Genmab A/S (GMAB) 2005 Q3 法說會逐字稿

Good morning, everyone. Welcome, ladies and gentlemen, to the Genmab conference call. At this time I would like to inform you that this conference is being recorded, and that participants are in a listen-only mode. At the request of the Company, we will open up the conference for questions and answers after today's presentation.

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 delayed or unsuccessful development projects. Genmab is not under an obligation to update statements regarding the future, nor to confirm such statements in relation to actual results, unless this is required by law.

I would now like to turn the conference over to the CEO, Dr. Lisa Drakeman. Please go ahead.

Good afternoon to all of you in Europe. Good morning to any of you calling in from North America. Thank you for joining the Genmab nine-month results conference call.

If you've seen our press release, you'll know that our net loss and operating loss are approximately the same in 2005 as they were in the first nine months of 2004. We also have told you an updated guidance, that we expect to have a little more cash than we originally guided. This is primarily a result of the Serono Partnership, which we signed in this quarter, where we did receive $70m though a combination of upfront payment and equity investment.

We had some very good news in the third quarter, in addition to the partnership with Serono for HuMax-CD4. We also started a Phase II study with HuMax-CD20, to treat patients with active rheumatoid arthritis. And we have positive interim results from HuMax-CD20 in a chronic lymphocytic leukemia study that was presented in September.

In addition, we're very happy to appoint Bo Kruse as Chief Financial Officer of Genmab in October.

With that, I would like to open up this call for any questions that you may have. Bo is on the call with me today.

Thank you. The question and answer session will begin at this time. [OPERATOR INSTRUCTIONS]. And our first question today will come from Sally Bennett from ING. Please go ahead.

Hi, afternoon. Sally Bennett from ING. Three questions, if I may. First of all, Lisa, I'm just wondering if you could perhaps give us an update on your partnering strategy, just your current thoughts at the moment around CD20 and EGF.

Secondly, just in view of Serono's statement yesterday, I'm just wondering if you can give us any details about change of control clauses that there might be in the HuMax-CD4 agreement? And just give us reassurance that you are in control of the clinical studies, and that if Serono is distracted in any way, that that won't have an impact on the timelines.

And just finally, I don't know if you can give us any update on whether the five complete responses that you saw in the CLL study, if any of those have been confirmed yet? Thanks.

Okay. Thank you, Sally. Let's start with the partnering strategy. As you know, in September we did have very encouraging data in the interim results with the CLL study for HuMax-CD20. In addition, in roughly the same time period, there was a decision or an authorization from the U.S. Patent Office to revoke the Cabilly patent, which some people thought might be a hindrance to Genmab in marketing HuMax-CD20 in the United States.

We have, on the basis of those two items, decided that we'd like to reopen our partnering discussions. We have had active partnering discussions all along on the CD20 antibody. And we chose to reopen negotiations because we felt that we had some negotiating leverage, after those two events, that we had not had before. As a result of that, although we originally said we hoped to sign a partnership for either the CD20 or the EGFr antibodies in 2005, we're now projecting that we won't sign these partnerships until next year.

There's another factor at play as well on the partnering thinking. Both of those products are being prepared for pivotal clinical studies. We do have a fast-track designation for the HuMax-CD20. We are in discussions actively with the FDA about the study design. We really hope that we can begin that study early next year. With the EGFr study, we are doing the scale-up work now on the manufacturing, and would have material in the spring. So we also hope that we can start the HuMax-EGFr pivotal study in refractory head and neck cancer patients some time in the second quarter.

Now, when we look around at products that are available for partnering, and the really significant interest not only in partnering generally but in cancer products, it seems to us that we'll have very valuable products when these two [inaudible]. And this is another reason, even though there won't be a lot of change in the clinical status of the products between now and when we have the permission to start the Phase III, we feel that we can potentially get a better deal for the Company and for its shareholders by waiting until some time in 2006.

To move on to that, speaking also about the Serono partnership. If you have a concern, Sally, that there's a change of control provision that would allow a new owner to automatically terminate the contract or that would allow us to do that, that's not the case. The agreements are assignable. And also, as you recall, we are running the pivotal study in the CD4 patients with CTCL who have failed on Targretin and one other therapy.

And that was actually something that was very important to us in the partnership, that in order to try to stay on the timeline, that we keep the process going that we had already initiated. So that has not changed and it's contractually provided for. We wouldn't expect that to change, even if Serono were to merge or be acquired by another company.

Finally, on the HuMax-CD20 CLL data, we do expect to present that on December 12 at ASH, and that -- until that time, I don't think we will be having any update.

Does that answer your questions, Sally?

Yes. Just on the change of control clause, have you got any provisions -- for example, if Serono was taken over but you felt that the program wouldn't be a priority in the new enlarged group, are there any provisions in there for you on that basis?

Well, the budgets are normally approved in the year before the budget year. So we would expect that some time before the end of 2005 we would be approving next year's budget. And the budget can't be changed without our written consent once it's approved. So I think if Serono were to be acquired, we wouldn't expect that to be finalized before some time in 2006, realistically. So it seems to me that next year's budget will already be settled by the end of next year. We should be very close to the end of the pivotal study. Now, they obviously have some activities under Phase II, but their budget would have been set as well.

Okay. Thanks, Lisa.

And at this time we have one question in the queue. [OPERATOR INSTRUCTIONS]. And at this time we will turn to Merrill Lynch's Peter Welford for our next question. Please go ahead.

Hi. I've got a few questions. I'll hop back in the queue after a few, though. Firstly, I've got a financial question. The cash flow item, of roughly 259m, that's booked as cash flow from financing inflow in the third quarter. Am I correct in assuming - I just want to check the [indiscernible] - that is the financial -- it's the money you raised from Serono acquiring your stock, excluding the premium they paid. And the premium is actually going through the higher -- the cash flow from operations because it's coming through as a deferred income/working capital movement. Can I just -- I just want to check that.

[Inaudible]

And then moving on -- sorry?

It's Bo speaking. It is correct.

So that's right. That's great. Okay. And then I just wanted to check the other part, which is that the future milestones you receive from Serono, for example on approval, let's say, of CD4, which seems like an obvious one, do you perceive that that will also be spread over future years, perhaps over the anticipated life of the product? Or is it more likely, given that you would no longer be an active role -- have an active role as such in the drug at that point, that it will be booked at that time, do you think, as a cash in revenue booking because you'll obviously cease to have involvement in the program?

Peter, we should probably give you a caveat but there's no way to predict what will happen with the guidelines in the future, with the accounting guidelines. But, Bo, what do you think the result would be under the current guidelines, to the best of our knowledge?

To the best of our knowledge, future milestones would be based on the things that we have fully achieved and delivered. So that would be to be taken to income right away.

Okay. So future milestones should probably go straight to income?

In the P&L [inaudible], yes.

Okay, okay. And then just, if I can, a couple of questions on products, I may as well do them now. Is it possible at all for you to get any of the NHL data, do you think, at ASH? Have you got [indiscernible] for a late breaking in that, or is it just likely to be the CLL and NCTCL that will be present at ASH at this time now?

I think that we would hope to update you before the end of the year, Peter, on duration of response in the NHL patients. We actually did submit that [at ASH] but you may have noticed we've been selected for three presentations at ASH. I guess it's hard to quibble that the fourth one wasn't expected. So some time between now and December we'll make sure that we tell you what's happening with those patients.

Okay. And then just two other questions. The first, what do you believe at this point is now likely to be the first antibodies now that you'll put into Phase I at this stage? And also, I was wondering - it's related to that, I guess - could you give us an update on how the Roche collaboration is going?

Generally, more pre-clinical projects are expected. The next Genmab antibody in the clinic probably will be a Roche program, because they've been working on them for some time. We are preparing both HuMax-HepC and HuMax-CD38 for clinical trials. We're doing the manufacturing and cell banking work now. So both of those are scheduled to move forward and I can't predict the exact timing at the moment. Maybe one of them by the end of this year -- next year, excuse me, 2006, or maybe very early 2007.

Okay, that's great. Thank you.

And at this time there are no further questions. [OPERATOR INSTRUCTIONS]. And we will now move to Ivo Staijen from HBM Partners for our next question. Please go ahead.

Yes, good morning. I have a question regarding the pivotal -- the planned pivotal trials for HuMax-CD20. Have you already decided exactly what indication this one is going to be?

Oh, yes, Ivo. That's an important question. If you remember, last year in December we received a fast-track designation from the U.S. FDA for CLL patients who have failed fludarabine. So these are patients who either didn't tolerate fludarabine, never had a response to it, or had a response that lasted less than six months. And my understanding from the Medical Team is that fludarabine is the most common first line therapy, that's what the FDA believes.

So the first study that we've been discussing with the FDA will be a group of patients who have failed fludarabine, which means that they're pretty sick, these patients, and that's why this is a fast track. Now, our current thinking is that we will probably test several doses because our Phase I/II study that -- only giving us a few patients information from some of the lower doses.

We may also decide to treat them a little longer. If you were to look, for example, at the Cantab study, which is the only approved product for these patients, that's an antibody and those patients received 12 weeks of treatment.

But basically, this should be a relatively modest sized study, I would say between 200 and 300 patients. We would hope to start early next year. Depending on how rapidly we find them, the follow up isn't really that long on these patients because the endpoint we would expect would be objective response rate. Although duration of response would be something we would collect as well.

What we see again, looking at this patient population, is they've relatively short-lived responses with other therapies. So since -- the point of this, it's not a very large study and it shouldn't be a very long study, although I can't give exact timings for it yet. But we hope that we could finish this study within a year and a half or so of starting it.

And is there any plan to start a Rituxan refractory or relapsing study in NHL patients?

We've been thinking about that as well. If you look at our pre-clinical data and also some of our clinical data, HuMax-CD20 does several things. It kills the cells with low-level suppression of the CD20 target. Now, that suggests to us that in addition to diseases like CLL, there might be a population of NHL patients -- because I think some scientists have established that patients are treated and retreated, the ones with follicular lymphoma, the level of CD20 suppression may go down.

In addition to that, it's possible that some of the patients who are treated with rituximab develop antibodies against it, called HACA, human antichimeric antibodies, and that those patients might not have a chance to respond to rituximab. So those look like two populations where there would be a good rationale, even though they would be refractory to rituximab, there might be a good rationale for us trying to treat them successfully. And that's something that's under discussion.

We're also planning to do some laboratory studies to collect some data, to see if in fact this is happening in NHL patients, so that we, again, can establish the rationale for that study.

To conclude that, the first study, pivotal study, would be the CLL?

The fast-track one. And then the next -- the most likely next pivotal study would be patients who are refractory to rituximab. But in both of these cases, we're positioning HuMax-CD20 to go into areas that rituximab isn't serving. But also, potentially, it will have some strengths that rituximab doesn't have and that may reflect in the [bottle] market in the future.

Okay, thank you.

And we will now move back to ING's Sally Bennett for a follow-up question. Please go ahead.

Hi, Lisa. I'm just wondering, since you've obviously had the CLL data and the Cabilly news, and reopened partnering discussions, if you can give us any feel for the kind of response you've had back from partners.

I can tell you that it's very, very active. I can't comment on how many parties we're actively talking to at the moment. It's just -- it's tough to say the numbers have gone up really very dramatically. So I think that what we suspected was the case seems to be the case, there's a tremendous interest from the people we're already talking to, and also from some parties that perhaps we'd had discussions with but that weren't as interested in the past as they are now.

Okay, thanks.

And at this time we have one question remaining in the queue and that's a follow-on from Peter Welford from Merrill Lynch. Please go ahead.

Hi, sorry about this. It's a very simple follow-on question. I just remembered, you said that there was three abstracts that are being accepted at ASH. One of them is the CLL data from CD20, the other one is the non-cutaneous data in CD4. Could you say -- what is the third abstract? Is that related to the other two?

No, it's HuMax-CD38. We'll have some new data being presented on HuMax-CD38.

Okay, that's great. That was my only question. Thank you very much.

And at this time there are no further questions. Dr. Drakeman, Mr. Kruse, I would like to turn the call back to you for any additional or closing remarks.

Thank you all for joining us today. We appreciate your interest in the Company and we look forward to talking to you again in the future. Thank you and goodbye.

Thank you, everyone, for your participation. That does conclude today's conference and at this time you may now disconnect.