Legend Biotech leads cell therapy's march forward

Following the latest FDA meeting last Friday, Legend Biotech has emerged as the "first and only" cell therapy on the verge of becoming the standard treatment for Multiple Myeloma, a prevalent and lethal blood cancer. 

Bottom line

Legend Biotech emerges as THE cell therapy leader in Multiple Myeloma, with its drug Carvykti justifying on its own the company's current valuation.

The news reinforces our long-held strong conviction in the company and, more broadly, in the cell therapy sector's potential. 

What happened

The FDA improved Legend Biotech's cell therapy existing approval

The FDA has expanded the label for Johnson & Johnson and Legend Biotech 's Carvykti (ciltacabtagene autoleucel) to second-line treatment. 

The decision, which follows a recent positive vote from an FDA advisory committee, allows patients with Multiple Myeloma (MM) to receive the cell therapy after just one prior line of treatment, much sooner in the treatment paradigm compared to its initial approval back in 2022 when it was cleared only for fifth-line use.

Impact on our Investment Case

Multiple Myeloma: a disease with the worst combination of being frequent and deadly 

In the United States, the average lifetime risk of getting multiple myeloma is about 1 in 103 for men and about 1 in 131 for women, a fact that is deeply concerning.

More alarming is that multiple myeloma has the lowest 5-year survival rate at only 58% among the three major blood cancer types: Leukemia, Lymphoma, and Myeloma.

The challenge of tackling a disease characterized by these stark realities is what can elevate a medication to megablockbuster status. Since 2008, Revlimid, the go-to treatment for MM, has amassed lifetime sales exceeding $104bn.

Legend is a beacon of hope and a long-term conviction of atonra

Despite the success of Revlimid, the existence of more than five lines of treatment for multiple myeloma indicates that it is hardly a definitive solution, as most patients eventually relapse. 

We started a position in Legend Biotech back in September 2021 just before A.S.H., the key annual blood cancer conference. Bristol-Myers Squibb/2seventy Bio's Abecma cell therapy results in MM were encouraging for the overall approach, and Legend is an undiscussed leader in the cell therapy technology.

During that same ASH conference, Legend published astounding results: 83% of very sick cancer patients, relapsing or becoming resistant after at least three prior treatments, showed a complete response, meaning that no tumor cells were found in the blood after a two-year follow-up - this data release granted them in 2022 an FDA approval as a 5th line treatment.

Fast forward to 2024: last Friday, results from the Phase III CARTITUDE-4 study supported the supplemental filing to go to earlier lines of treatment and win the approval. Indeed, the study, which evaluated Carvykti versus standard regimens in adults with relapsed and Revlimid-refractory MM who had received one to three prior lines of therapy, showed that Carvykti reduced the risk of disease progression or death by 59% compared to standard regimens. A very impressive feat.

Beating its rival Abecma and well ahead of the competition in cell therapy

Bristol Myers Squibb's Abecma cell therapy received its initial FDA approval in 2021 as a fifth-line treatment, beating Legend Biotech by a year in the race to the market. However, even though last Friday's FDA reviewed both treatments for earlier patient use, Abecma was only able to secure approval as a third-line treatment, while Carvykti secured second-line treatment approval. This outcome grants Legend Biotech the chance to cater to 2-3x more patients, with the company's ability to supply the treatment now becoming its most significant challenge. 

With its primary market competitor now behind, competition risk shifts to pre-revenue companies. Among these, Arcellx, operating in the same cell therapy space, is the leading candidate. Despite having only a third of Legend Biotech's market capitalization, Arcellx has shown promising early results that are hard to differentiate from those of Legend, and its production process is theoretically simpler. Supported by Gilead/Kite, which has experience in cell therapy though not specifically for Multiple Myeloma, Arcellx's main hurdle is its timeline; reaching the market could take 3 to 5 years. Even with Gilead/Kite's expertise potentially shortening production scale-up to 2-3 years, Arcellx will still need to compete primarily on price unless its Phase 3 trials demonstrate unexpected superiority.

The black-box early death concern is overgrown

Like Abecma, Carvykti's has been given a warning label, detailing an imbalance in early deaths in its pivotal study. Within the first 10 months of randomization of CARTITUDE-4, 14% of patients in the Carvykti arm experienced early deaths, compared to 12% for controls. This has been a cause for concern among investors.

Nevertheless, among the 29 early deaths with Carvykti, 10 occurred before infusion, all due to disease progression, while 19 occurred after infusion, with three due to disease progression and 16 due to adverse events, mainly infections. On the basis of such details and upon closer look, the Advisory Committee for the FDA unanimously voted in favor of moving the treatment to earlier lines, implicitly meaning that the therapy risk is not as significant.

As a comparaison, in a real-world study of more than 7'000 cancer patients starting Immune checkpoint inhibitor therapy, a staple of immunotherapy to which cell therapy is becoming an alternative, 15% had an early death (defined as dying within 60 days of treatment start), showing that overall, Carvykti's safety is good compared to that of other advanced anti-cancer therapies.

Far from its peak sales

So far, Legend Biotech has treated only 2'500 patients. There are 39'000 newly diagnosed patients every year, meaning Legend is currently capturing only a fraction of the market. Actually, its biggest challenge is not finding patients but manufacturing the treatment.

Tyrone Brewer, president of US hematology at J&J Innovative Medicine, said the company has been ramping up efforts to boost supplies. "We more than doubled the manufacturing of Carvykti in 2023, we are striving to double again in 2024, and we will continue to invest in our capacity."

The aim is 10'000 doses per year by 2025, which, even at a 50% discount for a wholesale price, would mean >$2bn in revenues, well ahead of any projection among Wall Street analysts. A clear opportunity in plain sight.

In addition, with the second-line nod in place, attention now turns to the first-line setting. The CARTITUDE-5 trial is testing Carvykti in patients with newly diagnosed multiple myeloma. A win here would more than double the addressable market and further emphasize the supply constraint, rather than any risk on demand. 

Our Takeaway

Legend Biotech is a cell therapy powerhouse: even discounting all the pipeline, Carvykti alone justifies the company's current valuation.

Legend Biotech's results and the FDA's favorable stance reinforce our conviction on the stock and we maintain an overweight stance towards the cell therapy sector.

Companies mentioned in this article

2seventy Bio (TSVT); Arcellx (ACLX); Bristol-Myers Squibb (BMY); Johnson & Johnson (JNJ); Legend Biotech (LEGN)



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