Legend Biotech Corporation — FY2023 Form 20-F Summary
Business context and reporting period
Legend Biotech is a Cayman Islands holding company whose operations are conducted through subsidiaries in the United States, China and Europe. The filing reports the fiscal year ended December 31, 2023 and presents audited consolidated financial statements under IFRS as issued by the IASB, not U.S. GAAP. The company develops, manufactures and commercializes oncology cell therapies, with CARVYKTI (ciltacabtagene autoleucel, or cilta-cel) as its only approved and commercialized product.
- CARVYKTI is commercialized with Janssen for relapsed or refractory multiple myeloma.
- Net trade sales of CARVYKTI were approximately $500.0 million in 2023; Legend recognizes its contractual share primarily as collaboration revenue.
- Approximately 1,800 employees were reported at year-end, and 363,822,069 ordinary shares were outstanding.
Financial performance and liquidity
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Total revenue | $285.1 million | $117.0 million | +$168.1 million |
| Collaboration revenue | $249.8 million | $66.7 million | +$183.1 million |
| License revenue | $35.2 million | $50.0 million | -$14.8 million |
| Collaboration cost of revenue | $144.2 million | $65.4 million | +$78.8 million |
| Research and development expense | $382.2 million | $335.6 million | +$46.6 million |
| Administrative expense | $106.8 million | $80.6 million | +$26.2 million |
| Selling and distribution expense | $94.2 million | $93.4 million | +$0.8 million |
| Loss for the year | $518.3 million | $446.3 million | Loss increased $71.9 million |
| Basic and diluted loss per share | $1.47 | $1.40 | Loss per share increased |
| Net cash used in operating activities | $393.3 million | $201.3 million | Outflow increased |
| Capital expenditures | $104.0 million | $70.3 million | Increased |
The reported loss before tax was $520.1 million. Other income and gains increased to $58.1 million, primarily from interest income and investment gains, but this was more than offset by a $85.8 million fair-value loss on the warrant liability, higher operating expenses, foreign-exchange losses and finance costs.
- Cash and cash equivalents were $1.278 billion; time deposits totaled approximately $34.7 million. Management expects available cash, deposits and investments of approximately $1.3 billion to fund planned operations and capital expenditures through the end of 2025.
- Management expects additional capital will be needed in 2026 and beyond, potentially through equity or debt financings, collaborations or licensing transactions.
- Janssen funding advances had principal of $250.0 million and accrued interest of $31.3 million; the carrying amount of the related liability was $281.3 million at year-end. The advances accrue interest at 12-month SOFR plus the applicable adjustment and a 2.5% margin.
- Contractual lease and capital commitments totaled $77.8 million, including $66.5 million of lease obligations and $11.3 million of capital commitments.
- Total equity was $1.251 billion and total liabilities were $597.2 million, producing a reported gearing ratio of 32% versus 44% in 2022.
Material changes versus the prior comparable period
- Revenue more than doubled, driven by the commercial ramp of CARVYKTI, while license revenue declined because milestone timing differed from 2022.
- Research and development spending increased due to cilta-cel Phase 3 enrollment, pipeline programs and startup costs for the Belgium manufacturing facility.
- Administrative expenses rose as the company expanded infrastructure, information technology and support functions.
- Operating cash burn increased substantially, partly because of a $100.0 million Novartis receivable recorded at year-end and received after December 31, 2023.
- Financing cash inflows of $791.5 million included $349.3 million from a public offering, $234.4 million from private placements, $199.7 million from full warrant exercise proceeds and $11.8 million from option exercises.
- The warrant issued in 2021 was fully exercised on May 11, 2023 for $200.0 million, resulting in issuance of 10 million ordinary shares and elimination of the year-end warrant liability.
- Previously identified material weaknesses in controls over complex agreements and information technology general controls were reported as remediated as of December 31, 2023. Management and Ernst & Young issued effective-control opinions for year-end 2023.
Guidance, outlook, commentary and unusual items
- Management expects continued operating losses as it funds cilta-cel development, pipeline programs, manufacturing expansion and commercialization. No profitability timeline was provided.
- CARTITUDE-4 met its primary endpoint, with median progression-free survival not reached for cilta-cel versus 11.8 months for standard care at a median follow-up of 15.9 months; the reported hazard ratio was 0.26.
- CARTITUDE-5 targets approximately 650 patients in newly diagnosed multiple myeloma, while CARTITUDE-6 targets approximately 750 patients and compares cilta-cel with autologous stem-cell transplant. Management expected CARTITUDE-5 enrollment to be completed by the end of the first half of 2024.
- In November 2023, Legend licensed worldwide rights to its DLL3 CAR-T programs, including LB2102, to Novartis. Novartis paid a $100.0 million upfront amount in January 2024; Legend is eligible for up to $1.01 billion in milestone payments and tiered royalties. The upfront amount was recorded as a receivable and contract liability at December 31, 2023 rather than as 2023 revenue.
- In December 2023, the FDA approved a CARVYKTI label update adding secondary hematological malignancies, including myelodysplastic syndrome and acute myeloid leukemia, to the U.S. boxed warning. The FDA also investigated T-cell malignancies associated with BCMA- or CD19-directed autologous CAR-T therapies.
- Key risks include CARVYKTI safety and market acceptance, manufacturing scale-up and supply constraints, reliance on Janssen, clinical and regulatory failure, pricing and reimbursement pressure, intellectual-property disputes, foreign exchange and interest-rate exposure, cybersecurity and data-transfer restrictions, and evolving PRC regulatory requirements.
- Legend reported no legal proceedings expected by management to have a material adverse effect, but disclosed a former-employee arbitration claim seeking approximately $3.0 million; no provision was recorded because the outcome and loss range could not be estimated.
- The company has not declared or paid dividends and does not expect to pay dividends in the foreseeable future.
Most important facts for investors to verify
- Reconcile approximately $500.0 million of CARVYKTI net trade sales with Legend’s $249.8 million collaboration revenue and the Janssen cost- and profit-sharing mechanics.
- Verify the sustainability of CARVYKTI demand, manufacturing capacity, product margins, patient access, reimbursement and supply-chain performance.
- Review the full safety implications of the CARVYKTI boxed-warning update and the FDA’s investigation of secondary T-cell malignancies.
- Assess the company’s cash runway through 2025, expected 2026 funding needs and the terms and recoupment mechanics of the $281.3 million Janssen advance-funding liability.
- Track regulatory decisions for expanded cilta-cel indications and the progress, enrollment and safety results of CARTITUDE-5 and CARTITUDE-6.
- Confirm the accounting and delivery milestones for the Novartis license, including recognition of the $100.0 million upfront payment and the probability of future milestone and royalty receipts.
- Monitor remediation of internal-control weaknesses, related-party transactions with GenScript, PRC data and human-genetic-resource compliance, and the company’s foreign-private-issuer governance exemptions.