Genmab A/S (GMAB) 2007 Q2 法說會逐字稿

Good morning and welcome to Genmab's conference call. This 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 delayed or unsuccessful deployment projects. Genmab is under no obligation to update statements regarding the future, nor to confirm such statements in relation to actual results unless this is required by law.

For opening remarks and introductions, I would like to turn the call over to Dr. Lisa Drakeman, Chief Executive Officer of Genmab. Please go ahead, madam.

Hello, and thank you for joining the Genmab second quarter results conference call. We're actually very pleased with, not only the way the quarter, went but also the way the results are. You may have noticed that our loss has narrowed significantly compared to 2006. This year, it was approximately $15.8m; down from $34.4m approximately, 12 months ago.

One of the reasons for that is that we've had such a dramatic increase in revenues. They were $50.7m this year so far, compared to $13.5m last year.

Now, we've actually continued to increase our spending on R&D, as we have so many products in the clinic, three in late-stage development and now seven clinical programs and we've spent 87% of our operating costs on R&D. We remain very focused on the clinical pipeline and on building value for shareholders through that.

As we look forward, we will be developing HuMax-CD4 [ourselves]. That was one of the highlights of the quarter, that we have reacquired that antibody from Merck Serono. We continue to be extremely enthusiastic about the potential to market this program.

We have, over the summer, conducted a number of studies of the best way to market the product, the most efficient and most effective, and believe that we can do the CD4 marketing in a way that fits very well with the HuMax-CD20 co-promotion option. And you may all recall that that sales force, that we could elect to take under the GSK agreement, is subsidized considerably by them. So we believe that we are moving very much in the direction of full commercial operations, assuming the data's positive from the two Phase III [studies].

Speaking of which, we also expanded the plans for HuMax-CD20 during the second quarter. We're adding new disease indications, like multiple sclerosis and diffuse large B-cell lymphoma, so the possibility for a larger market is growing.

In addition to that, we reported positive Phase II data from HuMax-CD20 in rheumatoid arthritis and we've received a significant milestone from GSK as a result of that. We added a Phase II study of HuMax-CD20 in a front line indication, a combination with chemotherapy called CHOP, in previously untreated non-Hodgkin's lymphoma patients.

We also had some very interesting pre-clinical data on HuMax-EGFr. Jan and his team continue to study the mechanisms of this antibody and the other antibodies in our portfolio, in hopes of maximizing the way that we discover and develop our products.

We have, to add to that, some very interesting HuMax-FC data, so the pre-clinical work, the building of the portfolio, the support of the clinical trials has also gone very well during the second quarter.

We move to HuMax-EGFr now, where we started a Phase II study which is a combination of chemotherapy and radiation and the antibody to treat non-small cell lung cancer. This is another expanded indication, another potential expansion of the market.

On August 10, which is just after the close of the quarter, Roche announced, or allowed us to announce, that they have filed an IND for another of their antibodies. This brings us to the seventh clinical program at Genmab.

Now, as we look forward and think about what's coming in the future, we realize that Genmab is at a pivotal time. In the coming few months, we hope to see data from several of our Phase III clinical trials. We also -- in the relatively near future, also expect to see HuMax-EGFr data.

And Genmab has the potential to become a new kind of Company; no longer a development-stage Company. But we have the potential within the next 12 to 18 months of having this data, moving into commercial operations and, hopefully, seeing good revenues coming in from those products as well.

This is a time that we've worked very hard for, since the founding of the Company in 1999. And we feel that the next year is a very important one for Genmab, and also a time of challenge and excitement for the management team, as the Company grows and changes.

We look forward to continuing to develop our programs, to working on expanding into the commercial operations area, to considering other areas where we should look to build the Company. We're very fortunate that we have such a strong cash position as a result of a variety of activities, including our partnering.

We have ended the quarter with approximately $722m, actually, DKK3.98b. So we have the resources, we have the will and we have the excitement to move Genmab forward to benefit patients. And also, over time, we hope we will see the shareholders share in a business that is growing and strong.

Thank you all very much for joining us. I'd now like to open the call for your questions. I do have with me today, Dr. Claus Moller, our Chief Operating Officer, who does oversee the clinical development, Dr. Jan van de Winkel, our Chief Scientific Officer and Bo Kruse, our Chief Financial Officer. So we are in a position to handle whatever you'd like to hear about today.

(OPERATOR INSTRUCTIONS). We'll pause for just a moment. The first question we will take from Philippa Gardner with Lehman Brothers.

Hello there. Good afternoon. I've got a couple of questions, if I could. I just wanted to start with CD20. Now, am I right in thinking that the CLL trial you -- Genmab are actually running this trial because this was started before the GSK deal? And if that's the case, I'm just trying to understand when the recruitment was increased by 50% to 150 patients, and what impact this is going to have on the data, and why we weren't told about this earlier?

Well, let's start by talking about the studies and the way that we run them. We actually have a joint development committee and also a joint steering committee and the job of those committees is to move all the programs forward. Genmab is, in fact, overseeing this study, but the teams decide together what the future will be.

Now in terms of the expansion of the study, this has actually been the subject of considerable discussion with GSK. As you know, if you've seen the information that is in the interim report, the goal is to strengthen the potential data package by adding patients who are both refractory to alemtuzumab and also patients who are intolerant of it. And we're adding enough patients in the study that it would be statistically sound to evaluate both arms.

Now, what happened is that, as we started to enroll patients in the study, they were dividing equally between those two arms. We've actually anticipated that they would fall more into one arm, I think the alemtuzumab refractory arm. So as we've realized what was happening -- the study is still blind; we don't know anything about the data. We simply know which arms the patients were going into.

There has been considerable discussion with our partner about the right way to approach this situation. And, in fact, we are still discussing what the absolute right, final number of patients is but, Claus, tell me if I'm correct, we believe the appropriate interim analysis is probably 66 patients in each arm?

Yes.

Which is why we've initially gone to 150 patients. Now --

And originally we thought that it would distribute unevenly, with about one-third of the patients being in intolerant, [Campath] intolerant, and two-thirds being Campath refractory, which -- and we need approximately 66 patients, based on our calculations, in the primary arm which are the [double] refractory.

And, therefore, we assumed that approximately 100 patients would be enough to get 66 patients in that double refractory arm. It turned out not to be the case and, therefore, to secure that we had 66, as Lisa said, in both the two arms. We have increased the number of patients.

Okay. So when might we get the -- because the data for this was originally expected towards the end of this year, but I'm assuming that's going to [split] some time now into next year, is that a fair assumption?

Well, I think that we expect it early in 2008.

Okay.

Do you think that's -- so, that's not very different. What -- we had hoped that we would have the data before the end of this year. It now looks like it will be early 2008. In terms of time to market, I think that filing and time to market is still projected pretty much on the same schedule, do you agree, Claus?

Yes.

Yes. So nothing's really changed very much, except that we have two possible indications here. So we have two chances at a possible approval, [two labels].

Okay. And can I just ask, are we -- can -- when are we going to be getting the NHL data? Is that still on track for -- in terms of where it was in terms of previous timelines, or is there any impact on that at all?

I think, if you look back at GSK oncology, that they were projecting some time in 2008, probably in the first half. Claus, do you have any comments? I don't believe we have anything more to add beyond that.

No. I think that's probably a fair estimation on how that study is progressing right now.

Okay. And then if I could just have a couple of questions on CD4 as well, which you have now got --?

Do you mind, because we have so many people on the call --

Sure.

-- would you mind if we let a few other people (inaudible)?

Sure. Absolutely. I'll jump back in the queue.

Okay. Thank you.

(OPERATOR INSTRUCTIONS). Moving onto [Ashika Goodwin-Morgan] with Piper Jaffray.

Hello. Sorry, it's actually Richard Parkes from Piper Jaffray. I've got a few --

But we like your new name, Richard. It sounds real exotic.

Yes. I've just got a few questions, mainly related to the expanded CLL study. And I just wanted to confirm that -- have the recruitment criteria to that study been modified or any way? My understanding is that recruitment criteria hasn't changed, is that true?

Claus?

Yes. It's correct. We have specified one thing in terms of how we define the refractory in this, in terms of how many doses you actually have had to receive of a treatment. So, just because you get the first dose of Campath and you feel sick, then you're not necessarily considered a refractory patient. You have to receive a certain number of treatments. So we have modified that a little bit. But, beyond that --

So would -- the recruitment criteria, as far as I understood, was always for refractory patients for --?

Refractory or intolerant, yes.

Refractory or intolerant. And intolerant was defined as patients that were -- had experienced a previous infection or an existing infection --?

Or bulky --

-- or had a bulky [odema].

--[bulky odema], yes.

And that criteria is still the same?

Yes.

Okay. So, when you discussed the 66 patients in each group, that's -- those two -- that 66 doesn't add up to 150. I'm assuming the other 18 patients are those patients that have had previous or existing infections that make them ineligible for Campath, is that the right assumption?

Or, for some reason, do not comply according to the protocol with the inclusion criteria.

Okay.

Or (inaudible) patient --

It's just that it's basically a margin for safety. That's why I was saying the actual number is a little bit under discussion.

Okay. And in terms of -- I just wanted to clarify an assumption that I have made. So my assumption is that the original recruitment criteria -- recruitment target was for 100 patients. Given the statements you've made earlier this year in terms of your optimism of seeing the data by the end of the year, my assumption is you must have met that original target ahead of expectations. Is that a correct assumption to make?

I think you're asking whether we have more than 100 patients?

And I think that's fair to say. Yes. I think it's fair to say yes and we have been saying over the summer that we're very, very close. The summer didn't turn out to be a good recruitment time, which is understandable. But we -- the answer is that there's a lot of enthusiasm --

But I think it's also important to understand that, in the beginning of a study like this, these patients are rare, to the extent that it's not like you decide to have 15 of these patients that are double refractory. And therefore we exhaust the [site] and then it takes a little while before they have a new patient that has been refractory to -- [for] therapy and have been refractory to Campath and are progressing therefore.

So, therefore, at the sites we start out with, recruitment is slower now and we -- whereas the sites that have been opened in the second quarter this year is the ones that are now providing.

And just finally, I just wanted to confirm that you are blinded to the efficacy data, and there's no single site or single physician that's recruited more than five or so patients and, therefore, would have any view on the trends in terms of efficacy?

Correct.

Okay. Great. Thanks very much.

And moving onto the next question, we'll hear a question from Guillaum van Renter with Canaccord Adams.

Yes. Hello guys. Actually, I think I have a question for Bo. I saw in your balance sheet that you have roughly 93% of your cash and cash equivalent in marketable securities. And I was wondering whether you could give more details on what type of securities your cash [is invested] in and, basically, what's the associated risk?

Yes. The marketable securities would mainly consist of government bonds and corporate bonds, all in the investment-grade category, and with a relatively modest duration. So we feel that we have put together an overall portfolio with a very limited risk.

Okay. And one additional question, actually, with regards to your R&D expenses for the year. Could you actually give us a rough idea of how much you are going to spend by the end of the year?

We have not provided any specific figures on the total R&D for 2007, but you can see that we have increased by 17% in the first quarter to the second quarter. And we experienced -- expect a reasonably high activity level in the -- all of the second half, basically.

If you also look --

Okay.

-- at our -- the guidance and our operating loss, we have consistently spent over 84% of our budget on R&D, [for years].

Okay. Okay. That's great. Thanks a lot.

Jason Kantor with RBC Capital Markets.

Hello. Thanks for taking my question. Two questions. You said that you have a whole list of late-stage trials, with news flow coming in the near term. I'm wondering if you could just list through those, just so we can be clear what to expect?

And also, now that you've reacquired the CD4 product, could you just briefly tell us what you think the market opportunity is for that product?

Okay, I'd be happy to. Late-stage trials, Claus, can you quickly summarize the Phase III studies for us?

Yes. We have a study ongoing in (inaudible) refractory cutaneous T-cell lymphoma patients and that study was consisting of a part A and a part B, and this part D study is now ongoing which is supposed to recruit 77 patients.

And we expect to -- if we can get that study up and running, and we have asked for some modifications of the protocol that we were struggling with Serono with from the beginning of this year. And we now seem to be getting through the regulatory resources for -- pretty quickly. That will help increase enrolment in this study so we can, hopefully, within a reasonable period of time, get the remaining patients into that protocol.

In addition to that study, the cutaneous T-cell lymphoma, we will have to start testing, or we want to start testing our CD4 antibody in other combination in cutaneous T-cell lymphoma. Especially, we would like to go into more front line-type of therapy, to give it in combination with [a proven] therapy. And we hope to, some time next year, to start first studies with such a combination. And then we are also looking into the possibility of combining with other T-cell therapies, such as [Zahas].

In non-cutaneous, in the [nodal] T-cell lymphomas, there is currently a very small investigator-initiated study that were started by Serono. They had a couple of investigators [who] were allowed to start by Serono in three sites in Europe, where they combine the chemotherapy combination, CHOP, with the CD4 antibody. That protocol is, I think, a very good idea.

I think to do it as an investigator-initiated study in three sites in Italy and Switzerland, may not be the most aggressive way forward, and we are looking aggressively into seeing if we can put together a larger, potentially pivotal, Phase II protocol for nodal T-cell lymphomas, that we can hopefully get up and running next year, especially if we have, [obviously] then, at some -- that time point, some results from the few patients that may be treated by the investigator-initiated study.

So, we have some pretty extensive plans for this compound now. But we're working on them. We haven't had the drop back for more than a very short period of time. But, of course, we have had ideas along the period of time where Serono was responsible for the work and, therefore, it's not coming like something absolutely new that we have to start new protocols.

My question was with regard to late-stage clinical data releases that are coming, not necessarily for the CD4 program, but (inaudible) --

Let me do just a quick overview of those.

HuMax-CD20, we have a pivotal study in chronic lymphocytic leukemia, which now has two possible sets of results; one for patients who [fell down] alemtuzumab were intolerant. That data, we think we'll see early next years.

Also with HuMax-CD20, we have a non-Hodgkin's lymphoma Phase III study for patients who are refractory to rituximab. That data, we hope to see in the first half of next year.

With HuMax-CD4, we've just mentioned that we have the ongoing pivotal study. We have said previously that the recruitment has been slower than we had hoped, but Claus and his team have been putting together some amendments to help speed it up. We can't project exactly. Claus, are you comfortable with the timing on the CD4 projection, with the new amendments we're hoping to add?

I think it's probably going to allow us to have data in the first half of next year.

Okay. Then, with HuMax-EGFr, we're treating head and neck cancer patients who have failed other therapy. That is a survival study, and even though the survival's fairly short, the data won't come as fast, I should say the anticipated survival normally. So, I don't think we expect data before the end of next year. Is that fair, Claus, for HuMax-EGFr?

Yes. Correct.

But, basically, this is the end of August, so we're talking about in the next 15 months, we hope to see data from all of these studies in Phase III.

I should move onto your market question. Claus actually provided you a nice overview of all the possible uses of HuMax-CD4. What you think the potential market if the early and late-stage uses come into play if the non-cutaneous T-cell lymphoma product works, where there is currently no approved therapy for that disease?

We think that market opportunity is probably around $500m, worldwide. It's not a huge program. It is an orphan drug. Based on the costs of creating the therapy, we think that the pricing would be fairly significant and that would be in line with other products for T-cell lymphoma. So that's how we come up with that market.

Thank you.

And now we will hear from Melissa Gallagher with Bear Stearns.

Hello there. I'm going back to the CD20 CLL trial. I was just wondering -- I believe you have Fast Track status for the CLL indication. I just wanted to check whether that's just for refractory patients, or if it's also for ineligible patients? Because I notice in the interim report you describe the other patients as ineligible rather than intolerant. And -- yes, first of all, that was the point.

And if that is the case, obviously, I'm still not clear as to why you needed to increase the population if, all along, you were looking at this mixed bag of patients. So why do you need to increase the size? If you could just clarify that for me please?

Let me start on increasing question, Melissa. It's because, statistically, we were not allowed to combine them for analysis. They always had to be analyzed separately.

Okay.

And we assumed that they were going to fall out in such a way that we could do that in one arm, which is the refractory.

Okay.

And then, Claus, do you want to comment on the Fast Track status?

Yes. We have for -- basically, for both of them, since both of them are addressing an unmet medical need. But the analytical or intolerant is more tricky to define because there's no, you can say, written guideline for how to secure that a patient is actually [ineligible], or how do you document that? So, that -- I would say, if we were only going with that population, we would have a more shaky situation.

But if we come with both populations at the same time, I'd say [see] if we treat double refractory patients, 66 patients, we have a very nice response rate; more than the 25% you have stipulated [and they last] four months. And you see that if we treat patients that are clearly, they are being refractory and obviously intolerant because they have bulky disease of other regions, intolerant or ineligible for Campath. You see we get, whatever, also plus 25% response rate. So, we would like to apply for Fast Track approval of these two indications for CLL patients.

I think that's a pretty straightforward way to move on from a regulatory perspective. If I only came with the Campath innovative [or slash] intolerant, I think it would be a much more bumpy road to go by, because they would ask me to, much more carefully, define why these ones were if the double refractory also have a very nice response rate. I think I'm almost [home].

Okay. Okay. That makes a lot more sense now. And can I quickly ask you a quick question on the milestone you received on the RA data? Was that just going to be received over this -- will we only see this one quarter, or is it being allocated over a number of quarters?

The milestone payment is fully recognized here in the second quarter, and it was paid in July.

Perfect. Thank you.

Now we'll hear from Richard Parkes, Piper Jaffray.

Good afternoon again. I thought I'd come back on as myself again this time. I just got a couple of points of clarification. Firstly, I think you stated earlier on that you felt that the timelines to market in CLL wouldn't necessarily have changed, following the expansion of the study. I think what you said previously is that you could potentially see an approval and launch in CLL by the end of 2008. With a fair prevailing wind in terms of recruitment in the study, do you still think that's a possibility?

I think I'll ask Claus to answer that.

It's -- to give a precise answer is very difficult, but at the time-point when I know my last patient is in of the 66, I know that it's a 24-week period of time before the last patient is out. I need to do my data analysis, and then I need to put together the PLA for the filing. And I need to make sure that the [CMC part], that GSK is also responsible for participating in, is also finished. Will all that be done so that we -- [during] a Fast Track evaluation and we'll be able to have it approved before the end of 2008? I hope so, but it also means that we have to work very aggressively when we have the data.

Okay. That's perfect. And then on HuMax-EGF, I think Lisa discussed that the survival data from that pivotal study should be expected in the second of 2008. I just wanted to check, is that overall survival data, so full survival data? And I'm wondering if there's an option for an interim analysis at an earlier stage?

I think I'll hand this one to Claus, also.

Well, I think the patients -- you have to understand, the patients we're recruiting in this study has a median survival of, typically, around four months. So we're randomizing between a [very supportive] care population and the supportive care plus EGFr antibody therapy. [We have] to see two months' improvement in median survival. So that means that we would at least have to for -- and that's a median survival. We would at least have to follow the patients for six months.

There is, of course, a possibility for an interim analysis, but still it's a six-months' time-point and I think at that time-point we, probably, will have way more patients in the study. So, I think Lisa is correct in her estimations of late 2008, rather than before.

Okay. Perfect. Thanks very much.

And now, hearing from Bridget DeLima with Merrill Lynch.

Hello. Good afternoon. I've got two questions please. Firstly, regarding the milestones you expect to receive from GSK for their collaboration on HuMax-CD20, could you provide any guidance as to how these milestones will be recognized? And should we assume immediate revenue recognition for all of them, or should we expect revenue to be amortized a certain number of quarters a year?

And secondly, given that you intend to build your sales force to market HuMax-CD4 and HuMax-CD20, would you also consider marketing HuMax-EGFr in the U.S. yourself? Thank you.

Let me start with the marketing -- well, actually, Bo, why don't you answer then I'll answer the marketing question. I'm sorry.

Yes. With respect to the recognition of milestones, then accountants force us to evaluate each and every milestone separately. And we would have to look into whether each milestone has completed a separate earnings process, as they call it. And, at the moment, it seems that milestones will be recognizable when they are achieved, but we would need to examine each and every one of them over time.

Okay. And then on the marketing, it's an interesting question. We suddenly have the possibility of critical mass here, because of the CD4 antibody coming back to us. And while we continue to hold partnering discussions, we are seriously considering the option that maybe we would like to market this product ourselves. We haven't made any final decisions on that.

But we will be building in a step-wise fashion in the commercial operations. And I think the HuMax-EGFr would require a larger [field] force because it's, in some cases, different cancers, different treating physicians. But it is a possibility for us, and one that could potentially really drive the Company to greater growth.

Thanks.

And now we'll take a question from Philippa Gardner with Lehman Brothers. Go ahead, madam.

Hello there, again. Yes, I just wanted to come back very quickly to CD4, which you've touched on already. And you talk about amendments to the trial to speed up recruitment, and on your last call you talked about increasing the number of centers. Is that still the case, or are there any other amendments that you're looking to make to speed up recruitment?

We have increased the number of sites now and we are opening sites, especially also sites in Europe, so we think we have taken the necessary precautions to get that recruitment speeded up now.

Okay. And then just --

We just need the final approval for it from the regulatory authorities.

And then, just very quickly, do you still expect CD38 to enter the clinic by the end of this year?

Yes.

Okay. Great. Thank you.

(OPERATOR INSTRUCTIONS). We'll now hear from Mark Clark with ING. Go ahead.

Good morning, and good afternoon. Just in respect of your comments about attaining critical mass in marketing etc., does this in any way suggest that you may re-evaluate partnering out EGFr, or do you think the potential breadth of an EGFr blocker is such that you need a large global partner still?

Mark, this is -- I would say, no matter what products we have, we always consider the alternative, which is should we keep this product ourselves, or should we partner it? So that would always be an analysis that we conduct.

I think, as we move forward, if we start to hire commercial operations people, a senior sales and marketing person, we may take that option more seriously. Up until now, we've considered partnering our first choice. Partnering is still on the list as a possibility.

So I would say nothing's changed, except that there might be a little more emphasis if we get the opportunity to have a very senior person in who feels comfortable about the idea of building a sales force and other supporting operations to back that team up. But it might receive more emphasis as an option. That's probably the fairest way to put it.

Okay, which, of itself, tends to suggest you're not likely to announce a partnership deal in the next week or two?

You know I never discuss the timing of partnerships.

So you haven't recruited this person you're referring to yet? So --

That's true. At least we haven't announced it. Allright?

Okay.

We're certainly working hard on those possibilities.

Okay. Thanks very much.

At this time there is no additional questions in the queue. (OPERATOR INSTRUCTIONS). Dr. Drakeman, there is no-one who is signaling.

Well, it has been our pleasure to speak with all of you today about Genmab and its prospects. It is wonderful to hear all the interest in the products. We hope that these products will provide a tremendous benefit to patients who currently don't have options, or need better options. We also hope that the Company's potential for sustained growth will provide shareholders with the type of returns that they're looking forward to.

Thank you for joining us and we look forward to speaking to you again in the future.

Once again, that will conclude your conference for today. We do thank you for your participation. Everyone, have a wonderful [day].