Genmab A/S (GMAB) 2014 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. And welcome to the Genmab A/S Q3 reports 2014. (Operator Instructions) There will be a presentation followed by a question and answer session. (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 this call is being recorded Wednesday the 5th of November 2014. I would now like to hand over to your speaker today, 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 quarter ended September 30, 2014. Joining me on today's call is David Eatwell, our CFO.

Let's move to slide 2. As already said, we will be making forward-looking statements, so please keep that in mind as we go through this call.

Let's move to slide 3. Before we look specifically at our third quarter results, let's review what lies at the foundation of Genmab. We create value by developing differentiated antibody therapeutics for cancer and bringing them to the market. We have done that successfully with Arzerra, which is now on the markets for refractory and first line CLL.

Daratumumab is currently evaluated in multiple visible trials, treating patients with multiple myeloma, which if successful could lead to marketing applications to regulatory authorities.

We are also working on a third product candidate. HuMax tissue factor ADC, our first antibody drug conjugate which is in a Phase I study for solid tumors. We are focused on continuing to create innovative antibody products using the latest technologies, including our proprietary antibody technology platforms as well as other technologies, such as antibody drug conjugates or ADC technologies.

Our expansive pre-clinical pipeline includes both Genmab programs as well as those carried out by our partners. Of those internal programs, the majority are currently based on our proprietary next generation antibody technologies, the DuoBody bispecific antibody platform and the HexaBody platform. While the remaining projects are all ADCs.

Partnerships stay an important role at Genmab. Collaborations with blue chip companies, including Janssen, Novartis and GSK, enable us to be well on track to transform Genmab into a sustainably profitable Company.

Additionally, we seek to build greater value in the Company in the future by holding onto products longer and by executing opt-in deals where we retain a greater share of product rights.

Let's move to slide 4. 2014 has been a very exciting year for Genmab so far. As we mentioned last quarter, we have announced four new Phase III studies, of which two are currently enrolling patients.

Recently, we earned a milestone payment of $10 million from Janssen for progress in the so-called Castro study of daratumumab in combination with Velcade or bortezomib and dexamethasone compared to Velcade and dexamethasone alone for relapsed or refractory multiple myeloma. This brings the total milestone payments received in the daratumumab collaboration in 2014 to $57 million.

As you know, GSK has now launched Arzerra in first line CLL in both the US and in major markets in Europe, including Germany. I will come back to the Arzerra sales later in the presentation.

We continue to work on clinical development of ofatumumab in other indications. We were very pleased to announce that the pivotal study of ofatumumab as maintenance therapy in relapsed CLL met its primary endpoint of improving progression free survival in an interim analysis last July. We have continued to examine the safety and efficacy data for the study and have submitted an abstract to present detailed data at the American Society for Hematology or ASH conference in San Francisco this coming December.

As you saw from the announcement earlier this week, we have agreed to transfer the existing ofatumumab agreements to Novartis. This is connected to the larger three-part transaction between GSK and Novartis.

We also continue to make excellent progress in our pre-clinical pipeline. We announced the new projects, HuMax-AXL-ADC, and we signed a collaboration with Seattle Genetics to combine their ADC technology with our HuMax-AXL antibody. This is an exciting program targeting AXL, a signaling molecule which is expressed on multiple solid cancels. Genmab paid an upfront fee of $11 million to Seattle Genetics and Seattle Genetics is entitled to receive over $200 million in potential milestone payments in addition to single digit royalties.

Prior to starting a Phase III study, Seattle Genetics has the right to exercise an option to increase the royalties to double digits in exchange for a steep reduction in milestone payments. Genmab retains full control of the development and commercialization of HuMax-AXL-ADC regardless of this option.

As to our financials, we have seen significant growth in revenues while keeping operating expenses at the same level. David will provide more clarity on the financials in a moment. Let's move to slide 5.

Here we can see the development of Arzerra sales since Q1 2013. Compared to the first nine months of 2013, sales of Arzerra were down 25% this year. The quarterly sales of clinical trial purchases impacted the rest of world sales numbers. The impact was larger in Q1 and Q2 of 2013 and Q3 of 2014, and this does distort the quarter and year on year comparisons. However, you can see, and that was anticipated, that the approval of Imbruvica has impacted the refractory CLL market in the US, taking market share from Arzerra. We anticipate that the US front line sales will begin to accelerate in the fourth quarter and more countries will launch in Europe and the rest of the world in Q4 and in 2015.

We were also very pleased to hear that the UK's National Institute for Health and Care Excellence, known as NICE, gave a positive recommendation for the use of Arzerra in combination with chlorambucil to treat front line CLL. NICE decides which treatments are available from the publicly funded National Health Service in England and Wales. So this is an important recommendation and Arzerra is [currently] the only next generation CD20 to receive a positive recommendation from NICE.

Staying with ofatumumab, let's now move to slide 6 and discuss the agreements to transfer the GSK ofatumumab agreement to Novartis. This is of course connected to the larger three-part transaction between GSK and Novartis, which we announced on April the 22nd.

Once this transaction is completed, Novartis will take over the collaboration agreements and develop Arzerra in cancer indications. They will also sub-license the autoimmune indications back to GSK for their continued development. Importantly for Genmab, after the end of this year we will no longer provide funding for the development of ofatumumab. That means that our future cash expenditures could be reduced by up to GBP60 million. This will free up capital to that we can continue to invest in the current pipeline and selectively accelerate exciting pre-clinical and clinical programs.

The new agreement also modifies the existing CD20 exclusivity provisions so Genmab will be able to develop exciting follow-on next generation CD20 products, potentially using our HexaBody or DuoBody technologies.

The other terms in the ofatumumab collaborations have not significantly changed. We will have the same role in making development decisions for ofatumumab under the collaboration with Novartis as we did with GSK and retain our role on the joint development committee for the cancer indications.

The royalty rate for ofatumumab also remains the same 20% for cancer sales and a double-digit royalty below 20% for autoimmune sales. So no change to those economics for Genmab. The remaining milestones in the follicular lymphoma indication also still stands.

As mentioned in the Company announcements, this new agreement is dependent on the wider GSK-Novartis transaction being executed and this is expected to be achieved by first half of 2015.

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

Thank you very much, Jan. Let's move to slide 7. Let's take a start by looking at the income statement for the first nine months. Again a very strong set of numbers, led by the revenue growth. And you can see here the nine month revenue came in at DKK635 million. That's an increase of DKK187 million over 2013. I'll expand on the revenue explanation on the next slide.

You can also see here that the expenses were flat compared to last year at DKK431 million, which means that all of the revenue growth drops through to improve the operating result. Hence the operating result for 2014 is DKK204 million compared to just DKK16 million in 2013.

The net financial items and tax were a positive DKK28 million in 2014 compared to a small negative last year. And of course, there was no discontinued operations this year while in 2013 there was DKK42 million of income related to the sale of the Minnesota facility. That takes us to the net result, which was DKK232 million in 2014, compared to DKK52 million in the prior year.

Finally on this slide, the cash position. Our cash position increased by over DKK1 billion in the first nine months of this year. That was mainly due to the private placement in January. And our cash position remained at over DKK2.6 billion at the end of September.

Moving on to slide 8 now and the revenue. This slide shows further detail of the revenue. The graph on the left shows the different categories or sources of revenue. This year the largest portion was from milestone income of DKK282 million. This was driven by the daratumumab collaboration with Janssen. It also included milestone from Janssen on DuoBody.

The next largest category was deferred revenue, at DKK213 million. At DKK78 million the Arzerra royalty was lower this year, but as previously discussed, the comparisons are clouded by the variation of clinical trial supplies quarter to quarter, as well as the impact of the Imbruvica launch, particularly on the US market.

The other category shown here also declined a bit as Janssen has taken on the responsibility for the new daratumumab studies. The graph on the right shows the revenue growth drivers between the two periods. And again you can see the milestones for daratumumab drive the overall revenue growth of 42%.

The DKK256 million of milestones relates to the $47 million from daratumumab. And that was two milestones, one achieved in March and one achieved in July. You will have seen that we also received another milestone, the $10 million in October, which of course will be recorded in our Q4 results.

Next if we move onto the expenses and the operating income on slide 9. The graph on the left shows you the movement in expenses or perhaps I should say the lack of movement in expenses. We invested DKK28 million more on early-stage research projects, but this was more than offset by lower expenditure on the development costs mainly driven by lower costs for ofatumumab and daratumumab as we complete some of the clinical trials. And you'll recall that Janssen is now starting the new clinical trials for daratumumab.

Also, as a result of the increasing share price, the non-cash warrant expenses increased by DKK13 million year on year. Looking at the chart on the right, you can see that the nine-month revenue growth and flat expenses means that we get a large increase in the operating result, growing to DKK204 million.

Now let's take a look at the guidance for 2014 on slide 10. First off, no change to our financial guidance this quarter. And on this slide we show you the overview of our current guidance for 2014 compared to the actual result for 2013 and 2012. The revenue range this year is DKK800 million to DKK875 million and the variability in the range is mainly due to the timing of the next daratumumab milestone, also for $10 million. We expect this milestone to be achieved just before the end of the financial year. And if it is achieved, we'll be at the higher end of the ranges shown here.

The daratumumab milestones are of course the key driver growth for the full fiscal year with anticipated milestones of over DKK350 million compared to DKK44 million achieved last year.

Arzerra sales, as we spoke of before, are difficult to forecast and although we do expect Arzerra front line label expansion to increase sales, this guidance assumes approximately DKK105 million of royalty in 2014. That compares to our previous estimate of DKK125 million. However, this change will not impact the overall total guidance as we have seen stronger DuoBody milestones coming through, particularly from Janssen.

We'll continue the disciplined expense management and therefore no change to the expense range of DKK600 million to DKK650 million with the midpoint of DKK625 million, showing a modest 5% increase over 2013.

I'd also just like to point out here that the DKK625 million expense base includes about DKK160 million of ofatumumab expenditure. So that's about one-quarter of our total expenditure. Assuming the wider GSK-Novartis transaction is completed next year, then 2014 will be our last year of funding for this program. This will give Genmab the opportunity to selectively invest in and accelerate our pipeline of products.

The increased revenue and moderate expense growth leads again to an improved operating result. You can see it here with a range of DKK175 million to DKK250 million. The midpoint of DKK213 million would be a healthy increase of DKK144 million over 2013.

Finally from me, slide 11. Here is a summary of the current guidance. As discussed, the GSK-Novartis agreement is not expected to be finalized until H1 2015. Therefore, there'll be no impact on the 2014 numbers. So no changes in the guidance, apart from just a slight increase in the contribution from warrant exercises. Therefore we remain well capitalized with a projected year-end cash position of around DKK2.5 billion, similar to where we are today. Also note that as usual, the guidance does not include any new potential deals.

In summary, solid results at the nine-month mark, well capitalized, and well positioned for the last quarter of the year. Now I'd like to hand back over to Jan to discuss the progress on our 2014 goals. Jan.

Thank you, David. Let's now move to slide 12. Our focus remains on our clinical pipeline -- ofatumumab, daratumumab and HuMax tissue factor ADC, our next generation antibody technologies and disciplined financial management. Looking at the progress towards our 2014 goals, we reported results from three of the four pivotal studies of ofatumumab expected this year, provided an update on plans for development of subcutaneous ofatumumab in autoimmune diseases and received approval for ofatumumab in front line CLL.

We have made very significant progress in our daratumumab collaboration with Janssen, having announced four new Phase III studies and presented updated data on earlier stage studies in multiple myeloma and strong proof of concept data in other hematological cancer indications.

We have submitted abstracts on daratumumab, ofatumumab, as well as pre-clinical projects for presentation at the ASH meeting and very much look forward to discussing those abstracts once they are published by ASH.

Our Phase I study of HuMax tissue factor ADC is progressing as planned and we are making firm progress with our pre-clinical programs. As mentioned earlier, we announced a new HuMax-AXL-ADC program in September and in addition we presented pre-clinical data for DuoBody platform programs, HexaBody platform programs and ADC programs at two dozen scientific conferences already this year. We have entered new DuoBody technology research collaborations with Lilly, Cormorant, a major biotech company that a name is undisclosed, Agenus, BioNovion and Humabs BioMed, a strong Swiss biotechnology company this year.

We also signed HexaBody research collaborations with the same undisclosed large cap biotech company and more recently with Humabs BioMed, a Swiss company in Bellinzona.

We have also made substantial progress in our existing commercial DuoBody technology collaborations with Janssen and Novartis and have received a total of $29 million to date in cash since the first two collaborations were signed in 2012. Furthermore, as already discussed on this call, we signed a new ADC partnership agreement with Seattle Genetics and we also entered alliances with the German company, MAB Discovery near Munich and the American company OMT in California for access to state of the art antibody technology platforms during 2014.

These achievements have been made while we keep a watchful eye on our financials. We have received significant milestone payments in the daratumumab collaboration with Janssen this year, resulting in increased revenues while at the same time holding expenses flat. We will continue our disciplined approach, selectively investing in the most exciting opportunities without significantly increasing our cost base.

Let's move to slide 12. This will end our presentation of Genmab's third quarter 2014 results. Before we take your questions, I would like to draw your attention to our upcoming investor events for the remainder of this year, specifically we will be hosting a post-ASH seminar in San Francisco on December 9th and we hope to see many of you there.

Operator, please open the call for questions now.

(Operator Instructions) Richard Parkes, Deutsche Bank.

Congratulations on another good quarter. I've just got a few questions. Firstly, on daratumumab. I just wondered if you could give us an update on when you might be in a position to make a decision on the potential early filing. I know that kind of decision's going to be sometime around the end of the year. Just wondering how that's -- how you plan to communicate that.

The second one relates to the R&D spend that's going to be freed up if the GSK transaction goes through. I mean that's $27 million in R&D budget next year that's going to be freed for you to reinvest elsewhere. I know you've talked about having flatter or not increasing the overall investment base, but can you accelerate your internal development programs sufficiently to utilize that full budget or could we see R&D spend coming down next year? So I think that were the two main questions.

Thanks for being on the call and for these excellent questions. Daratumumab the potential first decision on a first filing can likely be taken in the coming time. What we are doing is we're actively monitoring the data in the Phase II study. This was recruited completely in May this year. And we likely have a number of interactions with the US FDA in order to be a breakthrough therapy designation for this product in this line of indication where the Phase II trial has recruited. I already reflected last time at Q2, Richard, that we will likely present the full clinical data at ASCO. And not at ASH this year because it's too early. And likely in the time between now and ASCO we will likely, together with Janssen, give you further color on the potential filing on that data. I cannot say anything further I'm afraid at this moment.

However, on some other studies, like the Phase Ib multi-combo study, we use different Velcade and also formalist regimens with the dara. And also in a Phase I-II study where we actually tried dara, the effect of dara with Revlimid. We hope to present new data and also further data at the upcoming ASH event. And I believe that the abstracts may actually come out pretty soon now, so we will be pleased, Richard, to discuss with you on that data.

With regard to the R&D spend, this is a fantastic deal. We are very excited about this agreement which we could close with Novartis and with GSK. And this indeed will free up budget in our P&L. I will have David give his angle there. But we indeed are very enthusiastic to -- that this will allow us to actually selectively invest in either pre-clinical or clinical programs and accelerate those once we believe that that is the right thing to do in the coming time. That will create an enormous additional value for our stakeholders. Why don't I let David give his input on how that will affect our future P&Ls, albeit that we have not given guidance yet for next year or the years to follow, Richard. David?

Yes, I think it gives us a great opportunity, particularly for the programs that you're already aware of, like tissue-factor-ADC and AXL-ADC. Those are two programs that you know about. We've also got a strong portfolio of pre-clinical items that we can actually bring those projects through faster now and bring those into the clinic over the coming year. So overall I don't expect any reduction really in our R&D spend. I think I look at this as giving us the opportunity to accelerate into more exciting new products, differentiated products so we can then add more value in the Company again overall.

I mean the way I look at this, assuming the deal goes through, it's still conditional of course on the wider GSK-Novartis deal, we're assuming this closes in 2015. If you look at it, then we'll have sort of three key programs that are well advanced. We'll have Janssen daratumumab. Of course with that deal, we don't invest anything in the R&D, so it's a cash flow positive only project.

Now we'll have the same with Novartis with Arzerra in cancer. No further investment beyond beginning of 2015. And then finally, with GSK we'll still have ofatumumab (inaudible). Again no investment after the amendment that we negotiated in 2010. So we got three strong large programs, no investment, cash flow positive only and then our responsibility to carefully and selectively invest in the best programs, those differentiated programs and create more value in going forward over the next two, three, four years.

Great, that's what I was hoping you would say. Can I just have one follow-up on the OpEx guidance? If you look at the middle of your OpEx range, correct me if I'm wrong, but it looks like you'd have to have quite a big pick in the fourth quarter in terms of expenses to get to the middle of that range. Is that what we should still expect or is it more likely to be at the lower end?

Good question. If you look at the nine-months' number, we've got DKK431 million. If you look at the midpoint in the range, that's DKK625 million. So you're absolutely right, you'd be looking to jump up from an average over the nine-month period of about DKK144 million to the last quarter of DKK194 million. So that would be leave about just over 30% of the expenditure would be being incurred in the fourth quarter.

Give you a comparison, if you look at 2013, 28% of the annual expenditure was occurred in the fourth quarter. So it's not that far different from the quarterly phasing to 2013.

Much of that is going to depend on the GSK ofatumumab cost. If I look back over the last three or four years, it's tended to being a tradition that the fourth quarter has always been the biggest one from GSK. So if we get in the projections that we're currently working with and have been shared by GSK with us, then we'd be around that DKK625 million. If they come through a bit short on their forecast, then it may sort of slip through it towards the bottom end of the range. But that will be the key parameter.

The other thing is we know that we've got some larger expenditure in the fourth quarter. It's some CMC batches and material batches that we know. In fact I've already signed some of the invoices, so I know that will be a bit higher in Q4 than the preceding three quarters.

Okay, great. Thanks very much.

Thomas Bowers, Danske Bank.

Just a few questions left. Firstly just on Arzerra, just wondering if you could put some color on the initial feedback you had of the first line launch so far, also given that you have revised your guidance for 2014 once again here.

And then -- actually also in regards to the maintenance indication, is there any interactions with the FDA or email on this potential label extension?

And lastly on Arzerra, just if you maybe could comment on the price level in the UK that would be helpful.

And then actually also just -- I'm just wondering if you're gathering any early conclusions on the Agenus and then BioNovion on the collaboration, I mean both on the IP situations and where you sort of feel you have the freedom to operate? Maybe also some -- if you have some early lab models that makes you all more confident now in moving forward with some bispecific targets.

First (inaudible) color on the launch. I mean recently had a commercial update, but we believe that we already begin to see the US sales getting stronger. I mean it was certainly hit, as David has already said, by Imbruvica launch in the US. And we hope that we basically from here on would see sales in the front line indication to get stronger.

We actually get actually fairly good feedback from European countries, a number of European countries. So Arzerra seems to be picking up in the front line. And also be competing quite well with other next generation CD20 molecules launched there. And certainly we believe that the NICE recommendation we received yesterday from the UK, NICE, as I spoke about, Thomas, in my introduction, is going to help us, not only in Wales and England, but probably also in other countries.

So we hope, we're encouraged by those early signs, but it's hard to work, it's a competitive landscape. What we do hope is that we'll also see further clinical data getting into the open, combining I'll say around with the tyrosine-kinase inhibitors because that is where I believe the real niche will be where that drug can potentially perform much stronger on other CD20 antibodies.

Still Gilead is expected to come out with data on Phase III trial combining Arzerra with (inaudible) with [Zydelig], running it against in the other arm Arzerra. And that data is strong, could really help the third of carving out of a market share for Arzerra in the coming time.

And we certainly hope that Novartis will do trials with their small molecule inhibitors, Thomas. They have a fine set of like a PI3 kinase inhibitor, Bcl-2 inhibitor, a JAK inhibitor, an mTOR inhibitor. It's all potential molecules which could combine really well with a molecule like Arzerra and our initial interactions with Novartis are actually quite positive about how they see the positioning of the molecule in the future. But let's wait for the next few quarters to see how the front line sales build up.

And moving to the maintenance study, we are in discussions with different regulatory authorities, Thomas. It's too early to give you public feedback, but we are encouraged by the feedback from the authorities we have spoken to and very believe that it's potential to do a potential filing for a broader label, but it's too early to decide that. And once we have made that decision together with GSK, we will inform the markets.

Then I will probably move to your fourth question with regard to the BioNovion and Agenus interactions. We are very much up to speed there. There's already panels of antibodies made, both at Genmab and as well as our partners. And we are creating bispecific antibodies which are currently being made and then tested in relevant models. So it's a little bit too early to say that we have already created the right bispecifics.

It's uniquely positioned to do well in this important immuno-oncology area, but we have made more rapid progress than we anticipated some time ago when we closed the deals, Thomas. So but it's a little bit early days and we do believe that there is a real angle here to create novel unique IP by applying DuoBody to this immuno-oncology field. And I can tell you that there is a very, very large interest also from other players in working the DuoBody also for the immuno-oncology area.

I believe on the Q2 call this also came up by you and some other analyst questions and I think probably some people have listened to that call because we actually got a (inaudible) actively by other companies. But too early to say more on those immuno-oncology developments apart from saying that we are thrilled with our pre-clinical (pipeline, Thomas. We have never seen it in the history of Genmab.

Being stronger, roughly 80% is based on HexaBody and DuoBody in our pre-clinical pipeline, our own pre-clinical pipeline and the rest is ADC's. We don't work on a single naked antibody at this moment, so we have one of the most I think advanced, exciting pipelines now of all the antibody companies now in this area. So we really are in a pretty good shape as a Company. Best ever I would say judging from the beginning times.

And then maybe David can try to give some more color on your third question on the price level. This is set by GSK in the UK as it relates to the news from NICE and the recommendation for reimbursement as a cost effective drug yesterday in Wales and England. David, do you want to add anything further to that?

Yes, but I'm afraid I probably can't add anything on that. I don't think there's any public information. There was that comment by NICE that they had agreed to discount with GSK. I don't know what that discount is. I'm afraid you'd have to discuss that with GSK.

But I think as a general pricing comment, when you look at the US prices, which are easier to do as a direct comparison, then ofatumumab is priced lower than Gazyva. Gazyva for the same six months' worth of treatment regimen is about 40% more expensive than Arzerra. So I think there is that pricing advantage. One would expect on average price discounts throughout the European countries that we would probably also have a pricing advantage within Europe as well.

Of course the other advantage that Arzerra has in Europe compared to the competition is that we've got the wider label compared with Gazyva in Europe where we've got chlorambucil or bendamustine, which is a wider label, which I think give us an advantage as we know anecdotally bendamustine, ofatumumab or Arzerra has been a treatment regimen of choice, particularly in some of the larger markets like Germany.

Okay, that's great. Thank you.

Michael Novod, Nordea.

Just two remaining questions. Maybe an add-on to Richard's question regarding costs. You say you're going to kind of reinvest a lot into R&D, which is really good. Do you still have the target and the ambition to try to keep your cost levels largely unchanged, i.e., would you have to actually invest more than what is being freed up by the new GSK arrangement?

And then secondly, could you talk about the first clinical progress to be seen with DuoBody? We know that J&J's about to start some trials, but did you have anymore flavor on when those two could start?

Why don't I briefly say something about costs as it relates to giving us extra opportunities. I mean we really free up a lot of capital. This has a huge impact on the P&L, the potential deal, once it closes with GSK and Novartis. And we have a very strong pipeline already. I alluded to that in my answer to Thomas.

But also clinically we're really making progress now with some of our clinical molecules. So this gives us options to selectively invest. We intend to keep very focused on keeping these operating expenses under control. And I'll let David give you some further color on how we currently look at that, Michael, and then needless to say we will give you further updates once we give guidance for next year.

Then with regard to DuoBody, we are making massive progress with the DuoBody at notable levels, both in our own pipeline. I mean the majority of our programs -- there's actually DuoBody programs now, Michael, and we haven't announced any of them publicly. But that will happen in the coming time. And what I understand from the partnerships is that the Janssen programs are the furthest advanced with nine active programs and the furthest advance is a EN1 antibody, which is an [EGFR cMet] antibody which outperforms all the naked EGFR targeting or cMet targeting molecules by a big distance in pre-clinical models.

That one is now being put to use and but I understand, Michael, may go to the clinic next year in 2015. That's probably the earliest. Then very quickly followed by a number of other rare molecules, which have not been discussed yet. So really good momentum when you consider that we only closed the deal with Janssen in June 2012. And this is also quite when you come back down to the income, I mean we are getting increasing levels of income this year already. There's $8 million from the commercial DuoBody partnerships, which we are not yet at the end of the year. And last year we had 11 and the year before 10. So this is also accelerating. And the costs are very much under control.

David, do you want to add further input to Michael on the forward P&L. How that may look like in the coming years?

Yes, absolutely. I think there would be some variability around that, but I mean I think I guess overall one man's cost is another man's investment, so it definitely depends which way you look at it.

But I think don't worry. We're going to keep our feet on the ground, we're going to keep that discipline. It took a lot of work for the Company and commitment from the employees to keep the costs around DKK600 million, so we now four years in a row we've kept the costs at around DKK600 million a year.

I look at this as an opportunity to re-divert some of the ofatumumab expenditure into new programs. And those will be -- a lot of those programs will be optional for us and we'll be very transparent around the decisions that we're making. I mean if you look at a couple of options that we may have coming up in the next couple of years, this Tissue Factor-ADC currently in Phase I, hopefully that will continue and be successful and we'll get good efficacy without any tough (inaudible) with it.

At some point then it will be to expand that into Phase II programs. We're in eight different types of solid cancers at the moment. We'll have to select which different cancer types that we go into in these solid tumors, this may give us the option to actually accelerate some of that and do slightly a wider program for it, as an example. If we do that, we'll be very clear on the decisions we're making.

Another example would be something like with ADC Therapeutics with the TAC-ADC program. As you know, we gave them access to our antibody and we returned to an opt-in into that program. At some point coming up in the not too distant future, we're going to have to start making decisions, do we want to opt-in, retain our 50% rights, which also means sharing in 50% of the development costs? Or opt-out and retain a smaller portion of the ownership of that particular asset?

Again, we're in control of those decisions and we'll look at them and say okay, is this a wise investment for the Company? But we'll also be very clear to the street of saying look, we see this as an opportunity with a chance to return on investment. We are going to use some of our capital group to invest in it. So maybe that's not clear answers, so they're saying well, we're going to either accelerate above the DKK600 million or keep it solid at DKK600 million because it'll depend on those choices. And again, we'll be very selective about the programs with the best, most differentiated programs that we take forward.

That's great; it's very clear. I don't want you not to invest. But it's also good to keep the feet on the ground. So thank you.

Sarah Potter, Bank of America.

I just have two please. Thinking about the ASH abstracts tomorrow, I know that this first line study is predominately a safety study but can we expect any efficacy data at all in the abstracts or is that more likely to come at the actual conference in December?

And then thinking about the survival data for daratumumab, given the relapsed refractory trial is more advanced now. Is there a chance we might see overall survival data at ASH or will we have to wait for the readout of the double refractory monotherapy study?

So Sarah, I cannot tell you exactly what is in the abstracts for daratumumab. What I can tell you is that hopefully they will come out tomorrow and we have submitted a lot of abstracts, many on daratumumab, both clinically and pre-clinically. And I believe that we will get a very good spot at ASH.

In the abstracts there will be limited efficacy data, but they will definitely be described. Once they are selected for presentation at ASH you can expect them at the conference.

I would think there would be limited survival data presented at ASH, but we'll likely have to wait for ASCO because I think we're going to cluster that around those two conferences. But that's basically a Janssen-Genmab decision. But we look forward to a very exciting ASH conference, Sarah, and hopefully not disappoint you there.

Great, thanks very much.

Peter Welford, Jefferies.

Just a couple of questions left. Firstly, just on the -- and sorry, this is a financial question. Just on the cash flow. I see that there's a roughly, what, DKK63 million-odd outflow. I presume that relates to the Seattle AXL deal. But can you just sort of confirm that and also outline I guess how that's going to be treated in the future?

Equally as well on the pay down or whatever you want to call it, cancellation I guess, of the liability due to Glaxo. Given from an auditing perspective, given that's now disappeared, could that potentially be booked this year or is that now not going to be recorded until the actual closure of the deal with Novartis?

And then finally, just strategically coming back to the R&D spend, I guess I'm sort of curious, given we don't know the timing of the Novartis-GSK deal, are you just going to go into 2015 on the basis of the deal will close and therefore you can make plans accordingly? Because obviously your budget's freed up essentially within a month and a bit of time, whereas on the other hand the deal could potentially drag on for months beyond that.

And I guess therefore internally, are you already out there looking to increase internal resources and start to make plans? Or could we potentially see I guess the first half of the year have a noticeably lower spend?

Let me start briefly, Peter, and then I will give your questions to the real accountant here because some of them are real technical, hard core accountancy questions I think.

But to the final one, we are definitely making plans to potentially accelerate some of the programs for clinical as well as pre-clinical. And David has already mentioned ones. And we also know that there's pretty good momentum in the -- what we call the three-way swap deal between GSK and Novartis. Of course we have no influence on that whatsoever. So we hope that it will definitely close earlier rather than late in the next year.

But why don't I hand over your three questions to David and then he'll give you some more detailed answer then on the very detailed questions. David?

Yes, absolutely. Happy to do that. First one on in terms of the deal for AXL with Seattle Genetics. As you were seeing, that was an $11 million upfront payment. You can see that actually on the balance sheet you can see the growth in intangible assets jumping up from December at DKK2.5 billion jumping up to DKK65 million at the end of September. So yes, that is the Seattle Genetics $11 million upfront.

The accounting treatment for that is that we're amortizing that amount over a seven-year period. So the cash has gone out, the P&L charts will come in over seven years, which is the normal accounting treatment for deals of this type.

In terms of the long-term liability, that you could also see in the Q3 report. You could see it on the balance sheet itself. You could also see it detailed on page 17 of the interim report as well. You can see it identified as other payables, noncurrent other payables on the balance sheet, DKK176 million.

Now on that one at this point, because the wider GSK-Novartis deal is subject to completion, maybe now really we've got two things, the GSK shareholders out in December and then the antitrust clearance on all three parts of the larger GSK-Novartis deal.

So at this point it's conditional and our agreement is conditional on that wider agreement going through. So no change to the 2014 numbers. We can't reverse that liability yet, but we would expect to reverse that as soon as the wider deal between GSK and Novartis actually goes through. So hopefully that answers both of your questions, Peter.

That's great. Thank you very much.

(Operator Instructions) And there appears to be no further questions from the phone lines. Please continue.

I thank you for calling in today to discuss Genmab's 2014 third quarter financial results. And we look forward to speaking with you all again soon.

Thank you. Ladies and gentlemen, that concludes our conference for the day. Thank you for participating. You may all disconnect.