argenx SE (ARGX) Q4 2020 Earnings Call Transcript

Image source: The Motley Fool.

argenx SE (ARGX -1.21%)
Q4 2020 Earnings Call
Mar 4, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning. My name is Andrew, and I will be your conference operator today. Welcome to the argenx Full Year and Fourth Quarter 2020 Financial Results Conference Call. At this time, I would like to welcome everyone to the call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.

I'd like to introduce Beth DelGiacco, Vice President of Corporate Communications and Investor Relations. You may begin your conference.

Beth DelGiacco -- Vice President of Investor Relations

Thank you. A press release was issued earlier today with our full-year 2020 financial results and the business update. This can be found on our website along with the presentation for today's webcast.

Before we begin, I'd like to remind you on Slide 2 that forward-looking statements may be presented during this call. These may include statements about our future expectations, clinical developments, regulatory timelines, the potential success of our product candidates, financial projections and upcoming milestones. Actual results may differ materially from those indicated by these statements. argenx is not under any obligation to update statements regarding the future, or to conform those statements in relation to actual results, unless required by law.

I'm joined on the call today by Tim Van Hauwermeiren, Chief Executive Officer; Eric Castaldi, Chief Financial Officer; and Keith Woods, Chief Operating Officer.

I will now turn the call over to Tim.

Tim Van Hauwermeiren -- Chief Executive Officer

Thank you, Beth, and good morning to everyone on the call. We appreciate your joining. I'm proud of the exceptional progress we made in 2020 despite many unexpected global challenges. We believe we are closer than ever to reaching patients, and strongly positioned to create long-term sustainable value for our shareholders. I'd like to briefly highlights some recent milestones, and then provide updates on our deep and differentiated pipeline.

First, as we announced earlier this week, we are pleased that our BLA was accepted for review by the FDA. This decision is an achievement for us as a company, but more importantly, we are thinking about what this means for our patients. We see the very real unmet needs of people living with MG. We hear about it from patients directly, and from their supporters. And we are hopeful that efgartigimod may provide a new treatment option for this community. The acceptance of our BLA serves as an another gating event on our path to our first commercial launch, and we remain sharply focused on execution at every level of the organization. Between now and the potential approval of efgartigimod, we will be working in collaboration with the FDA to answer the questions and coordinate site inspections. I can tell you that we are planning to be ready well ahead of our December PDUFA date because we know that patients are waiting.

Still, these are exceptional times with much uncertainty ahead. We are proactively planning for a launch in various scenarios, fully virtual for one or now that we have more time for the COVID vaccine program to be implemented only partially virtual. We continue to make progress in engaging with a large proportion of our target stakeholders in a digital environment, which Keith will discuss later in the call. With that said, we would welcome the opportunity for our field force to hold meetings in person. Regardless of scenario, we plan to use every day we have until launch to further implement this important campaigns.

The US remains our priority for our first launch and our largest market, but we are also well under way with preparations in Japan, where we expect to file our marketing application in the first half of 2021. This sets us up for a potential additional approval shortly after the US. In the European Union, we are seeking scientific advice in the first half of this year with plans to file our marketing authorization in the second half. Our European General Manager is very experienced in market access, and is working on a strategic reimbursement plan in the highest priority countries.

Secondly, we recently announced a GO decision to continue enrollment in registrational ADHERE trial, evaluating subcu efgartigimod in CIDP. With this update, efgartigimod now has four out of four successful proof-of-concept trials under its belt. This further emphasizes the breadth and potential before us with efgartigimod, and validates our careful indication selection process and innovative trial design. We will continue to leverage the same comprehensive strategy with future indications, which we believe will strengthen our leadership in the FcRn class overall.

Third, argenx has a history of raising capital on the back of strong data and the recent financing was no different. The $1.1 billion in gross proceeds strongly position us for the launch, and will facilitate the expansion of our diversified pipeline, and the growth of our team. On that note, I would like to take this opportunity to thank and recognize the outstanding argenx team. We have grown to over 450 colleagues over the past year, and plan to increase to approximately 750 in 2021 across our four offices. In particular, I would like to thank our Chief Financial Officer, Eric Castaldi, who has been with argenx since 2014. As stated in the press release from this morning, we have started a planned transition process to recruit a US-based successor for Eric. This is part of our evolution to a commercial-stage company, and will all happen in close coordination with Eric, our executive leadership team, and the argenx Board. We are very grateful for Eric's long tenure with the Company and for his invaluable contributions.

Moving on to the pipeline updates, starting with efgartigimod. We continue to believe that we have a first-in-class and potentially best-in-class FcRn antagonist. The structure and mechanism of action of efgartigimod are depicted on Slide number 4, and you can see that efgartigimod is unique due to our close collaboration with Dr. Sally Ward. Efgartigimod is the only IgG1 smart fragment, which binds to FcRn in a way that mimics the natural ligands and preserves the pH-dependent binding of endogenous IgG to FcRn. In our studies, we have not observed an effect on other serum proteins like IgM, IgA or a reduction of human serum albumin. To-date, over 350 subjects have been dosed with efgartigimod, and we continue to observe a favorable tolerability profile, which has been observed to be consistent across indications.

On Slide number 6, we also see a consistent PD effect across trials that has translated into promising clinical benefits. The Phase 3 ADAPT trial demonstrated a response rate of almost 80% across two treatment cycles, a fast onset of action, depth of response, and a potential for individualized dosing. The consistent PD effect also enabled our ongoing subcu bridging strategy for MG as seen on Slide number 7. The study is a registrational non-inferiority trial, which compares the pharmacodynamic effect of 1,000-milligram subcu efgartigimod with 10-milligram per kilogram IV efgartigimod, and is expected to enroll approximately 50 patients. The primary endpoint will be taken at day 29, and thereafter, we will continue to build a safety database to support the filing of the subcu BLA.

Slide 8, CIDP is the second efgartigimod indication within our neuromuscular franchise, and the fourth established proof-of-concept indication. I covered the GO decision earlier in the call, so I will just mention a few key points. We believe we designed a very innovative trial with ADHERE, using screening criteria to identify patients with an active confirm diagnosis of CIDP. We also included a planned interim analysis. Before committing valuable time and resources to running a registrational program, we wanted to be confident of the role of the autoantibody in the disease pathophysiology. We set the bar high, using precedent trials to define our thresholds and we met the criteria. We can now move forward with confidence, as we open new trial sites for enrollment in this registrational trial. CIDP is an indication where there has been a little innovation, and we are advancing the program as quickly as possible.

Next, we are enrolling patients in our ITP trials, as well as our PV trial, which can be seen on Slides 9 and 10. For ITP, we have brought forward our subcu strategy based on feedback from patients and physicians, and are running two concurrent ADVANCE trials, one with IV, and one with subcu. We expect these trials will support registration of both formulations. In pemphigus, we are evaluating subcu efgartigimod in the ADDRESS registrational trial, and as part of this, are specifically evaluating the ability to taper patients off steroids. We listen to patients describe the ongoing burden of current treatments, and incorporated this evaluation into our trial design. As you can see, we take a forward-thinking approach when designing our trials based on feedback from physicians and patients. We will continue to infuse that feedback into future trial designs, so that we are optimally positioning efgartigimod within current treatment paradigms. This is true for our fifth and sixth indications, which we will disclose closer to the start of clinical trials.

Turning to Slide 11. We believe that there is a broad landscape of IgG-mediated severe autoimmune diseases, for which efgartigimod may provide clinical benefit to patients. We will continue to rollout indications ourselves, and will also expand and accelerate the pace of efgartigimod development globally through our strategic agreement with Zai Lab. Our MG launch in the US is just the beginning. Beyond efgartigimod we look forward to sharing the first set of clinical data from ARGX-117, our second pipeline candidate with broad potential in severe autoimmunity. We remain on track to provide data mid-year from a Phase 1 healthy volunteer study, from both IV and subcu formulations of ARGX-117. We expect to provide information on safety and tolerability, PK and PD effects, bioavailability and selected Phase 2 dose and dosing regimen based on free C2 levels.

Slide 12, the first indication we have highlighted for ARGX-117 is multifocal motor neuropathy or MMN, which fits squarely into our neuromuscular franchise. You can see our neuromuscular focus taking shape with MG, CIDP, our fifth efgartigimod indication, ARGX-117 and ARGX-119. We know that the investments we are making now in both the neuromuscular and other franchises will benefit us over time as the franchises grow.

Slide 13, quickly on cusatuzumab, for which we have a strategic collaboration with Janssen. We have shifted our priority for this program to the ELEVATE trial, evaluating a triple combination of cusatuzumab, venetoclax, and azacitidine. This was based on, one, interim Phase 2 data from the CULMINATE trial, and two, the shifting treatment landscape for newly diagnosed elderly AML patients where venetoclax has emerged as standard of care. In evaluating ELEVATE data, we will look at overall response rate, durability of response, and safety and tolerability to consider where cusatuzumab could address unmet needs in this indication. With ELEVATE and the future of the program overall, we will continue to make database decisions on the path forward for cusatuzumab, as we do with all our clinical trials.

Slide 14, we will not spend time on our broader pipeline today, but we are committed to providing updates as necessary. Investing in our immunology innovation program continues to be a core part of our pipeline strategy. As we look toward commercialization, we seek to create optionality within our pipeline whether through wholly owned candidates, partnered programs or asset-centric spinoff companies. We believe this is an important part of our growth story, as we transition into an integrated immunology organization.

I will now turn the call over to Eric for our financial results.

Eric Castaldi -- Chief Financial Officer

Thank you, Tim. On Slide 15, you will find our full-year 2020 operating results, which are detailed in today's press release and regulatory filings.

Operating income decreased by EUR28.1 million for the year ended December 31, 2020 to EUR54.5 million, compared to EUR82.6 million for the year and the December 31, 2019. The decrease was due to the milestone payments we achieved in 2019 for the start of the first-in-human clinical trial under our AbbVie collaboration, partly offset by revenue recognition of the transaction price related to the Janssen collaboration, and the increase in other income.

R&D expenses increased by EUR127.8 million for the year ended December 31, 2020 to EUR325.5 million, compared to EUR197.7 million for the year ended December 31, 2019. The increase in 2020 resulted from higher external research and development expenses, primarily related to our efgartigimod, cusatuzumab and other clinical and pre-clinical programs. Furthermore, the personnel expenses increased due to the increased headcount as planned.

SG&A expenses totaled EUR149.4 million for the year ended December 31, 2020, compared to EUR64.6 million for the year ended December 31, 2019. The increase primarily resulted from higher personnel expenses and consulting fees, related to the preparation of a possible future commercialization of efgartigimod.

For the year ended December 31, 2020, financial expenses amounted to EUR1.4 million, compared to a financial income of EUR14.3 million for the year ended December 31, 2019. Financial expenses correspond mainly to the decrease in net asset value of money market funds, following the impact of the COVID-19 outbreak on the financial markets.

Based on our current operating plans, we expect our cash burn rate to increase significantly in 2021, approximately doubling compared to 2020. This will support our transition to an integrated, immunology company including the build out of global infrastructure and drug product inventory ahead of our first expected commercial launch, the advancement of our clinical stage pipeline and our continued investment in the Immunology Innovation Program.

I will now turn the call over to Keith to discuss our commercial preparations in more detail. Keith?

Keith Woods -- Chief Operating Officer

Thank you, Eric. Slide 16, I would first like to take a moment to highlight an important event for the MG community that occurred over this past weekend, Rare Disease Day. Its purpose is to raise awareness of the challenges that the rare disease community faces each day and to demonstrate our solidarity alongside them, including people living with MG. We at argenx are united by our common purpose to pursue a better tomorrow alongside the MG community. We know that the best way we can do this is by listening and learning. We hear directly about the significant unmet need that still exist. The symptoms, treatment burden, strain on relationships and mental health, and struggles these patient face just to manage day-to-day activities. These stories motivate us every day in the work that we do.

Slide 17. With this in mind, we are very excited to hear from the FDA this week that our BLA has been accepted for review. We are now working toward a PDUFA date of December 17, 2021, and I can assure you that we are working hard to be ready for a potential commercial launch well ahead of that time. We have been building out our commercial capabilities and personnel for almost two years, and we know what we have to do to prepare in these next several months.

We also announced the opening of our pre-approval access program this week. We've been getting requests for efgartigimod from physicians and we want to accommodate them where possible as part of our commitment to MG patients and their supporters. We also want to honor our commitment for the patients that participated in our global registration trial to keep them on therapy as long as possible. More than 75% of patients who entered our open label extension are still on study, some for over two years now.

Slide 18. With the acceptance of our BLA, the clock has started and we are accelerating preparation across multiple fronts, building out our field team, including the sales force engaging with patients, physicians, and payers, and ensuring appropriate commercial drug supply at the time of launch.

Let's start with our team. We now have over 100 colleagues working out of the Boston office floor in the US field, including medical research liaisons, thought leader liaisons and reimbursement account directors. We have launched a hiring process of our sales force with the plan of being fully staffed at least four months prior to the anticipated launch. Based on the interest and experience level we are seeing from candidates, we are confident we will have the right team in place.

Moving to our patients. We launched several patient-centric efforts last year, including MG United, which is our digital platform to engage with the MG community and provide clear, credible information. We now have over 20,000 patients and caregivers, who have opted to receive information from us on MG. We also launched a real-world evidence study, MyRealWorld MG, where we have over 1,000 participants enrolled. We collaborated with global patient advocacy groups and launching this study with the goal to better quantify the real-world burden of MG, including hospital visits, loss of productivity, direct and indirect medical costs, treatment side effects and psychological implications.

Moving to our physician, education and engagement efforts, which we are rolling out through disease state awareness campaigns and CME programs. This will be critical to our launch success, because FcRn as a target in MG is not yet well understood, specifically details on our multi-channel approach include. The launch of our disease state awareness campaign called, gMG cycle. The purpose of this campaign is to educate healthcare professionals on the role of the antibody in MG, and on FcRn as an integral pathway to disease. We have had significant engagement from this campaign, reaching 62% of the target physician audience to-date.

We are also planning peer-to-peer marketing programs to start once we launch. We have been learning from our peers who have had precedent launches in a COVID environment, and they emphasize the growing importance of this channel. Physicians are faced with new challenges treating patients virtually and because of this there is an increasing reliance on input from peers and neurology thought leaders for new treatment considerations.

In planning for our various launch scenarios, we are also using market research to learn more about physician preferences and to tailor our engagement approach. With our December PDUFA date, we have -- we may have the option to offer both virtual and in-person engagement with healthcare professionals, because even in a post-COVID environment, we know that not one size fits all. Efgartigimod being a first-in-class FcRn antagonist, which means we have the opportunity to be a thought leader to the healthcare community on this new modality. But it also means, we may face a more gradual uptake as our education efforts take effect. In terms of payers, we continue to have valuable discussions with both national and regional payers. We know that it launch, we will not have a permanent J Code and that payers will not have a dedicated policy in place for efgartigimod. We are working on building out the patient support system to help patients and providers navigate the complexities of the reimbursement environment. We still know that early in the launch reimbursement challenges will be a potential hurdle to adoption.

We have a strong manufacturing strategy in place with our best-in-class partner Lonza. We currently have facilities in the UK and Singapore, and have plans to open a third site in the future to accommodate growth from our planned expansion into new territories and indications. In addition, we have partnered with Vetter for fill and finish, and Cardinal Health for third-party logistics. We recognized ahead of the global pandemic that ramping up supply chain efforts would be prudent given the broad potential of efgartigimod and our plan to open a pre-approval access program. We are glad that we did so, particularly as we've seen continued pressure on the global supply chain in supporting the vaccination campaign. We are in full preparation mode for our launch, and we plan to use everyday that we have to further engage with our stakeholders and build out our inventory.

On Slide 19, before I hand the call back to Tim, I would like to reemphasize the point that we made earlier on the call. MG is just the beginning. We are building a solid foundation, which we can leverage across indications and molecules in the future. This will allow us to benefit from certain economies of scale as the resources we are investing in today and relationships we are building now, will be advantageous for the rest of our pipeline and in the long-term.

With that, I will now turn the call back over to Tim. Tim?

Tim Van Hauwermeiren -- Chief Executive Officer

Thanks, Keith. Turning to Slide 20. In summary, 2020 has been an outstanding year for argenx, and we look forward to building on our accomplishments in 2021. We are proud of what we have achieved, including the acceptance of our BLA for efgartigimod in MG, demonstrated proof-of-concept in four indications, and an ambitious global development plan for efgartigimod, a second autoimmune assets from which we will show the first set of clinical data this year, continued expansion of our differentiated pipeline through our IIP, and our team, which continues to grow across our four global offices to support our success. 2021 stands to be another pivotal year for the Company, and we are strongly positioned to create long-term shareholder value.

As we continue to grow, we aim to stay true to what makes us argenx. We are firmly rooted in groundbreaking immunology research, which enables us to innovate. We are committed to growing through co-creation, because diverse opinions and experience challenges to do better, and our patients humblest and out of the core of all we do.

With that, I would like now to hand back the call to the operator to begin the Q&A.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Yaron Werber of Cowen. Please go ahead.

Brendan Smith -- Cowen -- Analyst

Hi, guys. This is Brendan on for Yaron. Thanks very much for taking the question, and congrats again on a great quarter, and all the great progress. Just a couple of quick ones from us. I guess, first on ITP studies ongoing here, can you just give us kind of a quick update on your thinking for the expected treatment regimen? Obviously, the two Phase 3 support registration from both. Are you kind of thinking of induction dosing with IV, and then transitioning to subcu? And do you think any additional studies would be required for that? And then I think just quickly on AML, can you give us a sense of where you're thinking the bar is for improvement with the triple combo treatment over the double that would kind of encourage you to expand development? Thanks very much.

Tim Van Hauwermeiren -- Chief Executive Officer

Thank you, Brendan. Thank you for joining us today. I'm going to hand over question number one to my colleague, Keith. Just for clarification, we streamlined the Phase 3 global registration campaign to now run a IV only study next to subcu only study. Remember, this is a streamlining, which we did last year in full COVID time. So these two studies together, I think, have the right to qualify for registration. Keith, can I invite you to comment on our views on the treatment regimen, which we have in mind please?

Keith Woods -- Chief Operating Officer

Sure. Happy to do so, Tim. The subcu study that we're running in ITP is utilizing the Halozyme enabled subcu. So it is the same dose that we use in the CIDP trial. And remember that 1,000-milligram flat dose is non-inferior to 10-milligram per kilogram IV. So there is no induction dose needed. The one trial is pure IV with 10-milligram per kilogram, and the other one is subcu with 1,000-milligram flat dose. So we expect both of them to be able to stand-alone and be registration enabling.

Tim Van Hauwermeiren -- Chief Executive Officer

Thank you, Keith. And then on the AML question, I think there's a firm new bar set by the BLA study. I think the BLA study tested the combination of venetoclax and azacitidine, and what we saw was approximately 37% CR rates, a 66.7% cumulative CR rates, and an overall survival going up to 15 months. So we believe this is the new standard of care in the newly diagnosed, elderly AML population, which is unfit for intensive chemotherapy and bone marrow transplants. So this is the path to beat, and of course the other dimension, which is important in this study, Brendan, is safety, can we safely add cusatuzumab on top of the combination of two drugs, which of course commit some significant safety burden for the patient. Thank you.

Brendan Smith -- Cowen -- Analyst

Great. Thank you.

Operator

The next question comes from David Nierengarten of Wedbush. Please go ahead.

David Nierengarten -- Wedbush -- Analyst

Hi. Thanks for taking my question. I had a question now that you have additional experience -- growing experience with patients on the open-label extension, could you describe the number of treatment cycles that you're beginning to see in some of the patients who are -- who have been treated the longest? Thank you.

Tim Van Hauwermeiren -- Chief Executive Officer

David, you're right. I mean, as Keith alluded to more than 75% of the patients are still in the open-label extension study, which I think is very exciting and we start to see the shaping of what is likely going to be the real-world distribution of the dosing cadence. So in the first portion of the open-label extension, we had patients which still followed the mandatory cycles of the ADAPT study with the ability to taper background medication. And in the second portion that we alluded to [Indecipherable] the real-world utilization of the product. It's too early to comment on what we see, but we are planning on the regular updates at clinical conferences of the open-label extension study. So stay tuned. Information is on its way this year.

David Nierengarten -- Wedbush -- Analyst

Okay, thank you. Congrats, Eric.

Eric Castaldi -- Chief Financial Officer

Thank you, David.

Operator

The next question comes from Matthew Harrison of Morgan Stanley. Please go ahead.

Max Skor -- Morgan Stanley -- Analyst

Hi. This is Max Skor on for Matthew. Thank you for taking our questions. We were wondering if the FDA provided any rationale for the standard review in their letter? And do you expect the agency to hold an advisory committee meeting? Thank you.

Tim Van Hauwermeiren -- Chief Executive Officer

Hey, Max. Good to hear from you. Thanks for joining us today. So we can only guess what the motivation was of the FDA. However, if you look at the overall landscape, and I think it's fair to say that this is a reasonable outcome of an FDA, which is of course heavily burdened and focused on the COVID pandemic. And I think in the letter the FDA states that they are currently not planning on a panel, which we think is encouraging news. Of course, the FDA will always reserve the right to organize a panel, if and when they deem that necessary during the review of the file. So, so far so good but we stay cautiously optimistic. Thank you.

Max Skor -- Morgan Stanley -- Analyst

Thank you.

Operator

The next question comes from Tazeen Ahmad of Bank of America. Please go ahead.

Tazeen Ahmad -- Bank of America -- Analyst

Hi, good morning. Thanks for taking my question. Tim, just wanted to ask you just given on the back of your announcement that you will be moving forward with CIDP, we saw that a competitor, UCB decided to discontinue their program. So obviously it's good in the sense that there is less competition imminently. Are there any other obvious conclusions to come to with their decision to discontinue their program in terms of superior profile of your products perhaps to theirs? Thanks.

Tim Van Hauwermeiren -- Chief Executive Officer

Thank you, Tazeen. Thanks for joining us today. Look I believe that in their press release or earnings call, UCB alluded to the fact that they would disclose the data of the Phase 2 CIDP trial later this year. So that's something which we will be eagerly waiting. You know that we like to study data and the database decisions. Now, first of all, I think both molecules are of course fundamentally different. I think there is a distinctly different design -- molecular design between efgartigimod and the full size high affinity monoclonal antibody. But we also believe that our innovative study design really contributed to a strong positive GO decision in our case. So we're confident in our data. We're confident in the path forward, and of course, we're going to study the data if and when they become available.

Tazeen Ahmad -- Bank of America -- Analyst

Okay. Thank you.

Tim Van Hauwermeiren -- Chief Executive Officer

Thank you.

Operator

The next question comes from Danielle Brill of Raymond James. Please go ahead.

Danielle Brill -- Raymond James -- Analyst

Hi, guys. Good morning. Thanks so much for the question. Can you just remind us what is required in terms of data for subcu filing, beyond showing PK/PD equivalents, what types of data gating any long-term safety requirements or that sort of thing? Thank you.

Tim Van Hauwermeiren -- Chief Executive Officer

Hi, Danielle. Thanks for joining us today. I think you're spot on. As you can see from the disclosure today, primary endpoint is taken on day 29 and that constitutes a percentage of IgG reduction at that point in time. So that's relatively straight forward. The gating data, of course, from a timing point of view will be the safety data. What we have been saying publicly there is, as you know, we were quite pleased with the outcome with the expectations of the FDA on the size and magnitude of the safety database, which we have not given any further detail there. So stay tuned, but that this maybe news we will disclose later.

Danielle Brill -- Raymond James -- Analyst

Okay. Got it. Thank you.

Tim Van Hauwermeiren -- Chief Executive Officer

Thank you.

Operator

The next question comes from Graig Suvannavejh of Goldman Sachs. Please go ahead.

Graig Suvannavejh -- Goldman Sachs -- Analyst

Good morning, good afternoon. Thanks for taking my questions. If I could maybe squeeze in two. The first -- maybe this is for Keith. Keith, I think on the last call you seem to be walking down launch expectations, and I just wanted to get a sense of where you are in the process of building awareness for efgartigimod. You clearly walked through the different initiatives that you've got going, but maybe to use a baseball analogy like what inning do you think that argenx is in, in terms of building up awareness for not only the FcRn mechanism of action, but also for efgartigimod itself. And then maybe a second question is maybe for Eric. If I could ask a financial question, but given the doubling of cash burn expected this year, could you perhaps provide some comments around -- is that equally distributed between R&D and SG&A that more heavily weighted toward R&D given that you've got so many late-stage trials that are ongoing? And in terms of capex, what should the expectation be for 2021 relative to 2020? Thanks.

Keith Woods -- Chief Operating Officer

Great, Greg. Thank you for the question. And what -- I want you to first know that my overall view on efgartigimod in treating MG patients has not wavered. We believe that of the 65,000 patients in the US, 20,000 of them will be appropriate patients for efgartigimod. But what we do believe and I've said is a gradual steady launch, and the reason being is this is a first-in-class mechanism of action. And this is a mechanism of action that really has been -- hasn't been taught in medical school, and so many of the physicians that treat MG were not previously familiar with FcRn. So we've got a great deal of healthcare professional education to do. I think that we also look at this of happening during COVID times, where a lot of the education was taking place virtually. I'm actually quite encouraged with our PDUFA date that we may have the opportunity to launch as I said in the prepared statements not only virtually, but also in-person. So I think that benefits our ability to be able to get this message across. It's also going to benefit patients being able to see their physician in-person. Because as we spoke the last time, so many of these calls are taking place -- so many of these appointments are taking place by a telemedicine with physicians. So look, remember at the beginning, we will not have a J Code, there will not be policies in place at most of the payers, and so this will take a little bit of time. As far as what inning, for your baseball analogy, all I can say is that, I think, we feel pretty fortunate that J Code is no longer something that you apply for once a year, now you can on a quarterly basis. And so, I'd expect this to be really hitting our groove here sometime in the -- toward the -- that six-month to seven-month when we get that J Code. Eric?

Eric Castaldi -- Chief Financial Officer

Yes. So with regard to your question on the distribution between R&D and SG&A and commercial expenses clearly in 2021 you will continue to see a steady [Phonetic] increase in R&D expenses. We're going to have seven Phase 3 clinical trials ongoing. So clearly, I mean, this is going to be impacting directly the operational expenses. And obviously, with the preparation of the launch, commercial expenses also are going to increase significantly. What we gave as an indication is that the burn rate for 2021 is going to double compared to last year. So last year we had a burn rate of about $400 million. So you could expect something around $800 million for this year. In terms of capital expenditure, this is not going to be important. I mean, we don't plan to invest a lot in capex. What we're going to have obviously sitting on the balance sheet is inventory for efgartigimod. Already at the end of 2020, we have an amount of $20 million, and this is going to increase significantly as we prepare the launch of efgartigimod.

Graig Suvannavejh -- Goldman Sachs -- Analyst

Okay. Thank you very much.

Operator

The next question comes from Yatin Suneja of Guggenheim. Please go ahead.

Eddie Hickman -- Guggenheim -- Analyst

Hey, guys. This is Eddie on for Yatin. Thanks for taking my question, and congrats on the year. Can you give us your thoughts on the lipid changes that we're seeing with one of your competitors? And if it's possible, if the FDA might require some sort of monitoring for that class? And did you provide any data to them to, like convince them that you're confident that you won't need any monitoring? And then just quickly for the pre-approval access program that you just initiated. Can you give us a sense of how many patients you expect to be on that by the time you launch commercially? Thanks.

Tim Van Hauwermeiren -- Chief Executive Officer

Thank you for the questions. I'm going to give the question two to my colleague, Keith. But let me start with the first one. Let me repeat that not all FcRn antagonists are made equal. I think they have distinctly different molecular designs. The phase of the antibody FcRn complex is fundamentally different as we have published. And you also see an emerging differentiated clinical profile between the molecules. So in our BLA filed, there's an extensive data set discussing all these parameters in detail. And the FDA will be able to look at the data, make data-based observations and Q&A. We do not think this is a class effect. We also did not get any specific comment or question on that so far. So let it continue to be a data-based conversation. We are confident in our own data sets. Hey Keith, would you mind taking question number two on number of patients?

Keith Woods -- Chief Operating Officer

Sure. I am happy too. We're really excited to announce our pre-approval access program because we have been getting requests from physicians if they could get access to efgartigimod to treat their MG patients. So we're really pleased to be able to do so. At this point, we have set aside a certain amount of clinical supply to be able to treat those patients. But for me to speculate with an actual number of what I think the number of patients we will enroll between now and the PDUFA date, it would be a guess. So that wouldn't really be valuable to you. The one thing that I do want to call out is this pre-approval access program is for patients in the US and also in Europe. So we're really excited for the patients that will be able to benefit from efgartigimod.

Eddie Hickman -- Guggenheim -- Analyst

Thank you.

Operator

The next question comes from Akash Tewari of Wolfe Research. Please go ahead.

Amy Li -- Wolfe Research -- Analyst

Hi. This is Amy Li on for Akash. Thanks so much for taking our questions. So first on the MG launch, how much interest have you gotten in your pre-approval program? And how quickly can you convert these patients on top of any patients currently in your open-label extension trial to commercial patients upon approval? And then another one, I just wanted to hear your thoughts on the kidney disease market for anti-FcRn, specifically in conditions like ANCA-associated renal vasculitis where we see a relatively large patient pool, the disease is predominantly IgG autoantibody driven, and we've seen recently promising efficacy data from complement inhibitors. And then finally, would love to hear the current in-house take on what's causing the albumin drop in competitors? And is immune advanced LDL increases are due to albumin drops or specific to thyroid eye disease, or if there is another reason? Thank you so much.

Tim Van Hauwermeiren -- Chief Executive Officer

Thank you, Amy Li. Keith, why don't you take question number one on the pre-approval program, and then I will continue with the question on kidney opportunities and the albumin story, OK?

Keith Woods -- Chief Operating Officer

Happy to do so, Tim. So first of all, this week is the first time we've actually gone public with the pre-approval access program. I can tell you that the request that we have had over the -- in the past have been from physicians that most of them participated in our trials because they're the ones that are educated about the FcRn and the mechanism of action, and how efgartigimod really works, as well as they have -- some of them have seen first hand experience of how efgartigimod has benefited their patients. Now, since we put this out publicly, and I can tell you that the patient advocacy organizations are aware of this program that we -- the increase of the number of physicians reaching out to us has gone up. But we're in early days here. So again, I don't want to make any projections, but there definitely is an unmet medical need in MG, and our ADAPT trial data has been pretty impressive. So I expect to get quite a few -- quite a bit of attention toward this. Thank you.

Tim Van Hauwermeiren -- Chief Executive Officer

Thanks, Keith. With regards to opportunity, we believe there's a vast opportunity in front of efgartigimod. So we continue to talk about at least 10 to 15 high conviction indications, high conviction meaning solid biology rationale, clear-cut feasibility for running clinical trials and registration trials based on known clinical endpoints and approvable endpoints and then, of course, a substantial commercial opportunity. So we are not going to comment yet on where we think the indication sits in the priority list. We will be disclosing fifth and sixth indications from efgartigimod this year. And you also remember that in the Zai Lab collaboration, Zai is now going to join us in adding new indications in an accelerated fashion. So you will see the strategy going forward on how we have been prioritizing indications. But I agree with you there's substantial opportunity including in the kidney area.

On the albumin drops, and we have consistently told you that we do not see any drops in serum albumin. We have also published that. And we have also in our Phase 1 manuscript disclosed an experiment where you can clearly see under the microscope and infectious experiment that efgartigimod is mainly residing in the recycling endosome, in the recycling loop, and is able to leave the cells to exit the cells. So efgartigimod is basically mimicking wild-type IgGs through the recycling pathway and is, therefore, not fundamentally impacting the fate of FcRn or driving FcRn into the lysosome. But that explains we believe why serum albumin levels are intact [Phonetic] upon dosing even the high doses of efgartigimod. That is fundamentally different, I believe, from the high affinity monoclonal antibodies. And look at the cholesterol data and only correlate to the indication activity or whether there being aggravated by drops in serum albumin as seen by some of the competitors, but that remains to be seen. We need to wait for that data. And when we remind [Phonetic] the literature, you will see that serum albumin levels inversely correlated cholesterol levels. I mean albumin is a very important carrier for many things, including a cholesterol. So there could be a combination of both forces, both factors here. But let's wait for the data before we make further comments on that. Thank you.

Amy Li -- Wolfe Research -- Analyst

Thank you so much.

Operator

The next question comes from Lenny Van Steenhuyse of KBC Securities. Please go ahead.

Lenny Van Steenhuyse -- KBC Securities -- Analyst

Hi, good afternoon. Some questions on the pre-approval access program, which is of course great news for patients and an opportunity to also invest in market share by sponsoring therapy before the official starting gun is fired. I was just wondering if there is a material cost as well related to the PP -- PAA given the fact that it will likely run for roughly nine months in the US, and likely longer in Europe. Thank you.

Tim Van Hauwermeiren -- Chief Executive Officer

Keith, could you take this question, please.

Keith Woods -- Chief Operating Officer

Yeah. In regard to the -- we are working with a corporate partner Clinigen, to be able to access to run this program. So our material cost are involved with the contract that we have with Clinigen, and then handling this, as well as the cost of goods sold. So, yeah, it's nine months, but in the long run this is a commitment to patients that we think is the right thing to do for them.

Lenny Van Steenhuyse -- KBC Securities -- Analyst

All right. Thanks for that.

Operator

The next question comes from Yanan Zhu of Wells Fargo. Please go ahead.

Yanan Zhu -- Wells Fargo -- Analyst

Hi. Thanks for taking my question. It's mainly related to the pemphigus program. In the Phase 3 IV study, the population is moderate to severe, which is different from the mild to moderate population in Phase 2, I believe. So could you comment on what have contributed to the change in the patient population in Phase 3? And also what about the IV dose? I don't think you have disclosed that will be used in the Phase 3 study, and whether that could be compatible with future subcutaneous strategy? Thank you.

Tim Van Hauwermeiren -- Chief Executive Officer

Well, thank you, Yanan. So, you're right, the Phase 3 trial for pemphigus is done with the subcu product. Patients in the patient panels were very excited about the ability to access the subcu products for treating pemphigus. You're also right in observing that the patient population is brought in the Phase 3 will aim for a broad label. It's a moderate to severe patient population, which is the bulk of the patients. That definition has shifted a little bit. If you look at the PDI cut offs to define what is mild, what is moderate, what is severe actually in our Phase 2 study we had patients, which would qualify today as actually severe pemphigus patients. So the patient populations overlap to a certain degree, and based on the PD and the efficacy data we have seen, we feel confidence that efgartigimod will be able to make a difference in this broader patient population.

Yanan Zhu -- Wells Fargo -- Analyst

Got it. Thank you.

Operator

The next question comes from Alex Cogut of Kempen. Please go ahead.

Alex Cogut -- Kempen -- Analyst

Hi, thanks for taking the question. I have a question about your fifth indication. If I look on the slide where you -- there's two opportunities, it looks like there are just a handful of indications that would fit number five. So I think the question is yeah, will you keep the strategy of going for orphan indications, or does it mean that it could also be a larger indication?

Tim Van Hauwermeiren -- Chief Executive Officer

Keith, would you mind commenting on that question, orphan versus larger?

Keith Woods -- Chief Operating Officer

Yeah, I would say at this time we continue on our path, which was our strategic plan that we -- when we select indication it's based on the biology rationale that is the first hurdle that we need to get through. And we work on this with academic experts, and we have indeed again for this fifth indication to determine it as our target. We do like to work in orphan and rare disease. And so we continue down that path and that is part of the plan. It's sticking to this formula that has allowed us to hit four for four on our proof-of-concept. And so we're going to stick with that plan. In the event that there comes a time later that we need to expand outside of rare disease and orphan, we will cross that bridge when we get there.

Alex Cogut -- Kempen -- Analyst

Got it. I guess a follow-up question is out of the bigger indications you have listed on the slides, which ones do you see the most compelling biology for?

Tim Van Hauwermeiren -- Chief Executive Officer

Yeah, some of them do have a relatively compelling biology. And I would be also very careful its concluding that it's going to be orphan versus a big indications. For some of these larger indications, which we list on the slides, you will probably find subtypes of key sub-segments of patients where the pathogenic IgG is really driving the disease. For example, in MS that could clearly be the case. So even when, if and when we would address larger indications, potentially reveal a target patient population would still qualify as orphan. So that's [Indecipherable] bridge when we're there. There's plenty of work on the table in this space, which Keith just described.

Alex Cogut -- Kempen -- Analyst

Okay, all right. Thanks.

Tim Van Hauwermeiren -- Chief Executive Officer

Thank you.

Operator

The next question comes from Douglas Tsao of H.C. Wainwright. Please go ahead.

Douglas Tsao -- H.C. Wainwright -- Analyst

Hi, good morning. Thanks for taking the questions. So I'm just curious in terms of the early sort of experience from the trials, and obviously from the early access program that's been a little challenging. But just in terms of educating physicians about the FcRn mechanism and efgartigimod as a therapy, are there any particular challenges or is it in terms of the actual therapy in terms of establishing dosing monitoring patients? Or is it really just about understanding how the mechanism works in the treatment?

Tim Van Hauwermeiren -- Chief Executive Officer

Keith, would you mind taking this question, please?

Keith Woods -- Chief Operating Officer

Yeah, happy to Tim. Actually when you look at the mechanism of action for efgartigimod and explain what it's actually doing that, it's fairly simplistic to understand and how that effect of the auto antibody at the neuromuscular junction, and the fact that we are removing it, which is why you're seeing the clinical efficacy. So that part, I don't view as big of a hurdle. When I talk about the education of healthcare professionals, it's because of the fact that we cannot speak about the mechanism of action except when we're in market research, or in some type of a Congress. We can't go out and speak about it at this time because that would be perceived as pre-promotion. So that's why I talk about our overall success in MG, I feel very good about. It's the gradual uptake because that's when we can begin the education. I can tell you that when we've done this in advisory boards, we can start at the beginning of the day, and there is an interest to learn about it. And by the end of the day, there is an enthusiasm of what this could -- this therapy could mean to MG patients. So it's really been -- [Speech Overlap] testing these physicians with the right message.

Douglas Tsao -- H.C. Wainwright -- Analyst

And then I guess just more broadly, I'm just curious in terms of obviously, you -- between 117 and obviously efgartigimod you have a really strong franchise in neuromuscular. I'm just curious, are there other mechanisms that you're looking into either for internal development or development programs or potentially through business development to bring into the Company? Thank you.

Tim Van Hauwermeiren -- Chief Executive Officer

Yeah. We already disclosed that ARGX-119 is a neuromuscular asset. It fits squarely into the neuromuscular franchise, which we are building. And, yes, we are, of course, also looking to the outside world for complementary mechanism of action molecules, which could actually fit very nicely. Although, I must say that we are pretty busy developing our own innovation from the IIP program, the Immunology Innovation Program, that proves to be a very rich hunting ground for opportunity. But that being said, we're looking holistically at building out a viable long-term and neuromuscular franchise. Thank you.

Douglas Tsao -- H.C. Wainwright -- Analyst

Okay. Great. Thank you.

Operator

The last question will come from Rosie Turner of Barclays. Please go ahead.

Rosie Turner -- Barclays -- Analyst

Hi, thanks very much for taking my question. Yeah, just one last for me. So in the presentation, and in the release this morning, you mentioned that Zai Lab are going to be discussing accelerated approval in China. And I just wondered what this actually could mean in terms of timing, and kind of your base case assumption for launch over in China. So if you've got some pretty chunky royalties over there? Thank you.

Tim Van Hauwermeiren -- Chief Executive Officer

I would like to comment on that question later in the year because frankly speaking there are two possible scenarios. So there would be a classical scenario, but on the back of a BLA approval, you would basically have to do a small PK study in order then to file for approval in China. That is a potential faster path, where actually we would skip that PK study, and actually you could go straight into registration. One of the many, many reasons why we did partner with Zai Lab is because of the proven track record in navigating the regulatory landscape in China, but I'll leave that to Zai Lab to comment on that. I think we need to navigate it step by step, and we will keep you informed, OK.

Rosie Turner -- Barclays -- Analyst

Thank you. Very clear.

Tim Van Hauwermeiren -- Chief Executive Officer

Thank you.

Operator

This concludes our question-and-answer session, and the argenx full year and fourth quarter 2020 financial results conference call. Thank you for attending today's presentation. You may now disconnect.

Duration: 64 minutes

Call participants:

Beth DelGiacco -- Vice President of Investor Relations

Tim Van Hauwermeiren -- Chief Executive Officer

Eric Castaldi -- Chief Financial Officer

Keith Woods -- Chief Operating Officer

Brendan Smith -- Cowen -- Analyst

David Nierengarten -- Wedbush -- Analyst

Max Skor -- Morgan Stanley -- Analyst

Tazeen Ahmad -- Bank of America -- Analyst

Danielle Brill -- Raymond James -- Analyst

Graig Suvannavejh -- Goldman Sachs -- Analyst

Eddie Hickman -- Guggenheim -- Analyst

Amy Li -- Wolfe Research -- Analyst

Lenny Van Steenhuyse -- KBC Securities -- Analyst

Yanan Zhu -- Wells Fargo -- Analyst

Alex Cogut -- Kempen -- Analyst

Douglas Tsao -- H.C. Wainwright -- Analyst

Rosie Turner -- Barclays -- Analyst

More ARGX analysis

All earnings call transcripts