Genmab A/S (GMAB) 2012 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Genmab AS publication of the interim report for the first nine months 2012 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 an obligation to update statements regarding the future, nor to confirm such statements in relation to actual results unless this is required by law.

I must advise you all that this conference is being recorded today, on Wednesday, the 7th of November, the year 2012.

And without any further delay, I would now like to hand the conference over to your first speaker today, Mr. Jan van de Winkel. Please go ahead, sir.

Hello, and welcome to the Genmab conference call to discuss the Company's financial results for the nine months ended September 30, 2012. And joining me on today's call is David Eatwell, our CFO.

Let's move to slide two. As already stated, we will be making forward-looking statements, so please keep that in mind as we go through this call.

Let's move to slide three, "On Track to a Sustainable Future." Genmab is well on its way to become a sustainable business following the focused execution of our strategic aims this year. We have secured an excellent partnership with Janssen Biotech for Daratumamab, ensuring expanded development of the antibody while minimizing risk and costs to Genmab. We have succeeded in validating our novel biospecific antibody technology, the DuoBody platform, by entering sizable partnerships which will serve to provide long-term value through milestone and royalty payments.

As a result of these deals, and our focus on cost control, we have significantly increased our financial security. At the end of 2012, we will have lengthened our cash run rate to four years, and we will continue to be disciplined when it comes to resource allocation and financial management. With selective investments in preclinical and clinical pipeline projects that offer real promise to provide effective new treatments, we can build a sustainable business and meet our mission of improving the lives of patients by creating and developing innovative antibody products.

Let's now move to slide four. As you know, we entered a $1.1 billion license agreement with Janssen Biotech for Daratumamab in August. We received antitrust clearance for the agreement in September, at which time we received an upfront payment of $55 million. In October, the final piece of the agreement fell into place with the issuance of around $80 million of Genmab shares to Janssen's sister company, Johnson & Johnson Development Corporation.

The Genmab and Janssen development teams are very excited to be working together on Daratumamab and have already met to discuss our ambitious development plans. As we previously disclosed, the agreed development plan includes more than 10 new studies, including several phase III trials. We plan to start several new studies in multiple myeloma next year. We will also present six abstracts on Daratumamab at the American Society of Hematology meeting in Atlanta this December.

As we announced on Monday, additional data from the ongoing phase I-II study with Daratumamab will be presented in an oral presentation, and new preclinical data on Daratumamab's unique mechanism of action will be presented as well. Additionally at ASH, we have an Ofatumumab presentation from Genmab GSK program and are aware of six other presentations of Ofatumumab data from investigator-sponsored studies.

Speaking of Ofatumumab, let's now move to slide five. We are pleased with the development of sales of our marketed product, Ofatumumab. This slide shows the sales trend for Arzerra over the last seven quarters. As you can see, sales for Arzerra rose again in the third quarter to GBP18.2 million. This is the highest quarterly sales revenue for Arzerra to date, and is a 53% increase in sales compared to the third quarter of 2011.

However, as with the second quarter, the Q3 rest of world sales were enhanced by the purchase of Ofatumumab by other companies running clinical trials with our antibody. And please note that this increase in rest of world sales does not reflect future commercial demands. Arzerra is currently available in 24 countries.

I will now hand over the call to David to discuss in more detail our financial results for the first nine months of 2012.

Thank you very much, Jan. Starting on slide six, this slide bridges the growth in revenue, comparing the first nine months of 2011 with the corresponding period in 2012. The revenue for 2011 came in at DKK258 million compared to DKK322 million in 2012. That's an increase of DKK64 million, or about 25%. The main reason for the increase was the growth in the Arzerra royalty of DKK29 million and the achievement of a GSK milestone relating to the filing of an NDA for Ofatumumab in Japan. That was DKK20 million.

The inclusion of the first month's revenue from the Janssen Daratumamab collaboration was DKK15 million. And that's just one month, so we will have a better Q4 from our Janssen collaboration.

The main sources of revenue for the first three quarters of 2012 were DKK177 million of deferred revenue, DKK84 million of Arzerra royalty income, and DKK28 million of milestone payments.

Let's move to slide seven. On this slide, you can see the total expenses for the first nine months of 2011 were DKK443 million. We've been able to slightly reduce them to DKK431 million in 2012. On this slide, you can see that we have selectively invested more in Ofatumumab, Daratumamab, and our most advanced clinical program, Tissue Factor-ADC. This has been more than offset by the reduction in Zalutumumab clinical trial expenses, as well as disciplined spending in all areas.

As previously discussed, from the signing of the Janssen Daratumamab deal at the end of August, all Daratumamab expenses, including FTEs, will be paid for by Janssen.

Now let's move to slide eight. On this slide, you can see that the DKK64 million increase in revenue and the DKK12 million reduction in expenses led to a nice improvement in the operating loss of DKK76 million, with the 2011 year-to-date loss at DKK185 million and the 2012 nine months at DKK190 million, a reduction of 41%.

The net financial items and tax were a positive DKK13 million in 2012 compared to DKK4 million in 2011. Most of the year-on-year improvement was due to a positive fair value adjustment on our sterling-Danish kroner hedge. This was the hedge that we put in place relating to our future sterling funding obligations under our collaboration agreement with GSK.

Moving on to the discontinued operations, which relate to the ongoing expense to maintain the manufacturing facility in a validated state, in 2012 the expense was DKK31 million, virtually the same as the nine months operating expense in 2011. However, as you can see on this slide, the DKK371 million reported in 2011 also included the noncash impairment charge of around DKK342 million. That was as a result of reducing the net value of the facility to around $58 million. And that brings us to the net loss of DKK127 million for the first nine months of 2012 compared to a net loss of DKK552 million for the corresponding period in 2011.

Finally on this slide, I've also included the cash burn for the first nine months of the year. Actually, this year we've increased our cash by DKK89 million. The increase is due to the receipt of the $55 million, approximately DKK327 million, the upfront payment from Janssen.

Without the upfront payment, our cash burn for the first nine months of 2012 would have been around DKK238 million. That's a decrease in cash used of DKK87 million, or about 27% compared to the cash burn of DKK325 million in the first nine months of 2011. Also, please remember that the cash from the placement of 5.4 million new shares was not completed until October, so that cash isn't reflected in the third quarter ending cash balance.

Moving to my last slide, slide nine, "An Improved Guidance." For the third time this year, we're improving our guidance for 2012. You'll recall the last big change to the guidance was on August 30, when we announced the Janssen Daratumamab collaboration. On this slide, you can see the revised guidance range for 2012 compared to the guidance issued on August 30. A smaller change to the guidance this time, and it's all due to the strength of the third quarter Arzerra sales, which resulted in royalties of DKK34 million in Q3.

With our nine-month royalty now at DKK84 million, clearly we couldn't maintain the royalty guidance for the full year at a range to DKK90 million to DKK100 million. Therefore, we've increased the range to DKK105 million to DKK115 million, an increase over the old guidance of DKK15 million. And that would assume that Q4 is similar to the run rate in Q1 and Q2. As Jan said, we do believe that some of the clinical trial supplies boosted the Q3 result.

As you can see here, the revenue has been increased by DKK15 million to a new range of DKK450 million to DKK475 million. You could also see that we're maintaining the guidance for the operating expenses, so that means the revenue gain drops down to improve the operating result. The operating loss improves to a new range of DKK125 million to DKK175 million. So 2012 could post one of the smallest operating losses in our history. The improvement in the royalty income also improves the cash used during 2012 and the closing cash balances for the year.

In respect to the year-end cash position before the Minnesota facility sale, we're projecting a balance of over DKK1.5 billion. And as you can see on the guidance slide, we're projecting the cash used, or burned through, during 2012 will now be at a midpoint of DKK373 million. That means that our cash runway at the end of 2012 will be slightly more than four years, on the assumption, of course, that we burn at the same rate in future years. Of course, in the coming years, we hope to boost our cash reserves in future periods with an accelerating royalty income stream and the collection of Daratumamab and DuoBody milestones.

In summary, this is a very satisfying performance [for at] the nine-month mark, with solid deals under our belt, improved guidance, and an excellent cash position.

Now I'd like to hand the call back over to Jan to discuss the progress on our 2012 objectives. Jan?

Thank you, David. Let's move to slide 10. For the third quarter, we have continued to deliver on our commitments, and our achievements so far this year are impressive. We continue to maximize the value of Ofatumumab and expand its commercialization with our partner, GSK. We believe the commercial success of Ofatumumab will follow the availability of an increasing amount of data from clinical trials and increase physician's experience with the products.

Already next year, we expect data from both the front line phase III student in CLL and from a key phase II study with Ofatumumab in combination with (inaudible). Also, recruitment is now completed in the phase IV of observational study, and data from that study is expected in the first part of next year.

We are also pleased with the growing number of ISS studies being run with Ofatumumab, and with the initiation of multiple new phase III studies by other companies running clinical trials with Ofatumumab. We now anticipate that the phase III CLL maintenance safety interim data, which had been slated for this year, will come in early 2013, although it's important to note that the timelines for primary data from this study remain on track for 2014.

Let's turn to Daratumamab. We have entered an excellent partnership for this antibody with Janssen. Since the deal closed, we have held meetings with Janssen, and we look forward to updating you as this partnership takes form. We are progressing with the DuoBody technology platform, having presented proof-of-concept data at 14 conferences this year, signed two deals with world-class pharma companies, and reached the first milestones in the Janssen agreement with the activation of three biospecific antibody programs.

These milestones triggered two payments of $750,000 each from Janssen to Genmab to add to the upfront payment of $3.5 million announced after signing in early July. We now have a number of scientists who are fully reimbursed working on both the Janssen and Novartis DuoBody programs at our [labs in Utrecht.] We continue to actively seek other partnership opportunities, as well.

And then, finally, we remain focused on managing our cash burn and have improved our guidance for 2012 three times. One milestone we have yet to achieve this year is the sale of the Minnesota manufacturing facility. For competitive reasons, we cannot say much about the sales process except that the process is active and that we are still very focused on solving the issue of the facility this year.

Let's move to slide 11. One of the key elements of our strategy is to build a profitable and successful business. To do that, we have to continue to build long-term value in our Company. We need to capitalize on the achievements we have made so far while also looking to the future.

We already have a solid foundation to work from. Our innovative approach to antibody product and technology development allows us to stay ahead of the competition in generating world-class, differentiated antibody therapeutics. We will continue to extract value from our technology and product collaborations by working with our partners to develop new DuoBody-based therapeutics.

Furthermore, we expect to see an expansion of Arzerra sales as pivotal studies start to read out in 2013. We are also working towards bringing HuMax Tissue Factor-ADC, which David already mentioned, into the clinic next year. We realize, however, that the way to create the most value in our company is to retain 50% or more of the commercial rights for our products, and we are focused to move towards this goal in the future after achieving profitability. Let's now move to slide 12.

This ends our presentation of the 2012 third quarter results from Genmab, and we are pleased to answer your questions. Operator, please open the call for questions.

(Operator instructions.) Thomas Bowers from Danske Bank.

Yes, thank you, a couple of questions. First, on Daratumamab, the single arm phase I-II study, have you actually decided on dosing levels for the second part of the study? And if so, which levels are we talking about?

And then also, in regards to the first part of the study, have you seen anything while dosing at 24 [mcs]? I mean, the abstract from ASH reflected you have not reached the [MTD]. But do you know whether investigators has increased the use of dexamethasone to limit any potential toxicities?

And then, I have question on Arzerra. First -- well, I don't see any new market launches. I still count 24. But any news on reimbursement? I have seven countries plus the US [J-CODE]. And then also, regarding potential label changes for Arzerra now that Daratumamab is no longer marketed in CLL, is that anything you might be able to comment on now? Thank you.

Thanks very much, Thomas, and apologies for the mess at the beginning of the call, on behalf of the whole company. We are still sorting out what has happened there.

Let me start with your first question. Daratumamab dosing, yes, we have selected a dose level. We have not yet communicated that to the market, but I can tell you it's higher than four milligram per [kick], and we will hope to start soon the second part of the study where we give 24-week dosing. And that will start -- you will hear that pretty soon.

The second question on the 24 milligram per [kick] dose, all the patients have now been included. You will get updated at ASH. Professor [Torbin Plesco] has been selected to give a oral presentation at ASH in Atlanta in December.

As we have announced last Monday, dexamethasone has not been increased. We have not yet reached the maximum tolerated dose. And we have seen responses in all the three patients, I can assure you. But you will hear more data and more color in the ASH presentation earlier December of this year, Thomas.

Then Arzerra, we are still at 24 countries on the market. There will be countries added this year, so the launch program is going as planned and is robustly increasing. So we will penetrate other countries and other territories in the near-time. We have recently had a update.

And I cannot update you right now, Thomas, on your next question, is how national reimbursement is progressing. We've heard some very positive feedback from GSK on a number of interactions in a number of countries, but I don't have any further update apart from the seven countries with national reimbursement and the [J-CODE] in the United States.

But this further rollout of Arzerra is progressing according to plan. We are now going into the Middle East, Russia. We are going to move to different countries in new territories in the coming time. What I understand from Glaxo is that that is progressing according to schedule and also positively.

And then, the final question, I don't know whether I have that precisely. What was the final one, Thomas, on Arzerra?

Yes, labeling on alemtuzumab.

Oh, okay, yes. Alemtuzumab is not any longer available the normal channels. It is available in Europe and in the United States, made available by Sanofi. And what I can tell you is that Glaxo is monitoring the situation, and there's no further updates at this stages, but we have it very hot on our radar screen. At this moment, patients can get access to alemtuzumab, but we believe, as we have heard (inaudible) [report] on that, it's getting more difficult in some countries. And yes, there may be interactions necessary with the authorities in the coming time, but no changes at this point.

Okay, great. And then, can I also ask regarding the pre-clinical pipeline? You had an undisclosed R&D candidate [cancel one] at some point. Has that been terminated?

No. This is an undisclosed candidate. This is from one of our partners. And what we will do, Thomas, is we have a post-ASH seminar now scheduled on December the 17 in London. This has been announced I think a week ago. And at that seminar, we will fully update you on all the IND filings, plans in the coming years, as well as an update on this year.

Okay, great. Thank you.

(Operator instructions.) We have no further questions coming through at this time, sir. Please continue.

All right. So thank you for calling in today to discuss Genmab's 2012 third quarter result, financial results, and we look forward to speaking with you all again in the near future. Thank you.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating, and you may now disconnect.