Genmab A/S (GMAB) 2008 Q2 法說會逐字稿

Good day and welcome to the Genmab conference call. Today's call is being recorded.

During the telephone conference, you may be presented with forward-looking statements that include words such as believe, anticipate, plans and expects. Actual results may differ materially, for example as a result of delay 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.

At this time, I would like to turn the call over to Dr. Lisa Drakeman, Chief Executive Officer of Genmab. Please go ahead, ma'am.

Hello and thank you for joining us today. This last month has been very exciting at Genmab and I'm happy to welcome you to the Genmab second quarter results call. For the first item of business, I'd like to turn to the results, which are in line with expectation.

We recognized revenues of DKK277m, approximately $59m. We also reported a net loss of DKK491m, approximately $104m. That's an increase of DKK404m or $85m from the same period in 2007. This is primarily due to a significant expansion of our ongoing clinical development activities that include seven Phase III studies and preparation for the first BLA ever for a Genmab product. We ended the second quarter with a cash position of DKK2.1b, approximately $443m.

An important event during the quarter was that we welcomed a new Chief Financial Officer, David Eatwell, to the Genmab team. We are very happy to have David on board and believe his previous experience with a commercial biopharmaceutical company will be invaluable to Genmab. Under the direction of David and Jan van de Winkel, our President of Research & Development and Chief Scientific Officer, we have begun a portfolio review process and review of our development organization and plan. On an ongoing basis, the goal of this process is to help us maintain our focus on key programs that deliver the most potential value for investment and to determine the right level of R&D investment as Genmab moves toward being a commercial company.

One immediate result of this review is that we have reduced the number of planned zalutumumab, previously known as HuMax-EGFr, studies, given that are already six studies in three indications underway in this program and that we have added two studies already this year.

We also continue to review the Zanolimumab, formerly called HuMax-CD4, program, and we do not anticipate beginning new studies in this program in 2008. That's an additional three studies that we had planned earlier in the year. Furthermore, we do not expect any increase in headcount for the balance of 2008 from now on.

As a result of this, we have updated 2008 guidance to reflect a slightly improved operating loss of DKK850m to DKK950m compared to previous guidance of DKK900m to DKK1b. This is despite a lower revenue estimate, which is now anticipated to be in the range of DKK850m to DKK900m, due primarily to a slight change in the timing of some anticipated milestone events. Given a lower net financial income, considering the market conditions we've all been experiencing this year, which is now expected to be in the DKK40m to DKK50m range, we are maintaining our financial guidance for net loss in 2008 in the range of DKK800m to DKK900m. And therefore, we also maintain our guidance for year end cash balance in the range of DKK1.7b to DKK1.8b.

The second thing I'd like to turn to, though, is our most exciting recent news event which occurred after the close of the second quarter when we reported positive interim results from the ongoing Phase III ofatumumab study in refractory CLL. We treated two groups of patients in this study and, based on the analysis of an independent committee reported a 51% response rate in patients who were refractory to both fludarabine and alemtuzumab and a 44% response rate in patients refractory to fludarabine but considered inappropriate candidates for alemtuzumab.

The results from the secondary endpoints also support the primary endpoint, including duration of response. There were no unexpected safety findings in the interim analysis and none of the patients tested positive for human anti-human antibodies. We believe these results are very good news for CLL patients with unmet medical needs and we expect to file a BLA this year with the European filing preparation proceeding in parallel. We have also submitted an abstract for potential presentation of the full study results at the American Society of Hematology conference scheduled for December.

Having gone over some recent highlights, I'd now like to turn to some pipeline updates. As you may know, we are also awaiting data from an interim analysis of the Phase III refractory head and neck cancer study with zalutumumab. We have just learned that patients are surviving longer than we previously assumed when we projected that we would have interim results this year. Although we cannot predict exactly when we will have the survival data we need to perform the interim analysis, we are now projecting results at the earliest in February or March of next year. This is due to the increased survival from the patients in the study.

I would like to point out that we do not have any specific information about survival in each of the two arms. We only know that survival in the study as a whole is longer than anticipated. I can also give you an update on enrolment. We currently have 173 patients in this study. This is up from 132 in May. So the accrual is really moving along very rapidly.

While we're talking about this study, we'd like to point out that this is the first controlled survival study in this patient population using only an EGFr directed antibody. In other words, we are treating the late stage head and neck cancer patients with zalutumumab plus best supportive care, which is typically something like methotrexate, or they are receiving best supportive care alone. Thus, we will be able to determine whether there is a survival advantage to treatment with zalutumumab.

We have also been granted a fast track designation from the US FDA as this will be the first controlled survival study in these patients. There is no comparable study in this patient population with cetuximab, the EGFr directed antibody that is on the market, and no way to determine if there is any survival advantage with cetuximab monotherapy in these patients. To date, there's only data available from a small, uncontrolled Phase II study in this patient population, where more than half the patients, 53 out of 103, also received cisplatin, a platinum based chemotherapy. The median overall survival, including the patients who received chemotherapy, was 178, days or approximately 5.8 months.

Now, because there was no control arm - that is, there were no patients treated with best supportive care instead of active therapy - there are no data to point to a difference in survival between treated and untreated patients. In other words, there's no way to understand what this data means in terms of whether there's any survival advantage at all with cetuximab. For anyone who would like to read the results of this study, they are published in the Journal of Clinical Oncology June 2000, 7th edition and the first author is Vermorken.

I'd like to move on now to discuss an update on ofatumumab. We are also conducting a Phase III study of ofatumumab in relapsed patients with follicular non-Hodgkin's lymphoma and we can report that recruitment is very close to completion. We only have a tiny handful of patients left to add into this study, so we do expect an announcement in the relatively near future about this.

We also announced earlier this week plans to begin four new ofatumumab studies this year. These studies include an important trial that we had already promised for this year, a front line study in combination with chlorambucil, a type of chemotherapy, in previously untreated CLL patients. We will also see studies begin in Japan. And we're offering retreatment and maintenance opportunities to the patients who have participated in either of the two Phase III studies, the refractory CLL patient study or the refractory non-Hodgkin's lymphoma patient study. The retreatment opportunities will be for patients who either achieved a response or achieved stable disease during the course of the original study.

In summary, this has been a very exciting and positive time for Genmab, especially as we prepare for the anticipated BLA and European filings.

We now look forward to answering questions from all of you. Joining me on the call today are Dr. Jan van de Winkel, our President of Research & Development and Chief Scientific Officer, and of course this is our -- the time when you'll be able to talk to our new CFO, David Eatwell. Operator, could you please open the call for questions?

Absolutely. (OPERATOR INSTRUCTIONS). And we'll take our first question from Richard Parkes, Piper Jaffray.

Good afternoon. Thanks for taking my questions. I've just got -- I've got two or three questions, actually. The first one is related to the ofatumumab studies. Now, obviously, you've revised guidance in terms of milestones. I'm just wondering if you could clarify whether there were any additional ofatumumab studies that may start this year other than those that you've already outlined because I think the other studies that we were looking for were maybe the relapsed NHL study and also a Phase III study in the US in rheumatoid arthritis. So that's the first question.

The second question is related to the design of the front line CLL trial. You've chosen to go versus chlorambucil and I'm just wondering are there any restrictions in terms of the recruitment criteria? Are you specifically recruiting elderly patients, because I think fludarabine has been shown to be more effective than chlorambucil in patients under 70 or with better prognosis? I think that's the two main questions for now.

Okay, great. Let's start with the study question. We are working hard on a design for a front line non-Hodgkin's lymphoma study in the development team that has representatives from both GSK and Genmab. We hope we'll be able to start that study later this year. That has been our plan.

In terms of the RA, of course, that -- we have two Phase III studies underway and we are in discussion with GSK about the plan for the large RA studies and the overall RA program. So those studies are also under consideration. I think in terms of the design of the new Phase III study I'd like to ask Jan to reply.

Dr. Jan van de Winkel: Yes, this is a very good question, Richard. And yes, we are targeting elderly patients in this study specifically. However, chlorambucil is also used in Europe more for the younger (inaudible) patient across all types of the older (inaudible) this disease, but this is specifically targeted to elderly patients.

Okay.

Jan's made a good point. I think the average age of the patients who have the disease is over 60, isn't it, Jan?

Dr. Jan van de Winkel: Yes.

Okay. And then, just expanding on that, I'm just wondering if you -- how do you plan to recruit? Do you have any concerns that you might come up against issues in recruiting in the US, given the availability of treanda? Just wondering how that might affect recruitment.

Dr. Jan van de Winkel: In the US --

Is treanda approved for front line therapy already, Richard?

Dr. Jan van de Winkel: No.

I didn't think so.

I think -- my understanding is treanda's approved for front line CLL. Is that incorrect?

You know we can double check that. I had seen the approval for the later stage patients.

Right, okay.

I think that the goal here is, though, to look worldwide for patients for this study. Jan, do you have anything to add to that?

Dr. Jan van de Winkel: Absolutely. And we're really gearing up, especially in Europe to include a lot of patients in this study. And yes, there will be -- the situation will be changing in the near future. However, you'll also see more and more data in the (technical difficulty) Phase III study.

We believe that, actually, a more benign type of chemotherapy in combination with a very potent antibody with a very good efficacy profile actually turns out to be better for patients than a very toxic chemotherapy (technical difficulty) with a less good antibody. But we will have to see for the data in the future. And the doctors we are talking to are actually not that worried about problems (inaudible) due to competition with compounds, very toxic compounds, like treanda in this very fragile patient population. But we will have to see that, Richard.

Okay, great. And then, just my final question's on the zalutumumab study. Could you just remind me what number of deaths triggers the interim analysis? And also, what median overall survival did you assume for the control arm when -- the best supportive care arm when you designed the study?

We conduct the interim analysis when there have been 116 events. And when we originally designed the study, we believed that the best supportive care patients would live somewhere between three and a half and four months, although in a clinical trial setting these patients can live longer than that. And we also made a projection then that our treatment patients would have a 50% improvement, living roughly six to seven months. So all I can tell you is that zalutumumab exceeded those projections.

Okay, great. Thanks very much.

We'll move to our next question from Poul La Cour, Kaupthing.

Yes, hi. It's Poul La Cour from Kaupthing. A couple of questions as well. Just going back to the RA plans in the US, you mentioned that you are in discussions with GlaxoSmithKline. Can you be -- as to whether to start these studies? Can you be a bit more specific as to if this is an issue of whether to wait for the SC version or if it is of a different matter? First question.

Second question, you mentioned that there are some milestones that you did anticipate receiving in 2008 that you no longer anticipate receiving. Could you be specific as to which indications or products that relates to? That's the second question.

Then, third and last question on CD4. You were mentioning that this program is under review now. We know that enrolment times have been delayed and you are now not starting the planned Phase III trial. Should we expect you to evaluate whether divesting or terminating this project or what's the thinking? Thank you.

Okay. Let's start with the RA. I don't feel at this point in time I'm in a position to add anything to what I already said, other than that we are, as we do with all programs, discussing the overall plans with GSK.

In terms of the milestones, you may recall that we had originally hoped back at the beginning of the year that we would finish some studies earlier than anticipated, like the -- excuse me, earlier than we are now experiencing, such as the Phase III follicular lymphoma study. But other than that, I can't speak more specifically, except to say it's just a timing issue. There isn't any milestone that we expected that we've lost because we're not starting these studies, for example.

And then, finally, with the CD4 antibody, we are continuing to study that. Accrual continues to go slowly in that study and we have been working very hard to understand what the probable market is and also analyzing the cost to complete not only this study, but to complete any filing if the data were positive. So at this point, we can't give you any final decision on the program, except to say that it remains under review.

Okay. Thank you

Our next question from Peter Sehested, SEB.

Yes, hi there. Could you just -- briefly on the production side, in terms of what's the production or the capacity utilization at this point in time? Furthermore, are you planning to sell capacity to GSK for the production of CD20?

I don't know that we've actually given any specific figures on the utilization of the capacity and I can double check with David on (multiple speakers).

Yes, I would say on that at the moment it is very low utilization at this particular point. Really, this year, for the Minnesota facility, is a year of transition. Part of their role this year is really to be working on some of the tech transfers for clinical trial manufacturing that's done outside the Genmab at this stage. And also, there's a small amount of manufacturing that we carry on doing for PDL. So utilization is very low at this particular point in time, but that's as expected, so no unexpected news there.

But when should we expect -- what are your projections for 2009? And then, I have some further more questions after that.

I think David's made a good point. We are moving the programs that we were having prepared by contract manufacturers into the facility this year. So I can't give you exact projections for next year, but we are moving, for example, the zalutumumab production to the new facility. And that's a product that we are anticipating launch of, which means that the amount of material we would make next year would be significant. We need to make consistency batches in order to apply for an approval.

We also anticipate continuing to make materials for PDL. I can't give you any comment on whether we would make any material for GSK. There aren't any plans at the moment. That doesn't mean it might not happen in the future.

All right. You have previously commented on the total available patient population for CD20 running at 20,000. But could you be more specific and say, for instance, how many patients are there for CLL in refractory -- or for CD20 in refractory CLL, in particular with regards to the two patient populations that you have trialed in the Phase III study, i.e. the combined fludarabine and alemtuzumab refractory and then the sole fludarabine refractory that would not tolerate Campath?

Those are not easy questions to answer, Poul because there are the two patient populations we treated and then there are patients who have failed prior therapy, who might not fit exactly into the categories that we used in the study but who would still be candidates. So if you're asking me if I can give you some projections to help say what sales would be initially from this particular set of labels, that's not something we're in a position to do right now.

Okay. Thanks.

We'll move to our next question from Peter Welford, Lehman Brothers.

Hello. Couple of questions and I'll do them one by one. Firstly, if I can just return to the clinical trials. As far as I understand from reading your interim statement, you were planning 17 this year and I think you said that before. You're now planning eight. I guess I'm just a little confused with some of the comments you made earlier, because you've started two with EGFr and two with CD20 already to date, so that's four, and you've outlined four trials with CD20 that you're going to start, the two refractory maintenance, the frontline and the Japan trials. So I guess I'm wondering there -- because that gives me eight. Should we assume therefore no more CD20 trials should start this year or am I missing something with some of the trials I've counted?

We didn't say we're only starting eight, Peter. We said that we would not start the full 17 originally announced. And what we said is that we will not be adding in any more studies with zalutumumab. We won't be doing the three studies that were originally planned for zanolimumab.

We expect that there will be more clinical trials this year with ofatumumab, although I can't predict the exact timing for the starts. The four that we just announced this week are ones that we think are coming relatively soon, where all the plans are -- and where all the plans are finalized. We also are hoping that we will have some new studies with other products besides ofatumumab and zalutumumab. So the year end number will be higher than eight, but I can't promise the exact number right now.

Okay. And moving, then, on to the RA studies again, is the -- are we right in saying that there's one or should there be two RA studies in the US? I guess -- I think you've disclosed the number of patients you're trying to treat in total. I'm unclear is that going to be one large study or is that going to be several US trials?

When we originally talked about this, we said we hoped to start one large study this year. But realistically, in order to have the safety database that we would need, we probably need two larger studies before the program is finished.

Okay. And the last question, then, is on the IL8 program. It's probably a little bit below the radar, but you mentioned that you're still working on the cell lines for that program. I guess -- was that one of the clinical trials that you could have started this year, or are other factors other than R&D costs delaying the progress of that into the phase two?

The IL8 program is in the process, I think, of tech transfer and it's also one in which we've been continuing our preclinical work. So that was not projected for this year. I don't think even the manufacturing work could have been done by this year.

Okay. That's great. Thank you very much.

(Multiple speakers) still under consideration, in other words.

(OPERATOR INSTRUCTIONS). We'll take our next question from Erica Whittaker, Merrill Lynch.

Hi there. I was just wondering if you could explain what exactly has changed between last quarter and this quarter to reduce the revenue guidance, because we -- I think you told us about -- last quarter, you told us about the trials that were being delayed, but I'm -- has anything -- is there anything else that you can explain why the revenue guidance has changed now and not last quarter?

David, would you like to comment on that?

Yes, sure. Overall, the revenue guidance, we did have DKK1b before. We're now saying DKK850m to DKK900m.

Yes.

As Lisa had said before, it's not because really any change in milestones that have failed, milestones that we're not getting. It's purely timing. It's just very difficult with the number of milestones that we have and project the beginning of the year. Some will be based on when a trial begins. Some will be based on first patient in. Some will be on a positive result, like you saw with the CLL positive and the large milestone that came in on that one.

Yes.

Some will be on product filing. Some will be on product approval. So there's a whole heap of milestones there and it's very difficult to gauge exactly when they're coming through. So there's nothing really overall to say that we're -- any disappointment on milestones or any failure on milestones. It's purely timing. So it's just a matter of the financial year finishes on December 31 and it's which milestones will be in at that particular time point.

I guess I'm not quite sure what happens -- what is -- what the sequence of events has been. Did you decide to not run as many new studies that would have received milestones, like, say, ofatumumab studies, and then realize that maybe the guidance was a bit high, or --? I'm just --

Erica, that's not the case.

Right.

I think that David's explained it very clearly. We have not delayed any studies in which we would anticipate receiving milestones. It's just that when we look at the -- it's just a timing issue and it's not always easy to predict. And in the last quarter, we feel that we've been able to see more clearly where timing might end up compared to earlier in the year. And that's why we've changed the guidance and tried to do everything we can to help the market understand exactly what we know about milestones.

Okay. It's -- I just don't really understand, because we -- there were -- you told us last quarter that were two trials that were going to be reporting next year, but then that --

But those aren't the only milestones, Erica.

Okay, yes.

I'm sorry. I can't give you any more details --

Okay.

-- than we already have.

Okay. And then, I was just wondering, for an update in the refractory follicular lymphoma study, in terms of recruitment, because the last quarter we've been told that recruitment had been slow and hence the data wouldn't be coming out until next year. Do we have any update on that?

Yes. Actually, during my remarks, I pointed out that we're almost finished and we're just missing a tiny handful of patients and that we expect an announcement very soon.

About the -- being completed?

(Multiple speakers) complete.

Okay. Thank you.

We'll take our next question from Brigitte de Lima, Merrill Lynch.

Hi. I've got two questions, please. The first one is is it still reasonable to expect a milestone payment for filing ofatumumab for refractory CLL later this year?

And the second question, financial one, on depreciation and amortization. If my [math] are correct, you reported about DKK22m in deprecation and amortization the second quarter. And I was just wondering if this already fully reflects the depreciation of (inaudible) manufacturing facility or if we should expect depreciation expense to go up in the second half. Thank you.

I don't think we have any comment on the timing of milestones beyond what we've already said. David, would you like to comment on the depreciation question?

Yes. Obviously, the acquisition of our Minnesota facility, there were some large fixed assets that we acquired there along with all the (inaudible), etc., as well. So yes, our second quarter, as you've noted, has got an increase in deprecation and amortization and that is directly linked to the acquisition of the Minnesota facility. The depreciation that you'll see in Q3 and Q4 will be similar to Q2, but that does mean, of course, that H2 will be higher than H1, because the acquisition of the Minnesota facility went through in the middle of March.

Okay, that's fine. Thanks.

Thank you.

(OPERATOR INSTRUCTIONS). We'll take our next question from Mike Kranenburg, GO Capital.

Yes, good morning. I have a question -- two questions, actually, on EGFr program. First, to clarify whether I understood this right, and sorry for my ignorance, but you mentioned that you have 173 patients in the trial at the moment with a survival estimate of 3.5 to four months and you need 116 events. But since you do not expect this before February, March, survival must be moving towards eight, nine months or so. Is that correct?

Well, there are two different arms, Mike. You're absolutely right about the standard care arm, the original estimate of 3.5 to four months. For the patients who are receiving treatment, we hoped that we would see about a 50% improvement. That's why we were saying it was a six or seven-month type of survival, somewhere in there.

So yes, it looks like the patients are living longer than we assumed when we make the projection. But we don't know whether it's patients in the treatment arm or the standard care arm, although the -- two-thirds of the patients are in the treatment arm, so it seems unlikely that all the extended survival could be in the standard of care arm.

Okay. And what will your strategy be towards EGFr with respect to partnering, particularly because you have now -- let's say you have narrowed the focus, on the one hand? And on the other hand, you could say, if you want to capture the full economic potential of this antibody, you have to grow the number of trials and indications. So how -- what is your strategy in this respect?

We're still very interested in forming a partnership for the antibody. We haven't made a final decision about whether to carry it on ourselves or whether to have a partner. But with six studies underway in three indications, which is head and neck cancer, lung cancer and colorectal, I think at this point we [would] have any more data from those studies before we would sign a partnership. And if we did sign one, we would -- could then make plans together with the partner about what the indications are that we would like to start in next. Go ahead.

What kind of interest do you encounter regarding this program?

We do have interest in this program. I think what I have said all along -- we have discussions, but we have always believed that, in order to achieve the best value for Genmab shareholders, that it's very important to have data in hand from the phase three study.

In this case, as we know, there's more than one EGF receptor antibody. We believe this antibody is superior. All the preclinical data that we have, the small amount of clinical data points in that direction. And because of that, we believe it has a chance to compete very effectively for market share and we think it would be in the best interest of shareholders to have the data from the study in hand in order to maximize potential partnership terms.

And we'll move to our next question from Peter Welford, Lehman Brothers.

Hello, sorry. If there's no other questions, I just have one follow-up, I guess, to Richard Parkes' initial question, which is on the CLL. I wonder if you could just go through again what was perhaps the choices in your mind behind choosing chlorambucil rather than fludarabine as the comparator in that trial? And maybe you could just outline what the -- where you see, I guess, the trials going insofar as demonstrating for the market how the drug should be used in the future?

Jan, would you like to comment on that?

Dr. Jan van de Winkel: Yes, I can comment on that. We have not -- said that we will not in addition also plan studies with fludarabine (inaudible), so we haven't updated you on that. But we are actually discussing a number of programs.

And this is actually a program where we saw a very nice angle, and frontline in this very fragile patient population, where a very effective antibody in fact could actually make a difference over a far less effective antibody as looks like when it could be combined with more benign chemotherapeutic agents.

And this has not been done with (inaudible) so I think we will be actually on time when we get the data from this trial in the frontline, this yellow. And this one would be a perfect strategy to try to move to a frontline with this chemotherapy combination. That makes sense to our clinical advisors and the opinion leaders we talk to. And from a business perspective, we think this is actually a very smart angle. However, we will probably also in addition launch other combination therapies with more aggressive chemotherapeutic agents.

Okay, that's great. Thank you.

We have a follow up question from Peter Sehested, SEB.

Yes, hi again. Could you, please could you give an update on the timing for the release of, of the [sample] two phase II trials for CD20 in the frontline indications?

And secondly, could please compose the current level of employees, I think you said it was 625, into the different functions?

In terms of expectations for data, of the two phase II studies that you're requesting information about, one of them is still recruiting patients. The other one finished recruitment over the summer. So we don't expect to see the data until some time next year because the patients have about a six-month treatment window. With the second study it will be roughly the same. From around the time that we finish the study, it will take probably at least six months before we have data.

In terms of the employees, I don't believe that we've really talked about employees really specifically beyond saying that more than 80% of them are in research and development.

And remember that includes 170 at the Minnesota facility.

Right. Thanks.

Okay. Thanks.

We have no further questions at this time.

Well, thank you all for joining us today. We really appreciated the opportunity to discuss the results, to bring you update on the pipeline and to answer questions to the best of our ability today. We look forward to talking to you again in the future. Thank you and goodbye.

That concludes our conference for today. Thank you for your attendance and have a nice day.