Genmab A/S (GMAB) Earnings Call Transcript & Summary

I'm excited to start our next session, where we're joined by Genmab. My name is Nick Hallatt. I work with the European Biopharma team out of London. I'm joined today by Anthony, the CFO; and Judith, the Chief Development Officer. So perhaps, Anthony, if you'd like to kick off with an introduction to the company, a kind of overview of the technology platform that you developed.

That would be super. Thanks, Nick. And it's great to be here today in person after so many years of doing this virtually. It's really super to be back here. So as you said, Nick, I'll just take a couple of minutes upfront, set a bit of context, and then I would really look forward to getting to your questions.

Perfect.

Maybe to start. It's really a super exciting time for us here at Genmab as we continue to work really hard to materially derisk, expand and accelerate our pipeline, and indeed, our entire business. When you think about it, we already got a super strong foundation, and here, again, that is across our entire business, our team, our technologies, our pipeline and, of course, our strong financials. So let's maybe just -- and on top of that strong foundation, we've got some really tremendous growth opportunities that are just right in front of us. But maybe to start, let's now unpack that strong foundation just a bit. First, at the very core is great science and technology, and that's really fueling the rich pipeline that we have today. Second, we're leveraging partnerships with industry leaders and innovators to enable us to do more and to go faster. Third, we really have a focused and disciplined approach to investment and capital allocation. And then fourth is part of our strong foundation. The strength of our financials means that we have a great platform to invest for the future. So if you just drill into those financials for just a bit. As you all know, we've got a super strong balance sheet and cash position, no debt. And on top of that, we have a great and growing recurring revenues fueled by the 5 existing marketed products. And in fact, in Q1, our total revenue was up 34% compared to last year. So a very strong start to the year. Now just quickly turning to the growth opportunities. I think for Judith and myself and for all of us at Genmab, we're really reaching an inflection point, where our clinical pipeline is both expanding and maturing. And in particular, we have the recent approval of Tivdak in September of last year and a very exciting data that we were able to present at EHA for epco. So really super excited about our pipeline. And as we think about the remainder of 2022, we remain absolutely focused on our key priorities, and there are 4 of them. First is the strong -- continued strong launch execution for Tivdak. Second is really putting our foot on the gas pedal for epco. Third, expanding 2 programs, both DuoBody-PD-L1x4-1BB as well as DuoBody-CD40x4-1BB, with some really pretty robust Phase II development work. And then finally, number four, in terms of our key priorities, really continuing to further build out our commercialization capability. So in summary, Nick, thinking about the combination of our proven track record, our solid foundation, the growth opportunities, I think we're really well positioned to continue to deliver substantial value for all of our stakeholders. So maybe with that, let's dive into it.

Excellent. Excellent. So perhaps we'll come back to the capital allocation, long-term strategy towards the end. But you mentioned your rich pipeline. There's a lot of excitement around epcoritamab. Can you perhaps tell us what drives your consistent enthusiasm and confidence in that asset?

Yes. I think that the data speaks for itself. So we are very happy with the data we presented at EHA in terms of safety, efficacy, combinability and subcutaneous. We see a very clear first opportunity in the DLBCL pretreated with 2 more lines at the data -- first data set to allow us to enter into the market. But we are building a combination with different standard of care in different decision setting to expand and unleash the full benefit of epco in other settings earlier and in other distal malignancies. But the first comes first, and we are very, very happy with this first data set that we presented at EHA.

If we perhaps drill down into that data a little bit more. And you added an update for -- or multiple updates for epco at EHA. What are your updated views having released that data? And maybe we start with the relapsed/refractory setting. What is it in the data that differentiates it from other options out there? It's quite a competitive space too.

Yes. So the differentiation is: in this particular patient population, there is not too much to compare. The only one to compare to is glofitamab, which presented the data at ASCO. And there, we see that epco stands out in terms of a little bit of efficacy, a little bit of safety and subcutaneous. So the whole package is very [ resilient ]. Now in that very setting, but not compared because it was different times. We have the CAR-Ts and we have Polivy eventually in the first approval, and maybe Monjuvi. But when we compare those data sets, again, we are not to be compared. For example, with CAR-Ts, we know that bispecifics are off the shelf vis-a-vis having a complex manufacturing time lag to get it. And we know that the data when we post -- vis-a-vis CAR-T can be even better because patients with CAR-Ts are selected based on non-rapidly progressive disease because they have to wait. So they can be very [ special ] on kind of aging. They are younger, and they have to be in better, fit position, not comorbidities. Even with those limitations, when you put vis-a-vis efficacy and safety, it looks very competitive. And then you cannot compare with Polivy and -- because basically these are different patient population with the same efficacy. So we think that the data is comforting and could be a great option with patients with this disease.

And then with that data in hand in the relapsed/refractory setting, what is the approach to filing for registration? And what gives you confidence that you may get approval based on that data you already have, and even perhaps an accelerated approval?

So what we said, we communicated: we think that the data is very compelling in terms of benefit-risk ratio, and we are engaging with the health authorities for accelerated conditional approval.

Okay. And then you've got the data in the relapsed/refractory. You're saying it looks good. How are you viewing the overall opportunity going into first line multiple myeloma? What's your kind of -- how might you size the market?

Yes. So we presented data at ASCO and EHA in combination with R-CHOP in patients with high bad prognostic factor, EP3 and above. And there are, albeit, limited number of patients, because the Phase Ib type of patient, the overall response was 100% with a CR of 77. So we presented data in follicular lymphoma, second-line plus with R2. So we are building different blocks to move epco to earlier lines and across the spectrum of distal malignancies. So again, DLBCL, third-line plus is the point of entry. It's the beginning. It's not the end.

Okay. When might we get some more updates on kind of data from the first-line setting or updates on the regulatory process to...

Yes. So we are -- as soon as we know, we will communicate, because those things are material.

Okay. And then sticking with the pipeline. You've got the BioNTech partnership with the 2 bispecifics that you mentioned, CD40-4-1BB and PD-L1-4-1BB. Can you update us on the progress being made there and perhaps when we might expect to see more data?

Yes. So we can start with PD-L1-4-1BB. We have a Phase II randomized study both -- PD-L1-4-1BB, which we call GEN1046, plus Pembro compared with GEN1046 in patients with non-small cell lung cancer pretreated with chemo and checkpoint inhibitors, which is a huge unmet medical need. Because for those patients, there is nothing approved, only taxotere, which is in the single-digit ORR and short lasting. Interestingly, in that very population, post-CPI, 1046 was only -- the only one agent that had single-agent activity. Not enough. And we learned from the biomarker that we need to compare -- to combine with Pembro and select based on PD-1. So this study is ongoing, and we expect to have data to guide us on further steps by the end of the year. And with 1042, given the biology of the compound, which is CD40, that activates APC dendritic cells and 4-1BB that activates these cells and threatens the immune synapsis, we need to combine with chemo or Pembro, which we show preclinically synergy and additivity. And those studies are ongoing, those cohorts in non-small cell lung cancer, pancreatic cancer and head and neck. And we are actively enrolling and expect to have data by the end of the year as well. And this -- as the data come out, it could be pretty transformative in the space of IO.

Okay. Perhaps if we move on to DARZALEX. Obviously, that's been a huge success story. There has been a little bit of an overhang to the stock in recent times with the arbitration that's been going on. And you announced last week that you're undergoing a new arbitration. Can you give us an overview of how this has come about and when we might expect to see more on that front?

Sure. Happy to take that one. Just to remind everybody, we commenced the original arbitration in September of 2020, and that played out over the course of the balance of 2020, 2021. And then unfortunately, in April of this year, 2022, we announced that the arbitration panel ruled against Genmab on both of the 2 matters that were under review by the panel. And just to remind everybody, the 2 matters related -- in very simplistic terms, one related to the royalty term, and then secondly, whether or not we had to contribute to the Halozyme royalty being paid to Halozyme by Janssen. So again, unfortunately, the panel ruled against us on both matters. Then really, we were left with the decision: should we appeal that first arbitration or not? Ultimately, we decided not to. What we did do is study the award that, that arbitration panel made and studied that. And really, from our perspective, the award, particularly as it relates to the Halozyme matter, let's call it, really turned on the fact that the panel decided that both DARZALEX IV and DARZALEX FASPRO are 2 separate products -- 2 separate licensed products under the license agreement we have with Janssen. And based upon that, we decided that we should start the second arbitration because we felt that we're entitled to the additional $405 million of milestones as well as the additional royalty term that we outlined in our company announcement from last week. So that's where we stand on this point, Nick.

Okay. And then sticking with CD38 target and partnership with Janssen again. You've got the HexaBody-CD38 in early-stage development. I know you've been very excited about this asset. Can you tell us kind of what drives that enthusiasm?

Yes. So I'll start with the biology and the data. We presented preclinical data at EHA that shows that the HexaBody-CD38 is much more potent than DARZALEX. So as measured by [ EC50 ] in terms of CDC, is 7x more potent. And as measured by tumor lysis or B-cell lysis of cells, with DARZALEX was 43% and with the HexaBody 71%. Furthermore, what we preclinically demonstrated is that even in the presence of isatuximab or daratumumab in the mix, the HexaBody displaces the other CD38 antibody and binds to the cell in an optimal fashion. So based on the preclinical characteristics, even in the killing of cells with low CD38 or high inhibitory proteins, complementary inhibitory proteins, we -- it's much more potent. So now is how to translate it into the clinic. So the first step, which is the dose escalation, to come to the recommended Phase II dose, is ongoing. After we reach that point, that we expect to happen by the end of the year, we will start a comparison between CD38 HexaBody and CD38 DARA FASPRO. And we will do this comparison in 2 settings, multiple myeloma, where FASPRO is approved as single agent, and diffuse large cell lymphoma, because they are -- DARA proved not to work. So we will do this head-to-head comparison. And this will be the data that will guide, a, on whether Janssen opts-in and -- to work with -- or not. And we'll give the data to see how we can expand or build upon the success of DARA.

Okay. What do you think we need to see to -- for, first of all, Janssen to opt-in? And then to -- what sort of improvement on DARZALEX, let's say, in multiple myeloma, do we think we need to see for that to be a viable asset?

Yes. So what we need to see is good safety and better efficacy. And we are here to transform the treatment of disease, not to do like a little bit more. So it has to be -- and this is why one of the settings is DLBCL, because in DLBCL DARA didn't work. So if HexaBody works, it will show not just it's better, but it's much more differentiated.

Okay. Makes sense. Is there an opportunity beyond multiple myeloma in DLBCL? Is that something you're interested in...

Yes. So for now, this is the proof of concept because this is where we have clear benchmarks to compare. But we believe that CD38 is a great target, it's quite pleiotropic that we could eventually think about. But for now, this is the first step.

Okay. Now you've obviously got a deep pipeline, and going through all the assets could be difficult. Maybe I'll give you an opportunity to highlight which other assets in the pipeline you think are most exciting. And perhaps you'd like to touch on TIVDAK and how progress is going there as well.

What is...?

So the thing -- Judith, he wants to talk about is sort of other opportunities in the pipeline. What else is exciting to you?

Yes, yes, yes. Yes, I can...

And then I can talk about -- a little about TIVDAK.

Yes. I tend to believe like -- the pipeline like when you have 5 kids and you love them all and you nurture them all and you educate them all. And then you have a doctor, a lawyer, a priest or whatever. So I think that the value of our pipeline is the breadth or the depth of our science and the opportunity for them to make it in different cells. For sure, I love TIVDAK because it was the first drug approved by Genmab. I love epco because I am pathologist by training. But let me tell you, 1042 and 1046 could be so transformative and creating like the new wave of IOs, where there's so much value in the science of the CD3-B7H4, CD37, DuoHexaBody-CD38, that is very hard for me to choose one. I think that the value of Genmab is the value of the science. And science is creating knowledge. And not all of them will win. We need to generate the data to unleash the full potential, and this is what we are doing.

I think, Nick, it also goes back to what I said in my introductory remarks about the -- one of the key elements of our foundation. It really does start with great science and technology. We think that has plenty of runway in terms of the overall capability set of our research and discovery efforts to continue to generate -- it's not a numbers game, but to continue to generate really interesting, exciting new product concepts. So I think what we have today is really super exciting, as Judith already outlined. But I think there's plenty more to come. And look forward to see how it progresses over the coming years. It really is that combination of deep antibody science, looking down at the targets and the suite of technologies that we can apply to really unlock the potential and the power of those individual targets. And we think there's a lot more work that we can do. In terms of TIVDAK -- I think you had asked another question about TIVDAK as relates to the -- maybe the launch a little bit. And Judith, maybe you want to give a quick update. But first about the launch. Look, it's a program that we're developing and commercializing together with Seagen. We've got the initial approval in relapsed/refractory cervical cancer in the United States. And I would say, so far, the launch is progressing well. We're really focused on launch execution. It is our first launch. So something we're taking very, very seriously, because it does lay the foundation and the building blocks for potential future launches, including epcoritamab. But so far, we're really pleased with how the launch is progressing. Maybe Judith, you want to comment like where we stand on TIVDAK as it relates to the overall development program.

Yes, absolutely. So as we all know, TIVDAK was approved based on the substantial benefit that provided with patients with second, third-line cervical cancer, which is a need opportunity, although a huge high unmet medical need with -- because impacts like very young women, like 49, 50, 52. And basically, the standard of care provides a response rate of 6% -- 6% to 8%. This is what -- there was nothing. With Pembro, there is another option in that field. But now Pembro is moving to the first-line based on a combination study. So TIVDAK became the option of choice for second, third line. But the question is how to -- or this benefit that we saw in the second, third line have to move to earlier line so patient can benefit the most. And for this, we presented data at ASCO that was defined by -- in an oral presentation. There is compelling efficacy, because in combination with Pembro in first-line that response rate was 40%. But not just that, but the median duration of response after 18 months was not reached. So 40% almost got a response that was long lasting, 18 months. Likewise, in combination with Carbo, although shorter lasting because we don't have the IO, the overall response rate was 55%. And we updated the data with Pembro in second, third line. So overall, what we are building -- and we are enrolling in the triplet combination with Pembro and Carbo plus/minus [ Deb ] to potentially unleash the full potential of TIVDAK in fighting cervical cancer. In addition, the same concept of synergy with Pembro or Carbo can be applied to head and neck, which is a tumor, but biologically is very similar to cervical. And we are running this study as well in the Part D of the study operationalized by Seagen. So we see, again, the second, third-line cervical as the beginning, not the end. And we are walking the path to generate the data to allow us to move TIVDAK to other diseases or to analyze in cervical cancer.

Okay. Anthony, perhaps if we come back to capital allocation, which you started earlier. You've got a strong balance sheet. You've got a robust pipeline. You've got your 5 children. How do you pick your favorite? So conceptually, how should we be thinking about spend, R&D, OpEx, say, for the next -- beyond your 2022 guidance? And how are you thinking about prioritizing that capital?

Yes. So I think I had touched on this in my opening remarks as well. I mean, part of our strategy at Genmab is to be really focused and disciplined in our approach, and that carries through to our investment in capital allocation. Those might just sound like words, but it's something that we take very seriously as we think about investing our capital back into our business. As we think about investing, it really did start with our organic strategy, thinking about those growth opportunities. And I kind of think about that organic investment at least in 3 buckets. So it's around securing what we already have today, making sure that those opportunities that are in front of us, that we are really securing them. And then for the future opportunities: how can we really expand and accelerate them? These are the discussions that we have every single day when we're talking about our pipeline. And I think it's not only the products themselves, but it's also building out the appropriate and relevant capabilities to really bring out all of the product characteristics that these wonderful products do have. So that's how we kind of approach it, I would say, at the macro level, particularly as it relates to our organic investment. Likewise, several years ago, we did start looking a little bit more thoughtfully outside the 4 walls of Genmab and primarily focused on, let's call it, the research and discovery or primarily technology lens, where we look at sort of antibody and antibody-related technologies. And here, over the last couple of years, we've done deals with companies like CureVac, Immatics, Bolt, Tempus. And the idea really being: when we think about bringing something in, we want to be able to really be good evaluators and really understand what is it that we're buying. And then once we buy it or license it, we can be very good owners and actually add value once we own it. So that's the mindset when we think about inorganic investments. And up until now, it's been really focused in the research and discovery phase. Now certainly, as we further build out our capabilities, we could think about opening up our aperture in that regard. So that's probably around the capital allocation, Nick. I think your other question was sort of about transition maybe of OpEx or OpEx trajectory as moving forward. I think specifically as it relates to OpEx, I would kind of think about maybe 3 different buckets. First of all, epcoritamab is in growth mode, is going to continue to be in growth mode here for the foreseeable future. So we expect to continue to add new trials, including new Phase III trials. And that, as a consequence, will increase our R&D. Secondly, thinking about SG&A or commercialization. So as we transition from '22 to '23, we'll certainly see then in 2023 -- if we're successful at moving epcoritamab towards the market, we certainly will have a full year of epcoritamab costs next year in the 2023 P&L. And then number three: this is probably the swing factor here. You heard Judith talk a lot about 1042 and 1046. At what pace and can we take one or both of those assets into late-stage development. And that would be a great reason to go back and tell the market that we have to increase R&D if we're able to increase our Phase III investment. So that's what I kind of think about our OpEx as we transition from 2022 into 2023. But the underpinnings are really focused and disciplined approach to investment and capital allocation. But part of that, too, is when you do have those growth opportunities, to make sure you're not starving them for capital.

Sure. And on that front -- obviously, the partnerships you've had, the recurring revenue streams have been incredibly important to the growth and the equity story of Genmab thus far. How do you see that story evolving over the next, let's say, 5 years? And what is the long-term vision for the company?

Yes. Maybe I can start, Judith.

Yes, you can start. Go ahead, yes.

Sure. I mean I think in -- really, I kind of think about Genmab sometimes in -- I've been around now since 1999 -- in having 2 phases. Sort of 1999 to 2013, where we were very much focused on out-licensing products and technologies. And really since 2013, when we launched our 2025 vision, we've been focused on retaining more of the product rights. And I think we're still in the early days of that journey. But moving forward, absolutely, our intention is to retain more and more of our product rights in different geographies as we continue to build out our capabilities. And as I already highlighted, Nick, to continue to look for opportunities outside the 4 walls of Genmab to bring in to the company. But it got to be -- continue to be a very thoughtful approach and making sure that if we are going to try to exploit a particular opportunity ourselves, that we do have the right capabilities in-house. Maybe I'll bring this to life for you a bit. As we got into the 2019 time frame, from our perspective, it looked pretty clear that epco had the potential to be a really meaningful drug. Now we were left with a decision point: could we take that ourselves to market -- finish development ourselves, take that to market ourselves? I think the answer would have been, "Well, yes, maybe we could have done it." But we were very rational in our thought process and said, "Well, we'll be better off if we had a very strong partner like AbbVie by our side." And that's ultimately we decided to do. And moving forward, while our intention will be to own more and more of the product rights, we'll continue to be rational in our approach.

No, I -- 100%. I think that the partnership is not to cover a hole, that you need the money or whatever, but what you can be complementary with your partner, how you can be synergistic and how you can create value for patients and shareholders together. So if we take, like example, the collaboration with BioNTech. We were -- we still are strong in platform technology antibodies. They brought a lot of expertise in the IO space and preclinical models that we didn't have at that time. So it proved to be a very complementary synergistic partnership. Likewise, with AbbVie. They bring the muscle, the know-how in the cell malignances and the ability to scale up in much more rapid fashion to meet the ambition of epco than we -- it's not only an economical, but putting on the table what the product can gain in terms of speed and quality to benefit more patients and the shareholders. So this is how we think about it.

That's great. We've got a few minutes left. So perhaps if I open up the floor for some questions, if you have any. Okay. If we come back then -- and perhaps, Anthony, if you could take this one. Can you summarize what you think investors should be most excited about, let's say, over the next 12 months? And what are the key events coming up for the company?

Sure. As I started my remarks, again, there's plenty to be excited about here at Genmab. I know for one that I'm excited, and I know that Judith shares that. There's plenty to be excited about. I mean -- I think, first of all, look -- just sort of think about this past weekend with the epco data at EHA and having the presidential symposium. So -- I know that's not the future, but it just happened. So I'd be remiss if I didn't mention that. I think you're going to have for epcoritamab some important feedback following some regulatory interactions. I think that's going to be super important for investors to focus on. Secondly, as it relates to 1042 and 1046, we're really focused again on doing some pretty robust Phase II work to really determine next steps. And we're hopeful by the end of the year that we will have enough information in-house to determine next steps for either or potentially both of those products. That could be a pretty meaningful catalyst from our perspective. Maybe a little bit -- moving down the pipeline, we do intend to report dose escalation data for 2 of our additional programs: that would be the DuoHexaBody-CD37 as well as the HexaBody-CD38. I think there's some meaningful data sets here between now and the end of the year and also some feedback from very important regulatory interactions.

Okay. That's great. It's obviously exciting times for the company, thanks to the quality. We've come to the end of our time. So I'd like to thank you both for joining us here today. It's great to see you.

Great. Thank you.

Thank you.