Khanchit Khirisutchalual
argenx (NASDAQ:ARGX) delivered another quarter of robust growth, adding 1,000 patients on Vyvgart and generating $74.9 million in net sales, up from $21 million in the first quarter. The strong adoption is the result of significant education efforts even prior to the approval and launch of Vyvgart, and the significant sales and marketing investments since the late 2021 approval.
The stock rallied briefly on the results but settled back to levels where it traded prior to the earnings release, and this shows expectations are already quite high, evidenced by the $20 billion market cap, a rarity for an early-stage commercial biotech company.
I remain bullish on argenx’s long-term growth prospects, but Vyvgart in myasthenia gravis alone is probably insufficient to get the company to the next stage of valuation expansion. Luckily, there are plenty of other shots on goal in the medium-term and we should see three very important phase 3 readouts in 2023 and at least one of these opportunities is larger than the approved gMG indication – chronic inflammatory demyelinating polyneuropathy, or CIDP.
Vyvgart is gaining traction in the U.S.
argenx ended the second quarter with more than 1,400 patients on Vyvgart, up from 400 at the end of the first quarter. This is the global patient number, but most patients are still in the United States and Japan contributed just $1.5 million. This means that Vyvgart’s market share in the U.S. has reached approximately 8% after only two quarters on the market – argenx states that the targeted population in the U.S. is approximately 17,000 patients.
The permanent J-code went into effect in early July, and this should make the reimbursement process easier and faster.
Most patients starting Vyvgart have experience with IVIg or biologic drugs, and most prescribers have written one or two prescriptions which is a good signal for broad adoption.
With the initial success of the launch, the key question is whether this is a bolus effect and can argenx keep the strong pace it has set in the first half of the year. There are also the questions of retention and the average dose per patient per year since Vyvgart’s dosing is individualized. I do not have high-conviction answers to these questions, but it seems unrealistic that the company can add 1,000 patients per quarter for too long if the addressable market is only 17,000 patients.
On the other hand, the company could keep this pace in the next few quarters if we count other markets, primarily Japan and Europe. The launch in Japan was six weeks ago and Vyvgart received a positive CHMP opinion in June; approval is expected within two months of the positive opinion. We should see a more significant ramp outside the United States in 2023.
argenx also expects to file a BLA for a subcutaneous version of Vyvgart by the end of the year. Assuming a timely approval in 2023 (and the company could use a Priority Review voucher it purchased to shorten the review period to six months), the convenience of subcutaneous administration should further improve the uptake in the second half of 2023 and beyond.
Vyvgart appears well on its way to meeting my peak sales estimate range of $1.5 billion to $2 billion in the generalized myasthenia gravis indication. And if it can keep up with the strong pace of the first half of 2022 in the United States and repeat the success in other markets, peak sales could exceed $2 billion in three to four years.
Cusatuzumab spinoff into OncoVerity, partner AbbVie touts positive combination data of ABBV-115
argenx also announced it would advance the development of cusatuzumab in acute myeloid leukemia by spinning it off into OncoVerity in partnership with UCHealth. I am not optimistic about this program given the disappointing phase 2 data that led former partner Johnson & Johnson (JNJ) to abandon the program. And argenx itself does not seem excited about it enough to keep it in-house because it certainly has the capacity to support such a program.
On the other hand, partner AbbVie (ABBV) had positive comments about the ABBV-151 program (formerly ARGX-115). This is a candidate that works by stimulating a patient’s immune system by going after a novel target called GARP. AbbVie is in charge of the program and argenx is eligible to receive more than $600 million in development, regulatory and commercial milestones, and tiered royalties on net sales from mid-single digits to the lower teens.
ABBV-151 (‘151’) did not generate good monotherapy efficacy, but AbbVie says it has seen promising combination data. This is what AbbVie said on the Q2 earnings call:
In our Phase 1 program, we’re combining 151 with a PD-1 checkpoint inhibitor in cancer patients who are refractory to or relapsed after PD-1 as well as evaluating this combination in PD-1 nonresponsive tumors. Based on the preliminary efficacy we’ve seen in the dose expansion cohorts for multiple solid tumors, including a deepening of responses over time and prolonged durability, we recently declared proof-of-concept for 151.
We plan to advance to Phase 2 in several solid tumors, starting with urothelial cancer. We’re also expecting additional data readouts later this year in other solid tumor indications, including colorectal cancer, which may enable further expansion studies in this hard-to-treat cancer type.
We will also begin new studies to explore a broader set of solid tumors where GARP is implicated as a critical immunosuppressive pathway, based on tumor tissue analyses.
This represents just upside for argenx and is worth mentioning, but not a significant long-term growth driver for the company considering its size and AbbVie getting most of the economics from the program.
Conclusion
Vyvgart had another great quarter and seems well on its way to generating more than $1.5 billion in annual sales in the generalized myasthenia gravis market in three to four years. The BLA submission for the subcutaneous version of the product is expected by the end of the year and, if approved, should further accelerate its adoption.
Meanwhile, the company continues to aggressively push the development of Vyvgart in many additional indications and 2023 should be a big year for the pipeline with three registrational trials reporting results – CIDP, ITP, and pemphigus vulgaris. And ARGX-117 should become more prominent. This was one of the things that were missing in the previous years – pipeline beyond Vyvgart. Cusatuzumab has disappointed and ARGX-117 needed time to progress through preclinical trials and a phase 1 trial in healthy volunteers.
argenx is in great financial shape with $2.6 billion in cash and equivalents at the end of the second quarter. Management expects to burn up to $1 billion this year, which suggests it will end the year with more than $2 billion in cash. The cash burn is high but necessary to properly execute the launch of Vyvgart and to push forward an increasing number of clinical trials, and it should start to go down in 2023 as Vyvgart sales continue to increase.
I remain bullish about argenx’s long-term growth prospects, though the upside seems somewhat limited in the near-term in the absence of big pipeline readouts (but three are expected next year) or a buyout. And the strong launch of Vyvgart and an expanding pipeline are the right ingredients to spark big pharma interest.
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