Genmab A/S (GMAB) 2006 Q2 法說會逐字稿

Good day, and welcome, ladies and gentlemen, to Genmab's Conference Call. At this time, I would like to inform you that this conference is being recorded, and that the participants are in a listen only mode.

[OPERATOR INSTRUCTIONS]

During this telephone conference you may be presented with forward-looking statements that include words such as believe, anticipates, plans or expects. Actual results may differ materially, for example, as a result of delayed or unsuccessful 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.

I will now turn the conference over to Dr. Lisa Drakeman, Chief Executive Officer for Genmab. Please go ahead, ma'am.

Hello, and thank you for joining the Genmab Six Months Results Conference Call today. I think you've probably seen the release and know that our results are slightly ahead of expectation, including a noticeably higher revenue number than we had 12 months ago. In addition to those results, we have reiterated our guidance that we announced earlier in the year, and we've also had some very important events in the last three months.

Most notably, we have begun two Phase III studies with HuMax-CD20, one of them in patients who have chronic lymphocytic leukemia, who are refractory to other therapies. These are patients who don't really have a good therapy available to them and whom we really hope that we'll be able to do something for in the study. In addition, we've started a pivotal study in patients who have follicular non-Hodgkin's lymphoma, who have failed existing therapy. So two sets of refractory population.

We hope these studies provide us with data about a year from now, so we're looking forward to that. We also had some very interesting news about HuMax-CD38 showing that it has some activity that has not been observed in other CD38 antibodies. We continue to prepare that antibody for clinical trial.

With that, I would like to open the call for questions from all of you who have joined us today. For your information, Bo Kruse, Genmab's Chief Financial Officer, is also on the call. Thank you.

Thank you, Ms. Drakeman.

[OPERATOR INSTRUCTIONS]

And our first question comes from Sally Bennett with Piper Jaffray. Please go ahead.

Oh hi, good afternoon, just three questions please. Firstly, just looking for an update on HuMax-EGFr, can we assume that you're very shortly due to start that pivotal study? Just secondly, Lisa, I'm just wondering if you can give us any update on your partnering discussions for CD20, and just whether your impression of the USPTO's decision on [Cabilly] last weekend, whether that has any implications for your discussions?

And just finally, Bo, a quick question on the financials, I'm just a bit surprised that your R&D has gone done versus Q1 '06 and versus Q2 '05. And to me -- the fact you're keeping your guidance, I mean just checking, obviously that means quite a big ramp up in R&D in the third and fourth quarter?

Okay Sally, why don't we take your questions in order? With HuMax-EGFr, you're right, we are hopefully going to start the Phase III study fairly soon. I think at this point we're just looking at all the regulatory stuff that we need to take to be able to start treating patients. In terms of the partnering, HuMax-CD20 I believe remains a very attractive unpartnered product. We continue to talk to a really significant number of potential partners, we have tried to select some parties for more intensive discussions. Just because we're talking to so many it's not reasonable to have those kinds of discussions with all of them.

As I said in the past, there are between 10 and 20 credible potential partners for this product from a variety of companies internationally. So our partnering discussions continue, they're very active and we're optimistic about the type of transaction that we could sign as a result of them. I think the only comment I can make on the Patent Office action is that it's probably as expected. For those of you who haven't seen it, there has been another Office action related to the second Cabilly patent. The patent office has again revoked all claims of the patent on the grounds of double patenting.

And they've also -- in that letter, which they sent to the patent holder and which they've published on their website, answered all the comments or answered the arguments that were made by the patent holder. So I think that it's as expected since they had revoked all the claims [one] prior time, I also think that's a positive for us in our discussions, so we're pleased with that. And now, I think I'd hand off to Bo to talk about our spending pattern.

Yes, and it is right that when you look at the R&D expenses for the second quarter of 2006, they are slightly below the second quarter of last year, and they're actually a little bit lower than what we saw and reported in the first quarter of this year. This is basically due to, when you look at the company, if you compare to the first quarter, it basically due to a couple of one-time charges of ordinary and also expected development expenses in the first quarter. So there's no real trend in the expenses.

If you look further ahead and you look at the second half, then you would expect R&D expenses to ramp up, as you say, in the third and the fourth quarter, since we have the two CD20 pivotal trials up and running. And also for most of the period we would expect to have the EGFr pivotal trial ongoing. So, it was [in fact] a more expensive half.

Okay. Lisa, I don't know whether I can just push you a bit further and -- I mean in terms of -- I know it's always very difficult to give time lines, do you think it's reasonable to expect that you could sign a deal on CD20 this year?

You know Sally, I've worked pretty hard to not give a guidance on that and there's a reason for it. If we were to say that we hope to sign this year, that might give some leverage to our negotiating partners, because they would feel that we had to meet that promise. So, we're doing everything we can to get the right partnership signed, but it's probably not the time for us to discuss exactly when we expect to do that.

Okay. Thanks, very much.

And we'll take our next question from Erica Whittaker with Merrill Lynch. Please go ahead.

Oh hi there, regarding the U.S. Patent Office action on Cabilly II, what are the next steps that you expect in this saga I suppose? And secondly just a minor question on financials for Bo, do you still expect a net positive financial income for the full year? And I guess my last question, just on partnering, is there -- do you feel that there's particular data that you'd want to have available before signing a partnering deal on CD20 that might put you in a stronger negotiating position? Or do you feel that your position is strong enough now?

Well let's start with the question about the Patent Office action, I'm not a patent lawyer, I can only tell you what my understanding as a person who's read some of the documents. I believe that Genentech has two months to respond to the Patent Office. And again, if you read the letter, you'll notice it says at the end that they can't have any extra time there, so we think that will take about two months. Then I don't think that the Patent Office has any time line to respond to that.

And my understanding is they have a chance to response then eventually have a response from the Patent Office. I believe they have one more response time because there was a second reexamination request, but again I'm not an expert in the process. So there are still some Office action steps to go before the patent is finally revoked and then they probably have two appeal possibilities, so the process will take a while. But we don't expect that we can come to the market before 2008, so we do have some time to watch this happen.

And you actually believe that the patent will be revoked?

You know in my personal opinion, not as a legal opinion, I think it's highly likely based on what we've read in the Patent Office letters so far. The examiner was extremely careful and seems to believe there was double patenting. So I think it's highly likely, but we'll have to wait and see. I understand that in their second quarter report, Genentech made a comment that they expected that the next Office action would also revoke the patent, so it seems that perhaps they believe that also.

Okay.

Then to go to your question about partnering, I don't think we need more data, Erica, to tell you the truth. You know there's really a tremendous interest in this antibody. I mean we're very optimistic that the antibody will provide benefits not previously available to the patients retreating.

We think that there's a lot of data that points in that direction. And I think that, if you look at what's available for licensing versus the number of parties that would like to license in a late stage product -- I think that what we have is probably considered very valuable. But again I can't promise anything at this point in time.

Okay, thanks.

Then I think it's Bo's turn.

Yes.

Yes when we look at the financial items, it's a good question will the net financial items be positive for the full year? I think what we have reported is for the second quarter we will turn positive. And looking at the exchange rate and the interest rates for July and even into August, I think it will contribute to making us positive, even on a year-to-date basis. So we still hope to come in positive for the full year.

Okay, thank you.

I think it's also important to point out that these are unrealized losses when we talked about financial losses. And you know we've actually had good interest income from our investments.

Thank you.

[OPERATOR INSTRUCTIONS]

Our next question comes from Pascal Besman with ThinkEquity. Please go ahead.

Hi good morning, Lisa, two quick questions. Did you have a comment at all on Genentech's, decision also on the second quarter call, to proceed with ocrelizumab only in the autoimmune setting? And my second question was, if you could just update us on where we are with the CD4 programs and when we may get data there?

You know the only thing I could say with ocrelizumab, because we don't know very much about it, there isn't much public, is that it looks like Genentech believes it important to have an antibody that's better for patients for chronic therapy. They obviously think the humanized antibody will serve the patients than the chimeric ones. To me, that just provides good support for our human antibody, which we hope comes to the market, even though it'll be in cancer before ocrelizumab. So, I think that it'll be interesting to see what happens with that.

In terms of HuMax-CD4, we haven't really said anything about accrual. I think the Serono said in its second quarter results that they expect to have data sometime early in 2007, maybe around the middle -- end of the first quarter or during the second quarter of 2007. So, I don't think I can add much to that.

Thanks.

And moving onto Peter Welford with Lehman Brothers. Please go ahead, sir.

Hi, I've got a few questions. Firstly on the financials, I'm just wondering if you could tell us what you would expect -- or perhaps this is for Bo, what you would expect the revenues to be in the second half of the year, if we just take into account what is certain, i.e. the Serono mass spend etcetera? Can you give us a guidance on what that would be?

And then secondly on the pipeline, first of all on HuMax-Inflam, can I just confirm, have you sorted out the manufacturing and the transfer etcetera for that? And are you therefore now basically looking at very much the clinical side? And is that really what we're waiting for to be confirmed before we get further information on HuMax-Inflam?

And then HuMax-CD20, if you can give us an update at all on enrollment on the Phase II for RA? I don't know if that's possible. And finally on HuMax-EGFr, Amgen's been increasingly talking about Panitumumab and I wonder whether you had any comments about the positioning of your product potentially, and how you could see it being positioned against Panitumumab? And also how they're sort of conversations about pricing and what they would do with the antibody, are potentially influencing your partnering discussions, if there are discussions with that antibody? Thank you.

Okay, that's a lot.

Sorry.

I tried to write as fast as I could, Peter. Let's ask Bo to go first.

Yes we haven't been very specific on our revenue numbers, we haven't provided an explicit guidance. But you probably know that a good chunk of the revenue is the recognition of the 2005 upfront payment from Serono, and you would expect that to continue through the end of 2007. And also, you know that there would be some research funding from other partnerships, so you could more or less apply some sort of pro rata approach in trying to forecast [the] figures.

Okay, I think that's my turn. Peter, you've asked a series of questions that are a little tough for me, because we haven't released information on a number of them. The HuMax-CD20 enrollment in the RA study, we haven't updated since the spring. I do think it's going well, and we have said we expect to have all the patients sometime this year. So as soon as that study is fully enrolled, I expect we'll make an announcement about it. And obviously, we have to follow the patients for about 24 weeks after the last patient before we have the data available.

On the pipeline and HuMax-Inflam, that's another one we haven't said too much about. We do hope that we can give an update later this year, but I think at this point I can't predict the exact timing of that. And with HuMax-EGFr, positioning-wise, we continue to hope that we'll be able to show some strengths in HuMax-EGFr that differentiate it from the other EGFr antibodies.

And we are designing a Phase III study to hopefully show that there'll be a survival advantage with HuMax-EGFr compared to standard of care in refractory head and neck cancer patients. So our initial position would be one where we'd have some survival data in a patient population that no one else has looked at, or if it's not survival time to progression [inaudible] we'll look at these patients over a longer period of time.

And I think the right average life expectancy for these patients is around three months, so this won't be a really long study, although we don't expect the data until a little later than the HuMax-CD20 data. So, I think that's our most important strategy. We continue to think about other trials like that, and we're hoping that we'll somehow differentiate the antibody, and we're hoping that we'll also start a second study in a different indication later this year.

So we know that our goal is, when we come to market, to be able to show that the antibody is doing things that other products can't. In terms of pricing and discussions with partners, I wouldn't say that any pricing discussions have entered into any partnering discussions at this point.

Okay. Thank you, very much.

[OPERATOR INSTRUCTIONS]

And we have a follow-up question from Erica Whittaker. Please go ahead.

Oh hi there, Lisa, just a follow-up question on the EGFr. You mentioned that for CD20 you had 10 to 20 credible potential partners you were in discussions with, could you give us a number of credible potential partners for EGFr?

We just haven't talked about that, Erica, we do have quite a few people we're talking to, but we haven't discussed in the same way that we have with the HuMax-CD20.

Okay. Thank you.

And our next question comes from Sally Bennett with Piper Jaffray. Please go ahead.

Oh hi, sorry, just to push you a bit more on EGFr, I'm just wondering if you can perhaps guide us towards which product you think it's most likely that you'll be able to sign a deal on first, CD20 or EGFr? I don't whether you can give us that guidance.

It would be good if I could know the answer to that question, Sally. It's a very hard question to answer, because I was a business development person before I was running Genmab, and some transactions take on a life of their own and they move very fast, regardless of when they started. And so, it's very hard to predict how long a partnering discussion will last, and then how long it will take to complete the agreements and finally make an announcement. And so, I'm probably not in a good position to make that prediction.

Okay, thanks.

Sorry.

And it appears there are no further questions. I would now like to turn the call back over to Dr. Lisa Drakeman.

Well, thank you all for joining us today. We appreciate your interest in Genmab, and we look forward to speaking to you again in the future. Thank you, and goodbye.

And that concludes today's teleconference. Thank you for your participation and have a good day.