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

Thank you for joining us for this session with Genmab. Delighted to be joined by CFO, Anthony Pagano, in a [ Danish ] back to back here. I see we're in. And I thought I'd start with a very sort of high-level question, just given everything that's been going on in the U.S. over the past sort of month or so on a sort of political level. Any sort of views, early thoughts from the company in terms of possible impact of incoming administration or nominations in terms of how you're thinking about doing business in the U.S. or what it might mean for reimbursement, et cetera?

Yes. I guess so. First of all, Jon, it's a pleasure to be here with you and a chance to sort of tell the Genmab story. So thank you very much for that. Look, at Genmab, we are super focused on what's our core business, which is creating differentiated antibody-based medicines to really help patients in need, particularly in the field of oncology. Our view is if we do a very, very good job with that, everything else is going to take care of itself. Obviously, cognizant of what's going on in terms of potential political risks moving forward. But every day, all of the very dedicated members of Genmab are super focused on our mission, which is again to really deliver these KYSO-based medicines, Knock-Your-Socks-Off based medicines to help patients that are in desperate need. That's what's most important for us.

Understood. Now one other one that I feel I should get out of the way because I probably just ask some people for asking if I didn't. But what's the latest you can say, if anything, on HexaBody-CD38. I realize you're probably limited there in terms, but it does remain a key catalyst for people.

Sure. No, I certainly appreciate that this is top of mind. There are a lot of other exciting things going on at Genmab, but do appreciate the question.

We'll get to them.

Yes. So on our Q3 earnings call, what we've decided to do is highlight the overall process and time line moving forward. So moving forward, we expect to have the data in-house that's from the randomized head-to-head trial comparing DARZALEX compared to HexaBody-CD38 to have that data in-house by the end of the year, share that complete data package with Johnson & Johnson. That then starts a process where they have a certain period of time to review that data package and ultimately make an opt-in decision, which puts the back date of that opt-in decision likely in the March time frame. That's where we stand with that process. We look forward to going through that process together with Johnson & Johnson.

Great. Okay. Now moving on to some of the more exciting things. Let's start with EPKINLY, if we can. Can you just talk us through what's driving the outperformance in third-line DLBCL and third-line FL and what differentiates the drug?

Yes. I mean, first of all, we're very excited about what we've been able to do with EPKINLY over the last number of years. Just to remind everybody, this was a product that we took from first patient, first dose to approval in less than 5 years. So this was a product that we looked at the overall profile was a product we were really able to put our foot on the gas pedal from a development perspective. That was a function of our capabilities, number one, but also a function of the overall profile of the product. We think EPKINLY has the perfect or a very, very good balance of safety, efficacy and convenience. So we were able to put our foot on the gas pedal from a development perspective, but also build out our commercialization team in the markets we prioritize the U.S. and Japan and really build out those teams in a bespoke fashion to really let EPKINLY shine in the marketplace. So, so far, what's really been distinguishing EPKINLY is that combination of safety, efficacy and convenience. As you highlighted, the initial launch is in late-line DLBCL based upon the approval in May of 2023, that's in the United States. That's gone very well. As you highlighted, we enjoy in-class leadership there in DLBCL. More recently, in 2024, we saw the second approval in the United States in late-line follicular lymphoma. And what seems to be resonating in the marketplace is physicians having a single option across both DLBCL and FL. That seems to be really resonated. They have one option they can use to treat either DLBCL or FL patients. In addition, the subcu formulation makes it very convenient for both physicians as well as patients. And on top of that, in the FL label, there is no hospitalization requirement, again, further facilitating that convenience factor for both physicians as well as patients. So it's really the totality of the product profile that is resonating in the marketplace. In the U.S., that's what I just highlighted. The other market that we prioritized is Japan. This is a result of really a strategic decision based upon some work that was commenced back in 2018 to identify what other markets where Genmab wanted to establish our presence. And that's paid dividends both from a development perspective as well as a commercialization perspective. Right now, EPKINLY is the only product that's approved for this specific types of disease in Japan. So we have the opportunity to have a very significant head start relative to the competition.

Okay. And just thinking about those two indications where the drug is currently approved, what do you think is the size of the opportunity there?

So right now, again, EPKINLY is approved in third-line plus DLBCL and third-line plus follicular lymphoma. This does represent relatively modest market opportunity in terms of size and revenue. We are very pleased with what we've seen so far really with this product in this overall bispecific class has the promise to help many, many more patients here moving forward as you get into second line and frontline, both FL and DLBCL. Here, Jon, we have 5 ongoing Phase IIIs that are already commenced to access this potential market. And importantly, I can't provide specific time lines and guidance. These trials will start to read out as we get into the later part of this decade and really provide many more benefits for many more patients in these disease areas. So we look forward to seeing those trials get further along in terms of recruitment as well as then ultimately data readouts. So more to come there.

And thinking about data readouts or whatever, what should we be looking out for ASH in terms of EPKINLY?

Yes. So excitingly for EPKINLY over the last number of years, we've been able to showcase lots of very exciting data for EPKINLY at ASH and other conferences. And this year will be no different. We have 20 abstracts that were accepted, and we have 4 oral presentations. Two of them for me really stand out. One is would be actually potentially highlighting the utility of EPKINLY outside of DLBCL and FL. There are some data that we're very excited to share in CLL, and it was selected for the best of ASH showcase presentation at ASH this year. So we're super excited about that. The other oral presentation that I would highlight is looking at some of the long-term follow-up data coming from our registrational Phase II trial in diffuse large B-cell lymphoma, showing the long-term durability of EPKINLY, some very exciting data there. And we'll have the chance to further highlight and characterize and contextualize this data at our post-ASH event after ASH. So a lot to be excited about for EPKINLY in general, but also at ASH here in a couple of weeks.

Excellent. Okay. Switching on to [indiscernible] if that's okay with you. Just -- you announced the acquisition of ProfoundBio earlier this year and with it came that lead asset. I was just wondering if you could frame the differentiation you see of Rina-S versus already approved ADCs and those in development.

Yes. So there's a couple of things that really stand out for Rina-S and first of all, from an investment perspective in terms of us making this important investment decision for our first M&A transaction, something we did not take lightly. But from our perspective, ProFoundBio and Rina-S really ticked all of the boxes. Rina-S was particularly a couple of things stand out for me. One is that it was essentially Phase III ready, meaning there was not a lot of incremental time or clinical development risk we had to take on before starting the first Phase III. That was number one. Secondly is that had the potential to be launched by 2027, so generating potentially significant revenues by the time we exit this decade. And here, we highlighted that it had the potential to generate more than $1 billion of sales at peak. So from an overall investment perspective, Rina-S ticked a lot of boxes. In addition, the overall product profile of Rina-S really stood out to us. And here, I'd highlight a couple of things. One is really the potential to treat many, many more patients. The first generation of follicular receptor alpha-based ADCs are really going after the high expressers, which is only 30% to 35% of the patients. Whereas with Rina-S, and this is where -- based on how we're running our Phase III, here, we're going after the entire set of follicular receptor alpha positive patients, potentially significantly broadening the patient population that could benefit from this very important medicine -- potential medicine, Rina-S. In addition, what we're seeing is based upon the very novel linker technology, the potential for Rina-S to have a differentiated safety profile. And here, this is super important for any cancer medicine, but in particular with ADCs for patients to stay on therapy to stay on drug. This really can then generate not only a differentiated safety profile, but also differentiated outcomes for patients. And here, what we saw, Jon, was at ESMO, we highlighted that all of the responders at the time of the data cutoff had actually stayed on therapy. And as we all know, this is -- this is the main driver for cancer medicines is the ability for patients to stay on therapy. This is critical to driving differentiated outcomes. And so far, based upon what we're seeing with Rina-S, we think this is trending in the right direction for sure.

Okay. And just thinking beyond 2027, what's the development program? And what other indications potentially are interesting?

Yes. So the lead indication is platinum-resistant ovarian cancer. And here, when we announced the acquisition -- at the time of the acquisition, we said we would start the first Phase III in 2025. Based upon a lot of focus and good execution and the profile of the product, we're actually able to bring forward the start of that first Phase III in [ PRC ] to 2024. So we've already been able to bring forward the development in PRC. In addition to PRC, we think there's a lot of utility in other indications in ovarian cancer, potentially platinum-sensitive ovarian cancer, other areas within ovarian cancer, -- but then when we announced the deal, one thing that we did highlight was the utility outside of ovarian cancer. Here, I would say the indication that is furthest along is probably endometrial cancer, but more to come there. We hopefully be able to share more data both in ovarian cancer and endometrial cancer in 2025. And again, here, reiterate what we said when we announced the deal, we fully intend to start additional Phase III trials beyond [ PRC ]. And as we sit here today, that remains equally true. So we think there's a lot of utility for Rina-S.

Okay. Great. And moving on to Acasunlimab, if we can. So the Phase II data for the second-line NSCL post IO or IO plus chemo combo was presented at ASCO earlier this year, and I think it's fair to say it was met with mixed reception from the community. I was wondering what makes you excited about it?

The short answer is the overall survival data. As I reflect and think about what ultimately we're trying to do with oncology medicines is to give back patients time. And the data that we presented at ASCO suggests an overall survival of 17.5 months. And based upon where the current standard of care is, this potentially represents a meaningful increase in overall survival relative to standard of care. If we were able to replicate that signal in the Phase III trial, we think this represents a meaningful product for physicians and patients in the second-line lung cancer post CPI space. So we think this -- what is Acasunlimab has really demonstrated clinically is meaningful and relevant for both patients and physicians and do appreciate what you said there in terms of how it was met with some skepticism. We were further able to elucidate the rationale behind that dosing regimen at SITC at other conferences here over the last number of weeks and hopefully can present some additional data during the course of 2025 to give further confidence to the market and the overall profile of GEN1046 or Acasunlimab.

Right. And then can you just maybe go into a little bit of detail about the Phase III trial design and precisely what sort of market opportunity do you think there is for the drug? I mean I know you just touched on it, the design, that is fine.

Yes. So look, the standard of care is chemo or docetaxel. So we'll be running it head-to-head against docetaxel. They're depending on the Phase III trial and readout, standard of care is in the 10 to 11 month range. Based upon what we've seen data we presented at ASCO, we think our data, if this were to be replicated in the Phase III trial at 17.5 months, plus or minus a bit there, represents, again, a very meaningful step forward in potential outcomes for patients in the second line post CPI setting. As we know, frontline patients are increasingly getting checkpoint inhibitors or CPI. So this is going to be increasingly an important unmet medical need for patients.

And then finally, just finally on GEN1046, what's the first-line opportunity? Excited about that? And what about sort of application in other tumor types as well?

Yes. So right now, as we think about GEN1046 or Acasunlimab, really, there are 3 investment priorities. Number one is the second-line lung cancer post CPI that I just highlighted. That's very clearly #1 in terms of that Phase III trial. Second is seeing if we can take that concept that we saw in second-line lung post-CPI and applying it to another tumor type. So another second-line plus opportunity in a different tumor type, and we intend to start a Phase II trial for a new tumor type in 2025. And the third investment priority is providing more data that informed our investment decision to start the Phase III to also provide that data to the market in 2025. So right now is what you -- I guess, through absence, what you've heard is we're not prioritizing investment in frontline lung at present. Really, these 3 areas is where we'll be prioritizing our investment during the course of 2025.

Fine. And then moving on to sort of P&L and balance sheet and capital allocation.

But maybe before that, kind of like we talked about the 3 products individually. I think it's important to also sort of think about and discuss the 3 products in totality. But this really represents where we're prioritizing our investment between these 3 products, we have 7 ongoing Phase III trials. We have 5 for EPKINLY, 1 for Rina-S and 1 for Acasunlimab. Importantly, for Rina-S and Acasunlimab, these are 100% owned products that Genmab is fully operationalizing. And if successful, will generate meaningful revenue for us as we exit the decade, also think about it from a profitability and a margin perspective, could also represent meaningful profit drivers for us, if successful as we exit the decade. I think it's important to think about them not only individually, but what these 7 products also -- 7 Phase III trials, excuse me, represent in aggregate as well.

And you talked about that profitability benefit that's because of the sort of economics and not being shared...

Exactly, particularly for Rina-S and Acasunlimab, these are 100% owned products. So we're making 100% R&D investments today. And if successful, we get 100% of the revenue and the profit margin moving forward. And that will be important as we exit the decade.

Right. Okay. And so we've seen a quite a substantial step-up in investment over the last sort of 5 years from the company. I was wondering if you can sort of outline what -- where that investment has been made. And then thinking about the next year, are you comfortable with sort of consensus expectations? And also what's your thinking further out in terms of investment priorities?

Yes. So as you highlight, we have very thoughtfully and in a focused manner, stepped up our investment over the last number of years. This has been important to build out capabilities and to build out our pipeline. Now some of this really started in 2017 when we started to scale up our investment in research and discovery. We view this as an underutilized asset, that overall research and discovery engine is an underutilized asset in the organization. So we scaled that up starting in 2017, and that's now been generating over the last number of years, the increased number and quality of IND candidates and products that we're currently seeing come through the clinic as we speak. As those products have come through the clinic, we've also invested more in clinical development in terms of products in the clinic. But also a couple of years ago, we didn't have -- we had exactly 0 Phase III trials that we are funding. Think about 2019, there were no Phase III trials. As I just highlighted, as we exit 2024, there are 7 ongoing Phase III trials that we are funding, either 50-50 or 100%. We've also invested quite a bit and talked about capabilities. This is really starting to pay dividends and building out our commercialization capabilities. This started around building out some commercialization capabilities for TIVDAK in sort of the 2020, '21 time frame. But more recently, in really a focused way, we've further built out our commercialization capabilities for EPKINLY in the United States and Japan. These are investments not just in field force, like oncology account managers or MSLs, also really building out some of that mid-office capability like distribution, market access, patient services. These are important investments that we were able to make for the EPKINLY brand to -- in a very bespoke fashion. Coming back to EPKINLY now the performance. the performance that we're seeing would not have happened without this very important investment that we made over the last number of years. Likewise, as I highlighted before, Jon, we also made investments and prioritized the Japanese market, both from a development perspective as well as commercialization. And the development has been crucial. We've been able to put a fair number of patients on our some of our Phase II and Phase III trials for products like EPKINLY and like TIVDAK from Japan as a function of the investments we made in development capabilities in that market. And what that ultimately has done, in some cases, allowed us to speed up development time lines because sometimes Japan can be an underutilized market from a development perspective. Likewise, we prioritized investing in Japan from a commercialization perspective for EPKINLY. And look, we were approved in September of 2023. We launched in November of 2023. And currently, we continue to enjoy the market to ourselves. So these are important investments that we've made to really build out our business over the last number of years. Now zooming in where we are at present on our Q3 earnings call, we highlighted a couple of things. One, I provided some commentary around my views around 2025 OpEx consensus, which is around USD 2.4 billion. And my view is that, that overall investment level is in a reasonable place as we think about 2025. We also highlighted our increased focus on prioritizing -- what that meant is we stopped or terminated 3 Phase I programs, and we also made the decision not to move forward with the Phase III trial for TIVDAK in second-line plus head and neck cancer. So what you're hearing from me is we have over the last number of years, really in a thoughtful, focused, disciplined way, scaled up our business, built out important capabilities. Now increasingly, we're focused on prioritizing our investments, particularly Phase II registration trials or Phase III registration trials and really focused and targeted sales and marketing investments that if successful, can generate revenue as we get into the middle part -- and part of this this decade. What that also means is we're going to be very thoughtful about prioritizing and potentially terminating programs that don't meet our very high bar like these 3 Phase I programs. It also means from a G&A perspective that we're able to further leverage investments we've made in the last couple of years.

Something that you just said that I think is potentially interesting. Just on investment in R&D, how much of that -- obviously, you talked about how you've gone from running no Phase III trials to there being plenty to run. In terms of your investment there, how much of it is actually in building the in-house capabilities to run those trials versus sort of investing in outsourcing and building those relationships as well for the actual management of the trials?

It's a mix of internal capabilities as well as utilizing CROs or contract manufacturing organizations. So certainly, from an overall medical strategy, development strategy, that squarely resides in-house. We also have a number of very competent and capable internal clinical development operations individuals that we've scaled up that team over the last number of years, but still we have to rely upon CROs to a very, very large degree as well. So I'd say it's a mix here in terms of the model that we're deploying. I think Judith Klimovsky, our Chief Development Officer, would call it a hybrid model, we can kind of plug and play resources either internal, external as we see fit. Likewise, from a manufacturing perspective, we certainly have to have a core team that really understands our products and can effectively work with our contract manufacturing organization.

And just think as you grow as a company and sorry to fish on this, but it's just -- it's interesting. I think do you think that, that sort of external or reliance -- some part reliance on the hybrid model, do you think it becomes more internal? Or do you think it remains sort of as on a sort of needs basis?

I think over the last number of years, it has evolved, I would say, from primarily or to a large degree, externally focused to now more balanced. There are obviously trade-offs around speed, quality, costs on internal versus external. And certainly, we have to sort of prioritize all of these, right? We have to prioritize speed and quality in the first order, but also increasingly, as we're running many more trials, we're also very, very focused on overall productivity measures, including cost. We have to sort of look at the -- what exactly we're trying to achieve and figure out the best way to achieve that. Now historically, as we kind of already talked about, we had a fewer number of trials, fewer number of mid- to late-stage trials. As that number increases, you potentially benefit from economies of scale in terms of having more internal resource. So we've had an eye towards this sort of this point over the last number of years as we built out the team under the leadership of Judith Klimovsky and Tahamtan Ahmadi, our Chief Development Officer and Chief Medical Officer, respectively. Really building out the teams underneath of them to really, let's call it, really be thoughtful about overall clinical and medical strategy and when we can utilize internal resources to really put our foot on the gas pedal.

And then on your commercial investment, you've obviously spoken about U.S. and Japanese efforts. Just thinking about all things going well, you've got Rina-S, you've got -- sorry, you got Rina-S and you've got GEN1046. I'm [indiscernible]. Just how are you set for launching those? What sort of further commercial investment is needed?

So as we've discussed quite a bit, we've made really important investments in capability build, particularly in the United States and Japan. As you know, part of that capability build in the United States was for TIVDAK, which was approved in September of 2021 in later-line cervical cancer. So we believe there's a lot of accumulated knowledge and know-how from that launch in the gynecological oncology space that can be applied to Rina-S. Likewise, not approved yet, but hopefully, TIVDAK can be approved in Japan in 2025. And again, we'll be able to have the benefit of that launch under our belt in Japan. So there's a lot of, I think, accumulated knowledge and know-how and customer relationships that can be leveraged as we think about evolving from TIVDAK to also Rina-S in the gynecological oncology space in those 2 markets. Also, I believe there's a lot in let's call it the mid-office in terms of access, distribution as well as patient services that can be leveraged moving forward. We'll evaluate the overall business case in terms of what additional resources we want to deploy for Rina-S. What I can leave you with is that we will take any investment decisions in this regard very, very seriously. And we're not going to shy away from making investments that we need to make to make sure that when this launches, hopefully, that, that team has all of the resources they need to launch effectively and also launch is what's going to be in a competitive landscape. We have to understand that there is a fierce competition generally in oncology. So we have to make sure that we invest, but we'll do that in a really focused and disciplined way. So that's for Rina-S in the United States and Japan. We'll carefully consider what additional markets we might want to go after from a Genmab perspective. For these 2 programs, GEN1046 and Rina-S, we do enjoy or retain 100% commercialization right. So we'll think very carefully about what markets we want to go after for these 2 programs.

Understood. And then just on M&A, BD, you mentioned earlier that ProfoundBio was the first sort of deal. Just wondering whether it's left you wanting to do more? Or maybe I can ask that another way. Are you still looking for other opportunities? And what do those opportunities look like? Are there any sort of gaps when you look at your sort of areas of core competencies, is there other gaps in terms of technologies or whatever that you'd like to -- you're looking to fill?

Yes. So maybe from an overall investment perspective, whether it be organic or internal or external, what we're really prioritizing is what I said earlier, and that's the keyword here, prioritizing investments that if successful, have the potential to generate revenue as we get to the middle part to end of this decade, whether that be adding on to the 7 existing Phase IIIs from EPKINLY, Rina-S and Acasunlimab. We fully expect to do more for EPKINLY and Rina-S. So that's the internal or organic investment. Externally, it have to tick the same boxes as Rina-S, meaning it have to be approaching Phase III ready, have to be a program where we think we can add substantial value that we can take a differentiated view like we're able to do for Rina-S and really leverage a lot of the investments that we've made in terms of capability build. Rina-S checked all of these boxes. If we find something that likewise checks these boxes again, it's something we will pursue. We're not going to chase and do a deal just for the sake of doing a deal. But it's something we'll certainly remain open to. So what you're hearing from me is in terms of significant outlay of capital. It's really not going to, in my opinion, not going to be focused on a technology-driven deal. If that were to come along as part of the deal, that all the better, but that's not going to be the driver of any larger BD or M&A. We'll continue to do smaller BD deals like we have historically over the last 5 or 6 years to bring in-house additional tools and capabilities into our research and discovery, and we'll continue to do those, but those are more on the smaller side. Larger ones will be focused on mid- to later-stage product opportunities in oncology.

And putting words into your mouth potentially, those feel like quite a high bar criteria, all things going well with Rina-S, I think most people would agree that the returns on that, if it hits where you're hitting a pretty decent. So is it fair to say there's not a huge number of those opportunities around? Or are there constantly things to be looking at?

So I think it's fair to say that there's not a lot of these around. You have to start your work early, right? You have to be starting your work early, like I just said, you have to be tracking programs as they enter the clinic and look for programs where you can potentially take a differentiated view based upon our core expertise, our core expertise in antibodies. We know a fair amount about ADCs based upon TIVDAK, particularly in the gynecological oncology space. So it's about looking early and looking for things where we can take a differentiated view and potentially act quickly. We took the view with Rina-S when we announced the deal that this was Phase III ready. Others may not have taken that view and wanted to see more data. We took the view that it was Phase III ready. And so far, it's tracking in that direction. Again, as I highlighted, when talking about Rina-S earlier, we announced the deal in April. We indicated we intended to start the first Phase III in 2025 in PRC, and we've been able to bring that start of the phase -- first Phase III -- start that first Phase III start into 2024. So it's not going to be easy, but we're going to keep on trying to look for things. Again, we're not going to chase and do a deal just for the sake of doing a deal.

And in terms of capital allocation, you obviously did a buyback in 2024. What's the -- well, should we expect more of this in the future?

Yes. So the priorities are what I said. It's really investing, number one, back into the business from an internal R&D perspective, particularly, again, prioritizing Phase II registration trials or Phase III trials. And then secondly, the BD or M&A topic we just discussed. Those are very clearly priorities #1 and 2. After we evaluate those opportunities, we'll make a determination if we should be returning capital to shareholders. I would say right now, it's not necessarily top of the agenda.

I realize we're a little bit ahead of time. I've exhausted my list of you here. I don't know, is there anything else that we should have touched on?

Yes. What I would encourage everybody to sort of think about Genmab is really the totality of the business in terms of the proven track record, number one. There, I'd highlight the 8 approved medicines we have. Sixof those are royalty-based, two are being co-commercialized and co-developed, have those 8 approved medicines. In terms of the royalty business, there's 3 additional products that potentially will generate royalties for us that are either in Phase III development or have completed Phase III development. You have Mim8 with Novo Nordisk. You have inclacumab with Pfizer, and you have another product from Lundbeck that just they announced the other day is going to go into Phase III development. We have the 8 products on the market, these 3 additional royalty medicines that are in Phase III or beyond development, and we have our 2 wholly-owned 100% owned products in Phase III development in the form of GEN1046 and Acasunlimab. So we have that track record of the 8 coupled with the strong foundation and the growth opportunities I just highlighted in terms of generating very significant revenue growth for us moving forward. So I'd encourage everyone to look at the totality of the business we've created, again, that proven track record, that very, very solid foundation from a technology perspective, team perspective, capabilities, pipeline, super strong foundation, which is fueling, I think, some pretty exciting growth opportunities here for Genmab moving forward.

Great. Thank you very much.

Thank you very much Jon. Thank you.