Genmab A/S (GMAB) 2016 Q2 法說會逐字稿

Good day and welcome to the Q2 report 2016 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 beliefs, 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.

At this time, I would like to turn the conference over to 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 period ended June 30, 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. In the second quarter of 2016, we continued the positive forward momentum we saw in the first quarter. DARZALEX or daratumumab was, again, the star of the quarter. In May, the European Commission granted a conditional marketing authorization for DARZALEX for the treatment of adult patients with relapsed and refractory multiple myeloma, whose prior therapy included a proteasome inhibitor and immunomodulatory agent, and who have demonstrated disease progression on the last therapy. The approval was closely followed by the first commercial sale of DARZALEX in Europe, triggering a $30 million milestone payment from Janssen.

DARZALEX has also been approved in Canada. The clinical data for daratumumab has continued to impress physicians and the investment community alike with the announcement of data from the Phase III POLLUX study of daratumumab, in combination with lenalidomides and dexamethasone versus lenalidomide and dexamethasone alone, in relapsed and refractory multiple myeloma. As with the CASTOR study, the POLLUX study met its primary endpoints of significant increase in progression free survival or PFS at a preplanned interim analysis.

Patients who received only lenalidomide and dexamethasone in the study had an estimated median PFS of 18.4 months while the median PFS for those who also received daratumumab was not reached as of the time of the analysis.

In addition, the analysis showed an unprecedented hazard ratio of 0.37, meaning that patients who were treated to daratumumab had a 63% reduction in risk of their multiple myeloma progressing compared to patients who did not receive daratumumab.

The POLLUX data were presented in key sessions at the European Hematology Association meeting that took place in June in Copenhagen. Based on these data, Janssen has initiated discussions with the health authorities about the potential for regulatory submissions for the indications in the POLLUX and CASTOR studies. After the end of the quarter, we received market regulatory news for daratumumab when the FDA granted a second breakthrough therapy designation for the products.

The new designation is for daratumumab in combination with lenalidomide and dexamethasone, or in combination with bortezomib and dexamethasone for multiple myeloma patients who have received at least one prior therapy. The designation will allow the FDA to potentially expedite regulatory review of daratumumab in these indications. In addition, patient recruitment was recently completed in the first Phase III study daratumumab in front-line multiple myeloma.

This study, called [HALCYON] investigates daratumumab in combination with VMP, which stands for Velcade, melphalan and prednisone versus CMP as a front-line treatment for patients with multiple myeloma who are not considered candidates for stem cell transplantation. We are very pleased that the commercial success we have seen for DARZALEX this year. Second-quarter sales of DARZALEX were $107.1 million, an increase of 5% versus the first quarter, which were at $101.9 million.

In total, net sales were $209 million for the first half of this year, with royalty income to Genmab of DKK168 million.

Let's move on to our auto market product, Arzerra, or ofatumumab. During the second quarter, the FDA granted priority review to the sBLA for ofatumumab and combination with fludarabine and cyclophosphamide in relapsed CLL.

We expect to hear results -- the result of our application from the FDA by September 10. We also announced that our collaboration partner, Novartis, plans to start enrolling patients in Phase III studies of the subcutaneous formulation of ofatumumab in relapsing multiple sclerosis this coming September. Other key highlights for the second quarter include rapid progress in our DuoBody collaboration with Janssen. Janssen is running Phase I studies for three DuoBody programs now and the first participants have been dosed in all three programs. Janssen has activated a total of 12 programs since the end of this collaboration.

Finally, as David will discuss in detail, our financial results are on target in the improve revenue for the first six months of 2016 by DKK243 million or by 86% compared to the same period in 2015. I'll now turn the call over to David to further discuss the financial results and guidance for 2016.

David?

Thank you, let's move on slide 4. Over the next few slides, I would like to go through the results for the first six months of 2016 and our revised and improved financial guidance for the full year.

First, let's take a look at the income statement for the period ending June 30, 2016. Revenue for the period came at a DKK524 million, an increase of DKK243 million or 86% compared to the first six months of 2015.

The increase was mainly driven by a higher royalty in milestone revenue related to our daratumumab collaboration with Janssen. This is the first time that we broken out the royalties from the other revenue on the slide, as it's important to recognize that the overall quality of the revenue is improving.

You can see here that a higher proportion of the revenue now comes from royalty income. 39% of the revenue in 2016 compared to 15% in 2015. Expenses were higher than last year at DKK366 million compared to DKK245 million in 2015. The increase was primarily related to additional investment in our clinical and preclinical pipeline.

Next, there was no other income in 2016 compared to DKK176 million in 2015. You will recall that the credit last year was due to the one-time reversal of the ofatumumab deferred funding liability, resulting from the transfer of ofatumumab collaborations from GSK to Novartis.

Moving to the operating result, we had an operating income of DKK158 million for 2016, compared to DKK212 million in the prior year. The decrease of DKK54 million was driven by the one-time reversal that I just referred to. Excluding the impact of this one-time event, operating income increased by DKK122 million year-over-year.

The net financial items and tax were a loss of DKK1 million in 2016 compared to a net income of DKK21 million in 2015. The difference between the periods mainly due to foreign exchange rate movements, which negatively affected our US dollar portfolios and cash holdings.

That brings us to the net result of DKK157 million in 2016 compared to DKK233 million in 2015.

Finally on this page, our cash position. That increased by DKK269 million over the first six months of the year, mainly due to income from operations as well as proceeds from warrant exercises. And this resulted in a cash position of DKK3.8 billion at the end of the quarter. Now let's move to slide 5 in the revenue.

Look at the breakdown of revenue by category on the left-hand side of the slide; in the first six months of 2016 milestone revenue was the largest portion of revenue, at DKK271 million. This year we achieved two daratumumab milestones totaling DKK234 million, three DuoBody milestones totaling DKK25 million, and a DKK12 million milestone related to our collaboration with Lundbeck.

In the same period last year, we achieved just one daratumumab milestone for DKK71 million.

As Jan mentioned earlier, Janssen's DARZALEX sales were $209 million in H1 2016. And with a current royalty rate of 12%, we recorded $25 million or DKK168 million of royalty income.

As you know, the European launch took place just at the end of Q2, and therefore we look forward to the rollout of DARZALEX in other countries in due course and of course increase sales in H2 of 2016. Of course, there were no DARZALEX sales in H1 last year as the first commercial sale occurred in November 2015.

Deferred revenue from collaborations was DKK45 million in 2016 compared to DKK144 million in the same period of 2015. This decrease is due to the ofatumumab deferred revenue that was fully amortized at the end of 2015. At DKK34 million the Arzerra royalty was DKK8 million lower in the first six months of 2016 compared to 2015. However, the Q2 sales did increase 13% from the first quarter of 2016.

The graph on the right bridges a revenue between the two periods, and as mentioned, the change is in large part due to DARZALEX royalties and the daratumumab milestones, which were partially offset by the anticipated reduction in the deferred revenue.

Next, the expenses and the operating income on slide 6. The graph on the left bridges the change in expenses for the first six months of 2015 compared to the first six months of 2016. As you can see, there was an increase in the operating expenses of DKK121 million. This was mainly due to the additional investment in our product pipeline, including the advancement of [HuMax IL8], HuMax-AXL-ADC, HexaBody-DR5/DR5 and DuoBody-CD3xCD20.

Looking at the chart on the right as we have already discussed, you can see a decrease in the operating income from DKK212 million to DKK158 million mainly due to the reversal of the GSK liability that we discussed earlier. Excluding the impact of this onetime reversal again, our operating income would have been increased by DKK122 million year-over-year.

Now let's discuss the 2016 guidance on slide 7. This slide shows an overview of our 2016 guidance, where again improving our [2000] financial guidance as last published on April 20 and reiterated on May 10. The improvement is driven by the increased revenue, partially offset by increased operating expenses, resulting in increased operating income, and an increase in our cash position.

The table shows the comparison of the revised guidance to the previous guidance for 2016. The revenue range for 2016 has increased by DKK50 million and now in the range of DKK975 million to [DKK1.025 billion]. The revenue improvement is due to an increase in our projected DARZALEX royalties to a new range of DKK350 million to DKK400 million. That compares to the prior estimate of DKK300 million to DKK 350 million. That's due to an increase in the anticipated sales of DARZALEX.

The projected DARZALEX royalties are based on Genmab's estimate of sales between $440 million and $490 million. That compares to the previous estimate of $400 million to $450 million. Genmab's 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 a new range of DKK800 million to DKK850 million, an increase of DKK25 million.

The increased expense level from the previous guidance is driven by additional investments and an acceleration in our early stage product pipeline, and in particular the DuoBody-CD3xCD20 project. Four key projects, tissue factor ADC, Axel ADC, DR5 and CD3xCD20 account for about DKK320 million of our total expenses in 2016. That's nearly 40% of our midpoint expense base of DKK825 million.

We are also increasing our investment in the other preclinical programs to drive even more projects into the clinic in the future. As a result of the increased revenue, and accelerated investment, we now expect the 2016 operating income to be approximately DKK150 million to DKK200 million compared to the old guidance of DKK125 million to DKK175 million. So that is also an increase of DKK25 million. We are now protecting a cash position of DKK3.55 billion to DKK3.65 billion at the end of 2016, an increase of DKK150 million compared to the previous guidance.

The increase is due to the improved operating results, proceeds from warrants exercised in May, and other working capital adjustments. Also note that, as usual, the 2016 guidance does not include any new potential deals or potential proceeds from future warrant exercises.

Now I would like to hand back to Jan to discuss our 2016 goals.

Thank you, David. Let's now move to slide 8. Let's take a look at how far we have come towards meeting our 2016 goals.

DARZALEX has been commercially launched in both the US and Europe, and we are eager to see how the sales will progress towards the remainder of this year. We've reported positive interim data from both of the key Phase III studies of daratumumab in the relapsed refractory multiple myeloma setting, and Janssen has initiated discussions with the health authorities about the potential for regulatory submissions based on these studies.

We have announced that Janssen will start new clinical trials in multiple myeloma and in solid tumor this year. Patients are expected to start enrolling soon.

We also expect to report first clinical data in non-Hodgkin's lymphoma later this year. For ofatumumab, we look forward to the start of patient enrollment in Phase III clinical studies with the subcu formulation of ofatumumab for relapsing multiple sclerosis by Novartis in September.

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

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. Patient enrollment in this study is now complete, and we expect data to be reported in 2017.

Additionally, we will continue to strengthen the rest of our pipeline. We plan to report further data from the first Phase I/II study of tisotumab vedotin towards the end of this year.

In addition, we filed the first clinical trial applications or CTAs in July and expect to start the first clinical trial with HuMax-AXL-ADC in 2016. We are working to robustly progress the HexaBody-DR5/DR5 and DuoBody-CD3xCD20 programs, as well as other preclinical DuoBody, HexaBody and antibody drug conjugate programs this year.

We will continue to execute partnership agreements for our state-of-the-art next-generation antibody technologies, as we have already seen partnership progress with new IND filings with respect to the Janssen DuoBody programs. Another partner program, HuMax-IL8, changed hands in July as Cormorant pharmaceuticals was acquired by Bristol-Myers Squibb.

We look forward to their development of HuMax-IL8 along with their other immuno-oncology assets.

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 nine.

That ends our presentation of Genmab's second-quarter 2016 financial results. Operator, please open the call for questions now.

(Operator Instructions) Michael Novod, Nordea.

It's Michael Novod from Nordea in Copenhagen. Just a few questions. So looking at your royalty guidance for 2016 and especially the guidance underlying sales, you suddenly changed to a more astute number in terms of using DKK50 million before, now you say $440 million to $490 million. Is there any reason to that? Or could we speculate that there will be a sales milestone associated with you coming to -- the sales comes to [$500 million]? And then secondly, on the cost guidance, where you see an acceleration into the second half of the year, I know you have not guided to 2017, but just to help us doing our modeling, could you try to explain whether we should use then the -- say the fourth quarter as you are seeing exploration data and then just add that into 2017 and usage trend there, so obviously it would increase in that level.

And then lastly on the European launch, we know it's launched DARZALEX in Germany. Could you comment whether it has reached other markets as more precisely in Europe? Thank you.

Thanks Michael. I think these are all three questions for David, so I will want to hand over the royalty guidance, the cost guidance and also the European situation to you David.

Yes, absolutely and thank you for the question, Michael. First off with the guidance for the royalties and of the sales, no magic about the increase of $40 million on the sales bringing it up to $440 million to $490 million. It does bring it to around a number of a DKK50 million increase on the royalties. So a 12% royalty, you're going to get an unbranded sales number or an ungrounded royalty number. So, no magic in the number of overall. We are delighted with the start of the sales so far, [$]209 million in H1. This brings us to a midpoint here of $465 million for 2016, which I think sort of has exceeded our expectations when we first got approval in November 2015.

So we think that the $440 million to $490 million is a very strong, very encouraging number.

In terms of the cost-based overall, you are right. We've increased the cost number of got to a range of 800 to 850. I think probably in many years I have been at Genmab, I think that's the first time with the MacArthur we've increased the cost numbers. It was, I would say, more of an acceleration of costs, rather an increase. It was an opportunity to actually get some of the CMC from one of the CMOs manufactured early, so it's more pulling forward cost from 2017 into 2016. But we think that was for the benefit of accelerating the program.

As far as guidance for 2017, we have our Capital Markets Day on November 10. We hope to be able to guess more indications of where we would expect cost go in future years. But overall, it really depends on the advancement of the pipeline.

So all the products go through with tissue factor, with AXL, with DR5 and CD3 CD20. If all those continue successfully, then the cost base will grow. Realistically, biotech Company, it's unlikely that all for products and future pipeline products will all continue 100% into the future years.

But I think I would -- at this early stage, would expect a cost increase for 2017. But I don't think I would like to put a number on it at this early stage.

In terms of the European launch, of course we did get the first commercial scale on May 30, so we've only just started the sales within Europe. It gets a little dubious and subjective on finding exactly when sales start in countries sometimes. You get approval to launch in a country, and of course you won't have price improvement, so it depends on the regulations in each particular country. I know for certain, of course, that most of the sales early on will be coming from Germany. I believe Austria has also launched, and one or two other countries are either about to launch or coming on stream. So, more countries will come on stream during 2016. Some of them, like Italy as an example, will be slower than those we would not expect to come on stream until 2017.

Thank you. Just one follow-up to the first question. More to think about when or whether you will be able to provide more clarity around when we should expect the first sales (technical difficulty) [milestones] or whether we should just wait and see that.

Yes, with Janssen, they don't like us to get too much details in advance of the various milestones. As a reminder, we got about $1 billion of milestones overall under the agreement. Previous guidance we've given is to say that slightly more than half of those around development and regulatory milestones. We've used an example and say call that [$]600 million. So you are right, that would indicate that there's about $400 million of sales milestones that are potentially on the table for future periods. But once we trigger one of those then we will announce it, or if we've actually got the sales level that we believe is one of those ones that would trigger the milestones, say for 2017 guidance.

If we believe we are triggering a milestone with our guidance number, then we would conclude that in our financial guidance.

Okay, super. Thank you very much.

Sachin Jain, Bank of America.

Three questions, please, just firstly on DARZALEX US. Do you have any color on source of patients, any off label usage you are able to quantify, and whether the data presentations at ASCO and EHA have had any impact as yet, albeit early?

Secondly, we see on clinical trials that the sub cut DARZALEX study has been recategorized as a Phase III study from Phase I with the readout in 2017. Could you confirm whether that's the case and whether that 2017 readout will be sufficient for filing?

And then thirdly, you mentioned in your introductory comments at the first line, a study had completed recruitment. Do you have any visibility on timing of the first interim analysis in first line there? Thank you.

We cannot comment on off-label -- potential of label use of DARZALEX. We have no insight in that. But what I can tell you is that the clinicians are incredibly encouraged by the data of the POLLUX and the CASTOR studies. When I can also tell you is that those data, is well presented at ASCO and EHA, will be presented very soon in one of the top medical journals, and that is, I think, very encouraging. We also have seen that actually from the first IMS data, that July is the strongest month of sales up until now. So I think there is a very good momentum now for DARZALEX. We cannot comment on anything further there.

Then with regard to your second question, I am unaware of that study has been recategorized. But what I can tell you is that the subcu is going really well. We are now still dosing patients in the Phase I study, and we are progressing rapidly. We think that's potentially around the end of the year, you will see some clinical data of the subcu formulation.

We believe that's a very important component for the daratumumab going forward, to broaden its way of use. So we are very excited about that.

Janssen is also continuously expanding the number of studies. When you look at CT.gov, you now see a total of 22 studies, 17 Janssen autopharma sponsored studies and five so-called ISS studies, investigator sponsored studies into indications, multiple myeloma or amyloidosis. And I can confirm that there are several new indications planned to be studied in clinical trials pretty soon. So the clinical program is already right now involves north of 5,000 patients will expand, and will expand quite quickly from here. That is probably where I should leave it.

And as it relates to your third question, the VMP study, the front-line study finished recruitment in July. And so we think that's actually in 2017, we cannot be more specific at this time. Probably around the middle of next year, we will see a potential interim analysis for that study.

Can I just follow up? So the clinical trial for subcut was reclassified on 4 August, so as you are aware, are you aware of any filing plans for subcut in 2017?

We are not aware of any filing plans in 2017. When that would be a concrete plan, we have not yet heard of at Genmab.

Thank you.

James Quigley, JPMorgan.

Just the first one on DARZALEX. Can you give us any color of how patient recruitment is going? You mentioned on the last quarter call that, with the revenue drop off the weather front end loading in the revenue, the second half might be a bit slower. And quarter on quarter, it looks like new equipment is only just offsetting backdrop. So if you can take us through your views and how that has impacted the guidance.

Secondly, on pricing, especially in the EU, we have seen Germany have a strong price, and it also looks like Denmark, you've also got a solid price as well, especially in comparison to the US.

Do you know or from your involvement in the steering committee, how does -- how is that likely to develop going forward? Is it likely just a windfall in 2017 or could it be more longer-term benefit? And finally, how long on average are you seeing patients on DARZALEX in the real-world setting for the current -- to the current patient population? Thank you.

I don't know that I got your question exactly, the first one on recruitment. But what I can tell you is that recruitment in the clinical studies is going very, very fast, actually. And the sense that all of the studies, there is a very strong momentum right now to be involved or get involved is patients with doctors in the daratumumab studies. So we keep hearing that there is robust recruitment in all of the clinical studies, but I don't know that it was exactly your question.

The question was more around the patients who -- the new patients starting on DARZALEX therapy, the revenue from (multiple speakers)

Okay, the commercial use, you mean? (multiple speakers) Oh, commercial use. I have limited insight on that and I'm sorry about that.

So I have limited insight in that, but what I already said in my answer to Sachin Jain's question, July has been the strongest month of sales since launch basically. So, there's more and more basis for patients going commercially on DARZALEX, and also when you listen to the messaging from J&J, is a very strong underlying demand for the drug right now.

So we are quite encouraged, and is also the reason that we upgraded the guidance now in the Q2 reports. So let's wait and see what happens in Q3 and Q4, which we are very, very excited about. But we will see happening in the coming months, and what will, of course, help is that the (inaudible) cost for data being uniformly endorsed, as well as one of the strongest pieces of data I've ever seen in multiple myeloma at any combination of drugs.

Then I want to refer the second question on pricing in Germany versus Denmark to David, and maybe what I can do, James, is take the average real-time the patients stay on daratumumab myself, your third question. What we know is that still from the first study, which is published in the New England Journal of Medicine last August, the very first DARZALEX study, they are still patients at the 60 milligrams per kilogram dose, still being dosed as we speak and benefiting from the drug, and those patients were essentially recruited in the 2012 timeframe. So from that, you can calculate the potential length of time that patients are on that yourself.

Maybe, David, a little more color on the pricing.

Sure. Just a follow-on from the sales and also the discussions at last quarter of the bolus of patients in sort of wanting not to keep just drawing straight line data of the IMS monthly sales growth, so I think we are very pleased with the Q2/Q1 $102 million, Q2 $107 million. And so that does mean, as you say, as that is sort of the bolus of patients are coming on, then it must mean the new patients coming through are filling that to get at least a stable or slightly increasing number in Q2. If you look at our guidance for the full year, we are saying $440 million to $490 million.

Now if you take the upper end of $490 million, then that would mean by taking off the $209 million for H1 of course, then H2, we are implying, would be $281 million. So I think that would be quite robust growth in the second half of the year. That would be 34% higher in H2 than the sales in H1.

So I think a combination of getting through that bolus and probably some sort of impact overall in terms of the ASCO/EHA expectations and knowledge of doctors of DARZALEX and the European and gradual launch and rollout within Europe all means a fairly robust expectation for H2 of 2016.

In terms of the German price, you are quite correct. The current German price is greater than the US price, although I wouldn't take too much into that in terms of the long-term pricing, either within Germany or within Europe overall.

It's good to see that the Janssen have been confident to get a high price within the first European countries. I would remind you that Germany goes through a review of pricing 12 months out after launch; and we will have to see where those negotiations come out between Janssen and their German regulatory authorities.

But off to a great start, and we look forward to more countries getting approved and reimbursed and start recording those sales.

Thank you very much.

Thomas Bowers, Danske Bank.

Firstly on DARZALEX, given that we see 11% quarter over quarter prescription increase in US, and maybe just as 4%, 5% quarter-on-quarter on reported sales including, of course, maybe something in Europe. So, I am just wondering, do you know if whether Janssen has started to give certain drug prepaids or just -- this just reflects some inventory adjustments? And maybe also if you could comment on the US/ex-US split.

And then the same question on the tisotumab daratumumab combination, I am just wondering why Celgene seems to go alone on this, rather than collaborate like you do with Roche.

And then my final question, just on the reason of liver failure last Friday and then front-line lung cancer, has this mean you consider any changes within your own I/O portfolio? I am assuming that you're looking at dual I/O targets in some way in preclinical studies, so just wondering if you have any high-level thoughts on this. Thank you.

Thanks, Thomas, for the questions. I think I will move some of the questions to David, but let me see that I can start with your third question on durvalumab, the Celgene collaboration. What I already said before is that durvalumab will be tried with different immuno-oncology drugs like durvalumab, like [T-centric] and essentially Thomas, all of these interactions are different, and therefore the structure of Janssen is overseeing those interactions. It's very likely that you'll see other immuno-oncology combinations with daratumumab kicked into gear pretty soon, and they will look again different not only for multiple myeloma, but also for all tumors outside of myeloma.

So there is increased excitement about the use of daratumumab as an activator of the immune system in patients with different types of cancer.

And yes, you can anticipate other interactions. They will all be structured differently. And the idea is for Janssen to not do exclusive interactions, but to basically make daratumumab the universal immuno-oncology potentiator for other immuno-oncology drugs.

So that's, I think, what I can say about it at this time, but do watch CT.gov because that lists will expand very quickly now from the 22 trials, and for over 5,000 patients that's on there right now. What you can note on clinicaltrials.gov is that the results were very large, [155] patients Phase II study with [Pomdex] at [DARA] and relapsed refractory setting done by Celgene as a sponsor.

So you will see more and more studies either being driven by Janssen or other corporate pharmas or biotech companies being initiated. So there will be a lot of expansion there. Then the fourth question with regard to the recent data from the MSM lung cancer and the potential impact for our own immuno-oncology programs, I would say no impact. We of course look at that remarkable readout with a lot of interest, and I can tell you that our Capital Markets Day on November 10 in New York, you will hopefully be able to speak about some of our men oncology approaches over half of our -- 50% or more owned pipeline, proprietary pipeline is in the immuno-oncology area.

And we have made tremendous progress in the preclinical programs; we are working on it, in immuno-oncology. We are very excited about that and hopefully we can share some of that excitement with the market because, in reality, we speak predominantly right now about DARZALEX. It's where everybody's focus is.

But you asked me and I am very, very excited and energized by what we see with novel agents, as we believe truly differentiated first-in-class agents with [biospecifics] immuno-oncology space. So hopefully, a little bit more color there from the end of the year, and we studied the data from [BMS] with interest. But they are not necessarily impacting us in our development plans there, because what we are doing is we are developing candidate leapfrog [drug storm] assets, basically jump over the gold standard in different areas.

It's clear that Opdivo is not the gold standard in first-line lung cancer anymore. So we also look at other parameters there.

So maybe David, you can take questions 1 and 2 from Thomas on DARZALEX and the growth quarter by quarter, and the potential for this kind of order rebate from Janssen.

Sure. I think first off, I would say that the IMS data is an estimate. I think even if you look at the monthly IMS data, even compared to the Symphony data, you will see differences between the two. Of course the only one and real important number at the end of the day is the net sales from Janssen.

Some of the noise or difference between those periods may be cut off month-to-month in effect, days when months are cut off between IMS data and buy back Janssen's own internal sales. I think the other difference will be inventory holding. I don't expect a lot of inventory holding with a specialized drug such as this at this stage, but there will be some specialty distributors that will be holding small inventories.

And also, as you said, there would be some small discounts; for this particular drug I would expect the discounts to very -- be very small at this stage, but there could be some small discounts such as early payment discounts and that type of thing that could slightly impact our sales. If I try to read too much into the month or even the quarterly is probably there directionally in the same area. IMS had 96 million for Q1, 109 million for Q2. Janssen had 101 million, and 107 million. So broadly, they are the same so I would not be too concerned with the differences. There will be noise between those two numbers overall.

In terms of split US to rest of world, we don't have that level of detail at this point. But again of course Europe was only just launched. So it would be a maximum of only one-month sales included in our H1 2016 result.

Okay, great, thank you.

Sarah Potter, Danske Bank (sic).

It's Sarah Potter from Deutsche Bank. I have just three questions, please. Just following up from Sachin on the subcut, DARZALEX. So is it your understanding that J&J will have to run a completely new trial to file for the subcut? Or can they expand their Phase I they are running at the moment to file? And then next on your cash position, could you talk a little bit about your plans for this cash? Is it the primary focus to invest in your earlier stage pipeline, or do you have a desire to do deals to maybe have a look at selling your later stage gaps that we see? And then finally do you have any color yet on when we may see additional data from the ongoing study in solid tumors? Thank you.

What I understand for the subcu daratumumab work is going very well, as I already said in my answer to chance question. But I understand up until this phone call actually, is that there will be a new Phase III trial needed to get the new drug, because it's a new drug formulated at the Halozyme enzyme for subcutaneous application, and that one large Phase III trial is needed to get it approved worldwide potentially with the right data. So we do understand that there is a Phase III needed, actually, to get it on the market. That is what I have heard and I cannot shed any further light on that.

And as it relates to your second question, the cash position, we are going to focus on identifying the next winner in the next like three to four years. And then once we identify that we are (inaudible), we are going to accelerate a response to the development program for that candidate. But also looking very actively at the landscape for [autotax] if it could potentially be additive or synergistic to our own pipeline. And we would not shy away from buying in one of these drugs that we think and actually fill in the perceived hole in our pipeline in a very effective way.

Right now, we think we have an amazingly strong pipeline. We will give you further color of that on the November 10 capital markets day. But we are clearly following the landscape very, very actively and I should say you have the cash position to potentially act on strike quickly and swiftly if you see the right opportunities. So don't be surprised if you would see that.

But right now, the primary focus is on identifying the next winner, Sarah, and then accelerate and broaden the program. And that's also what David already alluded to. This is the first time that we have actually increased the operating expense during the year and all of the years since David has joined the Company in 2008.

And that is to accelerate one of the years by specific program. So we get an earlier IND slot in the coming year and [CMAC] is doing the similar things with other programs once we are convinced that we have a winner on our hands. And right now, the preclinical pipeline looks stronger than we've ever had in a whole company's history. And I forget actually the third question, I think.

Just on data for solid tumors and if you have any further updates here.

Okay, that's for tisotumab vedotin. And no, it's in the second half of this year, because we are simply dosing a lot of patients right now with tisotumab vedotin. We are very encouraged by the recruitment of what we see in the trials, but basically these are solid cancers from eight different solid tumors, Sarah, and it takes time. They need to be here for some time. They need to be for some time on the drug before you can expect effects. I think more robust data says potentially at ASCO next year, the hopefully an update in the second half of this year, and that is what we are guiding for right now.

All right, thank you.

Jean-Paul Mannie, Kempen.

Could you share any color on your expectations regarding time of an approval for second line for filing later this year for daratumumab and [MM]? And maybe on [NHL], you mentioned that you expect some data later this year. Could you shed some light on which you would expect to see as well as an initiation of the potential Phase III trial there? Thanks.

We are going to file in second line, based on the CASTOR and POLLUX data. Janssen is doing a lot of work and I can tell you that filing is still scheduled for Q3, so it's around the corner. We did get a breakthrough therapy designation for the indication ASCO for both of these studies. But it's too early to say more concretely, give you more information on timing.

But it's clear that the FDA believed that the FDA believes there is a potential there to accelerate a potential approval process. But I don't want to comment on that until we have actually filed or Janssen has actually filed there.

And then, in non-Hodgkin's lymphoma, I already said in my previous questions that there will be an expansion into other indications in NHL. This is the first indication outside of multiple myeloma. We are accruing patients in three different categories and we will get you some further information on data, up to now probably towards the end of the year. And yes, you may actually see new trials starting up.

But I cannot give you any further color of that right now.

Thank you.

Peter Welford, Jefferies.

Just a few left, firstly on the -- you mentioned I think [science] fully enrolled in July. I just wanted to know if you could give us an update on the Maia enrollment and also on Cassiopeia and how those specifically are enrolling. Is Maia nearing the end of enrollment, do you know? And then secondly, just returning to subcut formulation there, given the change of classification or is that not the case, and given your understanding, I was wondering if you could possibly update us on the third cohort?

Are you aware? Has the third cohort begun or continued enrolling? Or should we infer that the second cohort is where the Phase I dose escalation stops, and therefore that's likely to be the recommended Phase II dose pursuant to the I-b plan? I don't know whether you can comment on that or not. And then just slightly bigger picture again, returning to your sort of pipeline investment in this.

I guess even if you were to accelerate substantially the early stage pipeline, can you give us perhaps some sort of idea as to the extent to which clinical costs could increase during -- I guess it's 2017, 2018. I understand that a significant proportion of the increase year on year this year has been due to moving those early programs forward. And they have not yet entered the clinic.

So, I guess why should we think the increase we've seen 2016 or 2015 is actually a relatively minor increase compared to what could happen in future years once these actually then into the clinic in 2017/2018? Thank you.

I will definitely have the last one on the pipeline investment to David to give you further color there. What I can tell you is that the Maia and Cassiopeia studies, the Maia, they both recruited very well. The Cassiopeia study is much larger than the other studies. It's about 300 patients extra, and it has started the latest.

What I understand from Janssen as they are recruiting like rockets like all of the Phase III with daratumumab. But I cannot give you any further color. So we are well underway with Maia, and with Cassiopeia, we are a little bit behind. But we will give you like I just did for the study at the [Austin] study come I will give you an update once all the patients are in and give you color on track, basically, while recruiting.

But the studies recruit really, really well, I can tell you.

Then with regard to the subcu study, which is going very well with the third cohort, has already enrolled, and I believe it will be data this year of the first, second, and third cohort of that study. As I already said in my answer to Sarah's question, I believe there was a Phase III needed for the subcu formulation and this is very high priority. We believe it's a fantastic way to actually increase, convenience the patients by reducing the infusion time to potentially less than 30 minutes, probably get the final formulation even close to five minutes infusion, and that's all.

It's a massive impact I think on patient use and patient convenience with daratumumab. So hopefully at -- near the end of this year, Peter, more color on the clinical data. But we are very excited about what we see there and the third cohort is absolutely enrolled already in that trial.

And maybe, David, a little bit of color on the potential acceleration once the surveillance reaches the clinic, then indeed, you can get a pretty substantial increase in investment. But David will try to give you further numbers there right now, Peter.

Yes, that's fine. As Peter was referring to the expenses and expense growth between 2016 and 2015, just a reminder for everybody is on the call our midpoint guidance for 2016 is DKK825 million and our expenses for 2015 were DKK579 million. So we increased by just under DKK250 million in 2016.

So, expectations going forward in future years, I said it will be somewhat dependent on the success of our key products that we so far identified and made public, and how fast they go forward. One other unknown at this point is tissue factor ADC or tisotumab vedotin in the opt-in option that Seattle Genetics have.

Recall if Seattle Genetics opt in at the end of Phase I, then we would own the program 50/50. We would also share the cost 50/50.

Earlier, when we were going through the guidance, I referred to the four key projects, total spend of DKK320 million. The largest expense on those as you would expect is tissue factor ADC. That accounts for about DKK120 million of that DKK320 million.

So you can see that if Seattle Genetics opt in, in the future years, then yes, there would be -- it was going to be one of our larger growth programs particularly as you go forward into the future and start the Phase III trials, that if one would assume that if the Phase I data is good, and it looks exciting, then I would expect Seattle Genetics to opt in and we share that cost 50/50.

So, that would certainly lessen the impact of any growth on that most advanced product.

When you go down to the other products, actually you often see the more expensive year is not when it actually enters the clinic. But it's the year before we enter the clinic, and that's because you have to get going with the CMC, the materials for the drugs, sort of the year, and get that ready, a year in advance before you actually start the clinical trials.

So even though AXL-ADC is entering the clinic in 2016, the expense in 2016 is about the same as it was in 2015. So again, we've got expensive years this year for DR5 and CD3xCD20.

I wouldn't expect those two to rise considerably in 2017. Of course again if they are successful, then I would hope that we would start to see a bump up, and that all four of those programs in 2018 and beyond, and also then start adding perhaps some of the immuno-oncology from a [duro] and from biotech as we going to late 2018 and into 2019. So in some ways, the bigger the expense it means the more successful, the more products that we've got going into the clinic.

But very difficult with those parameters to predict exactly where the expense will be 2017, 2018 and beyond. But I hope it increases.

That's great, thank you.

Carsten Madsen, SEB.

I have one rather simple question. This year Jan is just related to the second line filing for DARZALEX. Can you understand that -- I mean it's just hard to imagine this approval, once it has been filed, will not be very rapid considering that they already has looked at DARZALEX. Once you have the great clinical data in the benign (technical difficulty) profile.

So from an outside perspective, wouldn't it make sense to assume that this could be a really rapid approval once it has been filed by Janssen?

Yes, I said already in my previous answers, the filing is around the corner. These are massive studies in many, many different countries. In theory, with the breakthrough therapy designation, there is a very clean safety profile and medical efficacy data, basically unprecedented efficacy data, approval could in theory be very rapid. But that is, of course, under the assumption that all of the data and all of the patients have been scored and categorized correctly, etc.

I mean, it is a massive data set. Yes, I agree with you, that I think we have the potential here for a very rapid approval if the authorities like what they see. But even I haven't seen all the data.

I think Janssen is doing a fantastic job in actually handing off or preparing, I should say, the data sets in the way that the authorities can look at them officially and effectively and safely.

But of course, you still need to get the stamp of approval from the authorities. So I think until we hear the first feedback, it's very difficult to actually guess how quickly approval could be.

But I am in your corner. I think we will potentially see a very rapid and swift approval.

But let's first wait and see whether the filing is accepted, because then you could say more. Then you'll get like first feedback from the authorities.

And then, one of the good things is, you are very excited about this with a novel pursue therapy designation, which is highly unusual, of course, for products. You have very open dialogue with the authorities, so you can very quickly get a feeling for how they like the data set for the quality of the data and so on.

So let's talk again about the anticipated timelines, but is definitely the real potential for rapid approval. But until it's filed, and until we hear from the authorities that the quality and the integrity of the data is good, it is difficult for us actually (inaudible) at this early time to give you further feeling for that. But I share your optimism.

That's good. Thanks a lot.

There are currently no more questions and I will now turn the call back to your host for any additional and closing remarks.

Thank you for calling in today to discuss Genmab's financial results for the first six months of 2016. We look forward to speaking with you all again soon.

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