GMAB - argenx: Exciting Genmab Partnership All Eyes On Q1 Earnings And CIDP Readout

2023-04-21 13:34:59 ET

Summary

• Genmab partnership: argenx and Genmab plan to collaborate to advance antibody therapies in immunology and oncology, leveraging proprietary technologies and sharing costs and profits equally.
• Q1 2023 sales expectations: Minor headwinds expected in efgartigimod's US sales due to seasonality, but growth anticipated to continue in 2H 2023 with regulatory decisions and international launches.
• We have maintained a hold rating on argenx due to a) Q1 seasonality headwinds in Vyvgart's sales for Q1 2023 and b) cautiousness around the CIDP readout (expected in 2H).

Genmab partnership update

On April 17, argenx (ARGX) announced a unique partnership with Genmab (GMAB) to advance both companies' advanced antibody therapies in immunology and oncology. We believe the partnership between Genmab and argenx allows both companies to leverage their own proprietary antibody technologies while sharing costs and potential profits equally. In our opinion, this collaboration presents a smart low-risk strategy for argenx to diversify its autoimmune pipeline and venture into the field of oncology (with cusatuzumab's failure argenx currently has no meaningful exposure in oncology), albiet; we believe it is a minor positive to the stock price short-term as investors are more focused on the Q1 earnings and CIDP readout in the short term.

Source: Company IR

Genmab and argenx have announced a collaboration agreement to jointly discover, develop and commercialize novel therapeutic antibodies with applications in immunology and oncology. The multiyear collaboration aims to accelerate the identification and development of novel antibody therapeutic candidates with a goal to address unmet patient needs in immunology and cancer. The collaboration will initially focus on two differentiated targets, including one within immunology and one within cancer, with the potential to expand to more. Under the terms of the agreement, both companies will jointly discover, develop and commercialize products emerging from the collaboration while equally sharing costs as well as any potential future profits. The partnership brings together the antibody engineering expertise and knowledge of disease biology of both companies to unlock insights on the disease pathways that will be addressed.

Q1 2023 MG sales could be slightly underwhelming.

Despite the potential for continued growth in the US market, we believe Q1 2023 could have some minor headwinds to efgartigimod's US sales due to usual seasonality headwinds due to commercial plan resetting and co-pay and prior authorization forms. Albiet, we believe the drug to continue growing meaningfully during 2H 2023 at a similar trajectory to what we saw in 2022, with regulatory decisions for gMG treatment anticipated in Canada, China, and Israel, and launches planned in France, the U.K. and Italy, we expect the 2023 sales to comfortably reach >$800M (almost 80% YOY growth).

As suggested in our previous article , we believe SC efgartigimod will eventually happen in the near future, although we acknowledge there is some degree of uncertainty around the timeline and what is driving the FDA's concern around it.

Risks

1. Clinical risk: Potential failure of efgartigimod in ongoing clinical trials for CIDP, ITP, and pemphigus, which could impact the company's growth prospects.
2. Regulatory risk: Delays or unfavorable decisions in gaining approval for efgartigimod in various countries, hindering market penetration.
3. Commercial risk: Competitive landscape and pricing pressures affecting market share and revenue growth for Vyvgart and other products.
4. Operational risk: Challenges in successfully scaling up manufacturing and supply chain to meet the demand for approved indications and expanded geographies.

Conclusion

We have maintained a hold rating on argenx due to a) Q1 seasonality headwinds in Vyvgart's sales for Q1 2023 and b) cautiousness around the CIDP readout (expected in 2H 2023), which we believe can be a bit of a coin-flip due to uncertainty around CIDP's hetergeneous pathophysiology and high placebo rate. Net-net, we are long-term positive about the company's robust platform and efgartigimod's growth trajectory in 2023-2024, albiet we expect the ramp to slow down around 2024 with the exhaustion of patient bolus, but we expect SC efgartigimod to be approved by then, potentially adding more boost to the sales ramp. Furthermore, we highlight that the company will also focus on other late-stage readouts for ITP and pemphigus in the 2H 2023, which can be an additional underfollowed catalyst for the stock.

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