Genmab A/S (GMAB) 2015 Q4 法說會逐字稿

Good day and welcome to the annual report 2015 conference call. Today's conference is being recorded. During the 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 obligation to update segments regarding the future nor to confirm such statements in relation to actual results unless this is required by law.

At this time, I would like to turn the conference over to Mr. Jan van de Winkel, CEO. Please go ahead.

Hello and welcome to the Genmab conference call to discuss the Company's financial results for the year ended December 31, 2015. 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.

2015 was a transformational year for Genmab in which we continued to make significant progress with our business objectives. But more importantly with the approval of DARZALEX in multiple myeloma, we were able to play a role in improving the treatment of cancer.

During our last quarterly investor call, we were all eagerly awaiting to hear from the FDA on the regulatory application for daratumumab. Needless to say, we were extremely pleased to receive the approval on November 16, 2015, more than three months ahead of schedule.

Daratumumab, now marketed under the brand name DARZALEX, was approved in the US for the treatment of patients with multiple myeloma who have received at least three prior lines of therapy, including a proteasome inhibitor and an immunomodulatory agent, all who are double refractory to a PI and an IMiD. DARZALEX is the first monoclonal antibody ever approved for the treatment of multiple myeloma as well as the first CD38 antibody to be approved.

After the approval, our licensing partner Janssen was quick to launch DARZALEX and the first commercial sale in the US took place just three days later, triggering a $45 million milestone payment from Janssen to Genmab. We are now waiting to hear from the European CHMP about a potential recommendation for approval of DARZALEX in Europe.

Throughout 2015, the daratumumab development program continued to rapidly progress, with enrollment now completed in two of the five ongoing Phase III studies. We received a total of $85 million in milestones from Janssen for robust progress made with daratumumab during the year.

As you know, DARZALEX is the second antibody created by Genmab to receive FDA approval. The first one was of course Arzerra. In 2015, regulatory submissions for Arzerra as maintenance treatment for relapse CLL in the US and Europe were submitted by Novartis.

US submission was granted priority review and Arzerra was subsequently approved for extended treatment of patients who are in complete or partial response of at least two lines of therapy for recurrence of progressive CLL in January this year. A decision from the European regulatory authorities is also expected for this year.

Last year, we furthermore reported positive data from the study of ofatumumab in combination with fludarabine and cyclophosphamide, OFC, in relapse CLL. And as discussed last quarter, we expect Novartis to submit regulatory applications for this indication in the coming months.

Our progress during 2015 with DARZALEX and Arzerra was rounded out with achievements related to our earlier stage pipeline and our technologies. In June last year, we reported encouraging preliminary Phase I/II data for HuMax-Tissue Factor-ADC, which has now been assigned to the INN name tisotumab vedotin. We chose a therapeutic dose and expanded the initial clinical study with more patients.

We also started a second study in solid tumors investigating a more intense dosing frequency. Both studies are actively recruiting cancer patients at the moment.

Focus in our DuoBody technology collaborations was very substantial in 2015. We announced three new commercial collaborations with Novo Nordisk, BioNovion -- which was later acquired by Aduro Biotech -- and with BioNTech. We earned a total of $17.5 million in milestone payments from our DuoBody technology collaborations during the year, including $1.25 million for progress in our collaboration with Novo Nordisk and $16.25 million from Janssen.

One of the DuoBody programs under our collaboration with Janssen, called JNJ-61186372, or 372 in short, is now being studied in a Phase I clinical trial in non-small cell lung cancer. This is the first bispecific antibody developed under our DuoBody technology to enter clinical developments.

Finally, as David will discuss in detail, our financial results for 2015 significantly exceeded expectations as we have firmly improved the operating profit for 2015 by DKK465 million or by 175% as compared to 2014.

I will now hand the call over to David to further discuss the financial results for 2015 and to give you the guidance for 2016. David?

Thank you very much, Jan. Let's start by looking at the income statement for the period ended December 31, 2015, and move on to slide 4. Revenue for the year came in at just over DKK1.1 billion and that's an increase of DKK283 million or 33% compared to 2014. The increase was mainly driven by higher revenue related to our daratumumab and DuoBody collaborations with Janssen.

Expenses came in a little lower, at DKK579 million for 2015 compared to DKK585 million in 2014. The expenses will increase, though, for 2016 as we continue to invest in the clinical pipeline and accelerate the preclinical projects. And I will discuss these more in coming slides.

Next on this chart, you can see the DKK176 million of other income. This relates to the one-time reversal of the ofatumumab deferred funding liability as a result of the transfer of the ofatumumab collaboration from GSK to Novartis.

Moving to the operating result, in 2015, we had our highest-ever operating income of DKK730 million compared to DKK265 million in 2014. The increase of DKK465 million was driven by the reversal of ofatumumab liability I just mentioned and the high-end milestone revenue from our collaborations.

The operating result was slightly higher than predicted when we updated our 2015 financial guidance in November. This is the result of the achievement of several additional DuoBody milestones and the first royalties for DARZALEX toward the very end of the year.

The net financial items and tax was similar year to year, with a positive DKK34 million in 2015 compared to DKK36 million in 2014. And that takes us to the net result, which was also a record DKK764 million in 2015 compared to DKK301 million in the prior year.

Finally on this slide, our cash position increased by DKK832 million during the year and that was due to proceeds from warrant exercises as well as the positive income from operations. This resulted in a cash position at the end of the year of DKK3.5 billion. The cash position exceeded the November guidance due to the early payment of the $45 million milestone for the first commercial sale of DARZALEX in the US. You will recall we expected that to be paid in January 2016.

Now let's move on to slide 5. This slide shows the breakdown of revenue by category. In 2015, the milestone income is again the largest portion of the revenues, at DKK706 million. This includes DKK587 million in milestones from our daratumumab collaboration and DKK110 million related to the DuoBody collaboration with Janssen. In 2014, milestones were DKK315 and milestones from DuoBody collaboration with Janssen was DKK71 million. As previously discussed, the milestones will be lumpy quarter to quarter and year to year.

Deferred revenue from our partnerships with GSK, Novartis, Novo, and Janssen was DKK292 million, but as previously mentioned, this will decrease in 2016 as the ofatumumab deferred revenue was fully amortized at the end of 2015. At DKK76 million, the Arzerra royalty was DKK25 million lower in 2015 compared to 2014.

Sales of Arzerra continue to be negatively impacted by increased competition in the CLL market. However, new for 2015 are the royalties from DARZALEX, which were DKK16 million. The cost reimbursements to Genmab were lower in 2015 as Janssen is now responsible for all of the new daratumumab studies.

The graph on the right bridges the revenue between the two periods. And as mentioned, the change is mostly due to the growth in the daratumumab and DuoBody milestones, with DARZALEX royalties partially offsetting the lower Arzerra royalties.

Next, if we look at the expenses on slide 6. The graph on the left shows the change in expenses, and as you can see, there was a slight reduction in the operating expenses. And this was mainly due to lower development expenses for ofatumumab related to the transfer of ofatumumab to Novartis and our successful renegotiation of the deal terms.

However, the ofatumumab savings were reinvested in strengthening our pipeline, including Tissue-Factor-ADC and AXL-ADC. We also added new projects last year following deals with Aduro Biotech -- sorry, Aduro Biotech Europe, BioNTech, and the acquisitions of the DR5 and CD19 antibodies. So similar expenses between the two years, but quite a difference on where we were investing and an acceleration of the investment in our own pipeline.

Looking at the chart on the right, you can see a significant increase in the operating income, to DKK730 million, mainly due to the significantly higher revenue as well as the reversal of the GSK liability. 2015 marks our third consecutive year with a positive operating result.

Now let's move on to 2016 and the guidance. On slide 7, we show an overview of our guidance for 2016 compared to the actual result for 2015. And as I indicated during our Q3 earnings call, there will be quite a few changes for 2016.

The revenue for 2016 is expected to be in the range of DKK825 million to DKK875 million. The projected revenue primarily includes daratumumab milestones of DKK400 million and that's lower than the DKK587 million reported in 2015.

We also include DARZALEX royalties of somewhere between DKK200 million and DKK250 million. The projected DARZALEX royalties are based on Genmab's estimate of sales between $250 million and $300 million. It's of course very difficult at this early stage to predict what the DARZALEX sales will be. However, comparing with the launch-year sales for KYPROLIS and Pomalyst and reviewing the limited sales data we've seen so far, we believe these sales estimates are highly realistic.

The remaining revenue for 2016 consists of Arzerra royalties, DuoBody milestones, and loan cash amortization of deferred revenue. Of course, you'll note that the anticipated revenue for 2016 is lower than 2015. This is primarily due to the timing of the daratumumab milestones and a reduction of over DKK200 million in deferred revenues as the ofatumumab revenue from the Novartis GSK collaboration was fully amortized at the end of 2015. So the deferred revenue drops from DKK292 million in 2015 to just slightly less than DKK90 million in 2016.

However, despite the lower revenue in 2016, we believe the quality of the revenue is improving. While milestone income is still the largest portion of our revenues, with the launch of DARZALEX, we are seeing a higher proportion of the revenue coming from royalty income. And that's offsetting the lower quality non-cash deferred revenue.

As you know, we need the majority of our revenue to come from royalties that we can predict to achieve our goal of sustainable profitability. And while of course it's a little early to start thinking about 2017, if the daratumumab combination trials read out successfully this year and we get expanded labels in 2017, we'd hope to see a number of very sizable daratumumab milestones as well as increased DARZALEX royalties.

Now moving on to slide 8 and the operating expenses for 2016. We project operating expenses for the new year to be in the range of DKK775 million to DKK825 million compared to DKK579 million in 2015. The increase in operating expenses is driven by additional investment in our product pipeline, including Tissue-Factor-ADC, AXL-ADC, the newly announced HexaBody-DR5/DR5, and DuoBody CD3/CD20.

These four key projects account for around DKK160 million of the year-over-year increase. With a total in 2016 of a span of about DKK160 million on these four projects, that would be about one-third of our total expense base. We are also increasing the investment in our preclinical pipeline to drive even more projects into the clinic in future years.

We expect 2016 operating income to be approximately DKK25 million to DKK75 million compared to the DKK730 million reported in 2015. The reduction in operating income is due to the decrease in deferred revenue, the timing of milestones, and increased investment in progressing our pipeline. The operating income for 2015 of course also benefited from the one-time gain on the reversal of the GSK/Novartis liability of DKK176 million.

We project a cash position between DKK3.3 billion and DKK3.4 billion at the end of 2016 compared to the DKK3.5 billion at the end of last year. So we remain very well capitalized. Also note as usual, the 2016 guidance does not include any new potential deals or potential proceeds from future warrant exercises.

In summary, a record year in 2015 and increasing royalties from DARZALEX in 2016, enabling Genmab to increase the investment to selectively advance our pipeline and create even more value.

Now back to Jan to discuss our 2016 goals. Jan?

Thank you, David. Let's move to slide 9. Looking at our goals for 2016, we have some very busy months ahead. We expect to see significant progress in the daratumumab program with Janssen, with commercial launches in the US and other approved territories. And we very much look forward to a decision from the EU CHMP on the regulatory application for daratumumab monotherapy in relapsed and refractory multiple myeloma.

We expect to report interim efficacy data from two large Phase III studies of daratumumab in the relapsed refractory multiple myeloma subjects in the first half of this year. And if the data is positive, we expect Janssen to subsequently file for a label in these settings. We also expect Janssen to start multiple new clinical trials in multiple myeloma and other cancer indications and to report the first clinical data in non-Hodgkin lymphoma.

For ofatumumab, we expect our partner Novartis to start Phase III clinical studies with the subcu formulation of ofatumumab in relapsing-remitting multiple sclerosis in the second half of 2016. The US FDA approved the use of Arzerra as extended treatment for recurrent and aggressive CLL in January 2016 and we anticipate a new regulatory filing for ofatumumab in relapsed CLL this year.

Finally, we expect to report interim results from a Phase III study of ofatumumab in refractory follicular lymphoma during this year. We will continue to strengthen the rest of our pipeline as well and plan to report additional data from the first Phase I/II study of tisotumab vedotin in the second half of this year and to file an IND for and start the first clinical trial of HuMax-AXL-ADC in 2016.

We will work to progress the HexaBody DR5/DR5 and DuoBody CD3xCD20 programs as well as other preclinical DuoBody, HexaBody, and ADC programs this year. We will continue to execute partnership agreements for our next-generation antibody technologies and expect to see our partnerships progress with new IND filings. Lastly, we will maintain our disciplined financial management and we will selectively invest to progress and broaden our state-of-the-art differentiated product pipeline.

Let's move to slide 10. That ends our presentation of Genmab's 2015 financial results.

Operator, please open the call for questions.

(Operator Instructions) Michael Novod, Nordea.

I have a few questions. Firstly, if you take the costs, if you look at the 2016 guidance, could you also try to elaborate on how you envision the cost levels develop over the next two, three years, it would be very helpful to us.

And then secondly, on DARZALEX, congratulations on a very, very solid start. Could you just repeat what you said around the additional milestones related to label expansions? Are you going to see those big milestones attach to label expansion or to the actual filings for label expansion?

And then lastly on Arzerra, can you try to give us a bit of light on how you actually see the sales decline also into 2016? I'm not really sure that you're going to see competitive pressure easing. So what do you assume for Arzerra in the coming one or two years? Thank you very much.

Thank you, Michael, for the three questions. I will definitely give the questions one and three to David. Let me give you some further color on DARZALEX. What we have put in our current guidance, Michael, is the filing milestones for both of the Phase IIIs reading out in the first half of this year in the refractory setting with either Velcade or Revlimid.

But the big milestones -- David called them very sizable milestones -- which we could potentially hit is of course for the -- to get them basically get the labels for these very important, very large [broad learnings] of the label and they will likely fall into 2017. So we expect some very sizable new milestones for those programs next year, Michael.

So why don't I give questions one and three to David. David, for the 2016 guidance and the cost level, whatever you are willing to say to Michael over the next two to three years?

So just on the daratumumab milestones for 2016, as Jan says, we've got the filings. Assuming the trials come out successfully with the combos with both Velcade and Revlimid, we also hope we've got to look forward in 2016 for the EU approval and first commercial sale as well.

In terms of the cost overall, you are quite correct -- we've got quite an increasing cost in 2016, as I said. Those four key programs that we've now got ongoing is about DKK260 million this year. The largest one out of those four is Tissue-Factor-ADC, which is no surprise since we are now running two clinical trials.

Predicting where we go in the future in that, one of the things with Tissue-Factor-ADC is going to be if we added Seattle at the end of the Phase I data opt-in or not. Because if they opt in, then we will be sharing the costs on a 50-50 basis, and until that opt-in happens, I can't really predict whether that cost will continually increase for us or whether we will be sharing it with Seattle.

In terms of the other programs there, that means there's another DKK140 million being spent in 2016 on AXL, DR5, and CD3/CD 20. It's really going to depend on the advancement of those particular projects. If they are successful, then we will be spending more.

Is it likely with a biotech company in every project that we put through to the clinic going to be successful? Probably not likely. So difficult to project, but I would say look, if we are spending more money there, then it means those projects are advancing and that's going to be positive for the Company, as we will be creating more value for those projects.

But when you look at it overall, DKK260 million on four key development projects, convert that to the current dollar rate, it's under $40 million to advancing four projects, which we've got either a 100% or a very large proportion of ownership in. I think it's still good value for us as we go forward. But difficult to project at this early stage exactly where that expense will go as we move forward into 2017, 2018, and beyond.

In terms of the third question on Arzerra, as you know, I said earlier that the royalties were DKK76 million in 2015. We did see as we went through our quarterly results and those numbers were actually getting slightly smaller quarter by quarter. And we'd assume for 2016 that the sort of the run rate that we are getting in the latter part of 2015 will be the runway going forward into 2016.

So we are not projecting any large growth in Arzerra royalties as they come through. So not going to take the key headlines when you compare the interest and the royalty income stream for DARZALEX to be sure. I believe that gives you some answers to your questions.

Just on the cost -- I'm not criticizing the development in cost. I think it's great you invest in pipeline. It was just more to get some kind of feeling for how we should try to model the operational cost in the next couple of years. (technical difficulty)

Yes, understood. It's difficult for me to project, as I said, with Seattle opt-in or not opt-in, then of course my largest development costs of DKK120 million for Tissue-Factor could be halved. Some of the costs as well if you look at things like DR5/DR5 HexaBody in 2016 and CD3/CD20 -- they are quite expensive years for it because you are getting into the top studies into the CMC batches, which can be quite expensive.

In fact, we will be spending more on DR5/DR5 in 2016 than we will be spending on AXL-ADC because the CMC was already in for AXL in 2015. So if Seattle opt in, then it won't be a massive increase in the expense base, but it all will be very clearly identified to the development projects. So I like to look at it that we are not increasing the expenses, we are increasing the investment.

Sarah Potter, Deutsche Bank.

Just a couple of questions, please. Firstly, on your $250 million to $300 million DARZALEX sales guidance, could you just confirm does this assume usage only as per the label in 2016? Or are you assuming some off-label usage as well and in which regions?

Then just some anecdotal feedback on the launch if you have any. Are there any kind of feedback on the injection site reactions in the real-world setting or perhaps how the drug is being used compared with EMPLICITI.

And then just a final question -- maybe you could us an update on the subcutaneous formulation of DARZALEX? I think at ASH, you said a safety data committee would take a look and maybe add in further cohorts at the end of January. Has this happened? Thank you.

Hello, Sarah. The DARZALEX estimate for this year was very difficult to make, actually. What we did is we looked that KYPROLIS and Pomalyst. It's actually ever slightly broader label, as you and I know, and the first year sales data.

What I can tell you is that we are following the IMS data and what we have seen is a very robust pickup in January; basically week-by-week increases in sales. And we also have very solid feedback from our partner Janssen on the reception by the market and the underlying market demand. So we are highly comfortable with guiding you towards these sales numbers.

We want to see actually a number of quarters, Sarah, to actually give you a better estimate because we have heard that it's very difficult with a new drug when you have not seen two or three solid quarters of sales. We have not even finished the first full quarter of sale with DARZALEX, but we are very confident that the drug is used and it's used a lot actually.

And I cannot comment on on-label versus off label. That has not gone on to the guidance David and I have given you today. But we also hear back from the market is at the injection site, infusion reactions are absolutely no issue. They only happen the first time and they are very mild and then disappear in most of the patients at the second infusion. So there is absolutely no impact on the use of the drug in the clinic as we see it right now.

And I think EMPLICITI is a very different drug. We don't think there's any competitor actually to DARZALEX, but time will have to tell us in the coming months, Sara, how this spans out between the two drugs. But we feel that we are definitely working with a more efficacious, more interesting drug. But let's see whether that is going to be proved by reality.

Then the subcu question is a very good one. I can tell you that we have gone out through the first cohort acceleration and that came out very, very positively in the second cohort with the subcu formulation. So that study is progressing very, very well and is at this moment just performing exactly as we could have wished in our best dreams. And I cannot add anything further there.

Great. Thank you very much.

Sachin Jain, BofA Merrill Lynch.

Just a couple of questions, please. Firstly in the fourth quarter, DARZALEX number of $20 million just about -- was there any meaningful inventory in there? And then secondly, just following on from the last question, just to clarify your answer, I think you talked at ASH about the Pomalyst data, whether or not being label enabling could potentially be used in guidelines. So to clarify, is that reflected in guidance?

And then secondly, when Pollux and Castor data come, just to reconfirm then that off-label usage potential post-data isn't reflected in the guidance. Thank you.

Let me first start with the fourth-quarter data for DARZALEX. We just published some inventory accumulation in there, but we have not gotten that much detail from Janssen. We just got the final numbers of $19.7 million. What we are doing is we are following the IMS database very, very carefully and what I said already in my answer to Sarah is that actually we see robustly week-by-week increases now from the levels we have seen last year.

So yes, I think it may be some switching from the named patient program to the treatment on label. There may also be some inventory and some of the providers of the drug, but we don't have that detail at this moment. But I said in my estimate to the former analyst, I already want to repeat I think we want to see a few quarters of sales before we are going to give you much more detailed estimates and guidance.

And that also answers your second question on the Pomalyst data, which was stunning data as supported at ASH. It's now being put back for publication in one of the top medical journals, I can tell you, and that was still immature data. That has not gone into the consideration of the guidance we've given you today of the $300 million for this year.

And neither has the -- let's hope -- the assumed positive data on the Phase III studies Pollux and Castor gone into that guidance. That is all potential further upside to the numbers during this year. What we have put into the guidance is the milestones for filing in Europe and in the US for both Castor and Pollux, assuming, of course, positive data in the interims in the first half this year.

Can I just take a couple of follow-ons? I don't know whether you would be willing to share this, but would you give any color on the degree of inflection in January relative to the numbers we've seen? And then related, as you look at the fourth-quarter number versus your guidance, the bottom end of guidance is essentially the last six weeks annualized, which doesn't really assume an inflection. Is that fair?

I don't think we want to give a lot of further information, because the actual Janssen sales numbers may actually in the future defer from the IMS data. But what I can tell you that we have seen very solid -- more a mid-single-digit growth in several weeks in January, and we don't know whether that will be a trend because it's too few data to actually comment on in level of detail. Give us a few quarters of sales and then we can give you much more precise guidance on the numbers.

The same holds for the bottom number, I think. It's actually pointing very much towards at the high end of that guidance already at this time.

Very clear. Thank you very much.

Thomas Bowers, Danske Bank.

Yes, thank you. Just a few follow-ups. On the milestone guidance, I'm just wondering if you would put a little bit more color on the possible upside to the current guidance? It's primarily reflected to Sarah, I believe, that you still have around $100 million remaining in the FL indication and since that you are expecting interim date of this year. So what could the potential upside the here, whether you have included some of that in the current guidance?

And then my second question, just on ofatumumab and in order to differentiate against ocrelizumab, I'm just wondering if you see this as primarily on the commercial side -- subcu versus IV? Or do you believe that we have seen the fatal events in lupus and arthritis? Could that potentially still remain a concern that could differentiate ofatumumab to rilotumumab in order for you to catch up in MS?

And then finally, just on ASCO, I'm just wondering how many abstracts have been submitted and maybe if you could add some color in general and also maybe in regards to EHA in June? Thank you.

Thanks, Thomas, for the questions. I will leave the possible upside on the milestones to David. But let me start with the second question -- ofatumumab, the subcu formulation. Novartis has already indicated that it will start different large Phase III trials in relapsing-remitting MS with subcu ofab. And we think it's true be differentiated from everything we know of to this time from ocrelizumab, which is a very old primitive antibody actually not even generated by Roche, but Genentech.

And what we think is that antibody had real toxicity -- actually already it's at the infectious disease level, which we haven't seen with ofatumumab. Ofatumumab is subcu, so that means that you need far lower doses, which is commercially of course attractive and also much more convenient to the patients.

Plus if you stop with the dosing, Thomas, you can also actually get rid of the drug very quickly, which is not possible with the IV drug. For example, if you imagine a woman who wants to become pregnant, it's actually much more convenient. And a lot of ladies are unfortunately getting relapsing-remitting MS. This would be a much more effective and convenient drug to take from that perspective.

So we think there is a number of medical and commercial reasons to really pursue aggressively ofatumumab subcu. And Novartis is exactly going to do that in thousands of patients as of mid this year, and then further plans need to come from Novartis. But we clearly feel that there is a very clear differentiation between the two drugs.

Then ASCO, we are still collecting an overview of all the abstracts submitted and data submitted, but there will probably be some further incremental data of some of the dara studies at ASCO. At EHA, we have not yet I think fully made up our mind of what will be submitted to EHA.

And of course, needless to say, what is a possibility for both of these conferences as well as for ASH end of this year if we would get the Pollux and Castor data before that, that would clearly be candidates, Thomas, to be submitted to one of these three conferences, but it's too early to say at this time. We will get back with more full news on the ASCO abstracts. We don't have the complete overview of Sauza at this time.

And then David, maybe question on the guidance on the potential upside on the milestones?

Thank you, Thomas. We haven't included any milestones for Arzerra in the FL indication in the 2016 guidance. Remember, though, that actually those milestones are in Danish krone, so with the current strong dollar, it's actually about $80 million now with milestones.

Plus the largest portion of the milestones was actually based on approval, so you wouldn't expect that even if we get the positive results and get filing, you wouldn't anticipate approval in 2016. So that would be spread over a couple of fiscal years as well. But we have not included any FL milestones in 2016.

Okay, great. Thank you.

Carsten Madsen, SEB.

Jan, when you look at the Pollux and Castor data we will see later this year, would you care to speculate a little bit about which type of stressor you will need to hit in order to have a very strong drug in the relapse refractory setting? You can feel free to talk about overall response rates or complete response. What would you benchmark against as the sort of best level that you should do better than?

And then also on the Seattle Genetics collaboration on the tisotumab, at what point in time -- I know it's at the end of Phase I, but will it be next year that you will be making the decision? Thanks.

Hello, Carsten. These are both very good questions. Unfortunately, I cannot give you a lot more guidance on Pollux and Castor. We have of course covered already a pre-agreed threshold level that you need to go over. This PFS is the primary end point. Also of the interim, we need to see a certain percentage increase, Carsten, over the control arm, which is either RevDex by itself or VelDex by itself.

But what you can do for your own perspective is just look at some other interims in multiple myeloma with some other recently approved drugs based on interims. You need to see a pretty significant increase at the interim in PFS over the control arm in order for the regulators to consider it enough for filing. And that also be very much in line to what has been seen in other interim analysis recently as a requirement in multiple myeloma in the second line. I cannot give you further clarity because that would not be good I think here.

Then for SeaGen, for tisotumab vedotin, that could actually be this year, assuming that we get more data in the second half of this year. This is what we fully believe, Carsten, based on the current very active recruitment and the dosing with an optimal dose of the drug in the Phase I/II study. And also the more frequent induction -- infusion of the drug in the second phase study, we believe that actually the trigger point for Seattle could actually fall within this year.

Just a quick follow-up to the interim data, but is that Europe or [not address] or is it fair to say you are very confident in the interim data being strong enough for filing?

I mean, we have put in the filing milestones for both Castor and Pollux. And you have seen, as we have seen, of course, the very impressive RevDex/dara data, the 32 patients at ASH. That is basically blow-you-out-of-the-room type data.

This is after two lines of prior treatment, Carsten. And of course, the requirement for the Phase IIIs are after one round of prior treatment. So they are less sick; and usually cancer patients that are less heavily pretreated usually respond even better to drugs.

So yes, we are very confident and we believe that that may actually be a very strong driver of growth for DARZALEX royalties in 2017, as David has already indicated in the introduction. And of course also, we have some very sizable milestones, assuming that the label will be expanded for these very robust second-line settings with these two combination regimens.

So yes, we are quite optimistic about it, Carsten. Let's hope that we proved to be right and then you will also get optimistic.

Thanks a lot.

(Operator Instructions) Peter Welford, Jefferies.

Hi, thanks for taking my questions. Just firstly, sticking back to the spending on the pipeline drugs, I wonder if you could talk about if there is an upper-level, I guess, of spending longer term that you would feel uncomfortable with perhaps and therefore would want to consider out-licensing?

I guess I'm just sort of returning to a prior question and trying to get some sort of steer as to perhaps where -- what sort of growth in spend and what's the objective you are aiming for? Or what happens to -- given what happened to the DARZALEX royalties in the future, where you would perhaps be happy to see spend going?

And then secondly, in a similar vein, given you are now entering immuno-oncology, but given obviously the need to often run combination studies in those indications, how are you approaching that? Are you willing to give your antibodies at this stage to other companies to do studies? Or would you be unwilling to do that and you want to retain the rights and prefer to do sort of in-house or perhaps even bring in other drugs that you can then test in combination with your own?

And then finally, just coming back to the Arzerra milestone question on the financials, I just wondered -- you've given clarity -- I think you said there's $80 million left for Arzerra. I just wonder is that all regulatory- and clinical-based for Arzerra in follicular lymphoma? Am I right in saying the sales milestones on top of that as well or does that $80 million include the sales as well? Thank you.

Thank you, Peter, for the questions. Several questions for David, but why don't I actually give you first some color and then give David time to think about question one. And that's the pipeline of drugs; we have an amazing pipeline, Peter. We have like over 10 IND candidates for the next four years: three AXL, DR5/DR5, and CD3/CD20, which we have named.

And we said we are confident that we can at least push one IND a year into the clinic in the next four years and then it will accelerate and accelerate actually quite quickly. The acceleration phase starting in 2018 and 2019 will actually involved also the immuno-oncology candidates. It's the bispecific candidates under the BioNovion are now called Aduro Europe collaboration and the BioNTech collaboration.

And actually we have actually more than half of our programs are now immuno-oncology programs, Peter. So we actually expect a very swift acceleration of the number of candidates going into the clinic.

I'll let David comment on the ceiling of spend, but what I can tell you -- the whole strategy of the Company from here on is to identify the next clear winner that should be a truly differentiated drug candidate. Once we identify that winter, we will maximize the potential. We try to do that by ourselves or with a partner; for example, then it would be tisotumab vedotin is likely going to be Seattle Genetics.

And yes, then we can idle when we have [supply] programs because it has a ceiling of course, the spend. We can either put them on the shelf because some of these future drugs will fail, Peter. They will not all be winners because some of them are so potent that they may actually be toxic to patients and then we can immediately replace a stop program by a program from the shelf. Or more likely, as you already alluded to, we can potentially partner that with a pharma or a biotech company to lab animals to take the risk and spend money on it.

But from here on, you will see acceleration. I will let David respond to the question on the ceiling, how we see that, given our own internal guidance projections for the coming years.

Then with regard to combination therapy, yes, there are so many possible combinations; like DARZALEX will be combined with checkpoint blockers. And also hopefully within this year, in different cancers together with Janssen. And of course, DARZALEX is very much driven -- the development is very much driven by Janssen.

But for the same token, we have actually over half of our preclinical programs are in our immuno-oncology programs. All of them are bispecific, as we speak, Peter. But even they could potentially be combined with like other cancer vaccines or other small molecule immuno-oncology drugs, which has very good preclinical data for synergy. Yes, it's very likely that you would actually do it together with pharma or biotech partners in the future, also, in order to optimally use our resources.

So that's probably what I can say at this time. Maybe David, you can sort of allude to the spending for the pipeline to Peter. And also then try to answer the Arzerra milestone question on the follicular lymphoma milestones.

Sure. I'll start with the easy one, with the Arzerra milestones -- the $80 million or approximate $80 million we are referring to on the FL milestones is down to the regulatory and approval for the FL indication. There is also some sales milestones of a similar size, but given where the sales value of Arzerra is today, that would be somewhat further out. So -- but there are some sales milestones still within the agreement overall on the oncology side.

Going back to the future spending, I think at this point, it would somewhat depend on the patient success -- continued success clinically for DARZALEX. Because I think we are in a nice situation with the current DARZALEX royalty coming through and the expectations for royalties and big sales over the next three to five years. Then that gives us quite an income stream coming through that we can reinvest in this pipeline to create more value.

So being able to self-fund a large portion of the pipeline is quite attractive. Of course, it's somewhat going to depend on the success of the projects. If we are in such a lucky position that three or four of these programs all hit it through and all come out with differentiated antibodies, then we would be in a fantastic position to really look at it and say, hey, does this really need funding?

And we have to then decide do we do that with a partner, either on a 50-50, or perhaps there's some programs that we like more than others, some that we will really double down on and push further forward on our own. And maybe the ones that aren't quite so strong that we look to actually license or partner those out.

So I think we haven't got any preconceived ideas of exactly how that would develop over time. But again, I think the bigger the spend, the more good news it is for the investors because it means these projects are advancing and meeting our very high benchmarks and standards to actually take a product through forward.

Again, if we get a partner like SeaGen to come in that is going to have the future investment in Tissue-Factor-ADC. But I think we can afford to take some increased spend in 2017, 2018 based on the expectations for DARZALEX.

That's great. Thank you very much.

(Operator Instructions) We have no further questions at this time, sir.

So thank you all for calling in today to discuss general financial results for the full year 2015. We look forward to speaking with you again soon.

That will conclude today's conference call. Thank you, ladies and gentlemen. You may now disconnect.