indications. We have already added Hytrulo to our product suite and continue to develop future product presentations to support our plan to move earlier in the treatment paradigm. We are rapidly bringing VYVGART and VYVGART Hytrulo to market in new countries and have key pivotal readouts on the horizon, which will further help us realize the broad potential of VYVGART and efgartigimod into new indications. Slide 10. First, on broadening our patient reach with VYVGART and VYVGART Hytrulo. With our third quarter results, we have now generated an impressive $816 million in net product revenues year-to-date. The large majority of this revenue is driven by VYVGART and there are a number of metrics that we have observed that give us confidence in the trajectory of both VYVGART and VYVGART Hytrulo in the U.S. First, we are seeing VYVGART-naive patients comprise the majority of our Hytrulo prescriptions. So uptake is not being driven by a switch dynamic but rather by expansion. By providing flexibility in how and where patients receive treatment, we are reaching a broader population, which is what we had hopeful. The initial feedback from doctors on VYVGART Hytrulo has been broadly positive, and they recognize the benefit of the simple 30 to 90 second single injection, enabled by the unique Halozyme NH technology. We also continue to make progress shifting into earlier treatment lines and VYVGART Hytrulo is contributing to this expansion. With physicians, we're focusing not only on expanding our prescriber base, but on also driving brand loyalty with our current prescribers. VYVGART Hytrulo is healthy with both of these goals, and we're still at the front end of the adoption curve with neurologists. The opportunity before us is extensive. In the U.S., injection sites are actively working to set up protocols to enable the injections. This takes time, and we're seeing consistent progress. The first Hytrulo pay policies are also being published. So between this and the sites becoming available for treatment and the high level of excitement from physicians and patients, we expect to see this pull through into new patient starts as well. Overall, we are right where we expected to be. We're on the path towards maintaining the trajectory of our launch, consistent quarter-over-quarter progress towards reaching more gMG patients globally. Slide 11. Second, in terms of expanding our suite of product presentations. I truly have first-generation subcutaneous, but our goal is to continue to innovate on the patient experience with future product presentations as well. Our second-generation subcutaneous product is a prefilled syringe, which is already in development. Our plan for the PFS is to enable self-administration in the U.S. given the simplified experience for patients. We will also aim to advance our PFS product forward for both MG and future indications, including CIDP in parallel. The approval path includes bioequivalence and human factor studies as well as stability data, and we expect to be able to share more information with you on timing early next year. Slide 12. Thirdly, we're delivering growth by moving into new markets with VYVGART. We are thinking about this both in terms of how we expand geographically and also as we look to repeat the success of MG in new indications. On our geographic expansion, starting with China through our partnership with Zai Lab. After June approval, the first patients began VYVGART treatment during the third quarter. Zai also filed for an approval of subcutaneous efgartigimod, and we expect to hear back on an approval decision next year. We continue to make progress on pricing and reimbursement across the EMEA region and have had very good outcomes so far with our negotiations with reimbursement secured in Germany, Italy and now Spain also recognizing the important value that VYVGART provides to gMG patients and to health care systems. For subcutaneous efgartigimod, we received a positive CHMP opinion in September, which was a significant milestone for the region, and notably, the labeling EMEA will include self-administration. We also received an approval in Canada during the quarter, and we're planning for a launch before end of year. Similar to Europe, the pricing and reimbursement discussions with the HCA in Canada have been going very well, and VYVGART has been recognized as better value than other entrenched biologics. This is an important win for patients in Canada. Slide 13. And finally, on our indication expansion and here was the largest trial ever run in CIDP and the results were impressive. So we are busy preparing for a launch in CIDP next year. As Tim already mentioned, we'll be filing our application with a priority review voucher because we recognize that patients are waiting for new innovation in CIDP. Our priority now is to take those key learnings from the MG launch and apply them to our CIDP strategy, while also thinking about where we can expand and improve. We're also investing for the long term, building out our launch capabilities in a very intentional and disciplined way to enable success across multiple indications down the road. It's certainly an exciting time to be at Argenx. I'll now turn the call back to Tim.

[Tim Van Hauwermeiren, executive]

Thank you, Karen. Slide 14. As we conclude, let's come back to where we are today and where we are going. We are leading from a position of strength, delivering on our commitment to bring transformative treatments to as many patients possible. Through intentional launch strategies and relentless execution, we continue to reach new types of patients in new regions and make clear progress expanding into new indications. As innovators, we are looking forward and are incredibly excited about the opportunity ahead of us to lead what we believe to be one of the biggest drug classes ever. Thank you for your continued support as partners on this mission. I will now turn the call back to the operator.

[Operator]

[Operator Instructions] Your first question comes from the line of Yatin Suneja, from Guggenheim Partners.

[Yatin Suneja, analyst]

Question on the PV study. Could you maybe talk about what would you think you would like to show with regard to the CME and efficacy endpoint? And also, have you disclosed the powering assumption? How should we think about placebo performing?

[Tim Van Hauwermeiren, executive]

The pemphigus study, which is on track for readout before the end of the year. We'll actually give top line data in line with how we typically show data. So they will be sufficiently complete and transparent to understand the clinical utility of the medication in this setting. It will center around the primary endpoint, where we will assess the delta between active and placebo on the primary endpoint of CRMN, where patients need to achieve CR on a minimum dose of corticosteroids and that for at least 8 weeks. We will also disclose the key secondary end points, which have to do with steroid tapering and speed to disease control, and of course, importantly, safety. So it will be a comprehensive top line data set in line with how we have been showing top line data and other indications before. We have not disclosed powering assumptions. We never do that. But you know by now that we're relatively conservative when it comes to powering the studies. But remember, this is the single biggest pemphigus study ever with 222 patients involved.

[Operator]

Your next question comes from the line of Tazeen Ahmad, from Bank of America.

[Tazeen Ahmad, analyst]

Tim, I just want to get a sense of how you're thinking about what the uptake of CIDP could look like relative to the very steep uptake you had with gMG and are still having with gMG. I just want to set expectations for that.

[Tim Van Hauwermeiren, executive]

Of course, we're delighted with the Stellar data, which we generated in the ADHERE trial. And it is fair to say that the trial data put us in a position of strength I will leave it up to Karen here with me in the room today to comment on some initial thoughts when it comes to take off in the CIDP market. Karen?

[Karen Massey, executive]

We're certainly excited and getting ready for the approval of CIDP. And we're doing exactly that work up right now to really get a good sense based on the real data that we have and the strong data that we have to break down the market into the segments of neurologists as well as patients to really understand how quickly might the uptake be and how can we drive that to be as fast as possible. From my perspective, based on what we're seeing early on, I wouldn't expect it to be as fast as MG, as we've talked about before, IVIg is approved. I think we compete well versus IVIg. However, obviously, there's some loyalty from the neurologists and from the patients in this progressive disease, where shifting to a new medicine is something to be considered deeply. So we're working it up, and we're going to do everything that we can. We'll leverage all of our learnings from MG. We'll leverage all of the work that we've done on MG to maximize the uptake, but I don't think it will be as fast as we've seen in MG.

[Operator]

Your next question comes from the line of Derek Archila, from Wells Fargo.

[Derek Archila, analyst]

Congrats on the progress. Maybe a question for Karen. Just in terms of some of the checks that we've done more recently with physicians and really starting to position [indiscernible] earlier line even as early as first line in MG. Is that something that's consistent with your comments earlier in terms of what you're seeing? And again, how do you kind of navigate the payers if that is the case?

[Karen Massey, executive]

Yes, absolutely. Thanks for the question, and that is consistent with what we're seeing and with what our strategy is of where we think we can provide the most value, which is we're seeing consistently moving -- since launch, moving earlier and earlier in the treatment paradigm, as neurologists get more comfortable with VYVGART, more confident in the safety profile, in particular, and they're really seeing the benefit to patients. Certainly, from a payer perspective related to that part of your question, we're not seeing any challenges to date. We have broad access in the U.S. And obviously, we're securing pricing and reimbursement across Europe very successfully. So the value of VYVGART in MG, including in earlier lines, is really being recognized.

[Tim Van Hauwermeiren, executive]

And most of the policies pay policies actually stipulates that VYVGART can be used either straight after mestinon or mestinon with steroids, for mestinon steroids with on IST. So that is actually a natural positioning to move upstream in the treatment paradigm. So this is the dynamic we had all hoped for and which is happening, but it's happening in its own cadence. So it's going to take time.

[Operator]

Our next question comes from the line of Thomas Smith, from Leerink Partner.

[Thomas Smith, analyst]

Congrats on the progress in the quarter. Just on the timing for the bullous pemphigoid decision. Can you comment on what's driving the accelerated timing there? Is that faster than expected enrollment? Or is there some triangulating of this readout with the availability of Phase III pemphigus data? Or are there some other factors we should be considering there?

[Tim Van Hauwermeiren, executive]

The bullous pemphigoid study is a seamless Phase II, Phase III study, where we derive sufficient confidence from the Pemphigus data to venture into this trial design. The 40 patients GO/NO GO decision points, so 20 patients on active 20 patients on placebo is actually on time and will be the gating event for us to then continue to scale this trial into the Phase III part of the study. So very similar to CIDP. So I'm very happy with the performance of the team. Again, this is a significant recruitment efforts, and we are on track to show you the data as planned.

[Operator]

Your next question comes from the line of James Gordon from JPMorgan. James Gordon, JPMorgan.

[James Gordon, analyst]

Two questions on PV in the addressed trial, please. The first one is just the timing. So the trial then on clinical trials covers have been completed the primary on, I think it was August 22. So just in terms of further steps needed before you can reveal the headline results? And what has been the cause of the slight delay announced today? Because it sounds like now we might not get the data, at least the headline data until early 2024. So why there has been that slight delay? And then the follow-up question was just also on the same trial. Just I understand there's significant differences with Rituxan in terms of how quickly the drug is efficacy come on? And then maybe also in terms of steroid tapering. So do you think that the PEMF results for Rituxan, we there was about a 30 percentage point placebo benefit? Is it relevant comfort? Or is a smaller benefit than that still competitive? How should we think about that, please?

[Tim Van Hauwermeiren, executive]

Certainly, an exciting indication and a very ambitious trial design. There is no delay in the pemphigus study. Remember, when the study is fully enrolled, there is a substantial amount of time involved in follow-up of the patients. So we've been assessing whether we can push patients into CR within a 30 weeks time period and then actually they roll over into the hope label extension study, where we continue to collect data, which will be important for top line data readouts. In terms of comparing to the pemphigus trial, I would strongly advise against it. I mean these are molecules with totally different modes of action and therefore, the trial designs are totally different. The pemphigus endpoint was taken at a totally different time point. It has its own particular steroid tapering protocol in the background. We work with ours, which is specific. So I would not really compare the 2, it's a totally different situation. What we're looking for, for such a stringent endpoint, CRM for at least 8 weeks within a 30 weeks time frame that's unattainable for rituximab, by the way, is a statistically meaningful separation between active and placebo. That is basically the definition of the endpoint, the primary endpoint. And then in the secondary endpoints, we will unpack the clinical utility of the drug in more detail by looking at the speed to disease control, the amount of steroid tapering we can achieve. We will also look at the pemphigus fallacious patients, which is a subset of the study. And we're also going to look whether we can actually push people into complete remission of therapy as a portion of the old label extension study. So very exciting, very bold endpoints, which could represent the game changer in the pemphigus space.

[Operator]

Your next question comes from the line of Akash Tewari, from Jefferies.

[Amy Li, analyst]

So one on PV, how do you expect the more severe patients in Phase III to impact CRMN. Additionally, do you need B-cell drop to have sustained remission or do you consider this as more of a bridge to Rituxan.

[Tim Van Hauwermeiren, executive]

So first of all, we do not see any difference between mild more severe patients in their ability to respond to VYVGART. Remember, we had bought on trial in Phase II. It's true that in Phase II recruiting a somewhat more severe patient population, but we had them in Phase II, and they have an equal right to respond equally fast and equally deep and equally durable to VYVGART as the milder patients. So that there's no real differentiation there. In terms of positioning of the product, you're correct in calling out that maybe we can go faster to steroid tapering, which is something which patients badly want and need. You cannot continue these patients on a high dose of steroids for a too long period of time. And then, of course, we had this beautiful publication where we started to unravel the biology behind the durable clinical responses, which we have seen in Phase II as we try to set in the prepared notes, FcRn is much more than just a receptor involved in IgG homeostasis. It is also involved in autoantigen presentation. And actually, we see not only a sustained reduction in auto antibodies but also a sustained reduction in attractive T-cells in our publics patients, which basically means VYVGART is disease-modifying and has the ability to either postpone or replace completely Rituximab.

[Operator]

Your next question comes from the line of Danielle Brill, from Raymond James.

[Danielle Brill, analyst]

I also have a question on PV sort of a follow-up to a prior question. I'm curious what endpoints do you think will dictate scar's rank in the treatment algorithm, specifically, what do you think it needs to show in rituximab? And then how should we think about potential read through to BP?

[Tim Van Hauwermeiren, executive]

Of course, we have to be careful here and wait for the Phase III data because they will ultimately dictate whether we have a drug in this indication and how to position VYVGART within the pemphigus treatment paradigm. We did extensive work with the community, both physicians and patients. Actually, the entire global physician community is surrounding this trial. And of course, we have been doing extensive work with the patient advocacy group. What patients badly need is a fast response. They want to see stopping the formation of lesions, closing of lesions as fast as possible. They also want to taper steroids as fast as they can, they hate steriods with a passion. So imagine we can repeat the Phase II data in terms of quick onset of action. Remember, 90% of patients in Phase II went into disease control within the first 2 weeks' time. and then we can keep them in a very low disease activity state or complete remission whilst tapering the steroids. I think that will position VYVGART very well for positioning in the pemphigus paradigm. But let's not get ahead of ourselves and wait for these data.

[Operator]

Your next question comes from the line of Yaron Werber from TD Cowen.

[Yaron Werber, analyst]

And congrats on another great quarter. So a quick also question for me for the ADHERE study. So the study is including both naive and experienced patients. And if you look again at the Rituxan studies, the placebo vary between a 10% and a 28% response rate. I think a lot of the KOLs are kind of talking about a 30% to 40% delta, that was easily achieved sort of if you look at your CRA from the Phase II sort of the 7 out of 10 at the optimal dosing, can you give us a sense sort of in this study, the placebo is the 10% to 28% relevant at all? Or do you think it's going to be even lower just given the tightness of the endpoint? And are you expecting sort of 50-50 in terms of naïve and experience in the study?

[Tim Van Hauwermeiren, executive]

From a patient population point of view, we expect a real-world population. That means that the majority of the patients, of course, will have been on therapy with maybe some naive patients in there as well. I would caution against extrapolating from rituximab trials in terms of endpoints, which are different duration of treatment, which are different. -- background steroid tapering protocols, which are different, and therefore, placebo behavior in that trial cannot just be extrapolated into our trial. The way we designed the primary endpoint is such similar to ITP, by the way, that we try to really minimize any placebo response in the 30-week trial. So let's not extrapolate. Let's not assume similar placebo responses or deltas between active and placebo. This is its own unique trial design, and we would be very happy to see statistically significant delta emerge between the placebo arm and the active. It's a very aggressive endpoint.

[Operator]

Our next question comes from the line of Myles Minter, from William Blair.

[Myles Minter, analyst]

I think Halozyme previously actually announced the data showing that they can get a 10 ml auto injector and about a 30-second injection time. I know you're advancing a pre-field sort of range version VYVGART Hytrulo and that's in development, you're going to update us next year. But would that also potentially mean you'd introduce an auto-injector solution based on that Halozyme data.

[Tim Van Hauwermeiren, executive]

If anything, it just shows you the power of the enhanced technology from Halozyme, and it underscores again how important this technology is to win in the sub-Q setting. We're very happy to have the exclusive license to the technology which positions us in a position of strength. We are the only product out there which can deliver now a single sub-Q injection with this volume of products. auto-injector, of course, is in the works. As you know, Argenx is always planning for multiple steps ahead. So we were really feeling a sense of urgency to launch this first-generation sub-Q product ASAP because patients are waiting. You know that we are already working on the prefilled syringe. And we have also been public on the fact that we are working on an auto-injector as a third generation. So the data from Halozyme are boding very well and they underscore the power of the Helozyme technology in order to delight patients in the sub-Q setting. So stay tuned, and more news will come next year.

[Operator]

Your next question comes from the line of Joel Beatty, from Baird.

[Joel Beatty, analyst]

For the most covered parts, data in Q1, what would be good data? And could good data there be supportive of further development of VYVGART other settings?

[Tim Van Hauwermeiren, executive]

So this is one of the few indications where actually we need to go for signal finding first. I think there's a strong hypothesis, which was delivered to us by the key opinion leaders in post-COVID pots that this is IgG-mediated. We need to establish a firm signal in what is a true Phase II trial here post-COVID pots before then we can think about venturing into the Phase III trial. So we will be looking at the totality of data, and we will see conviction that this is truly IgG-mediated. So we have some fundamental answers to be given before we can go into a Phase III. We believe that post-COVID pots, based on the data we have seen is not different from regular pots, but the experiment is ongoing, and we will need to show the data now.

[Operator]

Your next question comes from the line of Alex Thomson, from Stifel.

[Alex Nackenoff, analyst]

I guess a question for Karl. How should we think about the net price per patient for VYVGART now in Europe now that we have the final German price? How should we think about modeling that moving forward?

[Karl Gubitz, executive]

Yes, as a reminder, we launched in September 22, we got the final price in August 23. We're very pleased with the outcome as it recognized with clinical benefit. And that, of course, resulted in the $6 million true-up, which I reflected earlier on. At the moment, our European business, of course, is largely Germany. And I do have to mention, I think that in Germany, orphan drugs are subject to the full analog process, renegotiations if your annual revenue exceeds $30 million. And we have now exceeded that threshold. Basically, what I'm saying is that we will go back and renegotiate again. So we expect that price to drop in year in 2024. That said, we are pleased with the strong commercial performance, with result we delivered, and we are pleased with our partnership with the German we obviosly look forward to continued discussions with it. For planning purposes, of course, I think, Alex, you have to assume that the European price will be lower than the U.S. price.

[Operator]

Your next question comes from the line of Allison Bratzel, from Piper Sandler.

[Allison Bratzel, analyst]

Congrats on the progress. Just one for you on the early experience with VYVGART Hytrulo. I know it's early days in the launch, but just curious if you have any insight just on the profile of early adopters to the sub-Q format, as initial uptake concentrated among neurologists who are already heavy prescribers of IV VYVGART? Or just what are you seeing there? And then I know you indicated that Hytrulo uptake is primarily in VYVGART naïve patients so far. But just as Hytrulo coverage policies are put into place, kind of hoping you could walk us through what you would expect would be the major barriers preventing a patient from switching just from IV to sub-Q. And then just second, separately, just a point of clarification. I think you talked about a $7 million in product sales to Zai Lab, that was commercial supply related, I think. Could you just confirm that? And how we should think about just modeling that this quarter and going forward?

[Tim Van Hauwermeiren, executive]

I will give the question to Karl in a minute to comment about the transfer of goods to Zai Lab in China. But maybe Karen, you want to comment first on the Hytrulo launch dynamics and patient phenotypes speaking on drug.

[Karen Massey, executive]

We're really excited about where we are with the Hytrulo launch. I would say we are getting positive feedback from urologists, from patients. And as you mentioned in your question, payer policies are now going into place, and they broadly reflect IV policies. So it's clear that the market is responding well to this innovation that has been brought forward. You mentioned, and I'll just reinforce, the majority of patients that we're seeing are VYVGART naive patients. So this is expanding the pool of patients that are considering VYVGART. And we are adding new prescribers with VYVGART Hytrulo as well. So if you go back to what we've talked about is this very intentional and very consistent approach to VYVGART and VYVGART Hytrulo, where we're focused on expanding quarter-over-quarter, the prescribers that have experience and confidence with VYVGART and VYVGART Hytrulo expanding the patients to go in earlier line, and that's certainly what we're seeing. We're getting very positive feedback on Hytrulo. Of course, it's taken a little while for some of the logistics, let's call them that, to be set up. Some of the infusion sites are getting infusions in place is standard procedure. They needed to get new protocols in place for doing an injection instead. But we've certainly seen that that's coming online now, and those injection sites are seeing the value of VYVGART as well. And then the last thing that I'll say is that not to forget that we did get self-administration in the EU for and Japan with VYVGART Hytrulo in that case, subcutaneous we've got. So we're pleased with that as well.

[Karl Gubitz, executive]

So the $7 million we've sold to China in Zai Lab, this is essentially stocking in the country. This is inventory now sitting in the Zai Lab warehouses. But same amount, the ZAR 7 million is both in revenues and in cost of sales. We only, of course, get our share over in royalties in about the 700,000 I mentioned earlier, which is in other revenues. I think for planning purposes, you have to exclude revenue and the cost of sales at 0 profit. Periodically, we will, of course, have to supply the China market, but we will always be transparent on that. But I would exclude it for mining purposes, please.

[Operator]

Your next question comes from the line of Vikram Purohit, from Morgan Stanley.

[Vikram Purohit, analyst]

We had 2 regarding the potential impact of competition in MG. So first, what sort of impact have you seen at this point, if any, on physician use towards VYVGART and treatment options and energy more broadly in the past few months given approval of the competing therapy from UCB. And how is the messaging regarding VYVGART potentially changing in response to competition? And second, given there are additional treatments in development for MG, we'd be curious to understand your perspective on how you think the market settles out over the coming years? And which factors you think are going to drive patient preferences, prescriber preferences towards one treatment choice or presentation versus another as the number of moving parts in the marketplace potentially increases in the next few years?

[Karen Massey, executive]

Look, the way that I would think about this in the way that we talk about it is that the MG market is still, let's call it, quite immature. And as you said, there's a lot of competition, a lot of innovation coming to the market over the coming months and years. I actually see that and we see that as a good thing. Innovation is a great thing for patients. And certainly, the real competition that we all face is inertia that there's an assumption that patients are well controlled with these therapies from decades ago. And that's just not the case. So from my perspective, more innovation addresses that inertia and really expand the market over time. We've talked before about it, look maybe something similar to the MS market. But what you really see is an expansion in the treatment, the treatment rates, diagnosis rates and improved outcomes for patients along with that. That's where we would see the direction of travel for the market. And within that, I think VYVGART is really well positioned. We have a first in class. I think we have the best molecule with the fragment technology. It comes through in the efficacy in clinical trials but also in the real-world efficacy that we're seeing. The safety profile continues to hold up and continues to be strong. And then obviously, on the treatment burden, we started with the infusion, but with Hytrulo, we've been able to decouple patients from the infusion chair. And Tim spoke earlier about the continued innovation that we're bringing as we think about PFS and auto-injector. So as these markets expand, I think they've got -- is incredibly well positioned and will be continue to be intentional and disciplined and we'll be investing for growth.

[Operator]

Your next question comes from the line of Manos Mastorakis, from Deutsche Bank.

[Manos Mastorakis, analyst]

So just a quick follow-up on the CIDP and potential ITP launch in terms of sales force planning and expansion. If you can help us understand whether the new sales force will be -- whether new sales force will be required with different types of expertise and what numbers are you looking to have deployed at least in the U.S., of course. In other words, what will be the respective contribution of MGI CIDP to the overall sales force? And then secondly, for indications such as bullous pemphigoid where potential competition could be much cheaper -- for example, in dupixent on an annual basis, it could be a lot cheaper than what efgartigimod currently is? How do you think about positioning and pricing of efgartigimod there.

[Tim Van Hauwermeiren, executive]

Karen I suggest you take question one, and then I will address the EBP question, please.

[Karen Massey, executive]

So I'll start where I left off on the last question, which is that we are investing for growth as we think about the opportunity in MG being larger than maybe what we had thought. Obviously, the opportunity with CIDP on the incredible strength of that data, and then we'll see where ITP, which you included as well as PV come out. Without getting into details, what I would say is that we are working out the details at the moment. But the way to think about it is that we're investing -- that we'll leverage the field force and all of the capabilities and the infrastructure that we built for MG and that we're thinking about investing for growth as we move forward, and we'll be able to share more of the details of what exactly that looks like over the coming months. But the goal for us is to maximize the opportunity and the value creation from VYVGART in the coming years.

[Tim Van Hauwermeiren, executive]

And then on the BP question. Look, we're not in a different situation than we are in the other indications, whether it is true there is other medications are there, which come with at a cheaper price. The question is, of course, what value do they offer. So we believe that bullous pemphigoid is a very difficult disease to treat. There's actually very little competition or competitive activity and development going on for the moment. And just like pemphigus, this is an IgG-driven disease. This is IgG-mediated. And therefore, we think that by hitting the disease in its heart, we can have a dramatic impact in these patients. And let's start with the clinical benefits, which we can demonstrate in these patients to then derive the value because it will all center around the value we offer for these patients. So I think let's wait for the data. But if the data pan out in a similar direction as what we have seen earlier in pemphigus, I think we're in a very strong position to really transform the lives of these patients and be able to extract according value from that.

[Operator]

Your next question comes from the line of Douglas, from H.C. Wainwright.

[Douglas Tsao, analyst]

I'm just curious, in terms of the early launch of Hytrulo -- you've obviously mentioned that it's largely patients who had not switches new patients to therapy. I'm just curious what was necessarily holding them back? Or was it just a matter of prescribers getting to these patients? Or for some of these patients just not willing to go on to therapy with the IV?

[Karen Massey, executive]

Look, I don't think there was anything holding them back necessarily. I think this is -- we're early in the adoption curve still of VYVGART, even 7 quarters in. And I think VYVGART Hytrulo gave the opportunity for new prescribers that might not have considered VYVGART before. Certainly, we have the DTC campaign highlighting Hytrulo patients that for perhaps they felt that an IV was for a more severe disease than they wanted to be on. So it opened up maybe some different patients. But overall, I would say the trajectory of the launch is just based on, as prescribers and patients get more experience with V VYVGART, they see the impact in terms of their quality of life. As I've mentioned a few times, the fact that the safety profile continues to hold up, and now we have these 2 routes of administration. I think what we'll see is just that continued momentum and consistency expanding with prescribers and patients.

[Operator]

Your next question comes from the line of Joon Lee, from Truist Securities.

[Joon So Lee, analyst]

Congrats on the strong quarter. I have missed this, but are you still on track to start TED trial by year-end just to I might have missed that on the press release.

[Tim Van Hauwermeiren, executive]

Yes, we're simple, we are on track. So actually, we are on track with all of the clinical milestones, which we had promised at the beginning of the year. So very proud of the execution power of the team. We have a ton of work in front of us, but these are all very exciting indications. So yes, we're on track.

[Operator]

Your next question comes from the line of Suzanne van Voorthuizen, from VLK.

[Suzanne van Voorthuizen, analyst]

It's more of a long-term using, but I wanted to ask your thoughts on the more recent development where CAR-T players are moving in autoimmunity. They seek to potentially cure lupus, but some players are also moving into indications not to distance from Argenx like myositis. So could you please elaborate a bit on how you look at this development? What are your thoughts on the position of this potential future modality versus lift card? Or if you have any other considerations that you think are relevant?

[Tim Van Hauwermeiren, executive]

Yes, of course, we are watching all sorts of innovation coming into the autoimmune space. I think it's an exciting time to be in autominity these days with multiple innovative modalities coming in. We're looking at the CAR-T technology, of course, to be fair and honest, we need a bit more data. So I think we have all seen that small set of data in SLE patients. Let's see how these CAR-T data play out in the different indications. And I think everyone will be focusing, of course, on what will be the durability of the clinical response, which we can expect with this type of technology. So it's very early days. Let's wait for the data. And of course, we're closely monitoring that. Now our ambition in autoimmunity, as Karen explained earlier in the call is not to wait with expensive innovation until your last line patients, but to actually move with affordable innovation early in the treatment paradigms so we can hit the disease hard early and hopefully avoid these very bad relapsed refractory patients, which are out treated, but nothing works anymore. So that is our mission in autoimmunity, bring that innovation as early as we can in the treatment paradigm to hold further progression of disease and prevent patients from getting in that final station.

[Operator]

Your next question comes from the line of Samantha Semenkow, from Citi.

[Samantha Semenkow, analyst]

Just a couple of follow-up questions for me. Just from a timing perspective, should we expect both pemphigus and the empasiprubart beta data to be read out at the same time? Or is the guidance just they will be read out near each other around the year-end. And then also for pemphigus, when we look at the Phase II data, about 20% of the patients that seem to have achieved a CRMN endpoint within about the 30-week time frame. Just recognizing that the efgartigimod and the dose schedule as well as steroid dosing what's different in the Phase II than it is in Phase III. How should we think about that translating into the readout for the address study? Is that 20% around where you expect the bar? Or would you expect it to be different than that?

[Tim Van Hauwermeiren, executive]

So from a timing point of view, we're not going to get any more finer than what we have been disclosing publicly, let the teams navigate the Christmas period, let them do a thorough data analysis and then we can come out of the gate with the data. But they will be close together on extrapolating from efgartigimod Phase II to Phase III, remember that the objective of Phase II was something total different rights. This is the only indication where we studied monotherapy of VYVGART, then combination therapy at different doses and dosing regimens with low dose of steroids. And therefore, you cannot just look at numbers. I think what we did in Phase II is fine-tune the dose, the dosing regimen and the ideal combination with steroids to then take that ideal combination into Phase III. So we did test drive the ideal combination with quite spectacular results, but it was a relatively small patient numbers. And that's why now we do the proper safety experiment.

[Operator]

Your next question comes from the line of Rajan Sharma, from Goldman Sachs.

[Rajan Sharma, analyst]

So maybe just to follow on from the question on competition. Could you just share your perspectives on early data from Immunovant second-generation FCR antibody? I realize it's still very early, but it would be helpful to get your thoughts on that. And specifically, I guess, how important you think an incremental IgG reduction is in driving clinical outcomes? And then given that Immunovant have been quite clear on which indications they're targeting initially, does that change your thinking on the additional indications you may target with they've got or indeed how quickly you may pursue those?

[Tim Van Hauwermeiren, executive]

So it's very difficult to comment on someone else's data, especially in the early Phase I data. I would invite you to study the Phase I data of VYVGART and the Phase II dose finding data of VYVGART to compare and contrast. Our task is the leader in the space actually is to fines to take what we think is a phenomenal after antagonist into areas of high unmet medical needs and actually continue to pioneer the understanding of the biology behind VYVGART and FcRn biology. So the only thing I would caution against in this call is to just extrapolate VYVGART data to other molecules. VYVGART a distinctly different molecular design with distinctly different properties. And I think we need to wait for Phase II data before we can start to compare and contrast. So we will continue to focus on the pioneering role we have, and we're sharply focused on the patient needs.

[Operator]

Your final question comes from the line of Charles Pitman, from Barclays.

[Charles Pitman, analyst]

Just quickly on Ballard. Can you just clarify and kind of highlight what it is that you're specifically looking for on the GO/NO GO decision? And to what degree the expected readout of FECs gas is expected to kind of help you in terms of trying to set up the kind of ongoing trial design post the GO/NO GO decision? To what degree is that design still adaptive to your impending learnings?

[Tim Van Hauwermeiren, executive]

You're right in your assumption that the GO/NO GO decision point would still allow us to tweak certain aspects of the trial, for example, sample size to adjust powering. This is a very demanding endpoint. It's a different endpoint than in pemphigus -- in pemphigus the endpoint is CR on a minimum dose of steroids for at least 8 weeks. -- in bullous pemphigoid the endpoint is even tougher. It is a complete response of steroids. So the GO/NO GO decision point allows us to triangulate the ingoing assumptions for the trial design correct? Or do we need some tweaking. They will also give us an early visibility on the achievability of course, of this primary endpoint. So that's the gist of the GO/NO GO decision point.

[Operator]

And ladies and gentlemen, this does conclude today's conference call. We thank you for your participation, and you may now disconnect.