ARGNF - argenx: High-Quality Biotech Targeting Blockbuster Immunology Indications

2023-03-31 07:58:34 ET

Summary

• argenx is a clinical-stage biotech company focused on developing antibody-based therapies for severe autoimmune diseases using its SIMPLE Antibody platform.
• Efgartigimod, argenx's lead product candidate, is a novel FcRn antagonist approved for the treatment of myasthenia gravis, a chronic autoimmune neuromuscular disorder.
• Efgartigimod showed remarkable first-year sales of $400m in 2022.
• ARGX has a robust pipeline of product candidates targeting a variety of autoimmune diseases and cancers.

Background

argenx SE ( ARGX ) is a clinical-stage biotechnology company focused on the discovery and development of differentiated antibody-based therapies for the treatment of severe autoimmune diseases and cancer. The company's proprietary technology platform, SIMPLE Antibody, allows for the creation of novel antibodies that possess characteristics superior to those of traditional monoclonal antibodies.

argenx was founded in 2008 in the Netherlands and has since expanded its operations to Belgium, the United States, and Japan. The company's lead product candidate, efgartigimod (ARGX-113), is being developed for the treatment of several autoimmune diseases, including myasthenia gravis (approved and launched in 2022), pemphigus vulgaris, and chronic inflammatory demyelinating polyneuropathy.

In addition to efgartigimod, argenx has a robust pipeline of product candidates targeting a variety of autoimmune diseases and cancers, including cusatuzumab for acute myeloid leukemia and ARGX-117 for the treatment of various autoimmune diseases.

The sales ramp of Efgartigimod in MG was impressive.

argenx's efgartigimod was approved in December 2021 and launched in the US market in Q1 2022. During the first year of launch, efgartigimod's sales reached $400m in sales, surpassing the street's consensus. The street consensus seems to be expecting close to $ 900m in sales during FY2023.

We note that the PDUFA for the Efgartigimod's SC version in MG has been pushed back 3 months due to "major amendments." We believe the new information for re-analysis of clinical data is already included in the BLA, and considering the compelling non-inferiority pharmacodynamic data that the company has shown vs. IV efgart, approval in June 2023 is a highly likely scenario.

argenx's efgartigimod, an FcRn antagonist, is a novel treatment option for patients with myasthenia gravis ((MG)), a chronic autoimmune neuromuscular disorder. Efgartigimod works by reducing the levels of pathogenic autoantibodies that attack the neuromuscular junction, thereby decreasing the severity and frequency of MG symptoms.

Efgartigimod has shown promising results in Phase 3 trials where it demonstrated a statistically significant improvement in the primary endpoint of the change from baseline in the Myasthenia Gravis Activities of Daily Living (MG-ADL) score compared to placebo. Additionally, efgartigimod was well-tolerated and demonstrated a favorable safety profile in these trials.

Myasthenia gravis is a rare autoimmune disorder that results in muscle weakness and fatigue. There is currently no cure for myasthenia gravis, but there are a variety of treatment options available to manage the disease. The mainstays of therapy for myasthenia gravis include acetylcholinesterase inhibitors such as pyridostigmine, immunosuppressant agents such as steroids, and immunomodulatory agents such as IVIg and plasma exchange (PLEX). While these agents can be effective in managing the symptoms of myasthenia gravis, they can also be associated with significant side effects and may not be effective for all patients.

The first-line treatment for symptomatic relief in myasthenia gravis ((MG)) is pyridostigmine. However, if pyridostigmine is not effective, steroids are typically prescribed to target the underlying immune dysregulation. Although some patients may respond well to long-term pyridostigmine alone, most patients with generalized MG require additional therapy to address the immune dysregulation at some point in their illness, potentially indefinitely. In moderate to severe cases of MG, rapid but short-acting immunomodulation treatments such as therapeutic plasma exchange (plasmapheresis) and IVIG are used to address symptoms quickly. While these treatments are useful in myasthenic crises and in the presurgical treatment of moderate to severe MG, they have a short duration of action. They are also used as a "bridge" when initiating slower-acting immunotherapies or as periodic adjuvants to other immunotherapeutic medications in refractory MG.

We believe Efgartigimod has the potential to be used to treat the patient population in the earlier line for MG, offering advantages over the current standard of care, intravenous immunoglobulin (IVIG) and plasma exchange ((PE)). Unlike IVIG and PE, which require hospitalization and frequent administration, efgartigimod is an easy-to-use subcutaneous injection that can be self-administered at home. Efgartigimod also has a longer duration of action, with a sustained reduction in pathogenic autoantibodies observed up to 12 weeks after the last dose.

We expect efgartigimod to face moderate competition from other emerging therapies, such as Alexion's Ultomiris, which the FDA recently approved for the treatment of MG. Ultomiris is a complement inhibitor that has shown similar efficacy to efgartigimod in Phase 3 trials but requires less frequent dosing (every 8 weeks) and has a longer half-life. Other competitors in the MG market include UCB's zilucoplan , which is also a complement inhibitor, and Soliris, another Alexion product.

Efgartigimod specifically targets the neonatal Fc receptor (FcRn), which plays a critical role in antibody recycling and, therefore, in the maintenance of high levels of circulating pathogenic antibodies. By binding to FcRn, efgartigimod accelerates the degradation of pathogenic antibodies and reduces their levels in the bloodstream. In contrast, complement inhibitors target the complement system, a group of proteins in the blood that plays a role in inflammation and cell destruction. By inhibiting the complement system, complement inhibitors can reduce inflammation and cell destruction in autoimmune disorders.

One advantage of efgartigimod is that it has a mechanism of action that is specific to pathogenic antibodies and does not affect the entire immune system. This targeted approach may lead to fewer side effects than complement inhibitors, which can affect the entire complement system and potentially increase the risk of infections. In addition, efgartigimod has a relatively long duration of action, with dosing every 2-4 weeks, compared to some complement inhibitors that require daily or weekly dosing.

On the other hand, complement inhibitors have a broader mechanism of action that can address multiple pathways involved in autoimmune disorders, not just antibody-mediated mechanisms. We believe efgartigimod has the potential to revolutionize the treatment of MG with its convenient dosing and sustained efficacy. argenx's success in marketing efgartigimod will depend on its ability to differentiate its product from competitors and gain market share in a crowded MG market.

Non-MG indications in 2023

ADHERE topline data in chronic inflammatory demyelinating polyneuropathy is expected in Q2 2023. We are neutral on the CIDP readout considering the high degree of heterogeneity of the disease and phase 2 failure of rozanolixizumab. Furthermore, we believe the entrenched incumbents such as IVIgs and steroids are still going to be used as a first-line agent even with the approval of efgar. Other than CIPD, we expect ADDRESS topline data in pemphigus in H2 2023. argenx plans to file for approval of Vyvgart to treat immune thrombocytopenia in Japan in mid-2023.

Financials

As of the end of December 2022 , argenx reported having approximately $2.2 billion in cash, cash equivalents, and current financial assets. The company anticipates a cash burn of roughly $500 million in 2023 based on its current operating plans. However, argenx remains confident that its existing cash reserves, along with expected future product revenues, will provide sufficient funding to achieve profitability.

Risks

1. First, argenx is still in the early stages of commercializing its products, and there is no guarantee that the company will be able to achieve significant market penetration or generate significant revenue from its products.
2. Second, argenx's success is highly dependent on the success of its clinical development programs. There is always a risk that clinical trials will fail to meet their endpoints or encounter unexpected safety issues, which could have a significant negative impact on the company's stock price.
3. Third, argenx operates in a highly competitive industry, and there is always a risk that the company's products will be unable to compete effectively against established or emerging competitors.
4. Fourth, argenx's stock price is likely to be volatile, as it is highly dependent on market sentiment and can be influenced by a wide range of factors, including clinical trial results, regulatory decisions, and macroeconomic conditions.

Conclusion

Our rating for argenx is "hold" due to its current high valuation, which we believe is too frothy (~$20Bn), although we are a big fan of the company's high-quality anti-FcRn franchise. We also consider phase 3 ADHERE readout for CIDP to be risky. We expect Efgartigimod's sales for MG to continue growing. We remain a long-term bull based on argenx's impressive track record of consistently exceeding expectations, solid financial position, and capable management team. Furthermore, we remain optimistic about the future of argenx, with the company expanding its pipeline to include various indications in the field of immunology.

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