Good day, ladies and gentlemen. Thank you for standing by. Welcome to Legend Biotech First Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please note that today's conference may be recorded. I will now hand the conference over to your speaker host, Jessie Yeung, Head of Investor Relations and Public Relations. Please go ahead.

Good morning. This is Jessie Yeung, Head of Investor Relations and Public Relations at Legend Biotech. Thank you for joining our conference call today to review our first quarter 2024 performance. Joining me on today's call are Ying Huang, the company's Chief Executive Officer; and Lori Macomber, the company's Chief Financial Officer. Following the prepared remarks, we will open up the call for a Q&A. We have Guowei Fang, Chief Scientific Officer; and Steve Gavel, Head of Commercial Development for the U.S. 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, everyone, and welcome to our first quarter earnings call. I am pleased that you could join us. As many of you on this call know, 2024 has been an eventful year for us. Obviously, our major news was the approval of CARVYKTI by the FDA and European Commission for second-line relapsed or refractory multiple myeloma. These approvals have the potential to change the treatment paradigm for tens of thousands of patients in the United States and Europe. The feedback from key opinion leaders, oncologists, advocates, patients and caregivers has been tremendous. On March 15, we received international media attention when the FDA's Oncologic Drug Advisory Committee, or ODAC, meeting raised awareness about multiple myeloma and the positive benefit-risk profile of CARVYKTI. ODAC's unanimous 11 to 0 recommendation in favor of CARVYKTI was independent and objective validation of its value proposition. We also added another noteworthy approval to our growing list. The Brazilian health regulatory agency has approved CARVYKTI for second-line multiple myeloma. I am pleased to report that CARVYKTI is now available by prescription in Brazil. Our patient-facing colleagues and those who work in manufacturing are energized and eager to share our transformative therapy with more patients around the world. As you will see on our addressable market slide, our second-line indication translates to an addressable patient population of 80,000 across 3 major markets. Turning to financial development. CARVYKTI net trade sales for the first quarter were $157 million, which is a 100% increase year-over-year. Sequentially, net sales decreased by $2 million from $159 million in the fourth quarter of last year. This was a result of phasing due to the timing of orders and when they were delivered and built for as well as manufacturing testing needed for the upcoming expansion. Importantly, there was growth in patient demand…

Thank you, Ying. And good morning, everyone. As Ying mentioned, we generated approximately $157 million in total net sales for CARVYKTI during the first quarter, an increase of 118% year-over-year. Sequential growth was roughly flat due to the timing of orders and when they were delivered and billed for as well as manufacturing, testing needed for the upcoming expansions. As a reminder, we show equally in all profits and losses for CARVYKTI ex China with our partner, Janssen. Turning to revenue. Total revenues for the first quarter were $94 million, consisting of $78.5 million of collaboration revenue from the sale of CARVYKTI and license revenue of $12.2 million from the recognition of deferred revenue in connection with our agreement with Novartis to develop, manufacture and commercialize LB2102 and other potential CAR-T therapies selectively targeting DL3. Net loss for the quarter ended March 31, 2024, was $59.8 million or a loss of $0.16 per share compared to a net loss of $112.1 million or a loss of $0.34 per share for the same period last year. Moving on to expenses. Collaboration cost of revenue for the first quarter of 2024 was $49.1 million compared to $35.6 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 expansions. Additionally, cost of license and other revenue for the first quarter of 2024 was $5.6 million compared to no cost of license and other revenue for the first quarter of 2023. These costs are in connection with our agreement with Novartis to develop, manufacture and commercialize LB2102 and other potential CAR-T therapies selectively targeting DL3. Research and development expenses for the first quarter 2024 were $101 million compared to $84.9…

Thank you, Lori. To sum up, 2024 has already been a monumental year for Legend with a string of regulatory successes. CARVYKTI continues to be the fastest launched CAR-T therapy and now we have new opportunities to serve even more patients. I want to thank each of our 1,900 employees for their commitment and dedication that will ensure patients who need CARVYKTI are able to access it. And with that, we'd like to take your questions.

[Operator Instructions] Now our first question coming from the line of Jessica Fye with JPMorgan.

I have two, please, sort of related. First, I know 1Q was impacted by a number of non-revenue batches for comparability work. How should we think about the scale of that work in 2Q and beyond? And then second, when you talk about doubling capacity from the end of '23 to the end of '24, but I think you mentioned that the Obelisc commercial production was going to be kind of back-half weighted or back-end weighted. What does that mean for how we should think about revenue year-over-year in '24 relative to '23? I'm just trying to figure out kind of is it one-to-one on that doubling year-end from your end to your end of capacity? Or are there other factors we should think about when we're thinking about revenue this year?

This is Ying. I'll help answer those two. So first on the manufacturing investments, I would tell you that qualitatively in first quarter of this year, we did have a number of non-revenue-generating rounds. And that includes bringing up the CMO from Novartis and also bringing up a couple of other additional nodes, including our facilities in Ghent up for production, including clinical and then in the future also for commercial production. So I cannot disclose exactly the number of the non-revenue-generating rounds, but it is on a similar order of magnitude compared to, for example, clinical rounds. And we do expect that for the rest of the year, in the next 3 quarters, that number will come down. The reason is we are pretty much complete in terms of the work we're doing with Novartis. So we believe that Novartis is in a position to file IND very soon. And assuming the IND is cleared by the FDA, we expect Novartis to start clinical trial production in the third quarter and then followed by commercial production first quarter of next year. And then, of course, we also have 2 other facilities in Ghent. The first one, Phase I is called Obelisc, and Obelisc is already producing for CARTITUDE-6 as we speak, and we expect pending regulatory approval probably around late third quarter or early fourth quarter this year, fourth quarter this year, Obelisc will start commercial production. And then followed by our much larger facility in Belgium called the Tech Lane. Tech Lane right now is on track to complete physical construction and validation by end of this year. So we expect that facility to start clinical trial production early next year, followed by commercial production in the second half of 2025. So that's kind of like the cadence. And then to address your second question, as I just mentioned, Obelisc is expected to start commercial production late 3Q or early 4Q this year. So in general, I think we have said that we are looking at a roughly doubling of our capacity from 2023 to 2024. We don't provide guidance for the product sales. But I think the capacity expansion gives you a good idea of where the revenue would lie, consistent with our policy to have similar or same closure -- disclosure from J&J, which does not provide product-specific guidance, we cannot guide the product sales. But I think that doubling of expansion gives you confidence that where the revenue would be in terms of growth year-over-year.

Can I just clarify, when you say doubling of capacity, there's other factors as it relates to revenue, whether it's kind of like in-spec, out of spec, the amount going to clinical trials, the amount going to these comparability batches or what have you. So when you say doubling of capacity, is that just like total capacity inclusive of all these other things that may not generate revenue? Or is that commercial capacity?

That is correct. When we talk about capacity, that includes the number of total slots from all nodes of production. That includes clinical production, that includes non-revenue manufacturing investment rounds, that includes commercial production. And then when you think about commercial production, yes, of course, you have to make assumption of the in-spec success rate, right? I mean we're encouraged by the trend so far this year because given what we're seeing in Q1 and now in Q2, that continues to improve. So then there's, of course, the net pricing. So audits will figure into the revenues. But when we talk about total capacity, we're talking about order capacity, order flux from different nodes, and that includes everything.

And our next question coming from the line of Gena Wang with Barclays.

Maybe I'll just follow Jessica's questions. So should we still expect revenue growth in second quarter, '24 or should we wait into second half, '24 when Obelisc commercial production on board in 3Q, 4Q? And another related question is regarding CARTITUDE-5 and 6, now mainly 6, you still have maybe roughly 700 patients that need to be enrolled. Where do you expect these 700-patient enrollment mainly at? Would that be in New Jersey site? Or would that be in Belgium site?

This is Lori. I'll take your first question on revenue. We do expect to see some growth in Q2. But as we've talked about, we expect pronounced growth in the second half of the year. As Ying mentioned, we have different factors coming into play in the second half of the year. With the Raritan ramp, we expect a second capacity ramp coming on there. Obelisc facility is the largest driver with that coming online in order to do some commercial production. And then we do have a CMO that we anticipate clinical production can shift there that will free up some commercial capacity at Raritan. So in addition to that, as we start to get these additional nodes that come online, we will have some multiple country launches we anticipate in the back half of the year. And as you know, with the complexity of cell therapy, some of the -- achieving those sales will depend upon how those launches go. And you've seen in prior launches, we tend to get a lot of the acute patients first. So we want to be conservative, but we do anticipate a more pronounced growth in the second half of the year. Ying, do you want to take the CARTITUDE-5 and CARTITUDE-6 question?

Yes, Gena. So on CARTITUDE-5, we have completed all international enrollment already for CARTITUDE-5 and that's actually above our preplanned number. Right now, we're just enrolling additional U.S.-based patients, so that we satisfy the minimum of the U.S. patient representation by the FDA. So by now, we have manufactured a significant portion of CARTITUDE-5 patients. Now on CARTITUDE-6, since we opened the enrollment in October last year, right now, it's enrolling really fast. It's actually faster than our plan. So in terms of where we're manufactured for those trials, I can tell you that, right now, Raritan, New Jersey is the main site for CARTITUDE-5 manufacturing. For CARTITUDE-6, right now actually, again, our first facility called Obelisc is the main site for that trial now, and will shift to other sources. But we're trying to really save the Raritan facility for commercial production for the rest of 2024. So that's where we're manufacturing for CARTITUDE-5 and CARTITUDE-6 for now.

And our next question coming from the line of Kelly Shi with Jefferies.

Congrats on achieving a great milestone in early approval. So for the launch in the U.S., could you talk about back to the current launch activities? Have you started treating patients in second to fourth line? And do you see a switch from lifeline? And I also have a follow-up.

Yes, why don't I take that question. This is Steve Gavel. I think the question had to do with part of for the status of it and patients and so forth and so on. One of the things I do want to just piggyback a little bit to Lori's response earlier concerning the second half component of this year, even though the product was approved in earlier lines in April, there's just a natural lag in the market, especially with a CARTITUDE-4 launch where we are looking for getting patients referred into our institutions. So I think this is some of the key differences with the CARTITUDE-1 launch versus 4, that there will be a natural lag in it just because of the referral piece of this. Now also to Lori's point, there are a number of patients that meet the eligibility criteria today in our hospitals that are moving very quickly through the approval processes and so forth. So again, we continue to do very quickly in terms of patient identification and apheresis, but I did want to caution you all that it's just a natural phenomenon of referrals and manufacturing and ultimately to revenue recognition. That's why we're basing our assumption on a really strong second half.

And also to reach the goal of 10,000 doses by year-end for 2025, would you need to consider the sign up for additional CDMO contract? Also what percentage of the patients would be needed to treat in all patient settings to reach 10,000 doses go if we're assuming like on the hospital side, there's also capacity constraints?

So Kelly, let me take the first half of the question, and then I'll ask Steve to talk about the outpatient administration of CARVYKTI. So when we look at the goal of reaching 10,000 annualized dose capacity by end of 2025, we believe that with existing nodes are 4 nodes, right, that includes our own site in Raritan, New Jersey, our 2 sites in Ghent, Obelisc and Tech Lane, plus on Novartis site here, that should be pretty much give us the reach to that number. Of course, we're continuing to evaluate the CDMO of other companies that could potentially give us a boost as well. So stay tuned on that front. And then I'll ask Steve to talk about the outpatient illustration of CARVYKTI.

So you're hearing at the top, talking about roughly about 1/3 of all patients now being treated in the outpatient setting. That's grown quite a bit. I mean that's to give you a comparator versus other CAR-Ts in the market that we compete with is they're right around 15%. So I think the question was what -- from an outpatient perspective, what would we need to see in order to achieve the target doses that you referenced earlier. We expect by the end of 2025 to be at least double to where we are today. And it's reflected in the growth in the outpatient sector that we are seeing today. So we are relatively confident that we are going to be there. I think the one wrinkle and you're seeing now, a number of our sites investigating this today is the partnerships that they are going to be and they're currently embarking with other outpatient players, whether it be in the community setting, I'm talking about pure community retail setting. And actually, if you haven't seen a good example of that is back in 2022, HCA Healthcare announced a partnership with McKesson, which is U.S. Oncology. And I know that they are very interested in leveraging outside of their own hospitals to bring these therapies out to as many patients that are eligible to receive them. So you'll see the definition of outpatient will change quite a bit over the next couple of years, not just hospital outpatient, but in the next few years, you will start to see community administration of our program.

Our next question coming from the line of Jon Miller with Evercore ISI.

This is Umer filling in for Jon. Ying, I don't have any single question on CARVYKTI today. And instead, I want to focus on a very important area in CAR-T space, which I don't think has come up in Legend conversations. So you have this triple-targeted CAR-T ongoing in China since March 22. I think it's wrapping up now. That's CD19, CD20, CD22 on autologous. And separately, you have this LUCAR-G39P, which is the dual targeting CD19, CD20 ALLO that I think you just started Phase I, both are these in China. My question is, shouldn't those trials have been an autoimmune and/or is that a plan that you're intending to do near term?

I will ask our CSO, Dr. Guowei Fang, to answer your question.

This is an important question. And our disease-focused area, both oncology and autoimmune diseases, for both assets we have plans to develop those in autoimmune disease indication as well, and it's in process.

And when would that start, Ying? And would it be a U.S. trial? I think that's the other very important question, obviously.

Currently, our U-1 is in the process of initiating the autoimmune IT study in China across multiple disease indications. For the U.S. autoimmune diseases asset, our current strategy is focusing on the auto-generic approach given some of the key challenges associated with the target treatment options. So for example, the requirement of lympho-depletion and the requirement of manufactured at the individual patient level, high cost, et cetera. We have assets in the process of initiating the U.S. IND [ enabling ] study. We will get those additional information in the future.

Sorry, one last one. If I may just clarify, in that ALLO trial for U.S., I'm assuming that's your CD19, CD20 dual targeting. Is it safe to assume that you would not need the full site loading, the preconditioning for autoimmune?

That's an open question. And I think we will make a decision based on the clinical data we are collecting. In terms of targeting mechanisms, we have -- we think that autoimmune disease, I'll cover a very broad spectrum of different diseases, and we want to have options and choice for patients. In terms of targeting mechanism, CD19, CD20 certainly validate the type of mechanism. I think plasma also play a major component in BCMA-driven disease pathology. So we are also considering the BCMA as additional type of opportunities.

And Umer, I know you had a question about the disclosure and also moving to U.S. IND. So I will just add that, you see that we already initiated the triple specific CD19, CD20 program, and it will probably start dosing for autoimmune by end of this year. So based on that clinical data, we will make the decision when and how to move assets into the U.S. IND process. And of course, like Dr. Fang just mentioned, we are very interested in whether we can either bypass or lower the dose intensity for fluid lympho-depletion regimen. That is one goal of our IIT trials in China. So is also the trial we're conducting for the dual-targeting ALLO CD19, CD20 [ come directly ] program.

Sounds great. So it sounds like you could have some autoimmune data next year. Is that a reasonable conclusion from all of this?

Without officially guiding, yes, that's a possibility.

And our next question is coming from the line of Yaron Werber with TD Cowen.

Great. Let me maybe just follow Umer's last question and then I have a question on CARVYKTI. Can you just discuss a little bit the concept of autologous with the triple CD19, CD20 and CD22 versus with ALLO, it looks like you're doing dual targeting. Can you just help us understand kind of your thoughts, why not do triple in both? And then I have a follow-up on CARVYKTI.

So for tumor targeting, it's the design principle is to drive the deep response by targeting multiple B-cell biomarkers. And so for that, we are currently initiating the IIT study and the clinical data. For the ALLO, we are going to have different targeting mechanism. And based on the IIT study, we will have additional insight in terms of which disease we should target among different autoimmune indications.

Okay. With the dual, but you'll keep that as a dual 19, 20 only because you don't need to drive deeper responses. Is that the thinking? Or you just need to reset the immune system?

Yes. So we are talking to both CD19 and CD20 as well as with different assets, talking to CD19 and BCMA from a different aspect.

Okay. Got it. Okay. Maybe just to move back. I have a quick question on CARVYKTI. Can you give us a little bit of a sense now that second-line is approved, is the auto specs now different pretty much and easier across the board? Or is the FDA still keeping a certain bar sort of on fourth line onwards and a different bar in the second line?

This is Ying. I'll answer your question. So the answer is that when we received FDA approval on April 5 for second-line, we did receive 1 label with 1 spec. So as of today, right, if we treat any patient on label, the release spec is the same for second-line patients versus a fifth line and beyond. And also, by the way, it is a wider release spec. So I know it's early days, but based on the data from the full month of March production, which we test in April, so far, we're seeing encouraging trends in OS so far based on either probably wider release spec approved by the FDA and also potentially once we start to see more second-line patients rolling in, the natural evolution of better baseline for those patients.

And those release spec, how do they compare with ABECMA and maybe TECARTUS as far as you can tell?

Without disclosing the number, I can tell you that based on latest data we have on out of spec, I think our success rate is approaching that of our competition at this point. Of course, like I said, it's very early days, we have only March production data, we have only a little bit partial of the April production data.

Okay. And maybe just final, I think you talked about 100 ATC target for the year. What's the gating kind of rate to open all of those? Is it capacity? Or are there other factors as well?

Yes. No, it's Steve Gavel. I mean, the gating element is really the site certification process. One thing to take note and I've talked about this on previous calls, is as we add more and more sites, you don't see nearly the volume that you see in our initial -- our Phase I site. So -- but we will continue to certify sites and our tenants to get between 90 to 100 this year. The key metric, just so you know what we look at is because there's so much outpatient now, administration in our facilities on a per site basis, we're seeing much more throughput per site versus what you would see, for example, with ABECMA. So I just want to make sure we're kind of viewing this the same way.

And our next question coming from the line of Ziyi Chen with Goldman Sachs.

Just 2 questions. One is on the EU launch. Well, I think the U.S. has been down quarter-over-quarter, but you have been increased to 23%, which is still growing nicely. So could you share a bit more color on the Europe pricing? And also, how is the reimbursement coverage in your countries? And also, any updates on the commercial launch in U.K. and in Japan? And a small financial question is really regarding the DLL3 partnerships. So we understand that upfront payment. You just recognize about USD 12 million in the first quarter out of the $100 million upfront payment. So is that the specific accounting timing for that? So it's going to be spread out over the next few quarters? And secondly, there is a cost of license related in connection to that. So could you help -- helping us to understand a bit more about where does this cost coming from?

Yes. We'll try to unpack this -- a lot of things from that. I want to take the first European question. So I think folks on the line are aware a good partner is responsible for ex U.S. promotional activity, specifically in Europe. I can't tell if you're aware of this already, if you're into a partner in Germany, Austria, in both CARTITUDE-1 and 4. The other thing to take note from a global allocation, even though we are in those countries, the majority of the global slot allocation is coming into the United States. I think you had a question around pricing. Pricing has not been disclosed as of yet in Europe. So we can't unfortunately provide information around that until it becomes publicly disclosed. I'm trying to think of the other European questions that were out there. Let's see here. On the pricing and reimbursement piece. Again, we aren't commenting yet -- we have received approvals, obviously, in Japan, but we have yet to launch there. And again, I'm going to defer to my partner on that one because they have not disclosed their intention on timing there nor as far as in the U.K. as well. Lori, you can get the next one.

So for DL3, as you guys saw on the -- how we recognize that in the P&L, there's actually 3 different locations of what we're recognizing there and then on our balance sheet. As you guys remember, and we disclosed, we received $100 million upfront payment. However, we have to defer the recognition of that $100 million over time for the activities that we're performing -- that we're obligated to perform as part of the collaboration agreement. So to your question of how will that spread out, yes, that will spread out over various quarters in the future as we continue to do our activities that we're obligated to perform for that study. Now we do have a passthrough. There are certain material costs that we will passthrough those costs to our collaboration partner. So we recognize that as other income. So that is actually separated out. And then the cost of the license is the actual -- what triggers that revenue recognition is the cost that we've incurred based upon those obligations that we have to perform. So that's the actual cost that we're incurring for the clinical study.

And our next question coming from the line of Leonid Timashev with RBC Capital Markets.

Wanted to maybe talk -- ask on sort of the cadence of data that we should expect for the rest of the year. And specifically, I'm curious on cohorts E and F, when we might see that data? What level of follow-up and what sort of efficacy measures we should be focusing on? And then really to that I guess what in your mind is the PFS benchmark that we should be looking for there and for CARTITUDE-5 as a whole?

This is Ying. So first, maybe I can just give you a quick review of ASCO. We expect to present some data from one cohort, Cohort D. These are the patients who did not achieve optimal response to the standard care regimen in the front-line. And then for Cohort E and F, we enrolled and dosed a total of roughly 60 patients in newly diagnosed multiple myeloma. So right now, we're expecting to release and publish the data at a major medical meeting towards the end of the year. So that's roughly the timing for cohorts E and F. And in terms of the level of follow-up, I think you should expect to see a year of follow-up or maybe even longer than that. If you talk about the PFS benchmark, so for CARTITUDE-5, as you know, the standard of care regimen we use here is RVD or Revlimid, Velcade and dexamethasone. If you look at the registration study for that regimen online, the median PFS is about 34, 35 months. And that is the benchmark we're looking at to beat, right? I just want to remind you that this is a superiority trial. And then for CARTITUDE-6, I think you got the answer from the PERSEUS trial that was presented at ASH last year, that is a DRVD regimen in combination of stem cell transplant. So there, you're looking at the 4-year PFS rate of 84%, and that's the benchmark we're looking at, right? Again, we are looking at a superiority in PFS as a primary endpoint. Now given the recent ODAC vote, we will be engaging with the agency to talk about potential of using MRD as an endpoint to accelerate the approval time line. So if you look at CARTITUDE-5, MRD negativity is already a secondary endpoint. And then for CARTITUDE-6, if you look at our clinicaltrials.gov, actually, the co-prime endpoint is PFS and MRD negativity. So we will follow all the patients through MRD negativity. And at the same time, we plan to engage the FDA and the EMA to talk about the potential of using MRD as endpoint as well.

And our next question coming from the line of Vikram Purohit from Morgan Stanley.

We just had 2 on CARVYKTI. The first on the topic of future disclosures, Ying and team, do you anticipate providing kind of a split of patients by line of therapy or any directional sense of how kind of patients used in the quarter has trended between earlier line versus later lines in the coming quarters of performance data? And then secondly, I know you don't provide long-term guidance, but looking at a couple of years out, how do you expect the CARVYKTI sales base to kind of trend U.S. versus EMA?

It's an important metric because it's your question around looking at line of therapy use. It's an important question. It's a very difficult question to track from. So just because of the available data that's in the public domain right now around that. So let me give you away how we're thinking about this. So we're assuming in a year -- year plus time, about 70% of our product use is going to be an earlier line of therapies, early-line treatments, I should say. And that's going to increase over time. It's because the market is so large and obviously, there's high demand to use this in patients that are doing quite well but we will not be, per se, teasing that out by line of therapy, not because we don't want to, but like I said, you get that data through different sources. One of the big sources is claims data, but the source information is a bit choppy. So to answer your question directly, we will not be disclosing that by line. Ying, there's a second follow-up.

Yes. So Vikram, on your second question, I mean, again, we're not in a position to provide guidance for CARVYKTI. But as you know, typically, when you launch a new indication, it takes about 3 years to get to that peak sales. And as of now, we are not changing the projection that CARVYKTI will peak at $5 billion plus. And by the way, that is really on stipulation that we'll have a healthy market share in second line for which we already have received official approval from both FDA in the U.S. and EMA in Europe. So we feel confident about the growth potential for CARVYKTI in the second line in the next few years.

And our next question coming from the line Kostas Biliouris from BMO Capital Markets.

One question from us on the guidance around the 10,000 slot production by year-end 2025. Can you maybe provide some color around the number of FDA approvals on manufacturing copies in case you will need to be able to manufacture this launch by year-end 2025?

So let me just give you a little bit more details about how we think about all the different nodes, right? So obviously, right now, the only commercial production site is Raritan, New Jersey facility. And we are implementing an FDA-approved increase as of now. And then we expect to have another increase towards the second half of the year. So that's what we're doing with Raritan. And then, meanwhile, we and our partner, Johnson & Johnson, are conducting a physical expansion of the Raritan facility. So that progression should complete by end of this year. So over the course of next year, we are going to validate the equipment and then bring all the fees up to the GMP facility standards. So sometime next year, towards the second half, we expect that doubling of the manufacturing area in Raritan to start to contribute to additional capacity. So that's what we're doing for Raritan. And then for the 2 facilities in Ghent, the first one, Obelisc right now is already manufacturing for clinical trial. And I just said in the call that towards probably late 3Q or early 4Q, we expect that facility to receive the regulatory approval for commercial production. The much larger Tech Lane facility in Ghent, right now, we're on track to complete all the validation work by end of this year. So that we expect clinical trial production to start early next year in 2025. And in the second half of next year, that facility will also come online pending regulatory approval for commercial production. And then we talked about Novartis as CMO. Again, we expect the commercial production to start early next year. So if you look at those 4 nodes, right, we're adding 3 additional for commercial production starting second half of this year and then throughout 2025. That's how we can achieve the 10,000 dose capacity by end of next year, all these 4 nodes together. And I can tell you that without disclosing all the technical details, if we track as of last Friday, we're on track to achieve that 10,000 total capacity by end of next year, given where we are in Raritan, where we are in the Ghent facilities and where we are with Novartis.

And our next question coming from the line of George Farmer with Scotiabank.

Ying, can you comment a little bit about how this wider release-back approval translates -- may translate into top line sales? Number one. Number two, also recognizing that CARVYKTI is moving into second-line primarily, at least in the relapsed/refractory fourth-line plus, can you talk a little bit about dynamics between how CARVYKTI is being positioned against bispecifics? It looked like that there was a bit of a surprise number from J&J when they reported. And then also finally, can you go into a little bit more detail on how you get to your cash you should -- you spend out to 2026?

I'll take the first question and then ask Steve and Lori to provide answers for the second and third one. So on a wider release spec granted by the FDA in April, I think what we have said previously is that based on our modeling and also the data from CARTITUDE clinical program, we believe this widened spec should result in additionally 5 to 10 percentage points lower OS compared to before the wider release spec was approved by the FDA. So right now, like I said, it's still very early days. But based on what we are seeing so far, the OS is already coming down by roughly 5% last month. So that is very encouraging, and we're going to have to have a little bit longer follow-up data to provide you with better confidence about where exactly the OS will be. But so far, things are trending very positively. Steve?

Yes. So why don't I take the question around how we're positioning the assets specifically for the CARTITUDE-4 launch in second line and then I'll get into a little bit around later lines in bispecifics. So it is our #1 promotional focus to launch CARTITUDE-4 in the second line plus setting. There's clearly a clear differential there versus standard of care, and it's going to be basically a single-minded focus for my team. The other thing, though, in terms of the bispecific question because it's the appropriate one, in later lines of therapy, you heard Ying in the opening talk about [ speed ]. One of the things that is clearly apparent to us, and Ying mentioned, I think, a Janssen surprise number bispecific. What's happening there, and this is honestly something that we could foresee coming, is that one of the things that's a key focus for us, you heard Ying talking about it is not only generate more slots in the market but get faster into the market. And that's extremely important in later-line disease, where patients are progressing very rapidly. So that's where you saw the growth happening with the bispecifics as teclistamab hit the market and then was followed by [ Tal ]. One of the things I do want to point out to is something we talk to our partner quite a bit about is as now [ Tal ] has entered into the market in fifth line plus in the U.S., what you're starting to see is a shift in the dynamic in terms of what bispecific is used in front of one another. What we're seeing, and it makes sense is with [ Tal ] coming on board now, you're seeing a shift where [ Tal ] is actually being used first in front of [ Tec ]. And the reason for that, and this is going out in research, this is a very effective bridging strategy to also get the cilta-cel. So in the past, with [ Tal ] not being around, obviously, the market had no other option but to use teclistamab if they needed it to bring a patient. The challenge there is you're also targeting the same BCMA target. We know there's efficacy there. But by using [ Tau ] instead, you're obviously targeting a different target. So they want to preserve the BCMA target to get the CARVYKTI. So maybe it's a little bit more than you had asked for, but I did want to just point that out to you that even though in this case, [ Tau ] might be used with some of these quicker progressing patients, we anticipate them to get to sell at a later point in time. Lori?

I'll take the question on cash and the runway into 2026. As you guys know, we ended Q1 with $1.3 billion in cash. If we take a look over the next 2 to 3 years, that will be adequate cash to bridge us until we get to profitability from the BCMA program. But what I do want to say is that doesn't prohibit us from potentially looking at additional couple of raises. And that's really going to be dependent upon pipeline advancement. If there's something that we want to do on a business development perspective, and also if there's a certain level of working capital that we want to maintain, so yes, we do see us having adequate cash to get to profitability, but there are other factors that will come into play if we decide that we do on the raise of additional capital.

And our next question coming from the line of Justin Zelin with BTIG.

Steve, can you talk about some of the factors that are constraining outpatient administration and just the dynamic that centers decide on whether to offer outpatient administration?

Yes, sure. Thanks for that question. There's a number of different factors. The challenge in later-line disease is the fact that you're dealing with a very difficult-to-treat patient to begin with, right? So I think just from a patient perspective, it's a challenge. However, as we see in our trends, we're saying almost 30% of the time, our facilities are working quite effectively to treat those very difficult-to-treat patients. What you're going to see, though, in an earlier line more mobile patient, out of many of these patients are often working is it becomes much easier for the sites. And that's what we are projecting as well, right? So from a patient selection, these are more mobile patients and some of the patient-related issues that the sites were challenged with, will get a bit easier for them. So that's the first thing. And the other thing that we keep an eye on is their intent to move forward. The question was asked earlier around capacity, right? So the sites recognize this, and they also want to use outpatient CAR-T administration as a strategy to reduce the amount of resources, to treat the numbers of patients that are eligible for this therapy. So just from a resource perspective, sites also look at this as a very effective strategy to do so. So we're very excited about this, and you've heard me talk about a little bit on the back end and one of the questions around outpatient, you will see with this program a very different type of migration to full outpatient use. Our strategy, we've been very deliberate on how we went to market with this program. And I think I'm proud in terms of what's going on in the marketplace, in terms of introducing this into the hospitals, having the hospitals move into their outpatient clinics. And like I said, over time, our hospitals are looking at other third-party partners on how to take this even further out to the community, to ensure that these numbers that we talked about earlier 10,000 doses, et cetera, we can meet that potential. So it's a very exciting step.

Our next question coming from the line of Ash Verma with UBS.

So in terms of this like double the capacity by year end '24 versus '23, like what is the respective annualized dose goal for this, just to make sure we understand the apples-to-apple comparison to your year-end '25 goal of 10,000 doses capacity? And then second, I wanted to ask is PERSEUS quad regimen adoption in the first-line setting, eventually, do you think that these delays are -- shrinks the second-line pool of patient for CARVYKTI in the long run effectively? These patients can have several years of progression-free survival, which could arguably impact the downstream market opportunity for CARVYKTI.

Yes, Ash. So, let me help with your first question. So yes, by end of 2025, we have this goal of reaching 10,000 annualized dose capacity, right? But that is when we exit 2025. So I just want to remind you that when we go into 2025, right, we are not going to be at the 10,000 but then because of the introduction of additional sites into the commercial production mode, we'll be able to end the year in 2025 with that capacity and it doesn't stop there because we'll continue to maximize the capacity from each of those nodes I mentioned. So we believe that we'll be able to actually get to a much higher number than that 10,000 dose. Once we complete all the expansion from the additional nodes with the investment here. So it's going to be hard for me to give you any quantitative distribution among the 3 -- I mean, sorry, the 4 different nodes we mentioned. But I can tell you that Raritan, New Jersey remains our biggest facility and in the foreseeable future, Raritan will be the most productive site in terms of the total output, probably followed by our sites in Tech Lane, Belgium. So that is how we think about the total peak capacity and then how we would plan to distribute the capacity among the different nodes. With regarding your second question, how DRVD getting into the front line would potentially affect the second-line opportunity, I'll ask Steve to answer.

Yes. So thanks for the question. So we -- just so you know, we've been -- we've modeled certain assumptions in terms of how -- in terms of eligible patient populations progressing on the quad. So I guess from an eligible patient population, has been accounted for in our forecast. And that forecast then we've obviously communicated that with the manufacturing counterpart. So I guess from my perspective, again, we've accounted for that and we kind of added it in our supply plan.

And then, Ash, maybe I'll just add to Steve to answer that. Number one, you do have this 20%, 25% so-called patients with high-risk cytogenetics mutation, and those patients unfortunately do not respond well. So they'll relapse. And that is why we are releasing the data at ASCO for Cohort D. These patients do not achieve optimal or a complete response from DRVD. They need a second-line therapy, right? That is your early adoption market. And then obviously, we are conducting CARTITUDE-5 trial. If you look at clinicaltrials.gov disclosure, we expect the primary position in the year 2026. So hopefully, within a couple of years, we'll have first-line label. And then obviously, we are going to pivot from second line to frontline when that happens.

Our next question coming from the line of Sean McCutcheon with Raymond James.

Maybe to put a finer point on that MRD negativity at [ FAM ] outcome. What do you think are the implications here for, I guess, CARTITUDE-5, CARTITUDE-6 timelines? And do you suppose the official draft guidelines will come in, in time to be impactful there or a bit too late? And what's your view on what the details for that MRD negativity requirement could be in CARTITUDE-6 to 12-month sustained MRD-negative CR? Do you think that's likely to be the bar? Or do you think maybe an earlier landmark could be informed or acceptable? And then just as a follow-on to that, what do you think is the impact on the competitive dynamic for your earlier competitors if they're able to utilize MRD in -- across different lines of therapy?

So first of all, we have all along worked through the MRD endpoint, right? If you look at all the CAR-T program trials, everyone has MRD measurement in the trial built-in. Like I mentioned just on the call today, in CARTITUDE-6, we actually have already designed the trial with MRD negativity as a co-primary endpoint with all this in our mind. So if you look at ODAC recommendation, right, the ODAC voted to recommend a 12-month MRD negativity as a potential endpoint. Right now, we don't expect FDA to publish the official guidance documents, but we do plan to engage with the agency to talk about the endpoint for CARTITUDE-5 and 6. And for CARTITUDE-5, it probably would make a small difference because anyway, we expect the readout to be in 2026. Now for a CARTITUDE-6, it could make a big difference because if you look at our disclosure on clinicaltrials.gov, primary completion is estimated at 2033. Now if FDA does agree upon the 12-month MRD negativity in combination, for example, with CR or any other endpoint as a potential endpoint for accelerated approval. Then we can make that much, much faster in terms of the process, right? Because if we can complete all the enrollments for CARTITUDE-6 by end of next year, which is end of '25 then if the 12-month MRD negativity is amenable at the endpoint, that means potentially by end of 2026, we could have that kind of read out, right? So it does help a lot for frontline trials. Now if you look at competition, I mean, I think in second line based on our experience, it doesn't change too much, right? Because the median PFS for our control was about 12 months. So I wanted to complete the enrollment, the readout shouldn't take that much longer. So I don't think there's a huge difference if you look at the second line or third line. But for frontline, it does make a significant difference here. In terms of the bar, I don't think there is a quantitative bar here that the regulators have already determined at this point. But you can follow our disclosure from CARTITUDE-4, CARTITUDE-2, CARTITUDE-1 trial, right? In general, we achieved a very high MRD negativity rate. In fact, at ASH last year, we even published the data from CARTITUDE-1. If you look at patients who achieved 6, 12 months or even longer than 12 months MRD negativity in combination of CR, those patients tend to have a very good prognosis in terms of longer-term PFS and survival. So we do have data from the CARTITUDE program to show that if a patient can achieve complete response in combination with some sort of longer-term MRD negativity, that is a very good predictive marker for a long-term outcome here.

And our next question coming from the line of Mitchell Kapoor with H.C. Wainwright.

I have two, the first one I wanted to ask a bit on the second-line launch and the payer discussions. Can you just talk about kind of the color of payer discussions in the second-line population? And how did those second-line reimbursement discussions compare to those that you have had previously for later-line reimbursement discussions? And then the second question is on COGS. Could you just talk about the trend in COGS, and any impacting factors or levers that could influence the COGS in the future?

It's Steve. Why don't I take the first question around payer and contrast CARTITUDE-4 versus 1? So it all comes down with these payer conversations around the value proposition associated with treatment-free interval, obviously the CARTITUDE-4 data is significant in terms of our PFS improvement. Payers -- the net of this in an earlier-line setting, payers love a product like cilta-cel, in terms of the benefit that we are able to give not only from a financial perspective, but also from a patient perspective in terms of the patient-related metrics. So all systems are a go in terms of early-line approvals in terms of -- from a reimbursement perspective, we have had no issues at all. As a matter of fact, the payers, the privates in particular, are one of our biggest advocates out there.

I'll take the COGS actually. So as you move into the second line and the payer structure changes, to your question, where you're going to see that is in the gross-to-net adjustment. On the COGS line, the reason that you see variability, actually has to do with the manufacturing capacity investments that we're making. So you will continue to see the COGS variability as we start to bring these in, finalize the capital investments and bring these nodes online in '24 and actually '25. So you continue to see that noise, it's the revenue line and the gross to net where you'll see the impact for the second-line launch.

So if I come back to that first point because it just occurred to me one more thing around the payers piece of this, it ties back into the issue around outpatient administration as well. I mean other than the treatment-free interval component of this, as you can imagine, private insurers love the fact of a now a CAR-T therapy that can be given by hospitals very safely in the outpatient setting just purely from a cost reduction as opposed to admitting these patients, keeping them in some time for weeks to reduce costs and continue to maintain these patients safely and then also benefit from that long-term, treatment-free interval is a very compelling story to private insurers.

Our next question coming from the line of Rick Bienkowski with Cantor Fitzgerald.

For the CARVYKTI launch in Europe, could you comment on the number of certified treatment centers that are open in Germany and Austria? And how many are expected to be certified by the end of the year? And as a second question, Ying, I was hoping you could expand on the prepared comments around reducing the CARVYKTI van-to-van time. Could you talk about the work that's being done here and if there are any internal targets for how much this could be improved?

Why don't I take the first question around Germany around sites? Unfortunately, I cannot get into the details around sites and the rollout plan in Germany. I know it's -- I can tell you this. It's very robust. And I could also tell you the fact that in any country, the site certification process is often somewhat lengthy. So I'm bringing that up because I know our partners are working very hard to bring more and more sites on board, but I can't unfortunately get into specifics around numbers of sites.

Okay. So on the question about van-to-van, I can tell you that our goal is to get to a median of less than 4 weeks by the end of this year. And also, we have a new metric to measure, which is P90. That means 90% of all the sellback we shipped out will fall into the -- what we call apheresis to receipt to less than 5 weeks. So that is our goal by end of this year. That means average what we saw shorter and then pretty much all the patients will be able to receive that within 5 weeks. That is our goal here.

I'm showing no further questions at this time. Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation, and you may now disconnect.