Genmab A/S (NASDAQ:GMAB) Q2 2023 Earnings Call Transcript August 3, 2023

Genmab A/S misses on earnings expectations. Reported EPS is $0.3 EPS, expectations were $0.31.

Operator: Hello, and welcome to Genmab’s Second Quarter 2023 Financial Results Conference Call. As a reminder, this conference call is being recorded. During this telephone conference, you may be presented with forward-looking statements that include words such as believes, anticipates, plans, or expects. Actual results may differ materially, for example, as a result of delays or and successful development projects. Genmab is not under any obligation to update statements regarding the future nor to confirm such statements in relation to actual results unless this is required by law. Please also note that Genmab may hold your personal data as indicated by you as part of our Investor Relations outreach activities in order to update you on Genmab going forward. Please refer to our website for more information on Genmab and our privacy policy. I would now like to hand the conference over to your first speaker today, Jan van de Winkel. Please go ahead.

Jan van de Winkel: Hello, and welcome to Genmab’s conference call to discuss our financial results for the period ending June 30, 2023. With me today to present these results is our CFO, Anthony Pagano. For the Q&A, we will be joined by our Chief Development Officer, Judith Klimovsky; and our Chief Operating Officer, Anthony Mancini. As already said, we will be making forward-looking statements, so please keep that in mind as we go through this call. During today’s presentation, we will reference products being developed under some of our strategic collaborations. And this slide acknowledges those relationships. In May, EPKINLY became the first T-cell engaging bispecific antibody approved for use in the U.S. for third line plus diffuse large B-cell lymphoma.

With this approval, we achieved an important milestone, both for Genmab and most importantly, for patients with third line plus diffuse large B-cell lymphoma who are in need of an innovative treatment option administered subcutaneously. Our teams, along with our partner AbbVie, were in place and fully prepared prior to launch. Now they are actively engaging key stakeholders, and we are encouraged by the overall positive response we have received as we deliver EPKINLY to appropriate patients. As we look forward to the potential for additional opportunities for EPKINLY as we work with AbbVie to progress development into a variety of patient populations and treatment settings. The third line plus diffuse large B-cell lymphoma indication is the first step to potentially establishing EPKINLY as the core therapy across diffuse large B-cell lymphoma, follicular lymphoma and beyond.

EPKINLY’s approval is also a testament to our team’s dedication to turn novel science into medicine and to develop differentiated antibody therapeutics with the goal of improving the lives of patients. It is the third approved therapy to be developed using our proprietary DuoBody technology. And overall, it’s the seventh medicine based on our innovation. I would like to thank the patients and investigators who took part in the EPCORE NHL-1 trial, that was the basis for this approval, our partners at AbbVie for an excellent collaboration and the unstoppable team at Genmab responsible for the discovery, development and now commercialization of EPKINLY. Let’s now turn to our other recent highlights. In June, we announced that epcoritamab has been added to the NCCN guidelines for B-cell lymphomas with a Category 2A designation.

As these guidelines are an important resource for providing U.S. health care providers with the information they need to make optimal treatment decisions, we were pleased that they were updated to include epcoritamab so soon after approval. Looking beyond the U.S. approval, we were pleased to announce in July that AbbVie received a positive opinion from the CHMP, recommending the conditional marketing authorization of epcoritamab for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma after two or more lines of systemic therapy. And if approved, epcoritamab would become the first and only subcutaneous bispecific antibody conditionally approved in Europe as a monotherapy in this indication. As I mentioned, together with AbbVie, we are advancing a robust clinical development program for epcoritamab across B-cell malignancies, including diffuse large B-cell lymphoma and follicular lymphoma.

And to this end, also in June, we announced positive top line results from the follicular lymphoma cohort of the Phase 1/2 EPCORE NHL-1 trial. The results showed an overall response rate of 82% which exceeded the protocol prespecified threshold for efficacy. The observed median duration of response was not reached and no new safety signals were observed. These results are encouraging for patients with relapsed or refractory follicular lymphoma that are in need of new treatment options. And based on the data, together with AbbVie, we will engage with global regulatory authorities to determine next steps. The full results will be submitted for presentation at a future medical congress. As we noted last quarter, we have data presentations at a number of recent medical conferences covering a variety of our investigational antibody therapeutics, including epcoritamab.

We also continued to grow our pipeline last quarter with an IND submission for GEN3017 or DuoBody-CD3xCD30, which has potential in hematological malignancies. Turning to other programs that incorporate our innovation. Last month, Janssen announced that they had received positive CHMP opinions for both TALVEY or talquetamab and TECVAYLI, both of which were created via our DuoBody platform. The CHMP recommended conditional marketing authorization for TALVEY as monotherapy for patients that relapsed or refractory multiple myeloma who have received at least three prior therapies, including an immunomodulatory agent, a proteasome inhibitor, and an anti-CD38 antibody and have demonstrated disease progression on the last therapy. The CHMP also recommended the approval of a type 2 variation for teclistamab, providing a reduced biweekly dosing schedule of 1.5 milligram per kilogram every other week in patients who have achieved a complete response or better for 6 months or longer.

DARZALEX also continues to redefine the treatment of multiple myeloma. As you have seen, J&J’s net sales for Dara were up 22% over the first half of 2022, and that is generating DKK 4.9 billion in royalties for us, contributing materially to our robust financials. I will now hand over the call to Anthony Pagano to take you through our first half 2023 financial results. Anthony, the floor is yours.

Anthony Pagano : Great. Thanks, Jan. We continue to strengthen our foundation over the first half of the year. Of course, top of mind for everyone is the FDA approval of EPKINLY. And as we’ll see, our financials continue to be strong. Recurring revenues grew by 27% in H1. This was principally driven by strong royalties from DARZALEX and other approved medicines. Our solid balance sheet, growing recurring revenues and significant underlying profitability allow us to continue to invest in our business and our pipeline in a very focused and disciplined way. And an important part of this has been to continue to build the team and capabilities that we need to succeed. So let’s take a look at those revenues in a bit more detail. We saw robust performance for DARZALEX in H1.

As you can see in the chart, overall, net sales grew by 22%. That’s net sales of nearly $4.7 billion, which translates to over DKK 4.9 billion in royalty revenue. This growth was driven by continued share gains and strong performance in the frontline setting. So DARZALEX remains a key driver of our revenue. In H1, we grew total revenue to over DKK 7 billion. And as I’ve already highlighted, that included a 27% increase in our recurring revenue. And to be clear, that’s on a reported basis. Excluding some minor FX headwinds, recurring revenues grew by 30% on an operational basis. And as a reminder, last year’s H1 results make for a somewhat tough comparator. Given that in 2022 we had significant FX tailwinds, and this is primarily related to the benefit from the DARZALEX currency hedge rate.

The strong operational growth in H1 for this year was driven by higher DARZALEX royalties as well as royalties from other products. Taken together, this really illustrates the power of our recurring revenue. In Q2, we also recognized net product sales for EPKINLY, and we’re pleased with how the initial launch is progressing so far. It’s, of course, super early days at this stage, so we shouldn’t draw too many conclusions from a single month of sales. Nevertheless, we remain excited by EPCORE’s potential to transform the lives of patients. And as we said, we’re taking our strong recurring revenue and investing in a highly focused way, as you can see on the next slide. In line with our significant growth opportunities, total OpEx grew 45% in H1.

In R&D, we’ve accelerated our investment into our product portfolio, especially the advancement and expansion of EPCORE and other pipeline projects. We’ve also further strengthened our team to enhance our commercial capabilities and support our expanding pipeline. And of course, that includes the launch of EPKINLY. Now let’s take a look at our financials as a whole. Here, you can see our summary P&L. Revenue came in at over DKK 7 billion, that’s up 34% on last year. As mentioned, that’s negatively impacted by a small FX headwind. Total expenses were $5.1 billion with 70% being R&D and 30% SG&A. And even with this increased investment, we’re still delivering over $1.9 billion of operating profit. Moving to our net financial items. Here, we have a gain of $75 million so far in 2023, and this is driven by two partially offsetting items.

First, we’ve got the weakening of the U.S. dollar against the Danish kroner, and that’s negatively impacting the value of our cash and investments. On the other side of the ledger, we have an increase in interest income due to higher effective interest rates. Then we have tax expense of $426 million which equates to an effective tax rate of 21.2%. And that brings us to our net profit of nearly DKK $1.6 billion. So as you can see, strong financial performance for H1. With that, let’s take a minute to revisit our robust financial framework. First off, our revenue profile on the left. With the approval of EPKINLY in May, we now have seven products on the market that are generating significant recurring revenues. And we see a clear path to potentially expand the number of approved products with the potential approval of Janssen’s talquetamab.

Taken together, we expect significant cash inflows for the years to come. Moving to the right, we remain focused in our investments as we evolve our organization for continued success. At the top of the list is accelerating and expanding EPCORE, but that’s just one of the exciting opportunities that provide us with a compelling rationale for increasing investment. As we’ve told you before, if we want to seize these meaningful opportunities, we’ve got to invest, and that’s exactly what we’re doing. So with that background, let’s take a look at our guidance. As you will have seen, we updated our 2023 guidance last week. We now expect our revenue to be in a range of DKK 15.5 billion to DKK 16.5 billion. And that’s an increase to both the bottom and top end of our range.

This increase is driven by continued strong recurring revenue growth, including higher total royalty revenues from DARZALEX and other marketed products. For DARZALEX, following strong H1 performance, we’ve increased the low end of our guidance for net sales and now estimate a range of $9.8 billion to $10 billion. Turning to our investments. As always, we remain focused on executing against our strategy and key priorities and, at the same time, creating long-term value. So we’re investing to capture the significant opportunities in front of us. And here, we’re increasing our OpEx guidance to a range of DKK 10.4 billion to DKK 10.9 billion. This is primarily related to increased and accelerated investment in epcoritamab and the progression of other pipeline products.

More specifically, for EPCORE, our higher investment reflects increased and accelerated dose optimization work to potentially achieve a best-in-class profile. We are also accelerating our investment for our frontline trial in FL. As you know, this is a significant value driver for the EPCORE franchise, and we’re doing everything we can to accelerate this opportunity. Putting all this together, we’re on track to deliver another year of substantial operating profit in a range of DKK 4.5 billion to DKK 6 billion. And finally, as a reminder, note that these projections are based on an assumed U.S. dollar/Danish kroner exchange rate of DKK 6.80. Now let me provide a few closing remarks. In summary, we’ve had a very solid H1. We’ve created growing recurring revenue streams, including now two of our own products on the market, and that gives us a strong backbone of significant underlying profitability.

And we’re investing those revenues in a highly focused way to realize our vision and to capitalize on the very significant growth opportunities in front of us. And on that note, I’m going to hand you back over to Jan.

Jan van de Winkel: Thank you, Anthony. In the first half of 2023, we continue to work towards our 2030 vision where our KYSO antibody medicines are fundamentally transforming the lives of people with cancer and other serious diseases. We are very excited about the launch of EPKINLY in the U.S. and we look forward to working with AbbVie to continue to expand EPCORE development with new studies. We are collaborating with our partner Seagen, to establish Tivdak as a clear choice for patients with metastatic cervical cancer. And together, we will continue to broaden the tisotumab vedotin clinical development program in cervical cancer and beyond. We also continue to look forward to data from the clinical expansion cohorts and progress to the next steps for both DuoBody molecules targeting 4-1BB that are in development with BioNTech.

And we anticipate expanding and advancing other early-stage programs, including the potential for additional INDs or CTAs this year. Fundamental to our success is having the right team and culture in place. We intend to continue to scale Genmab based on our planned portfolio developments and business needs. Finally, we will continue to leverage our solid financial base to support our growth. We have a lot to look forward to in the second half of the year. That ends our presentation of Genmab’s financial results for the first half of 2023. Operator, please open the call for questions.

Q&A Session

Operator: [Operator Instructions]. Your first question comes from the line of Vikram Purohit from Morgan Stanley.

Vikram Purohit : We had two on the EPKINLY launch. First, we were just wondering if you could provide some color on the types of patients you’ve been able to treat so far in the first phase of the launch. And any kind of patient characteristics you’re observing in the patients you have been able to treat and also in the centers that these patients are coming from? And then secondly, on a related note, how are you benchmarking the early phase of the launch internally versus other second line plus DLBCL launches? And how are you framing what you’re seeing in terms of the launch trajectory here versus other recent launches in the space?

Jan van de Winkel: Thanks, Vikram, for the questions. Let’s move them over to Anthony Mancini. I think he can give you color on both of the questions. Anthony, floor is yours.

Anthony Mancini : Thanks, Jan, and thanks, Vikram, for the question. First, we’re really, really pleased with the EPKINLY launch uptake to date. I think your question around characterizing a little bit the types of patients that we’re seeing here in these early — first early phases is very difficult at this point. But because really claims data is pretty limited, but I can give you some sort of sense qualitatively of what we’re hearing. But it’s really in line with our expectations with about a 27-day head start versus competition. So most of the early patients starts here or some of the patients — some of the early patient starts are later-line refractory patients, and most of them are coming from centers we’ve identified as key accounts, mostly academic centers for the most part.

But as the first FDA-approved T-cell engaging bispecific antibody for the treatment of third line plus DLBCL, really what customers are telling us is they’re enthusiastic about the power of EPKINLY overall responses, the manageable safety profile and the seamless and efficient step-up dosing and subcutaneous administration that goes along with it. And this — what’s encouraging is this is really consistent with what we’ve been hearing prelaunch from opinion leaders and clinical trial sites. And in our view, reinforces a really differentiated profile for EPKINLY. In terms of framing the launch uptake relative to other launches in this space, I think it’s important to ground ourselves in the size of this first indication. So this third line plus relapsed/refractory DLBCL population, it’s a modest one with about 3,600 patients in the U.S. And it’s really an important starting point from which we will build to help make EPKINLY a core therapy across B-cell malignancies in collaboration with AbbVie.

I think that covers it.

Operator: Your next question comes from the line of Peter Verdult from Citi.

Peter Verdult : Peter Verdult, Citi. Two questions, if I can or just a first one, if that’s the rule. Jan, firstly, just on GEN3014 HexaBody-CD38. We understand J&J is telling investors that an opt-in decision could potentially come in 2023. Now I realize you’re not going to comment on that per se, but could you just remind us how the open label head-to-head trial is progressing in terms of recruitment event rate and your level of confidence that HexaBody can indeed raise the bar in myeloma versus Darzalex in a clinically meaningful way? And then just quickly on 42 and 46. Can you provide an update on what data you expect to have in-house versus presented at scientific congress in 2023?

Jan van de Winkel: Thanks, Peter, for the questions. For the HexaBody-CD38 program, I can tell you happily that we actually are very actively recruiting the head-to-head arms of the trial, but the optimal dose of HexaBody-CD38 versus subcu data, but we will still need this year for recruitment of the patients. So we will — we actually anticipate that next year in ’24, we’ll have the readout of that head-to-head study. But of course, we can, on an ongoing basis, basis under confidentiality, share data with J&J. But we still believe that it’s very likely that they want to see all the data or at least a meaningful part of the data of the head-to-head. But it’s progressing well. And now in multiple countries, we have initiated new sites and new countries and I think we’re doing fine there.

And once you have all these patients and, Peter, we will be happy to give you a good update to the market. Then for 1042, 1046, what we actually want to do is come to a decision point this year to progress one or both of these programs to the next stage of clinical development. And that is the key target for this year, Peter. So we will actually internally, hopefully, get the data to allow us to take a rational decision to move to the next stage. And then it is possible to share that data at a medical conference this year when we are in time for an abstract, et cetera, maybe a late breaker for conference. We will also try to present that data publicly. What we could, of course, do is take the decision internally and then potentially flag it up at like an event like the post-ASH update event from Genmab after ASH, which we usually do to actually educate the market on key steps happening with the company.

But it’s very likely that the full complement of data for either of these programs or both would be presented in 2024 because we may simply not make the exact deadline this year. But we hope that we at least got the data to allow for a rational decision to move to potential next steps together with BioNTech. That’s where I probably want to leave it at, Peter, at this point.

Operator: Your next question comes from the line of Sachin Jain from Bank of America.

Sachin Jain : Actually, two follow-ups on the same topics that Peter had. So the first one is, do you have any — a best sense, Jan, on of how many patients you may have on HexaBody-CD38 by year-end should J&J want to make it? So just to get a sense of how quickly that patient recruitment is going. If you could just give us a sense of where you think you might be by the end of this year? And then just secondly. To clarify, I think it was clear in the answer. But you’re basically ruling out a conference presentation for 1042, 1046 this year and your working assumptions to update us on your post-ASH R&D event.

Jan van de Winkel: Thanks, Sachin, for the questions. For the head-to-head, I mean, I cannot give you a prediction because recruitment is not linear. Usually, once you build momentum, Sachin, this goes quicker and quicker. So hopefully, by year-end, we will have many of the patients in the head-to-head arms of the trial with HexaBody-CD38, but probably not all. I think there’s still some remaining patients, whether that will be enough and follow-up to your and Peter’s question for J&J, I don’t know. I mean it’s their decision, but I would still stick with 2024 as the more likely, I think, point where we have enough data in order for J&J to take a good decision on potential next steps. Then for 1042,1046, now it’s very likely that the bulk of the data will be described in ’24 at our medical conference.

But I think for at least one of those, we hope to present also some data this year at our medical conference. Those are key medical conferences in the second term, in the last part of the fourth quarter of this year, which we could potentially use for data dissemination. But at this moment, we don’t have that data. But I think it’s a very good likelihood that we will actually be able to share at least some data at our medical conference, Sachin, and then potentially further color on the data at our post-ASH events. But it’s speculation at this point. We are very rapidly now collecting data. That is going well. We are preparing for next steps for sure for a number of programs, but we need the data in order to allow for rationalization. That’s probably…

Sachin Jain : Can I just take one follow-on? Can you remind me of your target recruitment number of patients for the HexaBody-CD38 head-to-head?

Jan van de Winkel: Yes, yes.

Sachin Jain : Sorry, I just at — what the number of patients you’re targeting to recruit in that study?

Jan van de Winkel: Yes. We don’t — we haven’t made that public, Sachin, but we are well on track basically for targeting the number we want to actually recruit there. But we haven’t put it in the public domain, Sachin.

Operator: And the question comes from the line of Michael Schmidt from Guggenheim Partners.

Michael Schmidt : I just had a follow-up on EPKINLY. Obviously, understanding that the initial indication is sort of a small opportunity in third-line plus DLBCL. But could you talk about some of the cadence of possible label expansions? I know the second-line Phase 3 trial, I believe, is fully enrolled now. And you also started the first-line DLBCL trial recently. Just curious sort of how we should think about the pace of possible label expansions into larger markets. And then a follow-up. Your competitor, Roche, is marketing sort of this fixed duration treatment aggressively for their CD20 bispecific antibodies. Just curious if that is something that is under consideration for EPKINLY as well or if you’re sticking with the continuous treatment in the earlier patient populations?

Jan van de Winkel: Thanks, Michael. I will hand over both questions to Judith, who’s online here. Judith, you can start with giving your color. And then I can potentially add to that, if needed. Judith, please go ahead.

Judith Klimovsky : Thank you. Yes, thank you, Jan. So for the label expansion, as you are aware, we announced the positive opinion from CHMP for the third line in LBCL or DLBCL. We also announced that we filed in Japan for similar indication. So this potentially gave more opportunities to reach patients in need in different territories with the initial indication. Additionally, I mean, we announced the positive data on follicular lymphoma, third-line plus. And we are engaging with health authorities, as Jan well alluded, which will provide potentially additional expansion to other B-cell malignancies, in this case, FL. Additionally, we have three Phase 3 studies of epco in large B-cell lymphoma as per today in follicular lymphoma, in relapsed/refractory in combination with R2, in first line DLBCL in combination with R-CHOP based on the stellar data that we made public at ASCO and EHA.

And we have in the third line or above, epco versus [GemO-R] or BR. So all these Phase 3 studies will allow us more opportunities to compare to full approval or expand the indications. So this is with regard to question 1. With regard to question 2, I would like to make a clarification first that the treatment until progression is disease and setting dependent. So the treatment of the peer progression was important in the third-line plus for DLBCL because of the nature of the disease and our belief that sustained aggregation of B-cells with the CD20 and it could be beneficial for patients. Having said that, we also did MRD in this study that showed that a good proportion of patients, around 50%, get MRD negativity. So we allowed or we suggest that the right thing to do is to drill the progression in the belief that these patients will continue to get benefit.

But if it’s a decision from the side of the physician and — the treating physician and the patient. In other settings, though, the duration is more limited, and this is related to earlier lines where there, we treat for one year or two years, depending on the disease of the setting. So I hope this helps.

Jan van de Winkel: Thanks, Judith. Maybe, Anthony Mancini, you can add some further color on the fixed duration question. Anthony Mancini, please go ahead.

Anthony Mancini : Yes. Thanks, Jan, and thanks, Michael, for the question. I think in third-line plus DLBCL, as Judith sort of described, the setting matters and difficult-to-treat patients have already undergone several unsuccessful fixed-duration therapies. So maintaining treatment until progression effectively provides, in our view, patients the greatest chance for a positive outcome. And with EPKINLY, obviously, this is done with, even with a treated progression approach with less chair time per patient through the first six months compared to the competition. And as Judith outlined earlier, in other disease settings and earlier lines with less heavily pretreated patients for exploring fixed duration regimens for EPKINLY.

Operator: The next question comes from the line of Asthika Goonewardene from Truist.

Asthika Goonewardene : Congrats on delivering on another solid quarter. Just a quick financial one. Does the increased OpEx guidance for 2023 include an increase in expenditure for GEN1042 or GEN1046? And then in your first month of sales of EPKINLY, I know — I don’t want to tease too much out of the data here, but have you had any patients from the community centers that are being referred to the academic center? Just wondering if you were seeing that in the early data already. And lastly, on the potential data that you hope to present the 1040 to 1046 later this year, if you do, do that, would that be in just one tumor type? Or could there be a possibility of more than one tumor type there?

Jan van de Winkel: Thanks, Asthika, for the questions. The first one, I will let hand over to Anthony Pagano. The second one to Anthony Mancini, but let me take the third one. I think right now we are collecting data in multiple cohorts, Asthika. So we haven’t decided yet. In this cohort, we have an update to make a decision to move to the next step. But very likely in the public presentation, it will probably be a very — one or maximally two settings, I think, for 1042 and 1046. But that’s not decided yet, but that at least gives you some direction. So maybe we can move over to Anthony Pagano for the question on the OpEx guidance.

Anthony Pagano : Sure. Yes. To be clear, the vast majority of the higher investment is reflective of what I said in my comments where I did a double-click for you in terms of the increased and accelerated investment in for epcoritamab. The comments in the text of our company announcement and to report around other pipeline products, there’s nothing there for any of the products that’s individually significant or material. I really would like you to ought to leave with is really that the increase in acceleration, the vast majority of it is absolutely down to epcoritamab and the key drivers supporting that, that I outlined in my opening remarks.

Jan van de Winkel: Thanks, Anthony. Maybe move over to Anthony Mancini for the EPKINLY question on community center patients versus academic, a bit more color there, potentially.

Anthony Mancini : Yes. Really, Asthika, at this point in the launch, the vast majority of the starts are coming from the academic centers and hospitals at this point. So I’ll leave it at that. And as more data matures, we’ll be able to share a little bit more around the setting detail.

Operator: Your next question comes from the line of Emily Field from Barclays.

Emily Field : And I was just checking here because I want to be sure. So for EPKINLY, Roche said last week that they’ve had some leads from the regulators that the POLARIX regimen needs to be even given that it’s moving towards standard of care, it should be a comparator arm for any first-line DLBCL trials. Is that your take? And is that included in your first-line programs? Or just any thoughts on the first-line development there. And then also a question. I know that the legal language of EPKINLY is — should be hospitalize, and that did allow for some flexibility for health care professionals to determine the appropriate level of monitoring. So just any color that you could give on how that’s being enacted in the real-world setting and just what the regulatory process is to getting that hospitalization requirement removed?

Jan van de Winkel: Thank you, Emily, for very good questions. So I will hand over both to Judith, first. And then maybe Anthony Mancini can give — can add to the second one, if needed. Judith, why don’t you give it a go?

Judith Klimovsky : Yes. Thank you, Jan, and thank you, Emily. I will start with the second one with regard to the hospitalization. As you well alluded, the wording there should be hospitalized, not must be hospitalized. However, they should is — that the patient should be monitored close to the hospital or close to that setting. With regard to the removal of the hospitalization. As we flagged up in several calls, there was an evolving analysis with epcoritamab or EPKINLY in terms of the requirements for patient monitoring. And in the expansion for the first approval, we made the day 15, 24 hours hospitalization mandatory. In parallel, in new studies, we made it optional, leaving it to the patient and investigator to discuss whether they can be accessible to a hospital, but not in the hospital.

So we made the hospitalization optional and gave the option to treat it in the outpatient setting as well. Additionally, we have a study ongoing, testing only this outpatient setting. So we will have data accrued as we go with both options, patients in the hospital or patients remaining in close proximity to the hospital. This is with regard to question 2. The question 1 is regarding to POLIVY, was that the question?

Emily Field : Yes. And just whether that needs to be the comparator arm?

Judith Klimovsky : Yes, yes, yes. So again, thank you for the question. So we — POLIVY is one option in first line that — or POLIVY is in conjunction with rituximab and chemotherapy. We have the Phase 3 ongoing study is epcoritamab versus R-CHOP because R-CHOP is the gold standard of care as well. So POLIVY is an option as first line. But as you will know, the approval was based on PFS without OS benefit. So some sites might choose R-CHOP for some patients, some sites might not. So the standard of care R- CHOP is very strong. And — but in conjunction with that, we have in one of our, we call, basket studies, we are exploring very actively the potential combination of epcoritamab with POLIVY rituximab and chemotherapy. And this is ongoing.

Jan van de Winkel: Thanks, Judith. So, I think it’s clear. I mean this is an option. This is not mandatory. So it’s different from what I think you’ve heard from our competitors.

Operator: And the question comes from the line of Yaron Werber from Cowen.

Yaron Werber : I have a couple of questions. Maybe the first one, just thinking about is there any way to get an accelerated approval into first-line DLBCL or the only way is to really do a full study? I know you’re doing a combination that you alluded to, plus or minus R-CHOP in first line. I think that you’re probably going to have data in about four years or so, but is there any chance to get an earlier approval? And then secondly, on 3014, are you able to release data publicly before J&J’s opt-in option? Or are you just going to wait for J&J to make a decision and only then present the data? Because I believe it’s your data set. So do you drive the public disclosure of the data?

Jan van de Winkel: Thanks for the questions. I think the first question, I will hand over to Judith to see whether there are options for potential more aggressive, more rapid approval for the first-line diffuse large B-cell lymphoma setting. But let me take the second one, for 3014 for HexaBody-CD38. It’s our data, and yes, we can release data without the agreement of J&J for sure. So it’s the option of Genmab to do that. And Judith, maybe you can handle the first question.

Judith Klimovsky : Yes. So the regulation related to accelerated approval to [indiscernible] are very delineated and first-line DLBCL that is upholding this category.

Operator: Your next question comes from the line of Xian Deng from UBS.

Xian Deng : Two please, both on epcoritamab, potentially additional indications. So the first one, for follicular lymphoma. In frontline, I can see you have a trial, the Phase 3 trial is in combination with R2, but you also have a lot of other trials in follicular lymphoma with either Rituxan or just with Revlimid. So just wondering how do you actually think about the combination partner in follicular lymphoma in general, especially how does it work in terms of giving this is a much more indolent disease. Are you more cautious with combination with other drugs? The second question is on CLL. I’m just wondering if you could remind us where are you with epcoritamab in CLL? And what is your general strategy here? Are you aiming to potentially target the high-risk patients like Richter’s syndrome first? Or you’re talking here allcomers?

Jan van de Winkel: Excellent questions, Xian, and I will hand them both over to Judith, who can address them really well. Judith?

Judith Klimovsky : Yes. Thank you. So the Phase 3 ongoing in relapsed/refractory follicular lymphoma is combination with R2 based on the approved R2 regimen for this particular disease. And this is based, I would say, a very, very nice data of the combination of R2 plus EPCORE that was presented in the oral setting at ASCO and EHA this year that showed an unprecedented level of efficacy and in particular, in those difficult to treat patients, patients with both 24 or double refractory. So the Phase 3 is comparing R2, which is approved in this line and setting and versus R2 EPCORE. And it’s given by the fact that there is no restriction for EPCORE to be infused with rituximab because it’s a different epitope, so we are not restricted by that.

So this is the Phase 3 ongoing. Additionally, we are testing in a Phase 1b/2 epcoritumab plus lenalidomide only without rituximab to have this data as well, but the Phase 3 is in combination with R2, which is the approved regimen. So this is with regard to R2. With regard to CLL and Richter, we have a study ongoing. We present the very good data and Richter as well in CLL in patients heavily positive, all of them failing ibrutinib and most of them BCL2 as well, most of them with [PLC] or mutations. So — and they are — we found a very interesting and encouraging single agent activity. In both diseases, the strategy is to combine to make it even better for patients and to combine with [indiscernible], ibrutinib or R-CHOP based on the disease.

In both disease, this study is actively ongoing, and we plan to share more data in these two very promising settings in coming congress.

Operator: Your next question comes from the line of Peter Welford from Jefferies.

Peter Welford : Just two quick ones. Firstly, a financial one. Just trying to understand the split of the P&L in terms of — should we be thinking about on the COGS side of things that there will be a cost of good? My understanding was that you pay away 50% of the gross profit to AbbVie in the cost of goods side. So a little bit confused, I guess, as to why that isn’t there and how you — whether you’re going to disclose that in the future? And just on the split of costs. The guidance we’ve seem to suggest relatively modest second half versus first half increase. So were there any sort of one-offs at all in the 2Q R&D that we should think about to explain the phasing? And then secondly, I just wanted to come back to your comments that Anthony made in the opening remarks about the cost where you said that some of the reason this increase in accelerated dose optimization work for ATCO to improve the profile.

Just curious if you can go into any more detail on that in terms of whether the increase in accelerated dose optimization work mean?

Jan van de Winkel: Thanks, Peter. And I will ask Anthony Pagano to address both of these questions and potentially Judith to step in on the second one. Anthony, why don’t you get going?

Anthony Pagano : Yes, of course. In terms of the COGS and the elements being there, the cost of the actual product as well as the pay away to AbbVie, Peter, you’re exactly spot on. Our view for Q2 was that it wasn’t material. If you had a chance to read the detailed financials, we disclosed how we put that in SG&A for this quarter. Moving forward, that will most likely be broken out as a separate line. Your second question around phasing. I wouldn’t say there’s nothing or anything too specific as it relates to the phasing. What you would have seen in Q1, our year-over-year growth rate was 51%. Now on a year-to-date basis, that has moderated a little bit now down to 45%. As you would imagine, as we think about H2 of last year, that’s when we really started to put our foot on the gas pedal as it relates to a number of investment opportunities, including further building out the U.S. market in anticipation of the launch for epcoritamab.

So I think the comps in the second half of the year in terms of OpEx will be in a different place relative to where they were in H1. And as it relates to specifically around phasing, there wasn’t anything necessarily one-off-ish in the first half of the year. Judith, if you want to take a — address Peter’s question on the dose optimization?

Judith Klimovsky : Yes, sure. Thank you. As Anthony expressed, it is accelerating means accelerating enrollment and increasing the number of patients to potentially provide the data to support EPKINLY as best-in-class in terms of safety and efficacy.

Jan van de Winkel: In follicular lymphoma.

Judith Klimovsky : In follicular lymphoma. Correct.

Jan van de Winkel: Yes. Thanks, Judith. I think, Peter, that’s probably where we can leave it now.

Peter Welford : Sorry, just to be clear, though. There’s no plans then to make any fundamental sort of any changes beyond in terms of the device or in terms of the drug itself. This is purely profiled from the work you’ve talked about before in terms of outpatient and in terms of follicular lymphoma data.

Jan van de Winkel: This is the step-up dosing regimen, Peter. This is just basically to get a more optimal regimen for follicular lymphoma.

Operator: We will take our next question. And the question comes from the line of Matthew Phipps from William Blair.

Matthew Phipps : I know it can be tough this early in the launch, but was any of — can you contribute any of the EPKINLY to channel inventory that you might think modulate here in the near term? And then the EPCORE DLBCL 1 Phase 3 trial recently changed on clinical trials, like pushing back the primary completion from 2024 to 2028. Wondering if that is what we should expect or if there’s kind of other analysis that could come before that?

Jan van de Winkel: Matt, thanks very much for the questions. I missed the first one. I must admit, I couldn’t hear that. Maybe you can repeat the first one. The second one can definitely be answered by Judith for sure. But can you repeat the first one, please?

Matthew Phipps : For EPKINLY, was there any kind of excessive channel inventory build initially that can sometimes happen right when the drug launches?

Jan van de Winkel: Okay. All right. Thanks, Matt. The first one, maybe you can — Anthony Pagano can address that one.

Anthony Pagano : Yes, sure. Happy to. As I highlighted in my opening remarks, look, I mean, we’re super pleased with the launch so far. The team is in place. They’re executing well. Feedback has been positive, as Anthony Mancini highlighted. Look, I think we’re talking about really pretty small numbers here, around a month of sales. There’s nothing in the reported number, Matthew, that I would kind of be pointing you to really, really focus on it at this stage. And again, I think it’s just small numbers, a month of sales. Nothing that I would particularly get you to focus on other than what’s already been said on today’s call.

Jan van de Winkel: Thanks, Anthony. And maybe, Judith, a bit of color on the time line change on the EPCORE diffused large B-cell lymphoma trial?

Judith Klimovsky : Yes. I think in event-driven studies endpoint at event driven, you can have projections but you follow the course of events and project completion date based on cost events. This is the only comment I can make.

Operator: Your question comes from the line of Rajan Sharma from Goldman Sachs.

Rajan Sharma : Just two. So firstly, on I&I, and obviously, that’s an area that you’re expanding into. So could you just kind of help us understand where we may get some additional clarity on plans there and whether we may be able to get some clarity on what the specific asset for the first asset in I&I will be and whether that will be this year? And then secondly, just on the additional investment behind EPCORE. Can you just help us understand how much of that is actually kind of a pull forward from what you’re expecting to do in future years versus how much is kind of absolutely new?

Jan van de Winkel: Thanks, Rajan, for the questions. Let me give you a bit of color on I&I. It’s very early days. We have a number of programs internally which are progressing preclinically and then they need to be tested in animal models. And then the best ones will be ready potentially for clinical work. So that is a few years from clinical introduction, Rajan. We also have, of course, the argenx partnership, where we actually have two concrete targets we’re working on, one for I&I, one for cancer. But we are now creating the lead molecule. So also that is a few years of clinical introduction. So we will actually update you in the future on the exact phasing, but we are only going for differentiated, truly differentiated antibody-based therapeutic candidates here.

But the good thing is we have a number of programs already ongoing at Genmab and others starting up now with argenx. But the timing is still very much dependent on how effectively we can move forward to the preclinical and animal testing phase. And animal tested, some of the candidates are going to be slaughtered pretty quickly. So we are moving rapidly, but it’s still a few years from clinical introduction in patients. Then for EPCORE, the investment question, maybe to answer Anthony Pagano.

Anthony Pagano : Yes. As we think about investing in our business, we’re always on the lookout for opportunities, particularly for epcoritamab, where we can expand and accelerate. And I outlined for you the areas which we’ve done that for so far this year in my opening remarks. As I think about the increase here, look, I think this is a little bit on the margin, we’re probably talking about relatively small numbers. And I would say that the vast majority of this is probably expansion of work and acceleration. And again, we’re always looking for opportunities where it makes sense to, from an investment perspective, to expand and accelerate, particularly on epcoritamab, we’re going to do just that. So I know, I’m not really giving you a precise number. But I would leave you with those remarks and really for you to think about this as more of our investment framework and how we think about investing in our products. And the majority would be around expansion.

Operator: Your final question comes from the line of Jonathan Chang from Leerink.

Faisal Khurshid : This is Faisal Khurshid on for Jonathan. Just wanted to ask if you could sort of remind us, how are you thinking about the potential positioning of opportunities for GEN1046 compared to GEN1042? For example, like how could these products be potentially complementary to each other versus potentially being like more of an either or type of decision?

Jan van de Winkel: That is a very detailed question. Basically, I can give a very lengthy answer, but what I said publicly up to now is that we believe that we can actually position them differently in different settings, in different tumors based on what we see in the clinic right now. And that will become clearer, hopefully, in the coming months when we are going to share data, I hope. Or we speak about the data at our post-ASH events. But the short version is we think that we can actually position them in different tumors in different settings. So there will not be an either or, but they will be very clearly developed, we hope, in different therapeutic sessions.

Operator: I would like to hand back for any closing remarks.

Jan van de Winkel: So thank you for calling in today to discuss Genmab’s financial results for the first half of 2023. If you have additional questions, please reach out to our Investor Relations team. And we hope that you all stay safe and remain healthy and very much look forward to speaking with you again soon.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.