Genmab A/S (GMAB) 2010 Q2 法說會逐字稿

Welcome to the Genmab conference call. (Operator Instructions).

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 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 must advise you that this conference is being recorded today, Wednesday, August 18, 2010.

I would now like to hand the conference over to your speaker today, Professor Jan van de Winkel. Please go ahead, sir.

Thank you very much. Hello and welcome to the Genmab conference call. We are delighted to talk to you today about Genmab's half-year financial results for the period ending June 30, 2010.

We have made a number of important strides during the second quarter of 2010. We received conditional marketing authorization in Europe for the use of Arzerra in refractory CLL. This approval resulted in a milestone payment of DKK87.0 million to Genmab under our collaboration with GSK.

We also reported growth of sales of Arzerra in the U.S. and the first European sale.

In addition, we reported topline results from our other late-stage product, zalutumumab. While we did not meet the primary endpoint in the pivotal study, we were encouraged by the impressive improvement in progression-free survival seen in refractory head and neck cancer patients. We will be meeting with the regulatory authorities in the coming weeks, and plan to come back to you in the fall with an update on the plans for zalutumumab.

In addition, we have introduced a new preclinical program, HuMax-cMet, and a novel bispecific antibody technology platform.

We've also made -- already made a number of announcements in the third quarter. In July, we amended the ofatumumab agreement with GSK. We worked with GSK to find a truly win-win scenario and a way forward to maximize the value of ofatumumab, while at the same time taking a necessary step toward securing Genmab's financial future.

We reported data from three studies of ofatumumab. The first data from a study of ofatumumab in multiple sclerosis was announced in July. Data from the concluded pivotal study of ofatumumab in refractory CLL reported in August was consistent with that found at the interim analysis, and shows an overall response rate of 51% in patients refractory to both fludarabine and alemtuzumab.

We also reported the first ofatumumab data in relapsed or refractory diffuse large B-cell lymphoma. The 11% objective response rate achieved at ofatumumab monotherapy in this study was not unexpected, given the high proportion of patients who had received multiple prior therapies and points at the need for combination regimens with other anticancer agents in heavily pretreated patient populations.

The development plan for ofatumumab in diffuse large B-cell lymphoma and other indications will continue as planned, as we are presently conducting a head-to-head Phase III study of ofatumumab in combination with chemotherapy.

I will now hand over the call to David Eatwell, Genmab's Chief Financial Officer, to discuss the key financial data of the six months ending June 30, 2010.

Thank you very much, Jan. We should be on slide two, which is the forward-looking statement, and Makayla has already taken us through that. So if we can now move forward to slide three, the key data.

On slide three, I'd like to highlight some of the key data points for the first half of the year, but before I start, I want to remind you that these results do not reflect the GSK amendment as the deal was signed on July 1. But the deal, of course, does impact our guidance, and we'll talk more about that later.

So back to the key data. First, the revenue, which came in at DKK276 million, DKK48 million lower than the same period for 2009. This decrease is mainly due to the fact that we had two milestones relating to CLL in 2009, the filing of the NAA and the BLA, and only one milestone in 2010 for the approval of CLL in Europe.

But despite the lower revenues, we saw an improvement in the net loss by DKK95 million, or 30%, to DKK219 million.

We'll come back to discuss the income statement in more detail in a moment.

Also shown on slide three is the headcount. Here you can see that we reduced the headcount by 313 FTEs, or 59%, from the 530 FTEs in June 2009 to 217 in 2010. The 217 number includes a small group of 25 key staff that we've retained at the manufacturing facility in Minnesota, and of course, those will go along with a future sale of that facility.

Finally on this slide, the all-important cash position. We started the year with just under DKK1.3 billion of cash and ended the period with DKK931 million, meaning that we used or burned through DKK350 million of cash over the six-month period.

Next, let's move to slide four and the income statement. We've already discussed the revenue, but as a reminder, the revenue for 2010 does include DKK23 million of Arzerra royalty income, and Q2 did show a nice increase over Q1. We expect that royalty income stream to continue to grow as Arzerra becomes available in more countries throughout the rest of 2010.

For the operating expenses, you can see first off that the R&D cost declined by 11% to DKK413 million, reflecting our continued efforts to reduce costs despite an increasing number of Phase III trials.

However, in the operating expense you also see that the G&A expenses increased by DKK28 million over 2009 to DKK103 million. So, please note that 2010 G&A expense does include one-time costs related to the departure of the prior CEO of DKK39 million. This includes DKK21 million of compensation-related expenses and DKK18 million related to accelerated warrant charges, which are, of course, a non-cash charge. That brings us to the operating loss of DKK240 million, similar to the loss for 2009 of DKK213 million.

Next, the net financial items and tax at a positive DKK49 million. This does include DKK44 million of non-cash exchange gains related to the stronger U.S. dollar versus the Danish krone. If rates hold as they are today, then some of that gain may reverse in H2.

Finally on this slide, the discontinued operations. This is the ongoing cost of maintaining the manufacturing facility in a validated state, and of course, this cost is a lot lower than last year as we were still operating the facility in H1 of 2009, and that brings us back to the net income as we discussed earlier.

Now I'd like to hand the call back over to Jan, who will discuss the recent amendments to the ofatumumab agreement with GSK.

Thank you very much, David. We are now at slide five.

As we previously disclosed, under the terms of the amendment GSK has now full responsibility for the development and cost of ofatumumab in autoimmune indications from the beginning of this year. And Genmab has no further cost commitment in this program. We will retain double-digit royalties in the autoimmune setting, foregoing autoimmune development milestones and the first two sales milestones.

In the oncology setting, we will continue to develop ofatumumab jointly with our partner, GSK. The total cap on Genmab's funding of ofatumumab development is GBP145 million from 2010 onwards. In addition, our annual cash cap over the next six years will be GBP17 million per year.

Our royalties in the oncology program remain the same. Our future oncology milestones will be reduced by 50%.

Genmab and Glaxo remain strongly committed to the development of ofatumumab and believe that this amendment represents the best way to maximize ofatumumab's potential while at the same time providing Genmab with absolute clarity on the cash needed to fund this program over the coming years. Of course, the GBP90 million upfront payment from GSK was also welcome.

David will now explain the accounting treatment of the amended GSK agreement and how that translates into an improved guidance for 2010. David?

Thank you very much, Jan. Before we discuss the guidance, I'd like to discuss two accounting items that relate to the amended deal. Although these are a little complex to describe on a conference call, in the interest of transparency it's important for us to explain these matters to you.

So let's move to slide six under deferred revenue. As a reminder, under the original agreement with GSK, we deferred just over DKK1 billion of upfront income and amortized it over a five-year straight-line period. This deferred revenue was reported at a rate of DKK217 million per year. Indeed on this slide, you can see in the first line that we booked DKK109 million in the first half of 2010, half of that annual amount.

Now, as Jan mentioned, the amended agreement included an upfront payment from GSK of GBP90 million, or about DKK815 million. Again, you can see this new upfront payment shown on this slide.

Under revenue recognition accounting rules, we can't allocate all of this cash to the revenue line in 2010. We have to allocate it over an appropriate period, taking into account the nature and the style of the agreement. And as you can see here, we will amortize this DKK815 million over a 5.5-year period from the date of signing, which was July 1, to the end of 2015. So, we'll record DKK74 million of revenue in 2010, and then in future years we'll record DKK148 million of revenue per year.

Lastly, the accounting rules require that we look at the old deferred revenue remaining from the original agreement and reassess the remaining amortization period, and you'll see this amount of DKK325 million on this slide. Again, we will amortize that over the next 5.5 years to the end of 2015. So the accounting rules say we need to look at the whole agreement, what was signed originally back in 2006, as well as the significant amendment.

So in summary, our old guidance projected DKK217 million of deferred revenue in 2010, and when all is said and done, our new deferred revenue guidance is DKK212 million. So after that lengthy explanation, there is little difference to our guidance for the deferred revenue.

Now, some of you may have expected a larger portion of that DKK815 million would've been allocated to the 2010 P&L. But I think that's missing the point a little bit.

The important news is that we received cash of DKK815 million and, of course, cash is king for a biotech company. It really makes no difference to our future fortune if we report the DKK815 million over six years, over three years, or over one year. The important thing is getting that cash in to support the Company going forward.

Now let's move forward to slide seven and the funding cap, once we're sure that we've fully explained the difference between the total funding cap and the annual cash cap. As Jan explained earlier, our amendment with GSK means that we have an absolute funding cap of GBP145 million, but that we also have an annual cash cap of GBP17 million for the next six years, including 2010.

Of course, I don't exactly know how the funding of ofatumumab trials will occur in the future, but on slide seven I want to explain one scenario on how it could impact our financial statements.

On the first line, you can see the annual cash cap of GBP17 million, or GBP102 million over the next six years. On the second line, you can see the absolute cap of GBP145 million. If this was spent evenly over the next six years, then Genmab's commitment would be, on average, GBP24 million a year.

Now, even though the cash outlay will only be GBP17 million, the income statement would need to record for full future commitment and record the GBP24 million as an expense on the face of our income statement. We would then also see in our financial results this additional GBP7 million as a long-term liability recorded on Genmab's balance sheet.

While this is a little complex, it does impact our new guidance, and remember, the most important thing here is that Genmab has absolute clarity over the cash outlay for ofatumumab over the next six years, i.e., GBP17 million or about DKK150 million per year.

So without further ado, let's move to slide eight and the guidance for 2010. As a reminder, Arzerra royalty income is not included in these guidance numbers, and on this slide you'll see a range of numbers for the old guidance and for the new guidance.

As we show a range for each of these line items, it's a little difficult to compare the old guidance to the new.

So as we try and make the changes more transparent, I'd now like to move to slide nine and compare the midpoint of the old range to the midpoint of the new range. You can see that slide nine makes the comparison easier to understand. First, the revenue, which increased by DKK100 million.

We've increased the revenue as we now have more certainty over the milestone attached to the start of a new Phase III study, which should have the first patient in during Q3 of 2010. And also, we will now charge GSK for 100% of any costs that Genmab incurs on ofatumumab autoimmune trials.

You see that the operating expenses decreased by 15% to DKK850 million, and this is where the funding caps become important. We now expect that our share of the ofatumumab costs for 2010 will be above GBP17 million, or DKK150 million. In fact, we expect it to be about DKK100 million above that amount, so a total P&L charge of DKK215 million for our share of ofatumumab in oncology.

In other words, the DKK850 million shown here includes DKK100 million of long-term expense deferral that won't impact our cash balance until after the beginning of 2016. With an improvement in the revenues and the costs, the operating loss improves by DKK250 million, and then again you can see the discontinued operations, which is our Minnesota facility, and a small change here from the old guidance. It's just a difference in U.S. dollar exchange rates.

That brings us to the cash balance. As we said earlier, we started the year with DKK1.3 billion of cash, and we now project to a cash burn for 2010 of DKK671 million, an improvement over the old guidance by some DKK285 million. That means before the impact of the GSK upfront payment or the sale of the Minnesota facility, we project a cash balance at the end of 2010 of DKK610 million, nearly double the number in the old guidance.

On the next line, you can see that we have broken out the GSK upfront payment of DKK815 million, bringing it to a projected closing cash balance of DKK1.4 billion, an improvement of DKK1.1 billion over the old guidance.

Finally on this page, you see Minnesota, which is the same as the old guidance. We are still pushing to sell this facility as soon as possible. But the GSK amendment has relieved some of that immediate pressure on the sale. And even if the sale slipped into 2011, you can see that the end of the year cash balance would still be DKK1.4 billion, even without the sale of the facility, which is better than our old guidance including the facility sale.

And now the final slide from me, slide 10, a little bit of history on our expense base. On the bar graph, you can see the total operating expenses, including discontinued operations. There were DKK1.6 billion in 2008. Due to our portfolio review and focus on the most important programs, we reduced that expense to DKK1.3 billion in 2009.

And with strong controls and the decisions made in November 2009, we projected an original expense guidance of DKK1.1 billion for 2010. And as we just discussed, we've again decreased that amount to DKK900 million, including about DKK100 million of expense that will not impact our cash until beyond the end of 2015, as discussed in the previous page.

Rest assured that Jan and I will not stop our efforts to continue to pressure the expense base and to reduce this figure still further in 2011. For example, 2010 includes the expenses related to the zalutumumab trials, and as we have said before, we are committed to finding a partner that will take responsibility for all of that cost, all that ongoing investment in the future years.

And now, I'd like to hand the call back over to Jan.

Thanks, David. We are now moving to slide 11, the summary. In this summary, the amendment of -- to the ofatumumab agreement has had a very positive impact on Genmab's financial position.

We now have absolute clarity of our cash commitment to the ofatumumab program, and we have reduced our expenses and cash burn as a result. Our revised financial guidance now reflects an increase in revenue of DKK100 million, reduces operating expenses by DKK150 million, and improves the cash from normal operations by DKK285 million and the year-end cash by DKK1.1 billion.

We've also continued to control our expenses and expect a decline in spending of approximately DKK1.6 billion in 2008 to DKK800 million in 2010. And -- and this is very important, we will reduce this further in 2011.

Going forward, we will continue to carefully control our costs and manage our burn rate, and we will selectively invest in programs with the best potential returns. We will update you on this progress later in this year.

Let's move to slide 12, the news flow. Looking ahead, on this slide, a number of events on the horizon. We continue to focus on our 100-day go-forward strategy and will present our plans for the coming years on September 14 in London. In October, we plan to provide an update on our meetings with the regulatory authorities in Europe and the United States, and give you a status overview of the zalutumumab program. We hope to present a number of data sets from the ofatumumab program at the upcoming ASCO annual meeting in Orlando, Florida, in coming December.

In addition to updating you on the status of the manufacturing facility sale, we expect to announce the initiation of new ofatumumab studies, including updates on all our partners' clinical programs, before the end of this year.

We now look forward to answering questions from all of you. Operator, please open the call for questions.

(Operator Instructions). Lars Hatholt, Nordea Markets.

A few questions, if I may, please. Regarding the raise guidance regarding the top line for 2010, you are saying that part of the information is that you expect a higher probability now that you are going to start a Phase III study. What kind of probability have you attached to this project and is it an NHL -- the NSO indication of whether the Arzerra, when you combine with bendamustine?

And my other question, that's regarding your reimbursement price or the price of several -- in the European countries. Could you tell something and put some light on what's the price of the product in the European markets? Is it around $75,000?

The third question, that's regarding your NSO Phase II trial where we saw this [punch] in response rate. Jan, you have touched upon that, but could you tell a little bit more about how you look at the prospects for success in this indication based on -- and the successful outcome of the trials that you're doing, the two other trials you're doing in this indication?

And finally, the last question, you're talking about an alternative set of getting rid of your production site in the U.S., and you're talking about combining it with -- in packets where you may be sick or -- the rights for some compounds. Are you, for the time being, in any dialogue with any potential partners or buyers? Thank you.

Thank you very much, Lars. I think I can probably handle all of these questions.

The 2010 topline guidance, yes, I think we can answer very firmly that this is for the non-Hodgkin's lymphoma indication for the bendamustine combination studies -- study raft. We expect that to be initiated pretty quickly. And we have a very high probability attached to that.

With regard to the reimbursement question, this is a question I cannot answer because it's entirely up to GSK to inform the market on the price. But you're probably guessing in the right region for the price for Arzerra in European countries.

But it will vary from country to country, and also in a number of countries, these discussions are ongoing as we speak here, Lars. Some countries, the drug is on the market with -- at this moment, without a reimbursement in place. But GSK is expecting that reimbursement to come online literally in the coming months.

The Phase III study, the response rate of 11% was not too unexpected. I already said -- talked about that very briefly because these are very heavily pre-treated patients. Over 90% had been treated with rituximab and over half of the patients had over -- between two and five courses of rituximab. And essentially all of them, or more than 95%, had also had chemotherapy.

And it's actually pretty clear when you look at the disease state of these patients that you need combination therapy, so we are very confident, Glaxo and Genmab, in our ongoing study in non-Hodgkin's lymphoma, both in follicular lymphoma, as well as in diffuse large B-cell lymphoma, with what we have seen up to now with Arzerra. We are -- that is very much strengthened by the data we have obtained in animal models, as well as in vitro, that our drug is very active, but the lesson has been lost that you probably need in these very heavily pretreated patients this combination therapy.

And it is also difficult to compare these results with earlier results, for instance with rituximab, because there are some published studies with higher response rates, but remember, essentially all of these patients were naive to [rituximab], so they've never seen a CD-20 antibody.

I think this study, again, shows that our drug is active. I don't want to go into more detail because we want to actually present the data in Orlando at the ASH meeting. We will submit -- we have submitted a very large number of abstracts, and this is one of them. But I think you will understand, Lars, that we cannot give you more detail details at this moment because that is not allowed under the ASH regulations.

Then finally, your question about the manufacturing site in Minnesota, I can also firmly answer that question yes. We are talking -- this is a very active process. We are optimistic about the sale of this asset, and yes, we are discussing actively, with at least one party, a combination of selling the facility and giving them access to at least one of our compounds, or antibody therapeutic products. So, yes, we are working on scenarios like this, and this is a realistic possibility. That's all I can say at this moment.

And you're still expecting that you're going to close the deal by the end of this year?

At this moment, we firmly believe that that is possible. However, these discussions have their own rhythm, Lars. Over the summer, in July, it has slowed down a bit due to the holiday season, and it's always difficult to expect, then, exactly do such discussions close. But we are committed and very firmly committed to bring that to an end.

Tara Shivarattan, Jeffries & Company.

I had a few questions. The first was, when do you expect to book the reimbursed R&D spend from the GSK deal for the autoimmune costs that you've incurred in the period prior to the first half and prior to the amended deal?

The second question is over what time period in arrears do the royalty checks from GSK come in?

The third question was about Roche's RG4934. It's an anti-IL 17, and I just wanted to know if that was based on Genmab's technology or an alternative huMAb platform.

And also, if -- do you know if Roche had any other outstanding preclinical programs using your platform?

And then, finally, on the Arzerra amendment, just for clarification here, for the long-term liability that gets put onto the balance sheet, when is this due to be settled? Thanks.

I think I will probably do the Roche one, and then give the other three questions to David, if you allow me to do that.

Beyond -- the IL-17 antibody is not a Genmab antibody. I think Roche has access to multiple technology platforms also via its fully-owned daughter company, Genentech, and this is not a Genmab antibody. What I can firmly say is that there are other programs, preclinical programs, active [this] Genmab antibodies, and also I believe that our partner Roche will actually update, I think, announcements on some of these programs before the end of the year. But that's entirely up to Roche and Genentech to do.

Then I will ask David to actually go into the more detailed questions regarding the reimbursement, etc., and the royalty checks. David?

Okay, thank you. Thank you for the questions, Tara. I'll go in reverse order.

First off with the GSK amendment and the long-term liability. As we said on the call, we will have an absolute cash commitment until the end of 2015, and if GSK spends more than that GBP102 million, we will have an absolute cap at GBP145 million. That doesn't mean there's the potential for that GBP43 million pound difference to be a debt that we owe GSK at some point in the future.

We haven't said exactly how that funding will take place, but it won't take place until after January 1, 2016, and it won't be a debt that would be repayable all in one installment. It would be repayable over time, but start in 2016.

Of course, by 2016 we would be hoping that ofatumumab would be getting up to a substantial sales number and a substantial royalty income, and I think this was a really positive deal for Genmab because it really means that we can look after our cash over this next 5.5-year period.

In terms of your question on the royalty income that comes through GSK, they close their quarter when we get their royalty income check from GSK quarterly in arrears.

In terms of the last one, I'm not sure if I perfectly understood your question, but I think it was around the reimbursement of the autoimmune costs. We haven't got a huge amount of autoimmune costs being incurred by Genmab because many of the trials are now being run by GSK. But the amount of cash that's being spent by our R&D folks in Denmark on autoimmune, that we invoice GSK on a quarterly basis, and again we settle up with GSK on a quarterly basis in arrears as well.

So, hopefully, that answers your questions.

Brigitte de Lima, BofA Merrill Lynch.

I've got three questions, if that's all right. The first is getting back to the revenue guidance. I was just trying to understand a little bit better how you get to that extra DKK100 million. So, is the actual milestone changing or is it just the probability attached to receiving the milestone that changed?

And further, can you break out how much of that additional DKK100 million is due to the milestone and how much is due to increased reimbursement from GSK?

The second would be on guidance for the tax charge. I noticed that the tax charge you've been paying seems to be going up quarter after quarter. Can you provide any guidance as to how much you expect to pay for 2010, and should we assume that you will continue to pay taxes post-2010 as well?

And the last question is on Arzerra. I noticed that both NICE and the Scottish Medicines Consortium have recommended against the use of Arzerra, and this seems to be related to the high treatment cost. I was just wondering if you had any pushback in other European countries because of the treatment cost, and because that means that you'd have to significantly reduce the price in Europe? Thank you.

Thank you very much, Brigitte. I will, I think, handle the last question, and then I give the other two to David.

Arzerra, this is -- the pushback by NICE was actually to be expected for a costly treatment in end-stage patients, and we are dealing -- actually our partner, Glaxo, is interacting very actively with NICE about setting up a system to actually get the drug reimbursed in the UK, and I've not heard from our partner GSK of any other pushbacks in other countries. I think you need to ask them, I think, for more details. I cannot give you any further feedback.

But I have not -- I've never in all our update calls heard about that. Thanks for the question, Brigitte, and I will now ask David to address the first two questions on the revenue guidance (multiple speakers)

Thanks you, Jan. First off on the tax charge, it's a relatively small tax charge that we've got in our income statement, and I would expect it would continue along about that rate.

Of course, Genmab overall is in a tax-loss situation and has a considerable net operating loss carryforward as to how the future profits that we expect to come out of our Danish headquarters. The tax charge relates to a cost-plus arrangement between our Dutch facility and between our admin facility here in New Jersey.

So what we do is, we've got a transfer pricing agreement. We charge cost plus; hence it creates a small amount of taxable income; hence we have to pay a small amount of tax, both in Holland and in the U.S..

In terms of the revenue guidance overall, the improvement of DKK100 million -- you know, some of this is a little difficult to compare it to because we've actually narrowed the range from where we were before to a tighter range as we're halfway through the year now, but overall I would say roughly that DKK100 million improvement is half related to better visibility and confidence around the receipt of that milestone and the remaining part is mainly due to the extra charges that we were able to push back through to GSK because them taking on 100% of the liability of the autoimmune trials.

So overall, excluding royalty, our first half of the revenue was DKK250 million, and we're now projecting DKK500 million for the year. So it's pretty even, first half and second half.

And just to give you a very rough idea of how that comes through, we spoke earlier about -- just over the DKK200 million is deferred revenue, as we had in our presentation. About DKK200 million would be milestones, and then the remaining DKK100 million will be made up from those billings or charges back to GSK for the work that we've completed, and the 10X revenue that was already recurred -- recorded in the first half of 2010.

(Operator Instructions). Michael Novod, Svenska Handelsbanken Capital Markets.

It's Michael from Handelsbanken. I just have a few follow-up questions. First of all, to the facility, which you might say a worst-case scenario that it's not sold in the near term, when, say, are you hitting a wall in terms of accepting to potentially go down in price?

I know it's not that urgent anymore, given that -- the deal change with GSK, but anyway, you still have a facility there costing you around 60 million to run each year. So when are you considering to potentially lower the price?

And then, just a follow-up to the diffuse large B-cell lymphoma question before, because you're doing a Phase III, and Jan, can you say anything about when you could potentially have data from that? And then, secondly to that, given the data we have seen in other, let's say, show indications, and given also what we see now in the Phase II with the only 11% response rate, is there any reason to believe that you can actually really differentiate yourself against Rituxan in that Phase III?

Thank you very much, Michael, for the questions. Let me first handle the facility one and the potential worst-case scenario.

As I already explained to Lars Hatholt, we are on a very active process now talking to interested parties, so we are not, by any means at this moment, in a mode to actually drop the price [strengthening] because it's a very, I think, good and also valuable asset, and that is seen by other parties.

However, we do want to sell this facility as soon as possible for several reasons. First, I want to get this out of the way because we need to look at the future, and on September 14 we will talk very actively about how we see the plans for the Company towards the future.

And also, we have, of course, an obligation to the employees. We still kept a number of employees there to keep the facility validated and clean, so that actually the new owner can actually start working in that facility almost directly. But also we think about former employees that we had to let go last year, Michael, and I think for them, given the economic circumstances in the United States, it would be very good and they could actually hire back into the facility.

And we feel very strongly that we should do whatever we can do to facilitate a sale, and at this moment, we are absolutely not in a mode to drop the price significantly because we think it's actually a fair price for this facility, and we will update the market as time goes by. But we remain optimistic at this moment.

Let's look out to be diffuse large B-cell lymphoma question. We have an ongoing Phase III, and that study has an interim actually built into the study of 75 basis into the ARMs. One of the ARMs is the ofatumumab plus chemo and the other ARM is rituximab plus chemo.

We have not given further guidance on when we can expect data from the interim analysis, which I think would give a good feeling to the market of how this work responds in this non-Hodgkin's lymphoma indication. And I am sure that to get a better [firm] probably in next year where we can actually give further -- shed further light on the timing. It's fully dependent on the recruitment rate, etc., but at this time I cannot give you any further details on that.

However, looking at the [initial] data from the Phase II study, Michael, it shows the 11% response rate, I can very firmly say, yes, also in this population of patients, if I have any pre-treated patients with chemo as well as rituximab, you see a very good response rate in subsets of the patients. I cannot give you any further details because we want to present that at ASH.

But I can do say -- what I can refer you to is the follicular lymphoma refractory patient study, which actually was presented exactly a year ago on August 17, that we saw also a relatively low overall response rate. But in subgroups of the patients that had only seen Rituxan, you saw an over 22% response rate, very clearly showing that our molecule is differentiated from rituximab.

And also in this study, Michael, I can tell you that we have seen some very good indications. We have an active compound, even in very difficult to treat patients. So, GSK and Genmab remain very committed to actually do whatever needs to be done to get this indication also in the label. That's probably all I can say at this moment.

Just a final question, then. I don't what to, say, take all the shine away from your strategy update, of course, but could you shed some light on now, if we look at how, say, royalties are performing with GSK and your potentially lower burn going forward, when should we expect Genmab to be a profitable company?

We cannot comment on that, but we will absolutely give you further -- a better feeling for what steps we intend to take, Michael, to bring costs further under control.

I've already said that very firmly. I think we have a very good strategy. This is, I think, again a win-win type strategy for the Company. But you, unfortunately, will have to wait with all your other colleagues until September 14, and it will be pretty exciting. It will be at the end of the morning in London.

Sachin Soni, Kempen & Co..

This is Sachin from Kempen. I have three questions. First, regarding cost reduction, you mentioned it can go down significantly. Can you tell me the sources, besides zalutumumab, where it can actually come from and to what level it's realistic that it can go to?

Then, second is regarding zalutumumab. Are you still in active discussion with any of the potential partners besides discussing zalutumumab with regulatory authorities?

And lastly, does the ex-CEO, Mrs. Lisa Drakeman, does she actually hold anything in Genmab now or is she completely out in terms of shareholdings?

Thanks, Sachin. The cost reduction question is a very important one. I can again, also, firmly restate that we think we can bring the cost level down, and I will not give you any further detail in addition to the zalutumumab program which we intend to indeed find a home for with a partner.

Of course, we have a number of other steps that we believe will lead to a very significant reduction in our operational expenses. But that will clearly have to wait until the September 14 strategy update, and then immediately thereafter will be followed by action by the Company.

So, I cannot give you any -- I'm sorry. I cannot give you any further feedback on that one. But I understand that the market is waiting for that, and we will not disappoint the market, let me assure you.

Zalutumumab, I already said in my answer to Lars Hatholt that, yes, we are at least talking to at least one potentially interested party for the Minnesota facility who is also interested in one of the programs, and so, yes, we have active discussions with potential partners.

However, we do think that the value for the zalutumumab program will be higher after we actually have met with the regulatory agencies, which will happen in the coming weeks. We'll give you an update in early October on the interactions with European and the U.S. regulators, but there are ongoing discussions on zalutumumab as we speak.

And the third question, yes, the former CEO still owns shares, as you can see from the interim report, and also has warrants. Most of it is underwater at this moment, but she still has a significant shareholding, and as long as -- as good as I am informed, and maybe David can give you more feedback on that, she still owns those shares at this moment.

We can only talk, really, until the end of the quarter, whereas it is included in those five interim reports as to the amount of shares, but [their own joint calling costs] would be unable to comment about Lisa's shares as a private individual and shareholder of the Company.

The warrants are also being held in note five of the interim report, and I think as we've discussed before, those warrants will still be held by Lisa. But as Jan said, those warrants are all underwater at this particular point in time.

You have no further questions at this time, sir. Please do continue.

Thank you all for calling in today to discuss Genmab's Q2 results. We very much look forward to speaking with you again in the near future. Thank you.

That does conclude our conference for today. Thank you for participating. You may now all disconnect.