Genmab A/S (GMAB) 2016 Q1 法說會逐字稿

Good day and welcome to the quarter-one report 2016 conference call. Today's conference is being recorded. During this telephone conference, you may be presented with forward-looking statements that include words such as believes, anticipates, plans, or expects. Actual results may differ materially -- for example, as a result of delayed or unsuccessful development projects. Genmab is not under an obligation to update statements regarding the future nor to confirm such statements in relation to actual results unless this is required by law.

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

Hello and welcome to the Genmab conference call to discuss the Company's financial results for the quarter ended March 31, 2016. 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. 2016 got off to a great start for Genmab. We continue to experience success with DARZALEX, or daratumumab. The Phase III study of daratumumab in combination with bortezomib and dexamethasone versus bortezomib and dexamethasone alone in relapsed or refractory multiple myeloma matched the primary endpoint at a preplanned interim analysis. This analysis showed a significant increase in progression-free survival, as the PFS for patients who received daratumumab was not reached as of the time of the analysis, while those who only received bortezomib and dexamethasone had a median PFS of 7.2 months.

In addition, the analysis showed an unprecedented hazard ratio of 0.39. This has never been seen with any previous therapy combinations for multiple myeloma. This means that patients who are treated with daratumumab had a 61% reduction in risk of their multiple myeloma progressing compared to patients who did not receive daratumumab.

These highly impressive data have been accepted for an oral presentation at the 2016 American Society of Clinical Oncology, or ASCO, annual meeting in Chicago in June. The data will be presented in the plenary session on June the 5th, which is notable because, as per ASCO, the plenary session highlights abstracts of scientific research deemed to have the highest merits and greatest impact on oncology research and practice.

Other development highlights for daratumumab include the second $5 million milestone payment from Janssen for progress in the first study that was launched outside of multiple myeloma -- the Phase II study in Non-Hodgkin's Lymphoma. We also announced that Janssen and Genentech, a member of the Roche group, entered an agreement to clinically evaluate daratumumab in combination with a so-called checkpoint blocker from Roche, atezolizumab, that targets the PD-L1 molecule.

The companies plan to start two Phase Ib studies later this year. Genentech will run a study combining daratumumab and atezolizumab alone or with an additional immune monotherapy drug, either Revlimid or with Pomalyst, in relapsed refractory multiple myeloma. Janssen will run a study in a solid tumor, the first such study with daratumumab.

Furthermore, just off of the quarter-end, we announced that the European Medicines Agency's Committee for Medicinal Products for Human Use, or CHMP, adopted a positive opinion recommending the granting of a conditional marketing authorization for DARZALEX intended for the treatment of relapsed and refractory multiple myeloma. A final decision from the European Commission is expected in the coming months.

As part as the review process in the EU, the COMP, or the Committee for Orphan Medicinal Products, discussed the application for orphan drug status for daratumumab. Following this discussion, they decided to grant orphan drug status to daratumumab in multiple myeloma.

We are also very pleased with the commercial success of DARZALEX in the United States so far. This is the first full quarter of sales for DARZALEX, and we were very excited to see a rapid uptake of the drug leading to sales of $101.9 million, and royalty income to Genmab of DKK83 million. The sales exceeded our initial expectations. And, as a result, we improved our financial guidance for the year, as David will discuss later.

Moving on to our other marketed product, Arzerra, or ofatumumab -- in the first quarter, the Arzerra label was expanded to include extended treatment for patients with relapsed CLO in the United States. Our collaboration partner Novartis also submitted regulatory applications in the US and Europe for an additional label expansion, this time for ofatumumab in combination with fludarabine and cyclophosphamide in relapsed CLO.

Lastly, we announced updated development plans for the sub-cu formulation of ofatumumab in autoimmune diseases. Novartis will focus on development in multiple sclerosis, and we expect them to start large Phase III studies in relapsing multiple sclerosis in the second-half of 2016, while the study in pemphigus vulgaris started by GSK will be discontinued.

Other key highlights for the first quarter include rapid progress in a DuoBody collaboration with Janssen. Janssen is running clinical trials for two Janssen/DuoBody programs, and we expect additional DuoBody programs to enter the clinic later this year. We also achieved a EUR1.5 million milestone in our collaboration with Lundbeck for antibodies targeting central nervous system, or CNS diseases.

Finally, as David will discuss in detail, our financial results are well on track for the year, as we have improved revenue for the first three months of 2016 by DKK63 million or by 59% compared to the same period in 2015.

I will now hand the call over to David to discuss the financial results and guidance for this year. David?

Thank you very much, Jan. Let's move to slide 4. Over the next few slides, I would like to discuss the results for the first quarter and the guidance for 2016.

Let's start on slide 4 while looking at the income statement for the period ending March 31. Revenue for the period came in at DKK117 million, as Jan just said, an increase of DKK63 million, or 59% compared to the first three months of 2015. The increase was mainly driven by higher royalty and milestone revenue related to our daratumumab collaboration with Janssen.

Expenses also came in higher than last year, about DKK154 million in 2016 compared to DKK110 million in Q1 2015. The increase was primarily related to the promised additional investment in our clinical and preclinical pipeline.

Next, there was no other income in 2016 compared to the DKK176 million in 2015. You will recall that this related to the one-time reversal of the ofatumumab deferred funding liability, and that was as a result of the transfer of the ofatumumab collaboration from GSK to Novartis.

Moving on to the operating result for 2016, we had an operating income of DKK16 million compared to the larger DKK173 million in the same period last year. The decrease of DKK157 million was of course driven by the one-time reversal of the ofatumumab liability that I just mentioned. Excluding the impact of this one-time reversal, the operating income would have increased by DKK19 million year-over-year.

The net financial items in tax were a loss of DKK28 million in Q1 2016 compared to an income of DKK44 million in 2015. The difference between the periods was mainly related due to foreign exchange rate movements, which negatively impacted our US dollar-denominated cash holdings and marketable securities portfolio. That takes us to the net result, which was a loss of DKK12 million in 2016 compared to an income of DKK217 million in Q1 2015.

Finally on this slide, the cash position of DKK3.5 billion remained virtually the same as at the end of 2015.

Now let's move on to slide 5 and take a closer look at the revenue. This slide shows the breakdown of revenue by category. In the first three months of 2016, DARZALEX royalties were the largest portion of revenues at DKK83 million. Milestone revenue was DKK45 million, and includes DKK34 million milestone from our daratumumab collaboration with Janssen and an DKK11 million milestone related to our clinical collaboration with Lundbeck. There were no milestones achieved during the same period of 2015.

Deferred revenue from our collaboration was DKK23 million in 2016, compared to a far larger DKK73 million in the same period last year. As previously discussed, this decrease is due to the ofatumumab deferred revenue that was fully amortized at the end of 2015.

At DKK17 million, the Arzerra royalty was DKK5 million lower in the first quarter of 2016 compared to Q1 2015. However, the Q1 Arzerra sales did increase slightly from the fourth quarter of 2015.

The cost reimbursements to Genmab were lower compared to last year, as Janssen is running all of the daratumumab studies. The graph on the right bridges the revenue between the two periods. And, as mentioned, the change is in large part due to the DARZALEX royalties and the daratumumab milestone, which were partially offset by the anticipated reduction in the deferred rent revenue.

And it's interesting to see that the quality of revenue in 2016 is improving. With the launch of DARZALEX, we are seeing a higher proportion of the revenue coming from royalty income, which is offsetting the lower quality non-cash deferred revenue. And as we've discussed before, we need to get the majority of our revenue to come from royalty income to achieve our goal of sustainable profitability.

Next, the expenses and the operating income on slide 6. The graph on the left compares the change in expenses between the first quarter of 2015 and the first quarter of 2016. As you can see, there was an increase in the operating expenses of DKK44 million. This was mainly due to the additional investment in our product pipeline, including the advancement of AXL-ADC, Tissue Factor ADC, HexaBody-DR5/DR5, and DuoBody-CD3 CD20.

Looking at the chart on the right, as we've already discussed, you can see a significant decrease in the operating income to DKK16 million in 2016, mainly due to the reversal of the GSK liability, which was a one-time event.

Now let's move on to the guidance on slide 7. On this slide, we show an overview of our 2016 guidance. On April 20, we revised our financial guidance, driven by the anticipation of increased royalty income from DARZALEX. The table shows a comparison of the April 20th guidance with the original guidance that was issued in February. The revenue range for 2016 was increased by DKK100 million to a new range of DKK925 million to DKK975 million.

The revenue improvement includes an increase in our projected DARZALEX royalties, which are now DKK300 million to DKK350 million. The prior estimate was DKK200 million to DKK250 million. And this is due to the rapid uptake of the product since launch. The projected DARZALEX royalties are based on Genmab's estimate of sales between $400 million and $450 million in 2016 compared to an original estimate of $250 million to $300 million.

The revenue estimate also includes daratumumab milestones of DKK400 million. And the remaining revenue for 2016 consists of Arzerra royalties, DuoBody milestones, and non-cash amortization of deferred revenue.

We expect the operating expenses for 2016 to be in the range of DKK775 million to DKK825 million. The operating expenses remain consistent with our original guidance, as we continue to invest in our pipeline of products, including tissue factor, AXL, DR5, and CD3/CD20. These four key projects will account for about DKK260 million of the total expenses in 2016. So that will be about one-third of our total expense base.

We're also increasing the investment in other preclinical programs to drive even more projects into the clinic in future years. We now expect the 2016 operating income to be approximately DKK125 million to DKK175 million compared to DKK25 million to DKK75 million in our original guidance. The increase in the operating income is due to the increase in DARZALEX royalty.

We're projecting a cash position of DKK3.4 billion to DKK3.5 billion at the end of 2016 compared to DKK3.3 billion to DKK3.4 billion in our original guidance. So, again, an increase of DKK100 million. Also note, as usual, the 2016 guidance does not include any new potential deals or potential proceeds from future warrant exercises.

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

Thank you, David. Let's move to slide 8. Let's take a look at how we are progressing on our 2016 goals.

While we have already seen significant achievements related to daratumumab this year, we expect to see additional progress. The commercial launch of DARZALEX in the US has been a success so far, and we have received a positive opinion from the CHMP on the regulatory application for daratumumab.

We expect to receive final EU approval for daratumumab in the coming months, after which Janssen will launch the product in Europe. We have reported positive interim data from one of the two key Phase III studies of daratumumab in relapsed refractory multiple myeloma, which will lead to a regulatory application, and we expect the interim analysis from the other study to occur in the coming months as well.

We also expect Janssen to start multiple new clinical trials in multiple myeloma and non-multiple myeloma indications this year and to report the first clinical data in non-Hodgkin lymphoma. For ofatumumab, we are looking forward to seeing our partner Novartis initiate Phase III studies with the sub-cu formulation of ofatumumab in relapsing multiple sclerosis in the second half of this year.

At the beginning of the year in January, the US FDA approved the use of Arzerra as extended treatment for recurrent and progressive CLO, and in March, applications were submitted to both the US and EU regulatory authorities for ofatumumab in relapsed CLO.

Finally, an interim analysis in the Phase III study of ofatumumab in refractory follicular lymphoma was conducted during the first quarter. And it was determined that the study should continue. Data from this study is now expected to be reported in 2017.

Additionally, we will continue to strengthen the rest of our pipeline, and plan to report further data from the first Phase I/II study of tisotumab vedotin towards the end of this year, and to file an IND and start the first clinical trial, the HuMax-AXL-ADC in 2016. We will work to robustly progress the HexaBody-DR5/DR5 and our DuoBody-CD3xCD20 programs, as well as other preclinical DuoBody, HexaBody and ADC programs this year.

We will continue to execute partnership agreements for state-of-the-art next-generation antibody technologies, and have already seen partnership progress with new IND filings with respect to the Janssen DuoBody program.

Lastly, we will maintain our disciplined financial management, and will selectively invest to progress and broaden our strong differentiated product pipeline.

Let's move to slide 9. That ends our presentation of Genmab's Q1 2016 financial results. Operator, please open the call for questions. Operator?

(Operator Instructions) Sarah Potter, Deutsche Bank.

It's Sarah Potter from Deutsche Bank. I'll just take three questions, please. So firstly on the DARZALEX launch, could you give a little bit of color around the number of patients which are currently on therapy with DARZALEX, and why you are seeing the drug being used -- whether in monotherapy or in combination?

And then, secondly, I just wanted to dig a little deeper into your guidance of the DKK400 million -- DKK450 million. This looks to assume very little grades in future quarters despite having the late breaker slash to ASCO, which I guess is going to be a great place to marketing. Is this just conservatism, given we are quite early in the launch? Or do you feel that there has been a bolus of patients and the launch trajectory may drop off?

And then finally could you just confirm that J&J is still planning to wait for both the Castor and Pollux data before filing for a label? Thank you.

Hello, Sarah. Thank you for your questions. So the numbers of patients on DARZALEX, I don't think that we have gotten that number from our colleagues at Janssen, but there's definitely several-thousand patients now on DARZALEX, as I understand, in total both in trials and on the commercial products.

We are still, I think, looking at exactly who is prescribing it for which patients. And I don't think we have detailed information at this time, Sarah, because it's only one full quarter of sales in the United States. But what I can tell you is that the Janssen team is receiving very positive feedback. They're also very eager to launch the drug in Europe, so we are waiting for the European Commission to give us the approval in Europe, and then we will aggressively launch it in several countries in Europe.

So I think we are all ready to go there, but I think it's too early to give you further color on the exact number of patients and the exact line of use or combination of use.

I will defer the guidance question to David, because he's good in those questions. And I will give you a little bit further color on Castor and Pollux. We still expect Pollux to come at an interim readout pretty quickly in the first half of this year. We indeed believe that Janssen will very, very quickly file then for a broader label, based on both the Castor and Pollux studies.

We are very excited about the oral plenary session presentation on June the 5th. I think this is a first time also for a Janssen oncology product to be featured in that plenary session, Sarah, and I think it will be fantastic marketing and exposure to oncologists and hematologists at one of the world's largest oncology conferences in early June in the United States.

And maybe to David for the -- more color on the guidance between DKK400 million and DKK450 million.

Sure. Yes. No, that's fine -- I mean you're right, Sarah -- we're off to a great start. We are delighted to break the $100 million with Janssen sales in the first quarter, but it is only the first full quarter. We'd really like to see a little bit more of a pattern and see a few more quarters coming through before we can really conclude too much about the launch of the product.

I think we've spoken before about some of these products that go through sort of an S-curve launch as they get -- as you say, a large bolus of patients at the beginning, and some of those patients then falling off. I mean if you look at the sales trend from IMS, this IMS data, December was $16 million and then a nice jump of $25 million in January and $34 million in February, and then March was a smaller increase to $37 million. So you do see that that is a sort of a curve rather than a straight line overall.

And remember, we do have a bolus of patients sort of queuing up for the launch of the drug, then remember our dosing schedule, and that we've got weekly patients coming in to start with for the first eight weeks. And then for 16 weeks, you are going to bi-weekly, and then you switch into the patient dosing every four weeks.

So if you have a large set of patients starting at the beginning, you will start to see those patients going down -- their average sales number per patient will decrease once you then get through to the every four-week dosing. So our range is DKK400 million to DKK450 million.

I think if we had looked back in November and sort of said, look, do you think we can get DKK400 million -- DKK450 million? That would have well exceeded our expectations. So again, we are delighted with the start.

We've got a royalty number now which is DKK300 million -- DKK350 million. I think consensus came out -- we checked that; came out with DKK399 million. So again to the top end of our range there. I think consensus is about 14% above it, so not too far out at this stage. But we are excited to hopefully look forward to the launch in Europe, and we'll see how the sales develop over the next couple of quarters.

That's great. Thank you very much.

Sachin Jain, Bank of America.

Three questions as well, please. So first on Castor, you've obviously disclosed the hazard ratio on PFS. And I understand ASCO is important from a marketing perspective, but from a clinical community perspective, are there any aspects of data that we should focus on in the plenary that you can highlight without disclosing the data?

And secondly, given the very strong hazard ratio you've seen in the refractory setting, why don't you just update us on how you're thinking about timing of data in the first-line setting, and when we can think about first interims there?

And then just one financial question. On the hedging losses, if current rates are maintained, any color as to what we think about the hedging losses for the full year? Thank you.

Hello, Sachin. Thank you for the questions. We are incredibly excited about the Castor data, as you can imagine. I mean, this is like a hazard ratio -- unprecedented in the combination treatment in multiple myeloma. And we will feature that data on June the 5th in the plenary session.

I think the final schedules are just being released by ASCO -- I saw them this morning. And we are sure that this data will be very, very well-received. I mean, we have never seen such strong data before. And that also obviously bodes well for other combination settings.

We cannot wait to see the Pollux data, because you know that we have some very strong Phase I/II data which we presented at the ASH conference last year in the states for combination with Revlimid. And Revlimid is the key drug in multiple myeloma, for sure, in the United States. So we believe that the Pollux data will likely be very, very good as well, following the Phase I/II data.

And that clearly bodes well also for the front-line. The studies are progressing very well. They are rapidly recruiting. Hopefully, we can soon give you further recruitment updates. Then our first Revlimid interim time session that have been very much on how rapidly the patients are being recruited. But at the earliest it could actually end up next year. If not, that will be in 2018, but we hope for 2017 for at least one of the front-line studies to read out as an interim. So as I think that bodes all quite well for the rapid potential market expansion for DARZALEX.

And the hedging questions, with pleasure I will defer it to David.

Okay. Thank you, Jan. Yes, we did see the sort of the US dollar/Danish krone rate fall during Q1, but we did assume a guidance rate of [6.50] overall when we did our budgets and our guidance. I looked at the rate earlier today -- I think last time I looked it was [6.53], so we are very close to where we are expecting our budgets to be.

We did have some windfalls last year where the dollar was getting very strong. I think most experts assumed that the US dollar would continue to be strong or get stronger throughout the year. So if the rate stayed where it is today, then I wouldn't be expecting any more FX losses on our US dollar balances.

Also for the future, we can consider that we do have some natural hedging of the monies that we hold in US dollars today. Because we would expect, if tissue factor keeps carrying on being successful, we would expect to move into more expensive later-stage US trials. And some of those contracts with CROs will be in US dollars, so we'll have some natural hedging for our US balances.

Thank you very much.

Thanks, Sachin.

(Operator Instructions) Michael Novod, Nordea.

It's Michael Novod from Denmark. Just two questions. Before launching DARZALEX, there was a lot of discussion around (technical difficulty) time of -- duration of infusions. Could you give a bit of color on, say, what kind of feedback you get from the clinical community on the thousands of patients that have already received it, just to put it more in context also against the DMS drug?

And then, secondly, going back to the guidance, because maybe you could, I don't know, give a bit more specifics on what you actually expect for Europe. Because it doesn't take many, say, patients to do $50 million in Europe. And then you saw the actually modest decline in US sales and not just the flattening out of the curve. So maybe what is the potential in Europe this year?

Hello, Michael. I will take the first question and then I'll let David think about guidance question. The feedback we hear via Janssen and the doctors is that the duration of the infusion turns down to for most infusions closer to three hours and 10 minutes than to three hours and 20 minutes. They say this is absolutely no problem for the doctors.

But what we are very excited about, Michael, is that the sub-cu trial is going very, very well. It's rapidly -- very rapidly progressing now in the third dose cohorts. And apparently it's only a five minute to seven minute push infusion that you need for the patients. So, that's obviously a lot more convenient potentially than a three-hour IV line for the drug.

And we believe that if the data continues to look very good -- I mean, they have been good in the first two cohorts, that we will very rapidly move towards a Phase III trial for the sub-cue formulation. And that could really not only, I think, provide a much more convenient drug, but also, of course, lengthen the patent life for us. And so the royalty income stream for Genmab and also, of course, completely nail the position -- the competitive position.

Because there's no other company outside of Janssen who can use the helisand technology for a sub-cue application which is needed. Because you need to infuse quite a lot of drug, given the nature of the CD38 expression being quite broad in patients.

So we're very excited about our competitive positioning, Michael. And the duration of the infusions are no problem, because the drug works absolutely fabulously in combination, even better than monotherapy. And we all know that most cancer patients in the future will be used in combination, and guess what, a lot of these cancer patients already have an IV line. So it's not an issue.

David, maybe the guidance question?

Sure. Yes. As you say, our range is $400 million to $450 million. With Europe, I really haven't got many markers to be able to project what the European sales could be. We don't have approval yet. As you know, pricing discussions can be lengthy, depending on which country you're launching in within Europe.

So this early stage, I don't really want to get into sort of too much of forecasting by territory. But hopefully, as we sort of get a few more quarters under our belt, get European countries -- probably Germany is the first one to launch, and learn how it's going and what prices have been negotiated in Europe, we'll be able to get more accurate and more detailed in our forecast in future periods.

I think the other thing as well is, look, these are fairly narrow labels that we have in the first indications. So I think really when you start looking forward, particularly to 2017 and 2018, I think what's going to be more exciting is the potential label expansion into the relapse setting, both through the combinations with Velcade and Revlimid, because I think that will open us up to far bigger patient populations. So I think that will be more significant of getting hopefully those approvals next year and really expanding the sales number beyond where we are talking about today.

And maybe to add to that, Michael, for the second question is that, effectively, we've got an orphan drug status now from the COMP that will make reimbursement and pricing discussions a lot easier in Europe. So that's an immense advantage, we believe --

Yes, that's what I mean. (laughter)

-- to grant the orphan status. And I think we will speak about this again in more detail soon, Michael.

Could I just ask one follow-up question also to DARZALEX in the US?

Sure.

Regarding compendium because now if you are filing like, say, in the second half of 2016 for the combos in second-line, should we expect any guideline or compendium for the combos based on the data presentations or the publications of the data? Or should we just, say, await the final label for the drug?

I mean the compendium listings is still likely to follow, Michael, because we will publish the data also from the Phase I/II's very likely, which you have seen at ASH last year. And that can already by itself lead to compendium listings before you get the label, the formal label, from the authorities, that we are so excited about the cost of study.

And I already said in my previous answer that this also bodes quite well for the Pollux study, which we expect to read out very quickly now. And so hopefully, we can see the detailed data sets hopefully by mid this year for both of these studies, if Pollux reads out quickly. And that could really help also for the compendium listings situation.

Okay. So, congrats.

Thanks, Michael.

Carsten Madsen, SEB.

Carsten from SEB here. Two questions -- first on the Castor data, which so far look very impressive. And I guess we have all been looking at DARZALEX previously and thought that an IMiD combo would be where we'll get the best data. And now having seen the first study in combination with the PI, is there any reason for us or you to reconsider this view? At least just what we've seen so far look very strong.

And then secondly, on the Arzerra royalties at a very low level still -- for full-year, you are not that specific on what you sort of expect. But should we just take Q4 and look at the increase until Q1 and sort of see this as the trend for the rest of the year? Could anything happen in the latter part of the year? Thanks.

Hello, Carsten. I will take the first question and again defer the second one to David. So, yes, the -- Carsten, data, I mean, are incredibly strong. We have never seen such strong data. And you're right -- based on the mechanism of action, you would expect an IMiD like Revlimid or Pomalyst to be even working better with DARZALEX for two reasons. One is that IMiDs activate the immune system. And part of the -- what we call mechanism of action of DARZALEX is that via activation of the immune system can kill tumor cells -- CD38 positive tumor cells.

But the second effect of IMiDs is, Carsten, is that they can increase the expression level of CD38. So, it's like IMiDs were created to -- in order to make DARZALEX work better later on in combination therapy. And that is very different from a proteasome inhibitor like Velcade. We would expect absolute at least positive effects of Velcade and DARZALEX, because the mechanisms of action, via which they kill cancer cells, are very different than usually when you combine different mechanisms of actions, you see a very strong positive effect.

But the data has completely surprised us basically. The data are so good. And that will become clear in the plenary session at ASCO on June the 5th, that we expect even better data from the Pollux study because of the effects I just mentioned -- that it is not only expected to be strongly positive, but also probably synergistic, as we have seen in animal studies and in other preclinical studies -- study models.

So the data target has been a complete surprise in a positive sense, and that bodes very, very, very well for Pollux to be even more impressive, Carsten. But, yes, a pleasant surprise. And let's hope that the patients will continue to benefit from that combination.

As you know, the IDMC has recommended to immediately move all the patients in the control arm on Velcade to DARZALEX, and they get DARZALEX monotherapy. And I'm sure that in the future, combination therapy with the proteasome inhibitors will be very, very popular. I believe that combination therapy with an IMiD may be even more popular in the future.

But let's survey the Pollux data. Maybe David, some more color on the Arzerra royalties and how to guide for this year, so that -- to give Carsten a little bit better feeling of how we see the market for Arzerra develop in 2016?

Very good. Yes, I think you are right. You've got Q4 royalty at DKK15 million. You've got Q1 2016 at DKK17 million. I think that's a sort of a good run rate for the assumption for the coming quarters for the Arzerra royalty coming through.

Of course, we'll look for expanded labels hopefully in 2017 combining daratumumab with SC. And that could open us up into a slightly wider market there. There's also the European approval in for the maintenance setting as well. We don't expect that to be a particularly large market. But I think if you look at the Q4 2015/Q1 2016, that's a reasonable run rate to assume.

Okay. Thanks.

Thanks, Carsten.

(Operator Instructions) [Amalin Selvaradia].

It's [Amalin Selvaradia] from Sydney. Thanks for taking the questions. I have two, please. Just coming back to the PFS hazard ratio in Castor -- help us put this into context. Could I push you to speculate on the ballpark expectations now for median PFS, which I assume will not be at ASCO? And correct me if I'm wrong. And expectations for overall survival benefit, whether in this trial or in the real world. And if you could quantify that, it would be great.

And related, it's been partially answered, but if I can be more specific. Any read across to the hazard ratio that we should expect for Pollux would be useful. Clearly, 0.39 is a high bar and the control arm is obviously different. So any direction here would be useful.

And the second question is on the Roche collaboration in the solid tumors. There isn't much in the public domain here, but there is some reference to potential use in lung, head and neck, and gastroesophageal tumors. And can you comment on which of these makes clinical or commercial sense to go after first, if any? Thanks.

Hello, Amalin, and welcome to the call. Let me try to give you further color on the Castor data. I cannot say too much, because a lot of that is under embargo at this time by ASCO. And they are very, very strict on that. So I'm sure that there will be some people listening in to this call or at least read the script tomorrow morning.

So I can tell you that at the time of the analysis, we didn't see a median PFS to be reached in the daratumumab arm. And at the conference, it will become very clear what time that is -- I cannot give you that at this time. And also overall survival benefits -- yes, we are beginning to -- this data begins to get clearer and clearer.

What I've heard is that on the J&J recent conference call -- and you can look for that, Amalin -- that at least there is a suggestion from an overall survival benefit that's set by J&J research management. So, I didn't say that; they said that. And I cannot give you any further color there.

And then for Pollux, as I already said in my answer to Carsten Madsen from SEB, Amalin, I think a hazard ratio of 0.39 is unprecedented for any combination therapy in multiple myeloma. On a theoretical basis of a IMiD to do much better with DARZALEX than a proteasome inhibitor, I would expect at least that type of hazard ratio. But, of course, the control arm is also different. Because Revlimid tends to do better, as you know and I know, in a relapsed refractory setting in multiple myeloma.

So we haven't seen the data, so I cannot give you any further direction, unfortunately, beyond that, but I'm very optimistic that the data will be smashing at the time that they will read out in the interim.

Then the third question actually -- of course you smuggled in the second one here -- is the solid tumor. I can tell you that atezolizumab has the PD-L1 blocker from Genentech has delivered some great data in four types of solid cancers. And definitely the solid tumor we are going to test out here with -- in combination with daratumumab, is in one of the key very large solid tumors. And very soon you can see the tumor on clinicaltrials.gov, and the trial details are being revealed.

For competitive reasons, I cannot give you any further color on the solid cancer indication, but it's an indication that atezolizumab does really, really well. And we expect the combination with daratumumab to be even better, based on what we see now in the potential of daratumumab to activate the immune system via a different mechanism of action than checkpoint blockers do.

We have seen that in multiple myeloma patients. And we believe it was very, very strong rationale to also expect that in solid tumors. What I can also tell you is that the agreement at Roche and Janssen is not exclusive, so you can also expect other checkpoint blockers to be combined with dara in potentially other solid tumor indications pretty soon. But you will have to await news from that.

So sorry to not being able to give you more concrete answers. It's only a few weeks till June the 5th, and that will make you very happy that day.

Do you still have a connection?

We certainly do, Sir.

Thank you, Amalin.

Amalin Selvaradia

Thank you.

Andrew Carlsen, ABG.

This is Andrew from ABG. I just have one question left. And this is with regards to the litigation case with MorphoSys with regards to the patent infringement. And you quote in your report that you will, say, defend it vigorously, but what are the potential implications from this trial or the process that you are going to be undergoing in the future?

Sorry -- what was the exact question, Andrew?

Yes. So my question is -- so, what is it -- is it Johnson & Johnson, or will it be you who will be having, say -- will be conducting the defense of the patent litigation case against MorphoSys?

Okay. It will be Janssen and the Janssen employers. They have a whole army, I can tell you, to deal with this case. And the relationship with the case now being in the court, I cannot really give you a detailed feedback. But apart from the fact that we can say, Andrew, that this patent was known since 2011 and has been studied very carefully. There has been extensive due diligence by Janssen, as well as more than 10 other pharma or biotech companies on this patent case.

We believe we have a very strong case. And then we believe that Janssen will, with confidence, fight this interference scenario with MorphoSys. So, I'm totally relaxed here -- 100% relaxed, I can tell you.

Okay. Thank you.

Thomas Bowers, Danske Bank.

Just one question remaining. I'm just wondering on the Lundbeck collaboration, it's been silent for quite a while, and now you've suddenly got a milestone payment. I'm just wondering could you maybe add some flavor on when could we possibly see advancement into clinical development? I'm just curious to find out where you are exactly at this point in space. It's been a few years. Thank you.

Hello, Thomas. I can certainly give you a little bit more color. This milestone which we just have gotten in one of the three active programs with Lundbeck is indeed for a selection of a molecule which can be moved to the clinic. It's up to Lundbeck, of course, to determine the timing and determine how much further clinical -- preclinical work they need to do in order to move to the clinic with this therapeutic candidate.

But the data we have seen up to now is great. So it's a very productive collaboration. But as you and I also know, for CNS disease, it's many times the models are far less predictive -- the animal models, than they are, for example, in treatment of cancer, which is Genmab's focus area.

So, in that sense, the timelines tend to be a little bit longer, Thomas, despite the fact that the Lundbeck team is doing great work and then progressing this very rapidly. By the nature of CNS indicates to be more difficult, I think, to convince yourself of in the animal model setting before you go to the clinic, that lengthens the timelines. But we are well moving ahead and this is certainly a good signal.

Great. Thank you.

We have no further questions at this time. I would like to hand back to our speakers for any closing remarks. Thank you.

So thank you all for calling in today to discuss Genmab's financial results for the first three months of 2016. And we very much look forward to speaking with you all again soon. Thank you.

David Eatwell

Thank you, Claire.

That will conclude today's conference call. Thank you very much for your participation, ladies and gentlemen. You may now disconnect.