Genmab A/S (GMAB) 2013 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Genmab interim report for the first six months 2013 conference call.

During this telephone conference, you may be presented with forward-looking statements that include words such as "believes," "anticipates," "plans," or "expects." Actual result may differ materially, for example as a result of delayed or unsuccessful development of projects. Genmab is not under any obligation to update these statements regarding the future, nor to confirm such statements in relation to actual results unless this is required by law.

At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session. (Operator instructions.) I must advise you that this conference is being recorded today, on Wednesday, the 14th of August 2013.

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

Hello, and welcome to the Genmab conference call to discuss the Company's financial results for the first six months ended June 30th, 2013. 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. During the second quarter, we continued making good progress on our goals for the year. We announced impressive data from two studies of ofatumumab, a Phase II study in combination with bendamustine for second line CLL, and a Phase III study in combination with chlorambucil for frontline CLL. I will review the results of the Phase III study on the next slide.

In addition to reporting these results, we also announced that our partner, GSK, will start a new Phase III study in an autoimmune indication. They announced plans for the subcutaneous formulation of ofatumumab to be studied in a rare skin disorder called pemphigus vulgaris. This is the first Phase III study of subcutaneous ofatumumab, and we are pleased with the progress on that front.

Another important milestone achieved just after the close of the second quarter was an IND filing with regulatory authorities for HuMax-Tissue Factor-ADC in time to start a Phase I clinical study later this year, adding to our clinical product pipeline.

HuMax-Tissue Factor-ADC will be the first ADC to enter Genmab's pipeline, and we are looking forward to seeing how our antibody expertise and Seattle Genetics' ADC technology combine to treat eight different types of solid tumors.

We also announced exciting news for a second product, daratumumab, during the second quarter. Daratumumab has received breakthrough therapy, fast track, and orphan drug designations from the US FDA. We continue to work with our partner, Janssen, and the FDA to accelerate the development of daratumumab.

In May, we launched a sponsored level 1 ADR program as a service to US investors. Our US investor base is growing, and the ADR provides an additional channel for those US investors who prefer to settle in US dollars and trade during US market hours.

Finally, we are pleased to report that we are able to improve our financial guidance for the year. David will provide more details on the new guidance.

Let's move to slide four. Moving on to ofatumumab, at the end of May we announced positive results from the Phase III study of ofatumumab in combination with chlorambucil versus chlorambucil alone to treat frontline CLL.

We were pleased with the results of the study, which showed a 9.3 month improvement in progression-free survival in patients treated with ofatumumab plus chlorambucil versus those treated with chlorambucil alone. The treatment was well tolerated by patients in the study, and there were no unexpected safety findings. These data clearly underline the potential of ofatumumab in CLL.

We have submitted an abstract to the 2013 American Society of Hematology annual meeting, and aim to present additional results in December in New Orleans, including highly impressive complete response rates and minimal residual disease negativity data.

GSK is well on track to submit regulatory filings for ofatumumab in the European Union and the US soon.

Let's now move to slide five. Taking a look at the commercial aspects of ofatumumab, you can see on this slide that sales of Arzerra continue to increase over time. Rest of world sales remain lumpy quarter-to-quarter, partly due to other companies purchasing Arzerra for use in clinical trials. We saw a 40% increase in sales during the first half of 2013 versus the first half of 2012.

As a reminder, currently Arzerra's label is fairly narrow, and our focus is on the data we expect to report in the next 12 months from four pivotal studies which treat patients at earlier disease stages in both CLL and the diffuse large B-cell lymphoma. We believe it is the new data which could lead to significant label expansion and potentially to increasing sales.

I will now hand over the call to David to discuss in detail our financial results for the second quarter. David?

Thank you, Jan. Let's start by moving to slide six, and this is the revenue.

The revenue for the first half of 2013 came in at DKK298 million compared to DKK206 million in the first half of 2012. That's an increase of DKK92 million, or 45%.

The graph on this slide bridges the revenue between the two periods and shows DKK77 million growth relating to Janssen/daratumumab deal, an increase in the Arzerra royalties of DKK17 million, growing from DKK50 to DKK67 million, and a slight reduction in the other income of DKK2 million.

Overall, the 2013 H1 revenue comprised of DKK150 million of deferred revenue, DKK67 million of royalty, DKK58 million related to partner reimbursements, and DKK23 million of milestones.

Now let's move to slide seven and the operating expenses. The total expenses for the first half of 2012 were DKK288 million. And for H1 2013, we came in virtually at the same amount, DKK287 million. Our commitment to keeping the expenses under control of course is an important part of our strategy to create a sustainable, profitable business.

You can see here on the graph that the increased investment in daratumumab and HuMax-Tissue Factor-ADC, our newest IND, was offset by a reduction in the ofatumumab clinical trial expenses. The reduction in ofatumumab expenses was related to favorable FX rates as well as timing on study expenses. We do expect the total ofatumumab expense to be similar between 2012 and 2013 for the full fiscal year.

We also continued to show disciplined spending in all of the other areas. And again, as a reminder, all of the daratumumab expenses and the FTEs working on the program are now all paid for by Janssen.

Moving to slide eight and the income statement, on this slide you can see that the DKK92 million increase in revenue and flat expenses led to a nice improvement in the operating result of DKK93 million over the first half of last year, with H1 2012 loss of DKK82 million and H1 2013 at an income or a profit of DKK11 million.

The net financial items and tax in 2013 first half were DKK6 million negative compared to a positive DKK30 million in 2012. Most of that variation year-on-year is due to non-cash FX movements. And in 2013, there was also slightly increasing market interest rates. And as a result, that slightly decreased the fair market values of some of our securities.

Moving on to the discontinued operations, which relates to the Minnesota manufacturing facility, the DKK42 million of income in discontinued operations of course remains the same as last quarter since we sold the facility earlier this year. In the first half of 2012, the running expenses were DKK20 million.

And that brings us to the net income of DKK47 million for H1 2013 compared to a net loss of DKK72 million in H1 2012. So, that's an improvement year-on-year of DKK119 million between those two periods.

Also shown is the cash burn for the year at the bottom of the slide. During the first half of 2013, we increased our cash by DKK31 million. The increase primarily relates to the proceeds received from the sale of the manufacturing facility as well as proceeds from warrant exercises. The cash at the end of the quarter remained at just over DKK1.5 billion.

Let's move to slide nine and the guidance for 2013. We are improving our financial guidance for the year that we previously announced on March the 7th.

We expect the revenues to improve slightly, and now project a range of DKK550 million to DKK590 million. And that compares to the old guidance of DKK540 million to DKK580 million. The increase is mainly due to daratumumab reimbursements and positive progress with DuoBody programs.

We anticipate the operating expenses from continuing operations will now be in the range of DKK600 million to DKK625 million, a small reduction from our previous guidance of DKK600 million to DKK650 million.

As a result of these improvements, we now expect our operating loss from continuing operations for 2013 to be in the range of DKK10 million to DKK75 million compared to an operating loss of DKK40 million to DKK90 million in the previous guidance.

The cash position at the beginning of 2013 was just over DKK1.5 billion, and the improved operating result flows through and reduces the amount of cash used or burnt through in operations. And we have a new range there of DKK225 million to DKK275 million, or a midpoint of DKK250 million.

We have now also included the cash receipts from the warrant exercises in our new guidance. And as a result of these favorable movements, we're now projecting a cash position at the end of 2013 of somewhere between DKK1,350 million and DKK1.4 billion. And that compares to the previous guidance of DKK1,266 million to DKK1,316 million.

If we were to continue to burn at the 2013 annual rate of DKK250 million, then we will end 2013 with a cash run rate of about 5.5 years. This is compared to the old position of the old guidance, which is about 4.7 years. And this means we're in our strongest cash position for quite some time.

Finally, as usual, our outlook does not reflect any addition of any new significant deals, nor does it include any daratumumab milestones.

In summary, we're in a nice position at the halfway point of 2013 with revenues up 45%, a DKK93 million improvement in operating results, improved guidance, and improved cash run rate, which is now over five years.

Now I'd like to hand back over the call to Jan to discuss the progress on our 2013 objectives. Jan?

Thank you, David. Let's now move to slide 10.

At over halfway through the year, we are very pleased with the progress we have made throughout our 2013 objectives. We have reported strong data from two important ofatumumab studies and announced the start of a new Phase III study with the subcutaneous formulation.

For daratumumab, we obtained fast track, breakthrough therapy, and orphan drug designations from the FDA. We look forward to providing additional details of the extensive development plan for daratumumab later this year.

We met our commitment to file an IND for HuMax-Tissue Factor-ADC this year. And we expect to start the first Phase I study in multiple solid tumors before year-end.

We have seen progress on our partnered technologies and products. Janssen has now activated a total of five bispecific antibody programs under our DuoBody collaboration, and we have met the first in vivo proof of concept milestone.

In addition, we have reached the first development milestone in our DuoBody collaboration with Novartis. In 2013 to date, we have received approximately $3 million in cash from our partners' DuoBody programs.

Teprotumumab, the IGF-1 receptor antibody originally developed under our collaboration with Roche, has been out-licensed by Roche to River Vision. A new Phase II study of teprotumumab has been initiated in active thyroid eye disease.

We have also entered a new partnership with ADC Therapeutics to create a next generation antibody-drug conjugate with our HuMax-TAC antibody using PBD warhead technology. We have already seen great in vivo proof of concept for this program in an animal model.

And we believe that ADC technology is an important avenue to pursue in antibody development. And to that end, we roughly have a quarter of our preclinical programs as antibody-drug conjugate programs.

Finally, we continue to carefully manage our expenses while aiming to reduce our cash burn. We have improved our previously reported financial guidance for 2013. There is more to come from Genmab later this year, and we look forward to sharing our progress with you all over the coming months.

Let's move to slide 11. That ends our presentation of the 2013 second quarter results from Genmab, and we are pleased to answer your questions. Operator, please open the call for questions.

Thank you. (Operator instructions.) Michael Novod from Nordea.

Yes. Hello, it's Michael Novod from Nordea Marketing in Copenhagen. Two questions, first of all to the operational costs. During the first half, you have around DKK290 million in operating costs, and that also includes the three months where you had the employees for the Minnesota facility, I guess.

So, looking for the full year guidance, even though you have decreased the expectations for operational costs, aren't they still somewhat on the cautious side? Shouldn't we likely to see some more, say, decreases on that side going into the second half of the year, or where will you see additional spend? That was one.

And the second one is more to pipeline use. Jan, you mentioned that we will see highly impressive complete responses presented at ASH if the abstract is accepted, highly impressive also looking across trials, meaning towards the GA-101 complete response that we saw in the CL-11 trial. And then secondly, will we also see some combination data with daratumumab presented at ASH? Is that your expectation today?

Thanks, Michael, for the questions. I will park the first one for David so he can think about the answer there, and then I will take the second question on the pipeline news.

I said very explicitly that you will see impressive complete response numbers and very impressive minimal residual disease data for ofatumumab plus chlorambucil in our pivotal study.

We have that data in the abstract, Michael. And I can assure you that that data is stronger than the data we've posted for other CD20 antibodies in comparable trials, and that includes GA-101.

But, of course it's always difficult to compare trials, but our numbers are certainly more robust and more impressive. And we look forward to presenting them at ASH.

And the second question is with regard to daratumumab. We have submitted an abstract of the daratumumab-Revlimid study, and we are very, very eager and excited to get the chance to present that data also at ASH in New Orleans in early December.

Very good. Jan, would you like me to take question one?

Yes, please take question one from Michael.

Very good. Yes, first off, Michael, with Minnesota, Minnesota is actually not included in that operating expense line, which was DKK287 million for H1 2013. Minnesota costs in both years reported in the discontinued operations line.

So, in the DKK42 million positive that we have in H1 2013 discontinued operations, that includes two items, first the DKK52 million as the net sales proceeds and about DKK10 million of costs. So, that gives us the net DKK42 million as we sold in Q1.

As you know, we were spending about DKK40 million a year on Minnesota. And indeed, in H1 2012, at half year we spent DKK20 million. So, Minnesota doesn't impact it.

But, despite that, you're looking at that and saying look, we've got H1 at DKK287 million. We're saying our guidance for the year is DKK600 million to DKK625 million. If I take the midpoint, that's approximately DKK613 million. That means that H1 will be DKK287 million and H2 will be DKK326.

So, that gives us a ratio between the two halves of 47% in the first half of the year, 53% in the second half of the year. If I look back at 2012, it was a similar type of ratio, 48% in H1, 52% in H2.

Some of the increase -- and also, if you look at it as well, we did step up between Q1 and Q2. Q1 was DKK131 million. Q2 was DKK156 million. If Q2 and Q4 just carried on the same as Q2 at DKK156 million Q3, DKK156 Q4, that would bring the year out to DKK599 million. And our guidance is DKK600 million and DKK625 million.

Also, we've got the tissue factor. We hope to start the trial, get the first patient in before the end of the year for our new tissue factor ADC, plus we have got quite a lot of material that we're purchasing now getting ready for some of the larger daratumumab trials. So, I think we've still got a good opportunity to be in that DKK600 million to DKK625 million range.

So, that was very helpful.

Okay. Thanks, Michael.

Thank you very much.

Peter Welford from Jefferies.

Oh, hello. Thanks for the update. Just two quick questions remaining, firstly on daratumumab with regards to the ASH abstract. Just to be clear, can you provide an update? Have we finished now the dose range finding part of that trial? And is that the data we'll see at ASH, or is the dose range finding part of that study still ongoing and the ASH data will be, as we saw with the prior trial, just an update on the patients that have been treated so far?

And then secondly, just on the preclinical where you said obviously a lot of a programs are now ADC's, and obviously we know that the tissue factor is the first one to start Phase I soon. Can you just give us an update perhaps looking beyond tissue factor ADC? What's the sort of antibody or antibody-drug conjugate or DuoBody or whatever it may be that we should be keeping an eye out for that could next potentially be the most advanced program that you start to spend significant cash resources on? Thank you.

Thanks, Peter. With regard to the first question, the daratumumab abstract we have submitted is on the dose escalation part of the Revlimid DARA combination study. We already passed several cohorts, but we are still in that dose escalation part.

It may be possible at the time of ASH that we have finished that part, actually. So, you will see quite some data, but we'll have to see. That's an ongoing study, but it will be the first data of a Revlimid daratumumab combination treatment.

And we are very excited to present that -- being able to present that. And I think we will hear that, and I think in October, whether that abstract will be accepted.

But, it's an ongoing dose escalation. By the time of ASH, we may be through it at that point. I cannot give any further information.

With regard to the ADCs, we are very excited about antibody-drug conjugates. We have a fantastic molecule which we can now move into the clinic, HuMax-Tissue Factor-ADC. And we have a number of molecules behind that, either naked antibodies conjugated to ADCs and the DuoBodies conjugated to ADCs. And we're working on both of those types of programs.

We have not firmly prioritized one of these programs, but we will do that quite soon. So, I would hope that by the end of this year, Peter, we can actually give you further insight into what the next program will be which we intend to move towards the clinic behind HuMax-Tissue Factor-ADC.

But, also with several of the other programs, I can tell you that we have seen great data in vitro and in animal models, very impressive data. And we are very eager to actually work on multiple ADCs, and also clinically in the coming years. Hopefully by the end of the year we can give you further details on the programs following HuMax-Tissue Factor-ADC. It's a little bit too early right now.

Okay, that's great. Thank you.

You're welcome.

Thomas Bowers, Danske Markets.

Yes, thank you. Just a few questions remaining. First, on daratumumab, just wondering if you have any FDA feedback on how to proceed in the breakthrough designation and indication. Maybe by now you have some clarity on the requirements for getting an early approval in that indication.

And then, my second question, I'm just wondering if you can update on the filing for Arzerra in the frontline CLL setting. Do you have any indications from -- I don't know if you had any pre-filing meeting with the FDA or any feedback that you might be able to get a broader label in combination with chemo in broad terms rather than only in combination with the chlorambucil.

And then, I just want to follow up on the ASH conference. Should we also expect any data from the second part of the daratumumab study in monotherapy? Have you submitted anything, any abstract, or is that maybe just for an update on data you are having afterwards? Thank you.

Thanks, Thomas. With regard to your first question, we actually have now had meetings with the FDA, so-called Type B meetings. And we had very clear feedback on how to progress our development. We are now finalizing a very aggressive and advanced development program.

What I do hope is that, together with Janssen, we can give you further clarity over the coming months of that program. But, we will definitely -- we definitely intend to initiate multiple studies in the coming time, also including pivotal studies. But, we need to coordinate the messaging with our partner, Janssen, here.

But, the feedback has been positive and we are very excited. There is a lot of people working on daratumumab plans right now, both at Genmab and at Janssen, our new partner. And the more we see, the more we hear, the more excited we actually become about this program. But, nothing further to report at this time.

The second question with regard to Arzerra, we had a productive sBLA meeting, pre-sBLA meeting with the US authorities. We have discussed the label, but that is not public at this moment. But, also there very positive feedback, as I said in my introduction.

Glaxo is very much on top of this program, and we are really on schedule -- or Glaxo is really on schedule to file both in Europe and in the United States pretty soon now for a broader label. And I cannot comment really on the exact label which we will go for, but we have clear and firm feedback. I think that's probably where I should leave it at this moment.

Then the third question, for ASH I can be a little bit more concrete. We have not submitted an abstract for the monotherapy trial. Of course, it has been updated a number of times.

We have a Part B there, but we are also working on advanced plans as I already said to you on question one with regard to the feedback from the FDA on the breakthrough therapy designation. So, we may see some new studies and extra studies there.

So, we have not submitted a further abstract on the monotherapy study, but we have submitted an abstract on the combination study with Revlimid. And we also submitted some preclinical abstracts with very exciting data, further data with daratumumab, and we hope that it will be accepted.

Okay, that's great. Thank you.

All right.

We have no further questions from the phone lines. Please continue.

All right. Thank you all for calling in today to discuss Genmab's 2013 second quarter financial results. And we look forward to speaking with you again soon. Thank you.

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