Genmab A/S (GMAB) 2018 Q3 法說會逐字稿

Good day, and welcome to the Genmab Third Quarter Report 2018 Conference Call. Today's conference is being recorded.

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

So hello, and welcome to the Genmab conference call to discuss the company's financial results for the quarter ended September 30, 2018. Our CFO, David Eatwell, is joining me on today's call.

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. These last few months, we have continued to progress our pipeline and move towards achieving the goals we set for ourselves at the start of the year. During Q2 -- Q3, we were pleased that DARZALEX received another regulatory approval, this time, a label expansion in Europe for the use of daratumumab in combination with bortezomib, melphalan and prednisone, or VMP, in newly diagnosed patients with multiple myeloma who are not considered candidates for stem cell transplantation. We also announced that Janssen submitted regulatory applications in the U.S. and Europe to revise the dosing for DARZALEX in August, which, if approved, would give health care professionals the option to split the first infusion of DARZALEX over 2 consecutive days. In addition, Janssen submitted a regulatory application in China for daratumumab as monotherapy for patients with relapsed and refractory multiple myeloma whose prior therapy included a proteasome inhibitor and immunomodulatory agents. Janssen continues the further development of daratumumab in multiple myeloma space with 2 new Phase III studies combining daratumumab with bortezomib, lenalidomide and dexamethasone, or RVd, for patients with untreated multiple myeloma, one in patients for whom autologous stem cell transplantation is not planned as an initial treatment and another for transplant-eligible patients.

After quarter end in October, we were very excited to announce positive top line data from the Phase III CASSIOPEIA and MAIA studies of daratumumab in frontline multiple myeloma. The primary endpoint was met for Part I in the CASSIOPEIA study of daratumumab in combination with bortezomib, thalidomide and dexamethasone, or VTD, versus VTD alone as frontline treatments for patients with multiple myeloma who are candidates for stem cell transplantation. 28.9% of patients in the daratumumab plus VTD arm achieved a stringent complete response compared to just 20.3% of patients in the VTD alone arm.

In the second part of the study, all responders have been rerandomized to receive either maintenance treatment with daratumumab monotherapy or observation. The safety profile observed in the trial was consistent with the known safety profiles of both daratumumab and the VTD regimen in patients receiving autologous stem cell transplants.

Next, we reported that the MAIA study of daratumumab in combination with lenalidomide and dexamethasone, or DRd, versus Rev/Dex alone as treatment for newly diagnosed patients who are not candidates for high-dose chemotherapy and stem cell transplantations. This study met its primary endpoint of significantly improving progression-free survival. At the preplanned interim analysis in the study, there was a 45% reduction in the risk of disease progression or death in patients treated with dara Rev/Dex as compared to Rev/Dex. The median PFS was 31.9 months for patients who received Rev/Dex alone. The median PFS has not been reached in the dara Rev/Dex arm. Overall, the safety profile of dara Rev/Dex was consistent with the known safety profiles of both the Rev/Dex regimen and daratumumab. Janssen is continuing to analyze data from the MAIA and CASSIOPEIA studies and will discuss the potential for regulatory submissions based on this data with the health authorities.

Commercially, DARZALEX continues to do well in its approved multiple myeloma indications, with net sales reaching USD 1,441 million in the first 9 months of 2018, resulting in DKK 111 million (sic) [DKK 1,111 million] in royalties to Genmab.

In September, we held a successful Capital Markets Day event at which we introduced a new proprietary technology called the HexElect platform. This technology was inspired by our HexaBody technology. The HexElect platform unlocks potency and increases selectivity by making the action of 2 HexaBody molecules dependent on binding to 2 different targets on the same cell. This enables the HexElect platform to maximize potency while minimizing toxicity, potentially leading to safer and more potent drugs. Other highlights from the event included updates on our clinical-stage programs such as tisotumab vedotin, enapotamab vedotin and HexaBody DR5/DR5; preclinical projects such as DuoHexaBody-CD37; and information on how we are building our translational research and commercial capabilities.

Other achievements this quarter includes the first patients dosed in the DuoBody-CD3xCD20 program and the strategic immuno-oncology partnership with Immatics Biotechnologies. This collaboration will help us discover and develop next-generation bispecific immunotherapies for cancer, strengthening Genmab's position in the immuno-oncology space and increasing our ability to create novel, differentiated cancer drugs.

In addition, our collaboration partners made progress with a number of programs. Lundbeck started the first clinical study of Lundbeck AF82422, an antibody targeting alpha-synuclein, created by Genmab under our collaboration with Lundbeck. The first participant has been enrolled in the Phase I study in healthy volunteers and patients with Parkinson's disease.

Early data from Part I of a Phase I study of the Janssen DuoBody program JNJ-372 in small cell -- non-small cell lung cancer was presented in September, followed by a more robust and impressive data set presented at the ESMO conference in Munich in early October. We look forward to seeing further data from that study.

We are very pleased to report that patient enrollment has been completed in the Phase III study of teprotumumab, in active thyroid eye disease, which is being run by Horizon Pharma.

Finally, our financials are well on target, and we improved our revenues by DKK 441 million or 33% in the first 9 months of 2018 compared to the same period in 2017.

I will now turn the call over to David to present our financial results for the first 9 months of 2018. David?

Thank you, Jan. Let's move to Slide 4 and the income statement for the 9 months ended September 30. As Jan mentioned, revenue for the period came in at DKK 1,789 million, an increase of DKK 441 million or 33% compared to the first 9 months of 2017. The increase was primarily due to the higher DARZALEX royalties, driven by the successful launch and year-on-year increase in DARZALEX sales of 65%. We also saw an increase in the reimbursement income from our collaborations with Seattle Genetics and BioNTech, driven by the advancement of our collaboration programs.

Operating expenses in the first 9 months of 2018 were DKK 1,130 million, an increase of DKK 423 million or 60%, which was driven by the advancement of our clinical products and our preclinical pipeline as well as an increase in employees to support the pipeline expansion. However, it should be noted that this expense increase was partially offset by the reimbursements from our collaboration partners, which we are required to record as revenues. If we were able to net these reimbursements against our expenses, then the net growth in expenses for the first 9 months of 2018 would have been DKK 282 million or 42%. This compares to the growth in DARZALEX royalty income of DKK 404 million in the same period.

Of course, this accounting treatment has no impact on the operating result. We had operating income of DKK 659 million for the first 9 months of 2018 compared to DKK 641 million in the same period in 2017. The increase of DKK 18 million or 3% was driven by the higher revenue, which is offset by the increased investment in 2018.

Net financial items were a net income of DKK 162 million in the first 9 months of 2018 compared to a net loss of DKK 237 million in 2017. The main driver of the variance between the 2 periods is foreign exchange rate movements, which positively impacted our U.S. dollar-denominated portfolio and cash holdings.

The corporate tax expense for the first 9 months of 2018 was DKK 183 million compared to DKK 86 million in the same period in 2017. The estimated annual effective corporation tax rate for the first 9 months of this year was 22% compared to 21% last year.

That brings us to the net result, which is a net income of DKK 638 million for the first 9 months of 2018 compared to a net income of DKK 318 million in the same period of 2017, so virtually double, an increase of DKK 320 million.

Moving to Slide 5 and the revenue. A breakdown of the revenue by category is shown on the left-hand side of this slide. In the first 9 months of 2018, royalties were the largest portion of the revenue at DKK 1,134 million compared to DKK 743 million in 2017. The increase of DKK 391 million was driven by higher DARZALEX royalties, which were partially offset by lower Arzerra royalties.

License fees were the second largest portion of the revenue at DKK 338 million in the first 9 months compared to DKK 69 million in the first 9 months of '17. The increase was driven by the USD 50 million upfront payment from Novartis and obviously, the amendment of the Arzerra/ofatumumab licensing and collaboration agreement. The payment from Janssen for an additional DuoBody target pair is also in there as well as payment from Novo Nordisk for extending exclusivity of the commercial license for a target pair under the DuoBody collaboration. In the first 9 months of 2017, the license fee income of DKK 69 million was deferred revenue. Of course, there's no deferred revenue in 2018 due to the new revenue recognition standard.

The graph on the right bridges the revenue between the 2 periods. The largest increase in revenue was DARZALEX royalties, which grew from $707 million in the first 9 months of 2017 to DKK 1,111 million in the same period of 2018, an increase of DKK 404 million. The royalties were based on Janssen's DARZALEX sales of USD 1,441 million in the first 9 months of this year compared to $871 million for the same period in 2017. The impressive increase in sales of $570 million or 65% was driven by the continued strong uptake in the U.S., EU and Japan.

The Arzerra payment from Novartis of $50 million, or as shown here, DKK 304 million, was the second largest increase. The cost reimbursement increase of DKK 141 million was driven by the advancement of our collaboration products with Seattle Genetics and BioNTech, as I mentioned earlier. Compared to the first 9 months of 2017, there was a decrease of DKK 407 million in the DARZALEX milestones. As you know, these milestones income may fluctuate significantly from period-to-period and year-to-year due to the timing of achievements and the differing amount of each individual milestone under our license and collaboration agreements.

Next, let's move to the expenses and the operating income on Slide 6. The change in expenses for the first 9 months of 2017 and 2018 is shown in the graph on the left. There was an increase in the operating expenses of DKK 423 million, which was driven by the accelerated investment in our pipeline of our products portfolio. 68% of the total increase was due to the additional investment in our product pipeline, including the advancement of tisotumab vedotin, enapotamab vedotin, HexaBody DR5/DR5 and DuoBody-CD3xCD20 as well as advancing a number of preclinical programs towards INDs in 2019.

FTE costs have also increased year-over-year as we are undergoing carefully controlled growth and have hired key personnel to support our growing product pipeline and our continued efforts to build our commercial capabilities.

Looking at the chart on the right, you can see an increase in the operating income from DKK 641 million to DKK 659 million. As previously discussed, the small increase of DKK 18 million was because revenues were slightly higher than the increased investment in our pipeline.

Now let's discuss the guidance for 2018 on Slide 7. We are again maintaining our 2018 financial guidance, which was initially published on February 21, 2018. We expect our 2018 revenue to continue to be in the range of DKK 2.7 billion to DKK 3.1 billion, and our projected revenue for 2018 consists of DARZALEX royalties of around DKK 1.75 billion based on Genmab's estimate of DARZALEX sales somewhere between the range of $2 billion to $2.3 billion. We also project DARZALEX milestones of DKK 550 million in 2018. And our 2018 guidance also includes the payment received earlier in the year from Novartis of approximately DKK 300 million.

We anticipate the operating expenses will be in the range of $1.4 billion to $1.6 billion, which mainly consists of the advancement of our key programs and an increase in the employees to support the expansion of our product pipeline. And with the total DARZALEX royalty income of around DKK 1.75 billion, we will be covering all of our expenses.

In 2018, we'll spend about DKK 765 million on our 10 key projects or about half of our total expense base. We expect the operating income for 2018 to be approximately DKK 1.3 billion to DKK 1.5 billion. The 2018 guidance does not include any new potential deals or any further potential proceeds from future warrant exercises, which is as usual.

Now I'd like to turn it back over to Jan for an update on our 2018 goals. Jan?

Thanks, David. Let's move to Slide 8. As we close in on the end of the year, the Genmab team continues to work hard to move our pipeline forward and achieve our goals. We have already received U.S. and EU regulatory approval for DARZALEX in frontline multiple myeloma based on the Phase III ALCYONE study. We anticipate the start of a number of new daratumumab trials, including the 2 Phase III studies in newly diagnosed multiple myeloma patients that are recently published on ClinicalTrials.gov, and we have reported positive top line data in both of the 2 key Phase III studies of daratumumab in the important frontline multiple myeloma setting.

Patient recruitment in the 2 large Phase III studies called ASCLEPIOS, evaluating subcutaneous formulation of ofatumumab in relapsing MS, has been completed, and we very much look forward to a data readout currently anticipated in 2019.

Tisotumab vedotin is moving forward rapidly. And together with Seattle Genetics, we have started a Phase II potential registration study in cervical cancer, which is progressing very well; and a Phase II study in solid tumors outside of cervical cancer, squamous cell carcinoma of the head and neck, colorectal cancer, pancreatic cancer and non-small cell lung cancer.

We're also making excellent progress with our other pipeline projects. The expansion phase in the Phase I/II trial of HuMax-AXL-ADC, now called enapotamab vedotin, started in the second quarter. We are actively recruiting patients in 6 different cohorts: 2 lung cancer cohorts, 2 melanoma cohorts, 1 sarcoma cohort and 1 ovarian cancer cohort.

We have created -- we have treated the first patients with HexaBody DR5/DR5 and with DuoBody CD3xCD20, and we continue to accelerate our proprietary immuno-oncology DuoBody programs towards the clinic.

We will continue to progress our pipeline, and we look forward to 2019 as well when we anticipate doubling of our proprietary clinical pipeline. We remain committed to disciplined financial management with controlled company growth and smart investments, including investment in our highly innovative differentiated antibody pipeline.

Let's move to Slide 9. That ends our presentation of Genmab's Q3 2018 financial results. Operator, please open the call for questions.

(Operator Instructions) We'll now take our first question from Wimal Kapadia from Bernstein.

Wimal Kapadia from Bernstein. Just a couple, please. So just first, on CASSIOPEIA, could you just give us a little bit of granularity on filing time lines? And then I guess the bigger question is, how widely used is the VTD backbone, specifically in the U.S. in first-line? And then I guess, again, the same question, within the maintenance setting specifically. And do you believe that the data set can support the use of the drug in the maintenance setting with other backbone therapies? And then my second question is on the incremental revenue contribution from first-line MAIA data once added to the label. So I guess, if we look at the incremental revenues Q-on-Q for the product in the U.S., it's roughly around $20 million to $25 million that we've seen over the last 4 or 5 quarters. So I guess, just your thoughts on what incremental revenues MAIA would add once added to the label. And then I guess, following on from that, how would you expect that to change with the subcu product?

Thanks, Wimal, for the question. I think I can take them all. CASSIOPEIA, Janssen is analyzing the data. I think they probably need a few more months, Wimal, to submit it for filing. And then it will go into regular filing time lines likely in Europe and in the United States, depending on whether you get priority review based on the strength of the data that can shorten the time lines. But CASSIOPEIA is very much a -- I would call it the VTD regimen, a European-type regimen. It will be the very first ever regimen for the transplant-eligible patients in the frontline setting, and it's widely used in Europe and much less in the United States. The maintenance arm, we think, can actually be used for getting a maintenance-type label, which is broader than just Europe but also for U.S. and potentially Japan. But we have to see how that actually pans out. Then your second question on MAIA. MAIA, that is very much, of course, a U.S.-based revenue -- regimen together with Rev/Dex, very popular regimen. The data is fabulous, I can assure you. And we hope to present the data pretty soon at a conference. And we think that it can add very, very robustly to the revenues once it would get approved and the Rev/Dex dara combination would be in the label for daratumumab. Right now, you said, well, you add $20 million to $25 million per month in the U.S. That is actually far higher now. According to IMS, it's closer to $28 million per month. And we think that actually will increase by about 50% right away when we get the Rev/Dex dara combination regimen in the label. This could actually happen quite soon, and I think we'll soon give you updates on the time lines there for filing and potentially review. There are some exciting developments in that area. And then the next question, Wimal, was on the subcu. We expect that the first half of next year the COLUMBA Phase III trial to read out. It's fully recruited now. And that trial actually recruited like a rocket. And we actually believe that the availability of a subcu formulation, this would give the possibility to infuse the drug in 3 to 5 minutes subcutaneously. It's going to be dramatically boosting the use of the drug because we have heard from U.S. doctors that infusion chair availability, Wimal, right now is a bottleneck for daratumumab. And then to bridge the time between now and the subcu co-formulation with hyaluronidase, don't forget that Janssen has also filed for a split dosing of the first infusion, what I already said in my introductory words. And also, that process is now going quite rapidly both in Europe and in the U.S., so we hope that we actually get quite quickly a label for the split dosing, and that's already helped, I think, to further boost the use of daratumumab, but the subcu will be a game changer, we believe. And that could actually kick in, when you assume data in the first half of 2019, potentially, from early 2020 on. So we all look forward, Wimal, to 2 very good years for dara, 2019 being excellent based on the strength of -- especially the MAIA data.

(Operator Instructions) We'll now take our next question from Michael Novod from Nordea.

It's Michael from Nordea. Just a few questions. One to the DARZALEX guidance, maybe, Jan or David, you could go through like the high levels because you are maintaining the range, but of course, the high end of the range would imply like $3,900 million in market sales in Q4. So are you seeing anything that we should be aware of? Or is it just proving to just keep the range? And then secondly, on the subcu as well. So Jan, you are indicating potential data in the first half of '19. So when looking at clinical trials, it says completion in November. So maybe just update us on enrollment there and what you have specifically been seeing because it seems to be going much faster than what is indicated in the databases. And then just some housekeeping questions for modeling. So I can see the effective reported tax rate is around 22%. Should we just expect that to be the level from now on going forward? And then maybe, David, also add what you expect in terms of net financials for the full year.

Thanks, Michael, for the questions. And I think I will leave question one and three to David. But let me start with the subcu. COLUMBA is basically having all the patients in, which we need for the analysis, and I think is still probably recruiting some Asian patients, Michael, which would allow the dataset also to be used for Asian filings. But I can assure you that we currently project the readout of that noninferiority Phase III, literally, the first half and actually quite quickly. So we think that, that trial has concluded very, very rapidly. And as usual, I've explained that before, some of the Japanese and other Asian patients take actually much longer, at the end of the day, basically, don't impact the interim analysis. So I think we fully expect the analysis to take place early next year, in the first half. That's where I should leave it at. And then I'll let David give some further color, Michael, on the guidance, how we see it, and maybe David can also speak about the brand impact analysis from -- for September because that gives you some nice looks into what will happen in the coming months, Michael. David?

Okay. If we start with the guidance numbers overall, as I mentioned in the prepared remarks that we are maintaining the guidance. All of our numbers, I mean, we, of course, keep a careful eye on that every time we go through our monthly and quarterly forecasts, and all of our numbers are in range. So we're confident with our range of the -- to be in the range of the revenue, the range of the operating expenses and the range of the operating income. And then in addition to that, we're still happy with the range of $2 billion to $2.3 billion. But you may recall last quarter that there was some commentary that, would Genmab raise the bottom end of DARZALEX range from $2.0 billion to something higher. This quarter, I've been looking at $2.3 billion and say should we raise it more. As a general rule, we really look at it and say, look, it's within range, we believe these are reasonably type ranges that we manage to keep to consistently all year. And so we don't see any need to change it -- one challenge, and even if you just sort of hypothetically say that we change the $2.3 billion to $2.2 billion, that could then be implying to the Street, so we are not going to make your Danish kroner revenue number DKK 2.7 billion to DKK 3.1 billion. But there's a lot of moving parts in there as well. One of the things that we're actually gaining on slightly compared to our original guidance at the moment is the foreign currency rate between the U.S. dollar and the Danish kroner. So we may lose some on dollars, but we may gain when actually converting back to Danish kroner. So overall, with the guidance, we're confident with it. Of course, there was that $50 million approximately pricing accrual for pricing reimbursements outside of the U.S., which lowered the Q3 number, making it a little lower than we anticipated. But we've got good growth that we expect to come through, continued growth coming through from there, from the U.S. market in Q4. And I would also hope to see some of the frontline dara VMP combination to start to see some sales trickling in from Germany at least for Q4 as well. So we are confident with the range of guidances that we have in total. And on the tax, as you mentioned, 22% tax rate, that is pretty much our tax rate going forward. If you look in the annual report, you can see there's a little bit of the -- for the tax, the NOLs, a little bit more there to come but not much. Once we're through that final piece, then yes, we'll be on pretty much a go-forward tax rate of 22%. For the net financial items, they do bounce around a bit, but as I said, most of that is foreign currency. So you saw at the end of the quarter that we were at a rate of about DKK 6.4 -- just over DKK 6.4. As we sit here today, the dollar is a bit stronger, but it could go down again by December 31. So I would think that what we've got year-to-date is pretty much about where it will be, subject to the U.S. dollar, Danish kroner. If that dollar continues to strengthen, then that will be a bit more positive coming off from that -- on that foreign currency revaluation for our marketable securities in U.S. dollar cash. Jan, you asked me just to quickly mention the brand impact on this. In broad total numbers, we are seeing in the second line setting, its brand impact market survey data 3 months rolling average, and this is for their report ending September 2018. We're seeing the second line is at or just slightly below the 25% share. We're seeing the third line around 40% and the fourth line continuing at around 45%. Now we're also seeing in the second line setting that the most used combination now is dara plus Pomalyst. And just slightly behind the second most used in the second line is dara plus REVLIMID. In the third line setting, dara Pomalyst is again the most popular, at about 24% of the dara share. So it's looking good overall. I mean, to go back to the previous question, what can we expect for growth, even though we're getting 25%, 40%, 45% in the second, third, fourth line, respectively, if you look at our total U.S. market share, we're at about 14%. And now the reason for that, of course, is about half of the U.S. market is in the first line setting. Just to give you an idea of the approximate numbers of patients in first line, about 50%; second line, 30%; and then third, fourth line and beyond, about 20%. So of course, we got our largest market shares in the smallest segments or portions of the market. So really, when you look at it and say, okay, if we can get approval in the frontline setting with dara, REVLIMID, dex, it basically doubles our market size that we can then go after. So we're definitely looking forward to be hopefully approved with DRd in 2019.

We'll now take our next question from James Quigley from JPMorgan.

A couple for me. First of all, in Q3 this year, we obviously saw the retrospective pricing accrual and saw a similar thing in 2017. In certain countries, the European price is higher than the U.S. price. Should we still expect or should we expect these types of pricing accruals to happen on an ongoing basis in Europe? Maybe could you just comment on that? Then for -- in the press release, you mentioned, I think November 27 is the summary judgment in the case of MorphoSys. What could be the ultimate outcome of that event? Could we have the results there? And if so, could you remind us of Genmab's exposure? Then could you confirm if the abstracts or the potential abstracts for MAIA and CASSIOPEIA were submitted for the ASH late breaker. And then speaking of another one, you mentioned again about the bottleneck of infusion time for DARZALEX infusion. I think last year before ASH, there was a poster on the 90-minute infusion. How has that -- or has that -- or are people starting to take up DARZALEX infusion in the market? Is that beginning to free up space in the chairs? Or has that been completely ignored, given that in maybe a year or 2's time, it will be completely redundant given the subcu version?

Thanks, James, for the questions. I think I will probably leave question one to David to comment on the Q3 surprise correction by Janssen. Of course, we didn't see that one coming, I can tell you, James. And to give you further color on that, then let me briefly say something about the November 27 summary judgment. We cannot say too much about the process, but technically, the case could be over, then we get a positive judgment there. However, we anticipate it will go to the jury trial early next year in February, James. But there is a possibility that it could be -- that could be it, albeit that the chance is very slim as I listen to our lawyers and to the advisers. But we continue to feel that we have a very strong case and that we're not interfering with any of the MorphoSys patents at all. I think I should leave it with that. Then the third question, James, as it relates to the MAIA and CASSIOPEIA data, which are fabulous, both data sets. I can confirm here that we have submitted via Janssen, and the doctors are doing the studies and responsible for the 2 pivotal studies. We have submitted both datasets as an abstract for late breaker presentation at ASH. And we haven't heard anything of that to my knowledge, but early next week, I believe that, that news will come out on the 20th. So we're very eagerly looking forward to the outcome of the deliberations at the ASH committees and very eager to -- of course, to present the data because we learn on a daily basis now more and more about the data. And we're very, very enthusiastic about that. The fourth question is on the bottleneck. What we understand is that in some centers, like the bigger medical centers in the U.S., they are using for the third infusion and further the very quick 90-minute infusion rate. Janssen can, of course, not promote for that because it's not in the label. But we understand that only in the largest centers, James, it's being used as we speak, but not in the community health care centers, where actually the majority of the multiple myeloma patients are treated in the United States. So there's a very limited positive impact, I think, of the 90-minute infusion speed -- infusion times in order to actually make more capacity available. But the real -- I think the real big push will come from the subcu formulation, which we anticipate to be available and also can be promoted for in early 2020. Then, David, maybe you can give further color on the pricing adjustment from Janssen from -- in Q3, giving us a relatively flattish growth from Q2 to Q3 due to that $50 million correction and see how we think about that going forward.

Yes, sure. Of course, I would say the total pricing is Janssen's responsibility, not ours. But of course, we did speak to Janssen's senior management within their commercial organization to learn more about it. But the way they described it was a onetime adjustment outside of the U.S. and described it as accruals for retroactive price adjustments. Further, during their conference call, when they were asked a little more about it, they did confirm that, in their view, it is a one-off item. They further explained it, that it was in the normal course of business of getting reimbursement in certain countries. Now I think what you would see as you're launching a product, you may be launching in a very small indication like we did with the mono. And then as you pick up and come up with the next indication, it might be a larger population than is quite normal within Europe to go back and to renegotiate prices as you get into larger populations. So I think as we are now through -- gone through from the fourth line into mono into the second line with relapsed/refractory setting and now with VMP in the front line, you would think the opportunity to have to go through those large adjustments would get somewhat smaller as we go forward over time. But they did identify it as a one-off. Of course, the $20 million adjustment in Q3 2017 was also described as a one-off. So these could always come around, but we're not expecting any further price adjustments at this stage to come through anytime soon. Hopefully, that answers your question.

We'll now take our next question from Jack Scannell from UBS.

Two questions. One, rather mechanical, which I'll do second. So the first one is around -- for the full publication of MAIA data. Given your prior experience, have you seen sort of compendia listing in the U.S., which occasionally tends to mean that insurers will reimburse off-label use before a full FDA approval? So do you see that either from ASH data or, indeed, from some full peer-reviewed academic publications shortly after? And then the second question is rather mechanical. It's simply, if I look at the DARZALEX sales in Q3 and your royalties and divide one by the other, the raise is a little bit lower than what consensus would have expected. Now the consensus number seems stale because they don't seem to be updated for the Janssen reported figure, but nonetheless, the ratio of the Janssen figure to your royalties is around 13%, and I think people were expecting a little bit higher. I wonder if there's anything to read into that or if it's just noise. And if it's noise, could you explain it?

So, David, let me start with the MAIA data. Yes, what Janssen is doing is, of course, not only preparing and analyzing the data, compiling the data for submission, for regulatory submissions both in the U.S. and Europe and probably later on also in Japan. But they're also, of course, writing up the data in scientific manuscripts; the same for CASSIOPEIA, Jack. And yes, we have seen before that once data are published in the peer-reviewed manuscripts, that they can end up then in the compendia listings, and that can then directly lead in some territories in the United States by some insurers to immediately be compensated and be possible to use it for treatment of patients without the ability for Janssen to promote for that specific setting in the delay of use. So that will be the same probably for MAIA and for CASSIOPEIA. However, also what I said already in my earlier answer to Wimal, so also more speedy ways of getting products approved on the new, very fast regulatory routes, and that is a possibility, I think, for studying data like this type of data. So let's see how the [filing] is progressing. We will update you on that for sure over the coming months. And let's hope that we can very soon present the data at ASH, and then from there, hopefully, you can see both compendia listings as well as a very rapid approval based on very fast processes. That's probably where I should leave it at for this time. And then maybe David can talk a little bit more on what you call, Jack, the mechanics of the ratio basically between consensus numbers and what we actually reported in Q3 for DARZALEX sales.

Yes, sure, happy to. So it can get a little difficult with exchange rates because, of course, Janssen is taking a basket of different currencies compounding into there, function of currency of U.S. dollars and then reporting royalty data -- sales data and royalty data back to us, and we then are converting from dollars back into Danish kroner. So there can be some noise, as you referred to, around that. And as a reminder, the royalty is in tranches and it's tiered royalties that rise. As you know, when we started off with the DARZALEX sales, we said that the starting rate was 12%. And then we were able to involve the market and we've moved up into the second tranche of 13% in 2017. We were also able to arm wrestle with our friends at Janssen and be able to inform you that the higher royalty rate kicks in at 20% when sales exceed $3 billion. Now there is other tranches in between the 13% and the 20% overall. Unfortunately, I can't give you the details of all the tranches. We agree with Janssen that we wouldn't give out further detail of where the next tranche is and what the percentages were until those were achieved. Hopefully, we'll be able to do that for you in Q4. Just as a reminder, when we started the year, when we had our guidance overall, we're saying sales of $2 billion to $2.3 billion. So if you take the midpoint there, that would be $2.150 billion. If you look at our total royalty income, we are referring to a figure of DKK 175.0 million, and we also said our exchange rate was DKK 6. If you back that through, put it through your calculator, then you come up with an average royalty for the year of 13.5%. And so that will give you a clue that if the first tranche is 12%, the second tranche is 13% and the full year is an average of 13.5%, then you'll be able to work out that there is another tranche to come in Q4. And hence, that's why we give a higher royalty rate for us in Q4, the dollar sales that we do in Q1. Hopefully, that will help you a little.

We will now take our next question from Sachin Jain from Bank of America in London.

Sachin Jain from Bank of America. A couple of questions, please. Firstly, on the MAIA, exactly on the filing time lines, should we expect to hear on that at ASH or with full year guidance? I wonder if you could just help me, is what you're leading to sort of filing a proprietary review or faster route to market than that, whatever it may be? Second, I just need to clarify an earlier comment of the sequential growth you expect post approval. So if I understood, you said a 50% increase in growth, which takes sequential growth rate from 30% to 45%. I just wanted to make sure I'd understood that correctly. And then a final question for David, at your R&D Day, you sort of had a couple of slides discussing costs into full year '19, which generated some market debate. I wondered if you're able to clarify that any further at this stage or should we wait for full guidance into next year?

Thank you, Sachin, for the questions. Let me address the first 2. The MAIA filing time lines, I think, will get clearer over the coming months, Sachin. I cannot say too much more about that. Then, of course, there are regular review, priority review time lines, but there's also, of course, much faster time lines, more newer time lines for select projects and programs. So I think until we know which routes will be used by MAIA, it's very difficult to give you further guidance. But that will become clear, obviously, over the coming weeks if and how the time lines will be set. And we will definitely update you and the market on that because that's super relevant because that will actually determine how quickly we can actually expand the market in the U.S., which is the largest market, in the frontline setting, which is essentially what I said to Wimal, 50% of the patients are in the frontline setting. And we think that we can actually get a very significant percentage of that market very quickly. Since Rev/Dex is the main regimen right now and the data is so strong, that we think that, that actually compares very well to even triplet or quadruplet regimens that sit before in the frontline setting. So we think that we get very rapid uptake. We will model that further, Sachin, and we will probably -- at the time of the guidance for the company in February next year, we'll probably give you further tips on how we see the exact pickup in the U.S. versus other territories ourselves. It's early days there, but we are very, very encouraged by what we see data-wise and also what we hear as feedback from doctors being enforced in the data analysis. I think this will bode quite well for the market for DARZALEX. And then, David, maybe the third question for Sachin.

Yes, sure. I think as what we're saying, I think it's pretty exciting times for our pipeline. I mean, we were pretty pleased with our Capital Markets Day, as Jan mentioned earlier, and the 4 products in the clinic today, 3 more INDs or more in 2019. And of course, some of those projects as we've seen this year like with tiso moving into a potential pivotal trial, the basket trial, also another cervical trial ongoing, about to be starting in the ovarian tranches to start as well as AXL going into expansion cohorts. It's all good news for those products in terms of their advancing, and these all are very early sneak peeks of some interesting data for HexaBody-DR5/DR5 as well at the Capital Markets Day. So there was that reaction after the Capital Markets Day where some looked at that progress, the exciting progress in our pipeline as being extra costs. I think we prefer to look at it as increasing the investment and a potential to increase the value of the company. But clearly, there's a disconnect there between the short-term costs, which people will say is certain and looks at the short-term discounted cash flow and say, it's okay, well, that decreases value of the company; whereas people that look at it more as a biotech investment say that if you've got differentiated, exciting products that are advancing through the clinic, then they would look at that as an increase in potential value for the company, so we do have to get around that discussion to see that an advancing pipeline is good news, not bad news for the company. Now at this stage, we don't want to get into too many details about 2019. We've got 2 really large things to consider before we're ready to talk about the 2019 guidance. I will intend to leave the 2019 guidance until our full details that we're able to give in February with our 2018 full year results. But of course, we've got the DARZALEX sales, which will be a significant driver of the top line. A lot of that will be trying to figure out when we can anticipate the full approval of MAIA in the frontline, particularly for the U.S. market. And as we sit here today, the timing and potential approval is uncertain, and that will be the main driver around the top line for the company. And then for the expenses or investment overall, about half of it, as you know, for this year and probably be about the same for next year, half of it is going to be spent on advancing that pipeline. And at this stage, we're still in discussions with our partner, Seattle Genetics, figuring out which trials we'll be running, which ones they will run. That will make some differences to just the optics of the P&L, as we explained earlier. If Seattle is running a trial, they will charge half of the cost of the trial. That will go into our P&L. If we're running the trial, we'll have 100% in our cost line if we're running the trial, but we'll have revenue coming in as Seattle's 50% coming through. So that can get pretty confusing. We need to have that all bedded down before we go back to the market, and we want to be crystal clear when we go back with our 2019 guidance and like we've done before, being very transparent on where we're spending the money and how we're controlling our expenses. So more to come on that in February 2019.

We'll now take our next question from Richard Parkes from Deutsche Bank.

Richard Parkes from Deutsche Bank. I've got 2 or 3. First one, you just started to randomize Phase III trials of DRd versus VRD, and I just wonder how important do you think those trials are to ultimately maximizing penetration of DARZALEX into the first line setting. Obviously, that's comparing to what I think is current standard of care in terms of VRD in the U.S. in the first line. With the MAIA data, obviously, the discussion for physicians is going to be do I switch to this new regimen, which is more difficult than just adding something into what they're already doing. So I just wonder how important those DVRD studies are to ultimately fully penetrating that first line setting. And then the other 2 questions, just a couple of simple ones really. Is there a -- with the pricing readjustment ex U.S., is there an average price you could guide us to ex U.S. or an average price relative to the U.S. for DARZALEX that we should use for modeling purposes? And then final one is just if you could update us on timing of the publication of the [multi-tumor trial of] tisotumab vedotin. Is that still expected soon?

Thanks, Richard. I will definitely take question one and three and let David think about the answer to your pricing ex U.S. question to see how he can do that in a politically sound manner, helping you with your modeling. But let me first start with the 2 dara VRD combination studies Phase III. They are both going to start quickly near term. And you can, of course, question how important is that given that we now know that the MAIA data is so impressive. We didn't know that, Richard, at the time that we were planning together with Janssen the VRD combination studies, and they are the standard of care. But that may soon be replaced, actually, by dara Rev/Dex. However, we want to see the data, you will get a very nice peek next year, early next year, from the GRIFFIN study and, hopefully, already get an update from the runner end part of that study at ASH because that data will be presented at ASH in an oral presentation. And then you add dara to VRD in the transplant-eligible part of -- the [fifth] part of the multiple myeloma patients. Let's see how the data looks like because maybe it's even better than dara Rev/Dex from the MAIA study. And don't forget that very soon, REVLIMID will become generic in the U.S. from March 22 on. Velcade is also becoming generic in the U.S. in 2022. And so at the time that dara plus VRD may become available as a potentially very potent regimen, Richard, it's going to be a very economic regimen also, despite the fact that you have quadruplets of drugs because of -- 2 of the 3 key drugs being generic and only one first-in-class drug, dara, not being generic in that time frame. So I think we want to do the studies together with Janssen to just further penetrate and maximize the potential for dara to take over as the gold standard for combination with other therapies. And who knows, for the coming years, we don't really need it because of the MAIA data soon being published. But I think it's a very good strategy to actually do those combination studies. Janssen is fully committed to that, and they are going to recruit imminently in these studies. And I think that's good data from GRIFFIN at ASH, Richard, will probably also stimulate the enthusiasm of doctors to put patients in the clinical studies. So let's hope that we can recruit them quite effectively. But I think it's unclear now how much we actually needed to maximize the potential penetration in the frontline given how strong the MAIA data is. And then, hopefully, we'll all -- soon all see that. Then publication times for tisotumab vedotin. We are very, very close to be able to tell you the top medical journal, which will publish the data on tisotumab vedotin. We will hear at any moment, and we will then flag it up, Richard, and then the data will be published literally in the coming weeks, definitely before the end of the year, we anticipate in other solid tumors. So we are very enthusiastic about that. And then, David, maybe you can give Richard a feeling for the average price ex U.S. if you can for modeling purposes at Deutsche Bank.

Sure. Let me just pull that. Jan said the other thing to look forward to at ASH is the 3-year update on POLLUX of DRd in the relapsed/refractory setting. So I think the data is getting so impressive with the follow-ups on that one that even though that's in the relapsed/refractory setting, I think you'll be seeing that the data from POLLUX is getting nearly as good as the best treatments that we've ever seen in the frontline setting. So I think that also bodes well for the future once the MAIA study becomes more mature. We tend to see in the daratumumab studies that as the base matures, the results get better and better. So turning to the U.S. and ex U.S. pricing, I don't have that detail. Of course, Janssen has that detail. They place that fairly close to the chest. We'll say that we were pleasantly surprised with the original German pricing that was launched higher, actually, than the U.S. price. It has come down through a couple of rounds over the years, but it's still pretty close -- depending on the daily exchange rate, it's still pretty close to the U.S. price overall. And Japan tends to be a reasonable priced market as well. So I don't have details in particular for daratumumab. I would say that as a market generalization, not specific Janssen or daratumumab data, but as a market generalization, I would use the rule of thumb probably that the non-U. S. price would probably be in the range of 65% to 70% of the U.S. pricing.

And now we'll take our next question from Peter Verdult from Citigroup.

Most of my questions have been asked, but just maybe one for you, Jan. Just how, if at all, have your views on threats from BCMA and the company approaches changed with the incremental data that we've seen in the abstracts? Just interested in your updated thoughts there.

Thanks, Peter. And actually, we were actually delighted to see the updated data. We don't feel very threatened by them at all. There's no further data in the abstract, at least for the BCMA ADC from Glaxo, Peter. So we have to see whether that will be updated in the real presentation at ASH. But there, the 60% response rate doesn't really impress us because we're already at north of 50% with the subcu dara data that will also be updated from the PAVO study. So that bodes quite well for COLUMBA. And then the -- of course, there's some abstracts on the Nanjing Legend BCMA CAR T, which looks impressive but it's a single central study in China. We don't know how representative that will be for the broader population and for the U.S. population. And I think the data from the BCMA CD3 bispecific program from Amgen, which was flagged up, I think, 2 months ago, via Treat with very impressive data is also looking considerably less impressive. We now look at the abstract for ASH, and then given that, that program, Peter, is a continuous infusion, which is not going to be very practical for patients, that can also be deducted from the very slow recruitment in that trial, we actually believe that, actually, the dara will look -- the dara data will look better and better, with over 30 presentations at ASH. David already referred to the POLLUX data being absolutely stunning at 3 years and better than any other regimen, basically. I think that, actually, the prospects of dara becoming the gold standards have grown, and I think ASH will be very good, Peter, for us, but you'll have to look at the real presentations, of course. And what is also encouraging is that Janssen recently, they also have a BCMA CD3 bispecific program using our DuoBody technology. I said very clearly in the update, in the business update, that they intend to actually combine their BCMA CD3 bispecific together with daratumumab and not compete with daratumumab, and that is probably the right thing to do also for the BCMA ADC from Glaxo and potentially for Amgen's BCMA BiTE molecule. They probably are perfect combination partners with a very, very potent, safe and hugely efficacious molecule like daratumumab. So actually, we look forward with confidence to ASH, and Peter, we can't wait, frankly, to start ASH because this will be a good one for us this year.

There are no further questions at this time. Mr. van de Winkel, I'd like to turn the conference back to you for any additional or closing remarks.

So thank you all for calling in today to discuss Genmab's financial results for the first 9 months of 2018. And we look forward to speaking with you all again soon.

Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.