Genmab A/S (NASDAQ:GMAB) Q3 2023 Earnings Call Transcript

Genmab A/S (NASDAQ:GMAB) Q3 2023 Earnings Call Transcript November 7, 2023

Genmab A/S beats earnings expectations. Reported EPS is $0.47, expectations were $0.34.

Operator: Hello, and welcome to Genmab’s Third 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. 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 September 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; our Chief Operating Officer, Anthony Mancini and our Chief Medical Officer, Tahi Ahmadi. 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. This slide acknowledges those relationships. Genmab’s strong foundation is built on our consistent track record of success.

As we near the end of the year, it’s a good time to reflect on how far we have come as a company even in the last 12 months. We continue to expand our pipeline with new INDs and new product candidates in the clinic. We also matured our pipeline with new clinical trials and positive data readouts. And very excitingly, there are now eight approved medicines that are followed by our innovations, half of which were created with our proprietary DuoBody technology. Epcoritamab which we are codeveloping with AbbVie is also our first medicine to be approved for patients and territories outside the US. These advances are possible because we have a dedicated and unstoppable team at Genmab, an international team that has grown to enable us to continue to evolve into a leading integrated biotech innovation powerhouse.

Let’s now turn to recent key company events. September was an exciting month for epcoritamab as we and AbbVie received approvals in both Japan as EPKINLY and Europe as TEPKINLY. Like the approval in the US earlier in the year, these approvals were important milestones both for our patients and needs and for Genmab as a company. The approval in Japan is especially significant, as we at Genmab are the commercial lead for EPKINLY there. We began growing our presence in Japan in 2019. So we would be ready for just such an opportunity. So we are very pleased to be launching our own product there, especially as EPKINLY as the first and only bispecific antibody approved in Japan to treat adults with certain types of relapsed or refractory large B-cell lymphoma after two or more lines of systemic therapy.

And we are excited to note that in addition to the US, Japan and Europe, epcoritamab has now been approved in Canada and the UK. I’m also happy to announce that once again the broad potential of epcoritamab to become a core therapy for B-cell malignancies will be on display at this year’s prestigious ASH Conference at the end of at the beginning of December. We have had 15 total abstracts accepted for presentation at ASH, two of which are oral presentations. Of the accepted abstracts, four will be initial disclosures of clinical data for epcoritamab including an oral presentation of data from the EPCORE NHL-5 trial of epcoritamab in combination with lenalidomide as treatment for patients with relapsed or refractory diffuse large cell B-cell lymphoma.

This data is further support for EPCORE’s combinability and highlights its potential to move into earlier lines of therapy. HexaBody-CD38 will also be recognized at ASH with a poster presentation on preliminary results from the expansion cohort at the recommended Phase 2 dose of the ongoing Phase 1/2 trial. We are actively enrolling in the head-to-head portion of the trial. We are very encouraged by what we are seeing. And as we said previously, we anticipate to have to have data in 2024. If we look beyond our own pipeline and include all abstracts involving products that are powered by Genmab’s innovations, there are nearly 200 total abstracts accepted for presentation at this year’s ASH meeting 36 of them oral presentations. Now I want to turn to some additional exciting updates on the progress of our maturing proprietary antibody product pipeline.

First, GEN1046. It has cleared to the high bar that we set. We are very pleased to share that we are now engaging with health authorities to determine next steps. Previously, we shared data from an expansion cohort of patients with non-small cell lung cancer who failed prior checkpoint inhibitors. We saw encouraging single-agent activity, but responses are not durable. Based on clinical and strong preclinical data that showed that the combination of GEN1046 plus checkpoint inhibitors resulted in improved efficacy, we embarked on a scientific question, how to most optimally engage 4-1BB activation with checkpoint inhibition? The Phase 2 study of GEN1046 in combination with pembrolizumab in patients with PD-L1 positive non-small cell lung cancer who failed standard of care therapy with an immune checkpoint inhibitor address this question And emerging data from this study has provided us a clear answer.

So far the data from this study indicates that we can combine these two mechanisms and that this leads to improved efficacy. Based on this, we believe there is a clear path forward and we are engaging with health authorities to determine next steps. We look forward to sharing the relevant clinical data at a medical conference in the first half of 2024. As a reminder, we are developing GEN1046 with BioNTech. Moving to Tivdak. We were very pleased that we along with our partner Seagen presented the late-breaking results from the innovaTV 301 trial of tisotumab vedotin in recurrence or metastatic cervical cancer during the presidential Symposium of the Asthma Congress in Madrid in October. This follows the announcement by us and Seagen in September that the trial met its primary endpoint of overall survival.

As a reminder, the results of this trial are intended to serve as both the pivotal confirmatory trial for Tivdak’s accelerated approval in the US as well as to support global regulatory applications. Likewise, Tivdak has also cleared the high bar that we set. We are optimistic about the data, we have seen in head and neck cancer post standard of care. Here, we will actively engage with health authorities on next steps in this indication. Moving to GEN1042. We are also co-developing with BioNTech and we remain very encouraged by the clinical efficacy data that we are seeing across several tumor types. We are currently taking the learning’s from GEN1046 on how we can optimally dose and schedule GEN1042. We need more time to do this so we now anticipate that we will have the data we need to determine next steps for this program in the coming months.

Looking at some of our earlier stage programs, I have a brief update on GEN1047, our DuoBody CD3B7H4. We have now completed dose escalation in the Phase 1/2 trial and have transitioned to dose expansion. This is an important step in progressing our CD3-based bispecific platform in solid tumors. GEN3017 our DuoBody-CD3xCD30 a program that we announced last quarter has now started recruitment for our first-in-human clinical trial. We’re also very pleased to announce another IND submission for 2023 GEN1059, our DuoBody-EpCAMx4-1BB. The first preclinical disclosure for this program which will further leverage our knowledge of 4-1BB also took place at ESMO in October. This bispecific antibody which we are codeveloping with BioNTech has potential in solid tumors.

We anticipate that GEN1059 will enter the clinic in 2024. Finally, as we work to progress these new and existing programs we have also made the decision to seize development of GEN3009, our DuoHexaBody-CD37. This decision was made following its strategic evaluation of the program within the context of our entire portfolio and was not based on any safety or regulatory concerns. Our goal of transforming the lives of patients is always at the center of our decisions and we look forward to continuing to create and develop truly differentiated antibody products. The power of our innovation is reflected in programs that apply our DuoBody technology. Two of these products are Janssen’s Talvey and Rybrevant. In August Talvey was approved in both the US and Europe for relapsed or refractory multiple myeloma making it the fourth approved DuoBody-based bispecific antibody.

Also in August, Janssen submitted an sBLA for Rybrevant followed by a type 2 extension to the EMA in October. Both of these submissions are based on the confirmatory Phase 2 pro longed study. So overall you can see plenty of progress across our business with lots to be excited about as we look forward. And that’s a good note on which to hand over to Anthony Pagano and he will take you through our financials. Anthony the floor is yours.

Anthony Pagano: Great. Thanks, Jan. We continue to strengthen our foundation over the first nine months of the year. Of course, top of mind for everyone are the multiple regulatory approvals for EPKINLY. And as we’ll see our financials continue to be strong. Recurring revenues grew by 22% on a reported basis and impressively 30% on an operational basis. This was principally driven by strong royalties from DARZALEX, along with significant growth from our other seven 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, we need to succeed.

So let’s look at those revenues in a bit more detail. We continued to see strong performance for DARZALEX, during the first nine months of the year. As you can see in the chart, overall, net sales grew by 22%. That’s net sales of nearly $7.2 billion which translates to over DKK 8 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. We grew total revenue to almost DKK 11.8 billion in the first nine months of the year. And as I’ve already highlighted, that included a 22% increase in our recurring revenue. And to be clear, that’s on a reported basis. Excluding some FX headwinds, recurring revenues grew by 30% on an operational basis.

Last year’s results make for a somewhat tough comparator, as we saw pretty significant FX tailwinds, particularly for our royalty revenue. As a reminder, under our DARZALEX agreement, for purposes of calculating our royalties, sales outside the United States are translated to US dollars at a specified annual hedged foreign exchange rate. Operational growth in the first nine months of this year, continued to be strong, driven by higher DARZALEX royalties as well as royalties from our other products, and this really illustrates the power of our recurring revenue. We also recognized the first full quarter of sales for EPKINLY in Q3. And we’re very pleased with how the launch is progressing so far, with around $22 million in net sales for the quarter and $28 million year-to-date.

Overall, our strong recurring revenue growth enables continued highly focused investment, as you can see on the next slide. Back in February, we were very clear that we would continue to invest to capture the opportunities we see in front of us. And that’s exactly what we’ve done, with total OpEx up 42% in the first nine months of the year. At that time back in February, I outlined our top four investment priorities. First, securing a successful EPKINLY launch by, investing in our two key markets, the United States and Japan. Second, continuing to advance our pipeline. Here the lion’s share of our investment is being directed to our most advanced programs including EPKINLY, Tivdak, 1046 and 1042 which are all exciting opportunities for us. Third, investing in our world-class discovery engine, including focused investments to expand our therapeutic focus to include, I&I.

And fourth, foundational investments and enabling functions to achieve required scale. As you can see, our investments continue to be fully in line with these priorities. And as always, we continue to focus on long-term value creation. So with that let’s now take a look at our financials as a whole. Here you can see our summary P&L. Revenue came in at close to DKK11.8 billion. That’s up 26% on last year. As mentioned that’s negatively impacted by FX headwinds. Total expenses were around $8 billion with 71% being R&D and 29% SG&A. And even with the increased investment and significant FX headwinds, we’re still delivering around DKK3.7 billion of operating profit. Moving now to our net financial items. Here we have a gain of over $1 billion so far in 2023.

This is driven by an increase in interest income due to higher effective interest rates, as well as the strengthening of US dollar against the Danish kroner in the first nine months of the year. Then we have tax expense of about $1 billion, which equates to an effective tax rate of 21.2%. And that brings us to our net profit of over DKK3.7 billion. So as you can see continued strong underlying financial performance. 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 and TALVEY in August there are now eight products on the market that are generating recurring revenues for us, and we expect significant cash inflows for the years to come. Moving to the right.

We remain focused on 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 our 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 can see, we are adjusting our 2023 financial guidance. In summary, we are lifting the bottom end of our revenue and OpEx ranges. This is due to current year-to-date performance and the strong US dollar. This, of course, has the effect of tightening the ranges across the board.

We now expect our revenue to be in a range of DKK15.9 billion to DKK16.5 billion. One of the drivers of this increase is higher DARZALEX royalties. So we’ve increased our guidance here to DKK11.3 billion to DKK11.5 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 growth opportunities in front of us. And here we’re increasing the bottom end of our OpEx guidance, to a range of DKK 10.6 billion to DKK 10.9 billion. This is primarily related to increased and accelerated investment in epcoritamab clinical trials and the progression of other pipeline products including, 1046 and Tivdak.

Putting all this together, we’re on track to deliver another year of substantial operating profit in a range of DKK 4.8 billion to nearly DKK 5.8 billion. As a reminder, note that these projections are based on an assumed US dollar-Danish kroner exchange rate of 6.8. And finally, to give you a bit more color on FX, every 10 basis point move in the exchange rate relative to our guidance rate, is worth around DKK 80 million in operating income for the balance of the year. Now before I wrap up, I do want to take a moment to zoom out a bit, and take a look at the very high quality of our revenue profile and the power of our discovery engine. We believe this powerful combination sets us up very well for the long term. First, let’s think about the eight approved medicines, you can see in the box in the top right-hand side of the page, that are powered by our innovation and technology and that are currently generating significant revenues for us.

The top three, are already blockbusters. The remaining five, all have meaningful growth profiles and have the potential to become blockbusters. I can say this with confidence, because we have the clinical development plans and with our partners we’re investing to make this happen. The six royalty-generating products are marketed by pharma and biotech powerhouses, J&J, Novartis and Amgen. And our two proprietary products are co-marketed with AbbVie and Seagen and moving forward we anticipate Pfizer. So, we’re confident we will realize their potential. Now, let me turn to the power of our discovery engine. Of around the four programs we’ve moved into the clinic, eight are already approved and 19 are currently in active clinical development. That’s a pretty strong hit rate and it’s no accident.

We understood very early — we understood very early on, the competitive advantage that our deep antibody science and focused discovery engine could provide. So, we’ve invested more in discovery to increase the number and quality of our product candidates. This includes investment into our proprietary technology platforms. We believe that these diverse tech platforms are key to our success. They allow us to select the most appropriate modality from our toolbox, to tackle a specific disease target. We have four proprietary tech platforms including DuoBody and HexaBody and we also have access to a suite of other technologies, through our partners. This unique position allows us to bring only the products, with the best potential through to development.

It’s our deep insight into antibodies and our proprietary platforms that have helped us discover, build or design the eight products that are currently approved. If all eight currently approved products we’re wholly owned by Genmab, we would have the potential to generate estimated revenue here in 2023 of over $14 billion. As we move forward to a model in the future where we have 100% ownership of our products we believe we can continue this track record of success and further solidify our position as an innovative biotech powerhouse. Now to really wrap up let me provide a few closing remarks. In summary we’ve had a solid first nine months of 2023. 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 : Thanks Anthony. We continue to work towards our goal for the year and are especially excited about the multiple approvals for epcoritamab the positive data for tisotumab vedotin and for the next steps in the development of our earlier-stage product pipeline. I’m also pleased to announce that we will hold our annual R&D update and as data review event on December 12. To ensure the event is accessible to as many people as possible this year’s presentation will be fully virtual. Details are available on our website and we look forward to a lively event. So that ends our presentation of Genmab financial results for the first nine months of 2023. Operator, please open the call for questions.

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Q&A Session

Operator: Thank you. [Operator Instructions] We will now take the first question coming from the line of Vikram Purohit from Morgan Stanley. Please go ahead.

Vikram Purohit : Great. Thank you for taking our question. We had two. First on GEN3014. So as you mentioned there were some clinical data that was recently featured for this program through abstracts that were posted for ASH. And we were wondering what you think are some of the appropriate benchmarks to compare against here on both efficacy and safety to really frame these initial results? And secondly, just to clarify for the R&D update you’ll be hosting alongside ASH. Should we expect to see any updates for GEN1042 or GEN1046 at this event?

Jan van de Winkel : Thanks Vikram for the questions. I will hand over the first to Tahi. He can give you further perspective on the benchmarks which you need to think about for the HexaBody-CD38 program. And then the question on 1042 and 1046 to give a bit more color I will hand it over to Judith. So let’s start with Tahi for the GEN3014. Tahi?

Tahi Ahmadi: Yes. Thank you for the question. So yes in principle of course for daratumumab a benchmark would be the 501 study the study and then also for the subcutaneous administration the study. And it gives you a range of efficacy of somewhere between 30% to 40% with 19% data that can follow-up a little bit more about 90% of the patients having VGPR better. But it’s also important to understand that this data was generated in a setting with completely different treatment paradigm. And presumably the data in today’s world with patients are more heavily treated with other mechanisms may look differently probably less favorable. That’s why there is a head-to-head randomized that we are generating. But broadly speaking, that’s the efficacy benchmark.

And I think it’s important, as you think about comparison from an efficacy point of view not only oral but also the depth of response is going to be very important, and certainly for us, as we look at the data that we have on our hands. The same with safety and I think the safety data issue of course is like small data sets in a different environment. There are some factors that are different in today’s world. For example, one of the patients that had a great past event for say patient with COVID that was certainly not a virus existing at the time when the reference data sets were generated from eight years ago. So again, there I would say, the comparison will come from the randomized data set, which is why we’re doing randomized study.

Jan van de Winkel: Thanks Tahi. And maybe over to Judith, maybe a bit more color on 1042 and 1046, Judith at ASH.

Judith Klimovsky: Yes. Thank you, Jan. So as you alluded Jan, for 1046, we look forward to share the data of study 04 in a Scientific Congress that will — and we are looking for opportunities within the first quarter, second quarter, next year. So this is why the actual data will be presented. We expect at ASH to give a little bit more color directionally where we are going. But as we’ve discussed several times at CT 2021, we presented interesting data of responders in non-small cell lung cancer after failing the current standard of care, which encompass chemo and immunotherapy. Responses were always not durable. Interestingly, enough when we analyze the clinical data, we saw that this responders were concentrated in the period one positive.

And we also saw that these responders, who are mostly in the patients that received a checkpoint inhibitor in the last eight months, based on those data points and the strong preclinical synergy between pembro and 1046 we designed 04 study, which — those results allow us to discuss in future meetings with head authorities next steps. So we will see where we are but we’ve directionally plan to present a little bit more color. This is 1046. 1042, we are very encouraged and what we continue to see not just aligned with the four responders that we presented like CT in head and neck but in other tumor types. We’re also getting the learnings from 1046 in order to understand better how to dose and schedule 4-1BB engagement. So, we may give more color but we need to understand where we are to see to what degree.

And it will be more directionally, because we usually presented in scientific congress before we share with investors and analysts, but we will do our best to directionally give more color.

Jan van de Winkel: Thanks Judith. Vikram, as you can hear, we are literally steaming about all these three programs. So we’re very excited and I think we use the coming months to further position the molecules for next steps and more to come from Genmab in the coming months for sure.

Vikram Purohit: Okay. Thank you.

Jan van de Winkel: Thanks, Vikram.

Operator: Thank you. We will now take the next question from the line of Jonathan Chang from Leerink. Please go ahead.

Jonathan Chang: Hi guys. Thanks for taking my question. First question, can you discuss the progress made with the early EPKINLY launch? What gives you confidence that EPKINLY can become the market leader in the CD20xCD30 class? And then second question on GEN1046, what could a path forward in post-IO lung cancer look like? And can you discuss the opportunity for this program in endometrial cancer? Thank you.

Jan van de Winkel: Thanks, Jonathan, two excellent questions. The first one, I will hand over to Anthony Mancini, who will be delighted to speak about the EPKINLY launch and next steps. And then 1046 maybe Judith can give a bit more color on the both checkpoint inhibitor lung cancer landscape and the way to develop a – potentially develop the molecule. Anthony Mancini?

Anthony Mancini: Thanks, Jan and thanks, Jonathan for the question. As was covered earlier, we’re seeing a really healthy uptake of EPKINLY and really strong execution of our launch plans in the first quarter. And we’re also highly encouraged by the launch momentum and the overall positive feedback that we’re getting from our customers that are using EPKINLY the third line plus DLBCL setting. Our go-to-market approach really look to leverage our first-mover advantage. And the strong early uptake really is driven by a couple of factors that I think give me confidence that we can continue that through the life cycle. First, the solid execution and focus on key accounts. And on key customers from our field-based teams across medical affairs, across the sales team, across our alliance with AbbVie and of course the market access team.

And that really has yielded strong customer engagement and EPKINLY early uptake. And it’s also resulted in rapid access. So what we’re seeing Jonathan is 99% of covered medical lives in the United States with functional access to EPKINLY, which is very encouraging. It’s also very clear that there’s a high unmet need in later line DLBCL and EPKINLY is really filling the void, enabling an off-the-shelf access to T cell engaging innovation across diverse sites of care. We feel very good about being the first FDA-approved T cell engaging bispecific antibody for the treatment of patients with third-line DLBCL but we really understand it’s an important starting point to build from to help EPKINLY become the core therapy across B-cell malignancies.

So overall, we’re highly encouraged by the early response in the market to EPKINLY. And so far uptake has gone better than expected.

Jan van de Winkel: Thanks very much, Anthony. And Jonathan, we intend to actually give further color on the complete development plan this year potentially at the post-ASH event. So we will talk more about how to further build the market and the landscape for use of EPKINLY in the coming years. Now let’s move to Judith for giving a bit more color on the importance of the post checkpoint inhibitor, lung cancer market because we feel that that’s a very strongly growing market with a need for new medicines. Judith?