Genmab A/S (GMAB) 2018 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 report 2018 conference call. (Operator Instructions) I must advise you that the conference is being recorded today, Wednesday, the 20th of February 2019.

During this telephone conference, you may be presented with forward-looking statements that include words such as believes, anticipates, plans or expects. Actual results may differ materially, for example, as a result of delayed or unsuccessful development projects. Genmab is not under an obligation to update statements regarding the future nor to confirm such statements in relation to actual results, unless this is required by law. Please also note that Genmab may hold your personal data as indicated by you as part of our Investor Relations outreach activities in order to update you on Genmab going forward. Please refer to our website for more information on Genmab and our privacy policy.

And at this point, I'd now like to hand the conference over to your speaker today, Jan van de Winkel. Please go ahead, sir.

Hello and welcome to the Genmab conference call to discuss the company's financial results for the period ended December 31, 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. In 2018, the Genmab team continued to advance our pipeline and work towards our ultimate goal of making a difference in the life of cancer patients. We are continuing to develop a robust pipeline of innovative antibody products, and the progress with DARZALEX continues to be impressive.

Starting with DARZALEX. We saw multiple regulatory actions during 2018. In the U.S. and Europe, DARZALEX was approved in combination with bortezomib, melphalan and prednisone, or VMP, in frontline multiple myeloma. In Europe, the DARZALEX label was amended to allow physicians the option to split the initial dose of the antibody over 2 days. And just last week, the U.S. FDA approved the same label expansion.

Our partner, Janssen, also submitted regulatory applications for DARZALEX in China and Japan for various multiple myeloma indications. Excitingly, we have already seen key regulatory activity for DARZALEX for 2019. Based on the top line data from the MAIA study, the submission is being completed under a new pilot scheme at the FDA called Real-Time Oncology Review, or RTOR. This program is aimed at allowing a more efficient review process for drugs that are already approved that are requesting a marketing approval to treat a broader group of patients.

The MAIA study compared data to multi-combination with lenalidomide and dexamethasone, or Rev/Dex, versus Rev/Dex alone in frontline multiple myeloma in patients who are ineligible for autologous stem cell transplants. The data presented as a late breaker at the American Society of Hematology Annual Meeting in December showed that combining daratumumab with Rev/Dex significantly reduced the risk of disease progression by 44% compared to Rev/Dex alone. The progression-free survival for patients who received daratumumab with Rev/Dex had not been reached compared to 31.9 months for those who received Rev/Dex alone. The addition of daratumumab also resulted in deeper responses, including increased rates of complete response and a higher rate of MRD negativity. Overall, the safety profile of daratumumab in combination with Rev/Dex was consistent with both the known safety profiles of the Rev/Dex regimen and of daratumumab.

We also reported positive top line data from Part I of the Phase III CASSIOPEIA study of daratumumab in combination with bortezomib, thalidomide and dexamethasone, or VTD, versus VTD alone as a frontline treatment for patients with multiple myeloma who are transplant eligible. 28.9% of patients in the daratumumab plus VTD arm achieved a stringent complete response compared to 20.3% of patients in the VTD alone arm. In the second part of the study, all respondents have been re-randomized 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.

DARZALEX also continued to be a commercial success. In only the third year of full year of sales, DARZALEX became a double blockbuster with net sales by Janssen exceeding the $2 billion mark during 2018, triggering a $75 million milestone payment to Genmab. The daratumumab development program aims to further expand the patient population that can be treated with the drug as well as investigating a subcutaneous formulation. The milestone payment adds to the income stream from DARZALEX, which allows Genmab to invest in our innovative pipeline as we move towards our 2025 vision.

So now let's move to Slide 4. Now turning to the success of our rapidly developing proprietary pipeline, which currently includes 4 products in clinical development. Our collaboration with Seattle Genetics continues to be fruitful with 4 new studies started or announced last year. One of these studies, called innovaTV 204, is a potential registration study in recurrent or metastatic cervical cancer. The other new studies in the tisotumab vedotin program are a Phase I/II study, a combination study in cervical cancer, a Phase II study in ovarian cancer and a Phase II basket study in multiple solid tumors.

We were extremely pleased to see earlier this month that the prestigious Lancet Oncology published data from the original dose-escalation Phase I/II study testing tisotumab vedotin in multiple solid tumor types. The data showed encouraging clinical activity of tisotumab vedotin in a number of solid tumor indications, including, of course, both cervical and ovarian cancer. And it was this data which supported the decision for further clinical development in multiple cancer types.

We also progressed the Phase I/II study of enapotamab vedotin in solid tumors into the expansion phase and treated the first patients in the first in-human studies of HexaBody-DR5/DR5 in solid tumors and DuoBody-CD3xCD20 in B-cell malignancies. We are very enthusiastic about these programs and look forward to presenting data from all of them later this year.

We continue to look for ways to grow our pipeline of the future. And during 2018, we sought to achieve this with the announcement of our new technology, HexElect, and a strategic collaboration with Immatics. The HexElect platform will enable us to maximize the potency of antibodies while minimizing potential toxicity. Our immuno-oncology partnership with Immatics will help us to discover and develop next-generation bispecific immunotherapies for cancer. These are just some examples of what makes Genmab an antibody innovation powerhouse.

Our company is based on deep insights in antibody biology and world-class expertise in creating differentiated antibody therapeutics. And many of you will have seen more details of our strong scientific know-how and deep research and development expertise during our Capital Markets Day in September last year.

Additionally, we were also very pleased this year that we have prevailed in the patent litigation relating to DARZALEX brought against us and Janssen by MorphoSys. The case was finally closed at the end of January with the agreement that MorphoSys would not appeal the summary judgment of invalidity of all 3 of their CD38 patents. And Genmab and Janssen would no longer pursue our inequitable conduct claim.

Finally, for the sixth year in a row, we are profitable, with our revenue, operating results and net result in 2018 at the highest level in the history of Genmab.

I'm pleased to now turn the call over to David to present our financial results for 2018. David?

Thank you very much, Jan. If we can move forward to Slide 5. Over the next few slides, I'd like to highlight the results for 2018 as well as look at the financial guidance for this new year. Starting on Slide 5, the revenue for the period came in at DKK 3,025 million. That's an increase of DKK 660 million or 28% compared to 2017. The increase was primarily driven by higher DARZALEX royalties as well as the payment from Novartis of $50 million and reimbursement income from our collaborations with Seattle Genetics and BioNTech, and that was partly offset by a decrease in the DARZALEX milestones.

The total expenses in 2018 were DKK 1,645 million, with 87% of the total expense being R&D and 13% being G&A. The total expense increase of DKK 624 million or 61% was driven by the advancement of tisotumab vedotin and additional investments in our product pipeline and also the 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, and we're required to record those revenues -- record those payments as revenues. If we were able to net these reimbursements against our expenses, then the net growth in the expenses for 2018 would have been DKK 456 million or 49%. This compares to growth in the DARZALEX royalty income of DKK 695 million in the same period. Of course, the accounting treatment has no impact on the operating result, and we had an operating income of DKK 1,380 million for 2018 compared to DKK 1,344 million in 2017. The increase of DKK 36 million or 3% was driven by the higher revenue which was offset by increased investment in 2018. The net financial items were a net income of DKK 232 million in 2018 compared to a net loss of DKK 280 million for 2017. The main driver for the variance between the 2 periods is foreign exchange rate movements, which positively impacted our U.S. dollar-denominated portfolio and cash holdings in 2018.

The corporation tax expense for 2018 was DKK 140 million to corporation tax income of DKK 40 million in 2017. The corporation tax expense for 2018 was due to current and deferred tax expense, which was partially offset by the reversal of valuation allowances on deferred tax assets related to our expectations for future taxable income, resulting in a net tax charge of DKK 140 million. The Genmab A/S Danish tax -- deferred tax valuation allowances have now all been reversed, so we can assume a future P&L tax rate of approximately 22%. That brings us to the net result, reporting a net income of DKK 1,472 million for 2018 compared to a net income of DKK 1,104 million in 2017. That's an increase of DKK 368 million or 33%.

Moving to Slide 6 and our performance against our original 2018 guidance. On this slide, we show the actual result for 2018 compared to the guidance that was issued in February 2018. We maintained our guidance throughout the year, and if you compare our actual results to the midpoint of the original guidance, you will see that both the revenues and the operating expenses were around DKK 100 million above their midpoints. That means the operating result came in virtually at the guidance midpoint of DKK 1,380 million versus the original guidance midpoint of DKK 1.4 billion. We were very slightly higher on the guidance than the operating expenses, driven by our decision to accelerate the additional cohorts in enapotamab vedotin and accelerate DuoBody-PD-L1x4-1BB program with BioNTech.

Now let's take a look at the revenue side in more detail on Slide 7. The revenue breakdown by category is shown on the left-hand side of this slide. In 2018, royalties were the largest portion of the revenue of DKK 1,741 million compared to DKK 1,061 million in 2017. The increase of DKK 680 million was driven by higher DARZALEX royalties, which were partially offset by lower Arzerra royalties.

Milestones were the second largest portion of revenue at DKK 687 million in 2018, lower than the DKK 1,133 million reported in 2017. The decrease of DKK 446 million or 39% was mainly driven by our lower overall DARZALEX milestones in '18 compared to '17. As I've mentioned before, milestone income may fluctuate significantly from period to period due to both the timing of achievements and the varying amounts of each individual milestone and royal license and collaboration agreements. In 2017, we achieved several daratumumab approval-related milestones towards the end of that year.

License fees amounted to DKK 348 million in 2018 compared to DKK 90 million in 2017. The increase was driven by the $50 million onetime payment from Novartis, and that related to the amendment of the Arzerra ofatumumab license and collaboration agreement. In 2017, the license fee of DKK 90 million was the old deferred revenue.

Reimbursement income amounted to DKK 249 million in '18 compared to DKK 81 million in 2017, and the increase of DKK 168 million was driven by those collaborations, mainly with Seattle Genetics and BioNTech.

The graph on the right bridges the revenue between the 2 periods. The largest increase in revenue was for DARZALEX royalties, which grew from DKK 1,013 million in 2017 to DKK 1,708 million in 2018, an increase of DKK 695 million. The royalties were based on Janssen's DARZALEX sales of USD 2,025 million in 2018 compared to USD 1,242 million in the same period in 2017. The impressive increase in sales of DKK 783 million or 63% was driven by the continued strong uptake of DARZALEX in the U.S., EU and Japan. The Arzerra payment from Novartis of $50 million or DKK 304 million was the second-largest increase in the year. The cost reimbursement increase was primarily those collaborations that I mentioned a moment ago. As I just noted, compared to 2017, there was a decrease of DKK 523 million in the DARZALEX milestones.

Next, let's move to the expenses and operating income on Slide 8. The change in expenses between 2017 and 2018 is shown in the graph on the left. There was an increase in the operating expenses of DKK 624 million, which was driven by the accelerated investment in our product portfolio. In fact, 68% of the expense increase was due to additional investment in our product pipeline, including the advancement of tisotumab vedotin and enapotamab vedotin and advancing our preclinical programs towards INDs in 2019.

If I go back to the beginning of 2018, I estimated that 51% of our total expense base would be spent on our top 10 programs. If I look at the actual results for 2018, we spent DKK 843 million on our top 10 programs, which indeed, is also 51% of our total expense base of DKK 1,645 million.

FTE costs have also increased year-over-year as we're undergoing carefully controlled growth and have hired key personnel to support our growing product pipeline and continued efforts to build our commercial capabilities. During 2018, we increased our head count from 257 FTEs to 377, an increase of 120 FTEs. These were evenly distributed over our 3 key locations. Also, 103 of these additional employees work in R&D.

Looking at the chart on the right, you could see an increase in the operating income from DKK 1,344 million to DKK 1,380 million. As previously discussed, the increase of DKK 36 million was mainly due to the higher revenue offset by the increased investment.

Now let's move to the 2019 guidance on Slide 9. This slide shows an overview of our 2019 guidance compared to the actual result in 2018. Starting at the top of the slide, we expect our 2019 revenue to be DKK 4.6 billion, an increase of DKK 1,575 million or 52% compared to 2018. The growth in revenue is driven by DARZALEX. The expense base will also continue to grow in 2019, driven directly by the successful advancement of our clinical pipeline. The increased investment will see our expense base grow to DKK 2.6 billion, an increase of DKK 955 million or 58%. With revenue growth exceeding the increased investment, we will record our seventh year in a row of profitability with an operating income of DKK 2 billion in 2019, an increase of DKK 620 million or 45% compared to 2018.

Now let's take a closer look at the revenue at the bottom of Slide 9. Our projected revenue consists of DARZALEX royalties of just under DKK 2.7 billion based on Genmab's estimate of DARZALEX net sales of $3 billion. We expect DARZALEX sales to rapidly advance again in 2019 with growth in U.S. market share, both in the frontline and the second-line setting, where we anticipate a long duration of treatment and increased patient numbers on treatment.

In Europe and the rest of the world, we'll also continue to see more countries come on stream and expect to see the introduction in frontline multiple myeloma with daratumumab plus VMP. Now that the DARZALEX royalty tranches have all been identified in our annual report, you can also calculate that the average royalty for the $3 billion of sales is just under 15%. And as a reminder, all sales above $3 billion have a royalty rate of 20%. You will also note that in both 2018 and 2019, the DARZALEX royalty exceed the total expense base. And remember, from this total expense base shown here, we do get the reimbursement from partners.

We also project daratumumab milestones of DKK 1.5 billion in 2019 compared to the DKK 586 million in 2018. In both years, the milestones mostly relate to sales-based milestones. And to be completely transparent, the 2019 guidance does include a $150 million milestone for sales exceeding $3 billion in a calendar year as well as another milestone for exceeding $2.5 billion in a calendar year.

The remainder of the revenue in 2019 mainly consists of cost reimbursement income related to our collaborations with Seattle Genetics and BioNTech. The reduction in the other income from 2018 is mainly due to the onetime payment from Novartis of approximately DKK 300 million related to the transition of Arzerra from commercial availability to compassionate use in non-U. S. markets. And of course, that was received in Q1 2018.

Now let's move to further guidance detail on Slide 10. On the top of this slide, we show you that we're investing in 3 main areas: project investment, personnel costs and business support. The largest cost, at nearly 60% of our total expense base, is our project investment. This directly relates to the success and advancement of our pipeline. The major driver is the cost of clinical trials with CROs and the CMC costs with CMOs. In fact, about half of the total investment here in our pipeline relates -- in 2019 relates to CMC costs. The next largest cost is the personnel costs. At the end of 2018, we had 377 FTEs, and we anticipate this will increase to about 560 by the end of 2019. Again, the increase in resource is directly driven by the success of our pipeline. The business support relates to all of the different support functions, and the growth is across all support areas and includes enhanced technologies and systems, data science as well as early investment in medical affairs and commercial.

Turning to the bottom of this slide, I've broken out our most significant area of investment, the project costs, and I've broken this into more detail in the pie chart. On the left, we have our total project investment of DKK 1,475 million. Over half of the amount will be invested in our 2 most advanced projects, tisotumab vedotin and enapotamab vedotin. In comparison, for the next 8 projects, including the projects already in the clinic and newer near-term INDs, we'll invest around DKK 500 million. Interestingly, if you add these 2 together, that means we'd invest DKK 1.3 billion in our top 10 programs. Again, that would be 50% of our total expense base of DKK 2.6 billion, which, of course, is the same proportion as 2018. The total growth from 2018 in the project investment is DKK 490 million, and 76% of that increased investment relates to our 2 most advanced projects as we increase the number and the size of the clinical trials.

On the right-hand side of this slide, we have the breakout of the increase in FTEs, the increase of about 180 FTEs. 73% of the increase relates to R&D employees. About 18% relates to the business support functions and just 9% for the growth in medical affairs and commercial. We're of course projecting to be cash flow positive again in 2019, and our priority for capital allocation is to continue to increase the investment in our preclinical pipeline and clinical pipeline and continue to invest in our vision for 2025. Note, as usual, the 2019 guidance does not include any new potential significant deals.

In summary, another record year in 2018. Increasing royalties and milestones from DARZALEX in 2019 enabling Genmab to increase the investment to selectively advance our own pipeline of products and create even more value for both patients and shareholders.

Now I'd like to hand back to Jan to discuss our key priorities for 2019. Jan?

Thanks, David. Let's move to Slide 11. In 2019, we anticipate solid progress across all areas of developments. For daratumumab, we look forward to Janssen submitting regulatory applications based on the data from the CASSIOPEIA study. As mentioned earlier, Janssen already started the sBLA submission process under the FDA's Real-Time Oncology Review program based on the MAIA study, and we would expect a rapid decision this year. We also anticipate European regulatory submissions for both of these studies. Importantly, we also expect to see data from the Phase III COLUMBA study of daratumumab, which compares the intravenous formulation of daratumumab to a subcutaneous formulation.

For ofatumumab, we expect Novartis to report data from the 2 large Phase III studies of the subcutaneous formulation of ofatumumab in relapsing multiple sclerosis this year. If the data is positive, it could give ofatumumab a new life as a potential treatment for relapsing MS.

We will continue to advance the tisotumab vedotin program with Seattle Genetics and anticipate completing enrollment in the Phase II study in cervical cancer by midyear. We believe the rest of our pipeline could grow exponentially in 2019 with further development of the proprietary products currently in the clinic, including reporting data from the enapotamab vedotin, HexaBody-DR5/DR5 and DuoBody-CD3xCD20 programs in the second half. In addition, we are well on track to file INDs and/or CTAs for 3 new proprietary products.

I would like to finish by saying that we're all very excited overall by the robust pipeline we have created. We very much look forward to selectively investing to further strengthen this pipeline during 2019 and beyond. We have a highly effective and rational portfolio selection process in place involving multiple levels of decision-making concerning the development of our projects and how we can best invest in programs to accelerate them to build value in our business. Our development process is data driven, and we expect to have a pipeline of 7 fully differentiated proprietary products in the clinic by the end of this year. We have a drug development team with world-class expertise, and we are confident in the potential of our antibody products to become leapfrog therapeutics for different types of cancer so that we can make novel differentiated treatment options available to patients. I'm looking forward to a very exciting year.

Let's move to Slide 12. That ends our presentation of Genmab's 2018 financial results. Operator, please open the call for questions.

(Operator Instructions) So our first question from Bernstein comes from the line of Wimal Kapadia.

Wimal Kapadia from Bernstein. Just a couple, please. So just first on your $3 billion sales for 2019. Can I just sort of ask what gives you the confidence to remove the sales range like you've done in the past? And then can you also talk a little bit about your assumptions for contribution from first line, specifically the MAIA study. When have you assumed the first-line contribution begins? And is there an upside/downside to that assumption? My second question is on the higher OpEx. So you outlined the split of costs in the slide deck. And clearly, there's a larger increase in absolute spend on R&D. But I guess I just wanted to get a sense of how should we expect this trend moving forward given the TV launch and the pipeline progress? Should we expect a similar increment next year in R&D but also a larger growth in S&M costs for the TV launch? Just trying to get a sense of OpEx progression moving forward. And then my final question is around the frontline penetration and the hindrance of this -- the long infusion time. So in the past, you've talked about the long initial IV dose being a hindrance of penetration in the U.S. community clinics. But I guess I just wanted to get a sense of will this not continue to be a hindrance within the first-line population? Or is there some form of preference within these patients so that they actually get priority access within these clinics?

Thanks, Wimal, for the questions. Let me pass over the first 2 to David in a sec, and then go to question #3. I didn't exactly catch your question. The -- you said the difference between penetration in the first line versus third line. Can you explain that again, your third question?

No. Yes. So it's more along the lines of in the past, we've talked about the long IV times being a hindrance on penetration in the U.S. community clinics. So my point being, would that continue to be a hindrance within the first-line population once the MAIA data has been added to the label? Or is there some form of preference within the first-line patients so that they get access within these community clinics?

Yes. Let me try to give you my perspective. I think that the -- there is still a hindrance because of the long infusion times, and of course we've now got a split-dose formulation also approved in the U.S., Wimal. What I understand is that split dose is already used for the first dose in most of the larger academic centers like Sloan Kettering, Dana-Farber, MD Anderson and so on but is actually less used in the community healthcare centers. And now Janssen can promote for that split dose in the -- for the first dose of dara. They think that, that will take away some of the bottleneck, basically. And so we think that, actually, that will also be taking place in the frontline. We don't have yet a label which is relevant in frontline in the U.S. because the MAIA label we expect, actually, pretty soon based on the RTOR process. And I think there, the split-dosing option will really help to penetrate rapidly also in the frontline, also in the community healthcare centers. But this is what we currently see, Wimal. I think the big, I think, turbo accelerator will be that we get the subcu formulation. I can tell you that we get the COLUMBA data very, very quickly now, the top line data from the COLUMBA study. So hopefully by early next year, we have a subcutaneous injection, 3- to 5-minute injection on the market in the United States. And that will actually really, really stimulate, I think, the usage also in the community healthcare centers. So I think this year, we will build up based on the split-dosing regimen, also the ability to shorten the infusions, the average infusions from 3 hours and 20 minutes to 90 minutes, as you ascribe a lot in the United States, I've heard. So I think, in time, we will see less and less of hindrance by the longer infusion times, Wimal. And early next year, assuming good data in the COLUMBA study, that trouble will all be over, and we will have turbo accelerate in 2020. So that's probably all I can say at this time. We'll have to see how the sales will pick up in the coming months. But what I can already tell you, Wimal, that from the IMS data, the first 2 weeks of February look very, very good in the U.S. So I think we will see a good run this year, and that's also behind a solid $3 billion sales performance we guide for today. And we are very confident that it's the right number. And David will give you further color on that because that addresses your first question. David?

Thank you, Jan. Yes. Let's talk for a little bit of detail around the $3 billion because I'm sure that's going to be a question that's on a lot of people's minds on today's call. So let's carefully walk through where we've been with the sales and where we're going. 2017, 2018, I'm pleased to say our original guesses sort of panned out well towards the end of the year, although for 2018, the mix was a little different to what I originally expected. In 2018, we needed about $800 million of growth. I thought it would come evenly about USD 400 million, $400 million rest of world. In fact, U.S. was about $100 million lighter, and rest of world contributed about $100 million more. But we got the $800 million. We got the $2 billion, which was the all-important number. So let's think about 2019. 2019, we've got the base of U.S. sales of $1.2 billion; rest of world, about $800 million, giving total sales of just over the $2 billion. So what we need is a total increase of $1 billion to get to the $3 billion in total. Now what I'm looking at on there is a similar split to 2018 that it's, in dollar terms, it's going to, I think, be relatively even, $500 million from the U.S., $500 million from rest of world. That means we need a little bit over 40% growth for the U.S. and a tad over 60% for the rest of the world. Now let's take a look at the rest of the world growth to start with, and then we'll talk more about the U.S. So what have we got to look forward to in the rest of world growth? Well, I think the majority of that growth is likely to come from the EU5. One of the positive factors was the approval in the frontline setting of daratumumab plus VMP. I think most of those frontline sales will come from the early adopters, particularly countries like Germany, where we're are already selling DVMP in the frontline. But there are also some other contributions. Denmark, we've seen as a country that's been continually punching above its weight in terms of DARZALEX sales, so I'd expect some contribution in frontline from places like Denmark and some of the other smaller countries within Europe. We've also got a number of countries within Europe and rest of world that have still only got approval or reimbursement in the monotherapy. So we've got some significant countries where there are still discussions going on with pricing reimbursement to actually be as-used dara plus REVLIMID or dara plus [methylcade] in the second-line setting. One of the larger ones of those would be, if NICE in the U.K. approve, in that particular setting. Also, we believe there will be further growth. If you look at Japan, that exceeded expectations in 2018. It's been selling around the $9 billion to $10 billion -- $10 million a month. As you know, we filed the dara VMP in the frontline setting for Japan. And Japan like Europe, does use VMP in the frontline. So that could be something that could impact the latter part of 2019. Brazil has been a country which wasn't originally on my radar which has been surprising. And as we mentioned at the Capital Markets Day, the daratumumab in the mono setting is also being filed in China, so we would hope for approval and, at some point, our first sales to start coming through from China as well. You bring all that together and look at rest of world and say, okay, you're looking to grow by $500 million. But of course, the sales continue to grow quarter-by-quarter in 2018. So if you actually look at the base of where we're starting today, the Q4 sales 2018 were $261 million. If we just multiply that by 4 and assume no growth, then you're at over $1 billion, $1,044 million. The number I'm looking for is to get it to $1.3 billion. So I need $256 million of new growth for 2019. Now that sounds a lot more achievable and an easier number than saying, okay, we need a year-on-year growth of $500 million. When you look at the current run rate, we've already got some of that growth built in for the base. So about $250 million we need from rest of world.

So now let's take a look at the U.S. market and what we need there. As I said, $1.2 billion in 2018. Again, we need $500 million of year-on-year growth, about 42%, to come out to about $1.7 billion. Now that's net sales numbers. If we now look at IMS data and where we're currently trending, we're now doing about $30 million a week. You've just seen the January numbers from Symphony. They're similar to IMS numbers. But we're doing about $30 million a week. If you say that is the current rate, multiply that by 52, then you get $1.56 billion. What we need to get is to $1.7 billion net. The current gross to net, as far as we can tell, looking at Janssen's reported numbers versus IMS or Symphony, it's about a 12% discount between the two. So that means that we need a gross number to achieve $1.7 billion net of about $1.9 billion. That means we need new growth of about $371 million. So in rough terms, if we get $250 million growth in rest of world, about $350 million, $370 million in the U.S., then we get to our total USD 1.7 billion, $1.3 billion rest of world, $3 billion in total. So I think now if you look to say is, okay, well, what is the belief? What is going to drive that $370 million of new growth? Then I think in the second-line setting, we see continual gains in market share throughout 2018. We started at the beginning of '18 in the second-line setting with a market share of about 19%. By the time we got to the end of 2018, that market share had grown to 27%. And continually, each month, when we looked at the Brand Impact market data, we continued to see that new patient starts are still higher than our overall market share, which to me indicates that, that market share total has still got room to grow. So I think our 27% market share in second line and with the patient stacking, we'll continue to grow during 2019. Then, of course, the big one is MAIA, DRd in the frontline setting, going through the RTOR process. If that process continues, if it's successful and we get the frontline setting, then I think we're going to see a nice pickup, a nice contribution in the frontline setting. Now a final comment, because I know this is a very long answer. The final comment on that is, remember, when you get a new label, a new indication opening up a new bolus of patients, then we get an accelerated sales number when you start treating those new patients. That's because the first 8 weeks, you dose every 8 weeks, the next 16, you dose bi-weekly, then you go into a once every 4 weeks setting. That means for daratumumab, when you start new patients, like in the frontline setting, you're going to get 23 doses in the first year, dropping down to 13 doses in the second year. So those new patients, when you get into a new indication area, are very valuable patients in comparison to the ongoing ones. Remember, we saw the S-curve when we originally launched in mono. We saw another S-curve when we introduced in the second-line setting. And I expect we'll see another S-curve within the frontline setting as well for those reasons. So I think adding all that together, it sounds a lot when you look at it, $2 billion to $3 billion, $1 billion, 50%. But when you start breaking it down and looking at not the average for '18 but where we ended up in '18, where the IMS data, Symphony data is going today, that gives us confidence around the $3 billion number for 2019. So hopefully that gives you some color on our thought process there.

Can I go ahead and -- sorry, can I just follow up? Can you be more specific on the -- your assumptions for timing for the first-line label update? Or at this stage, not really?

Well, I think...

(inaudible)

Yes, there haven't been many products approved under RTOR at this stage. But I think it's really now we're waiting for Janssen to complete and finish through their filing. The ones that with the limited number of RTOR products, are once the filing has been completed, the approvals have been coming out pretty quickly. So I think it means that the approval could certainly be in H1 rather than being sort of August/September type sort of time frame if you went under a normal review process. And that really, to be honest, while that won't be the difference of the U.S. number for the year, it will be the exact timing of that MAIA approval. Earlier the better for us. We can't give you any more guidance on when that could be expected, though.

Thanks, David. Can you take the second question for me as well on the operating expense and maybe say a little bit about trends going forward?

Sure. Yes, well, we really want to focus today on the 2019. I know people are starting to think yes, okay, what's the ramifications for 2020. I think it's very difficult for us to put a number on 2020 at this stage. There's a number of factors there. Jan mentioned in his prepared remarks that we've got quite a lot of data beginning to come through in 2019 to give us more signals, including, we've got the progress and the potential registration trial for tiso. We've got the expansion cohorts in AXL or enapotamab vedotin. DR5/DR5, early indication, but early data certainly just sort of give us an idea of where and how that program could go ahead. And lastly but not least, DuoBody-CD3xCD20. So until we get those sort of types of data, it's very difficult to project exactly where we're going. With tiso as well, we have the basket study, that's Seattle Genetics. If we're lucky enough there to find another indication, that could also spark off new indications beyond cervical cancer. And then, of course, we've got the new INDs coming through, early stages for those products in 2019. But sometimes, if you get a product, if you could start getting tox signals, you can get those quite early, and those -- some programs can fall by the wayside. So there's still a lot of variability in that number. The last thing I would say with that is, repeating what I said at the Capital Markets Day in September, we're in a fantastic position, underwritten by the strength of DARZALEX and the royalty income coming through. But that puts us in the driving seat in terms of what we want to do and what we can do with our programs. We have the option to in-license things. We have the option to out-license things. Last year, we in-licensed things like Immatics for the slightly longer-term potential for new products. In the past, we've got partnerships, like with Seattle Genetics, where we're sharing on a 50-50. We've got partners like BioNTech that we're sharing the new program costs on a 50-50 basis. We've also said in the past that we may look and say this program is looking particularly relevant to Genmab in terms of its market side, in terms of developability and the number of trials and indications we need to run. We may find other ones that we say, maybe this is not the product for us, and we'll look for a partner to take on some of the cost burden or to take on that program. But we have all of those that they're our decision. We can actually negotiate from a position of strength should we want to pull any of those particular levers. So we'll be able to make more of those decisions as we go throughout 2019 and decide where we want to go and where we want to invest for 2020. So hopefully that gives you some idea of our thought process there.

Thanks, David. That was a short answer, Wimal. And we can make it longer, but I think we should probably give some other analysts a chance to ask questions as well.

From UBS, your next question comes from the line of Jack Scannell.

I've got 2 questions. The first one is very simple, which is when do you actually expect us to see the tisotumab vedotin cervical data? And then the second one is around reinvestment. So some people believe, including some people who run drug companies, believe that the drug industry as a whole is returning below its cost of capital and R&D. And you guys clearly have a sort of optimistic vision where you're actually reinvesting that DARZALEX revenue in your pipeline. Have you done any benchmarking that would show, for example, whether the 14 still active INDs or approved drugs you have from the 27 or so that you've actually put into the clinic, whether your sort of success or survival rate in those compounds is higher than the industry average?

Thanks, Jack, for the questions. I can probably give it a go at both of the questions, and then I'll ask Dave to step in on the second one. So when can we anticipate seeing cervical cancer data? I assume, Jack, that you refer to the 204 study, the potentially pivotal Phase II study. We are very rapidly recruiting cervical cancer patients right now. And if we can recruit all of the 100 patients by April, we could have the data by the end of this year. We didn't put it in the key milestones for this year because it all depends on whether we have actually all the patients in, Jack. But I think we have a pretty good chance looking at how rapidly the patients coming in at this time, to actually lock the database in, hopefully, the November time frame and then get to the data, the pivotal data for that study. But we will keep you up-to-date on when we have actually all the patients in. We have formally guided that in the first half of this year, Jack. But we hope to be a little quicker there. Then as it relates to reinvesting into R&D, I think we actually didn't file 27-or-so INDs or CTAs but actually 31 through the end of last year. The number will be quite a bit higher because of filings this year by us and partners. We have 14 antibodies still in active development; 2 of them are in the markets, and some others may actually get closer to the market this year. And that is a far higher rate of success than the industry average. So we believe that we're actually quite good, Jack, in developing antibody therapeutics. At least the statistics points in our favor. And then coming back to your question and also Wimal's questions about operating expenses, David already explained, is that we want to focus on 1 or 2 winners and then maximize the potential of those winners in the near term, Jack. When we have an additional drug which looks really, really good, we could potentially partner that with a big military machine and then still hold on to 50% ownership because of the income stream, which is robustly growing not only because of daratumumab but also, we believe, that ofatumumab from next year on can actually start contributing to the growing income stream because of the trials reading out with Novartis in MS in the early Q3 time frame. So I think we actually have a very good chance to actually beat the industry statistics, and big pharma has been notoriously poor in creating new drugs. And I think there are some biotechs like us and also Regeneron, some other biotechs which are actually pretty good in doing that. And I think the essence is that we focus, focus on an area we really understand very, very well. And in that way, I think, you can actually beat the statistics and industry. Maybe David can add some further perspective on the efficiency of reinvesting the income from our -- for our current drugs into new drugs. David, do you want to say anything further on that?

Yes, sure. Jan, I think if you take a look at some of the ROIC on some of the projects. I mean, I think, if you probably look at the ROIC on daratumumab. If we take that into the average, then I guess all the others could be negative and we'd still have a pretty good return on investment for daratumumab if nothing else worked. But I think if we also look at ofatumumab in RMS, when you look at Horizon, that could be new products that start coming through overall. If you look at the Janssen DuoBody program, phenomenal hit rate there, 4 products in the clinic. I think there's a good chance for one or more of those actually coming through to real commercial products at the end of the day. I think our attrition rate, I think that was one thing where, in the past, our expenses were a little bit towards the higher end in 2018. And that was because the attrition wasn't there. None of the programs -- and remember, these are really sort of leapfrog programs that are very differentiated. We don't take boring things forward, they get knocked out way in the process at the portfolio board meetings. So I think we take interesting products forward. I think we take ones forward that can be real game changers in the industry overall. And we have a very rigorous process. And what you don't see is that we kill an awful lot more in the preclinical development that never see the light of day. If they're not interesting from a clinical perspective, if they're not looking like that we'll know the challenges of those drugs, whether it would be toxic side effect, we know the commercial, we know the competition. We'll only take things forward with a very rigorous process if we think that those are going to be projects that are going to be worthwhile and meaningful for us overall. So yes, we'll continue to keep that rigorous process as we go forward.

Now your next question from Nordea comes from the line of Michael Novod.

It's Michael from Nordea. A few questions, so first on the milestones. Now you have DKK 1.5 billion this year, including the 100 million from the 3 billion. How much is left? Can you just remind us in terms of development and sales milestones to be booked after 2019? And then on the Seattle Genetics, how much exact, say, operating reimbursement is included from Seattle Genetics in the 2019 number? I can just see the 415 million, but how much of that is Seattle Genetics, just to get a feeling? And how do you expect these, say, pipeline reimbursements to go on in 2019?

Thanks, Michael. I think both questions are excellent ones for David. David?

Yes, if you look at the total daratumumab milestones overall, if we go back to the original agreement we signed in 2012, we had just over $1 billion, $1.015 billion was the actual number that was in that. I think a lot of the time -- at that time, a lot of people thought that was bio dollars and perhaps didn't give us too much credit back in 2012. But if we fast-forward to the end of 2018, the amount collected, or at least recorded, at the end of 2018 was $571 million. So compared to the total license agreement, $1.015 billion, that would mean that we've got $444 million to come still within that program. As I said originally, those are split between multiple myeloma milestones, nonmultiple myeloma milestones and sales hurdle milestones. And as you correctly point out, we got about the DKK 1.5 billion put down in 2019. So there is still some more milestones to come. But as we said in the past, look, it's a $1 billion milestone contract. We are expecting to collect the vast majority of those milestones in before we're said and done. But as those milestones begin to fade out, we'll continually expect for DARZALEX sales to accelerate. And as I mentioned earlier, as we start to get into 2020 and beyond, particularly with the game changer with the subcu format, we start to get into the sales that are above $3 billion. The royalty rate on sales above $3 billion will be 20%. And as those sales will rise, then that will offset the loss of the lumpy milestones that rise and fall on an annual basis.

Just on the DKK 1.5 billion for this year, you have 900 million for the 3 billion milestone and then say how much of it -- is any development milestones in the number?

It's mainly the sales milestones that's in that DKK 1.5 billion. And it's a rounded number, DKK 1.5 billion.

And then the second question, David, on the partner reimbursements?

The second question on the reimbursement income, I don't want to go down to individual partners because I'm not sure what detail they'll be giving on their various external numbers. But I can give you overall the size of the reimbursement numbers overall. 2018, as I said, was just a tad under DKK 250 million. That will increase to somewhere around DKK 340 million in 2019. So if you look at our gross expense of DKK 2.6 billion, after taking off contributions from partners that are recorded in the revenue line, then the net expense will be about DKK 2,250 million.

And your next question from JPMorgan comes from the line of James Quigley.

I've got a couple. So you mentioned with the RTOR review that the time is going to vary, and you mentioned that you probably would expect approval in the first half. With all the other DARZALEX files, the time between the announcement of the top line data and the announcement of filing has been around 90 days. It was around 86 days when you said you got the RTOR review and the first part has been filed. And is there anything different about MAIA that would make the file or the potential filing longer than the other files? And in which case, should we really be expecting the approval in the first quarter rather than the second quarter of this year? That's question number one. Then question number two, you've moved the point estimates for your guidance. I'm just interested to know, number one, why that is? And number two, you've used 6.0 for your FX rate. The current FX rate is 6.5. Again, what's driving that? And on that basis, are all of your guidance numbers potentially too low? Then again, on the point, estimate point, should we really be considering these at the lower end of what would've been the guidance range given that you've included the 3 billion milestone in your guidance? Then on costs, is there anything in the increasing costs that might be one-off in nature? I know you've mentioned before that CMC costs can be quite high in the first couple of years. Again, just sort of trying to gauge going forward if there is anything that could drop out. And then, finally, also related to costs, at what point do you pull the trigger and decide whether a program will continue or will be killed or will be partnered? I mean, does it vary? Or is it sort of -- is there a standard Genmab post-Phase II decision? Again, anything there would be helpful.

Thanks, James. I will take the first and the last question, and I'll leave the financial ones to David. First of all, RTOR filing. What I can say is that Janssen is right now filing in different parts -- pieces, the filing to speed up the process, and we think that by next month, that most of the components will be in at the FDA, and then it depends on how quickly the FDA can make up their decision to combi the label. So it could be very rapid. That's probably all I can say about it. And apparently, it's a pretty big file, what I understand from our colleagues at Janssen. But I cannot go into details on how this filing is different from the other Phase III trials, James. But it is going very, very rapid and very well, what I understand. And of course, the FDA needs to like the data, and they need to like the response time of questions that they have for Janssen. And otherwise it will fall back to a regular process, as we explained in the press release when we did the initial filing. But what I understand is that the filing is going well, and we anticipate a very rapid potential decision on the label. Then on the fifth question, as it relates to how we actually think about our pipeline, we want to develop drugs, James, which really matter. We call them leapfrog drugs. So preclinically, we only select candidates which are slotted to go to the clinic. When they outperform by a factor of 100 or more in relevant preclinical models, the gold standards, we call them leapfrog candidates. So when they don't fit that criteria, we don't even take them into the clinic. And that may be relating to the statistics questions we got from UBS, from Jack. I think we are beating the statistics here because we actually are much more stringent preclinically than any other company we know of in the antibody therapeutics field in selecting the lead candidates. Then, clinically, we also tend to be very rigorous. We will only take forward molecules which are going to be differentiated drugs from what is the gold standard or the optimal way of treating cancer patients with certain tumors. So we are not only very stringent preclinically, but also clinically, we have a very high bar in selecting the ones we will take forward. When the molecules, which are now active in our 4 proprietary programs, are not hitting the bar we have preset ourselves, James, we will simply put them on the shelves or stop them. And when we think that we can accelerate them, like with AXL-ADC or enapotamab vedotin, Tahi Ahmadi described it at the Capital Markets Day, we expanded cohorts of patients very quickly when we think that we're seeing unusual efficacy in some of these subpopulations. So we have a very, very stringent data-driven process. I think more stringent than what we see with some of the other companies. So what we want to do is focus on 1 or 2 winners, and the rest, we will either partner out to a big military machine if we think the market is huge and we need a big engine behind it or we kill it. We'll just put it on the shelves, James. Of course, time is of the essence. We are not going to waste the shareholder's capital and money on programs which we don't believe can make a substantial difference. I mean, daratumumab is an amazing drug, as we all know. That is underlying the value for the company at this point. Ofatumumab, disappointed in cancer, but I think could be an amazing drug in MS and could become a blockbuster there as well. Not a bad track record. The third one, teprotumumab, which Horizon is working on is also having a breakthrough therapy designation in Graves' eye disorder. It's not working well in cancer, but it's doing great in Graves' eye disease. So I think we have a pretty good track record. And I think we tend to get better and better in that process by hiring better and better people on the team. I think we have a world-class development execution team now in place under Judith's leadership. And we are now very, very massively investing in data sciences to make these decisions even more rational and better in the future. And then programs like enapotamab vedotin are likely going to get a companion diagnostic to actually optimize the identification of the patients which will optimally respond to this type of drug. So I think we are getting better and better, James, in that process. And when we don't get what we would like to see, we'll kill the program, because we don't have a shortage of good programs right now in the company. We're a small company with less than 400 employees; we actually have a pipeline comparable to what midsize pharmas have in clinical pipeline. So we have an amazing company, and I hope that the outside world is also soon going to experience that. But we -- I think we're very rational in how we decide the molecules which we want to focus on. David, maybe you can address the other questions from James?

Absolutely. Yes, first question from James on the point estimates. We traditionally gave a range of different numbers. I thought it was easier and cleaner this year to just give you the sort of the one number. This is what we're based on. We're based on the $3 billion sales. Part of the reason of that is that I've actually now given you more detail, breaking down the revenue into 3 different numbers, breaking down the expense into 3 different numbers. If I started to give you a range on each of them, there's 8 data points there. If I give you ranges on there, it's like, okay, are they all going to be higher? Are they all going to be low, et cetera, et cetera. We could sort of send ourselves crazy on all the permutations that are there. So I thought it was just simpler to be able to talk through, be transparent, give you full detail of what that we've got there, plus I wanted to make your life easier, James. So that was the main reason for doing that. I think also, it's a pretty tight range overall, and I think we saw in 2018, we didn't have any movement of our guidance overall. And of course, look, I've been very transparent with the milestones that are in there. They're binary. And look, for the long-term trajectory, our DARZALEX sales, whether they're 2.99 billion in 2019 or 3.01 billion in 2019 makes absolutely no difference of where the future success of DARZALEX will be. But there's a milestone that will flip from one year to the other, and I think that's the important thing for people to remember. This isn't like a milestone that you're getting through on successful Phase III data, that if you fail, that you never see the milestone. This is a sales milestone. We will get the milestone. We expect to get it in 2019. If you want to take a dim view on it, it really doesn't matter; we'll get it in 2020. So we felt that this was the best way to do it just for clarity and to be very open and very transparent. On the exchange rate, you're right, we pointed out that we've used a U.S. dollar to Danish kroner exchange rate of 6.00. The exchange rate at the end of 2018 was it ended up the year quite strong at 6.52. We did see a lot of range throughout the year. We started the year at 6.20. We ended the year at 6.50. A lot of the royalties come into Q4 for 2 reasons. One, we've got rising sales numbers quarter-by-quarter as we go throughout the year. But remember, we've got the tranches of royalties that come through. So in Q1, you're going to be starting off again that your royalty income is going to be at the 12% and 13%, rising to the 16% and then going through for the last tranche in the fourth quarter then. When we get to that point, you'd be at the 18%. So I've got a bigger sales number in Q4 at a bigger royalty rate in Q4. I don't know what the FX rate is going to be in Q4 2019. Then you've got those milestones which are, again, are going to be back-ended, particularly the $3 billion-related milestone, $150 million, DKK 900 million. Now if -- and I think, a final thing, I think just looking at some of the bank estimates, there is some expectations that the dollar will weaken a bit during 2019. I don't know where it is. But again, I wanted to be transparent and say, look, that's what those U.S. dollar revenue numbers are based on. Should we be lucky and that rate is higher or stays somewhere closer to today, then that will be some lucky strike extra for us. In terms of the costs, now we've got more programs -- I think we've got sort of safety in numbers that we've got programs going through different transitions and different amounts of times. We do get lumpiness in the programs, as you've quite rightly pointed out. We've said in the past that CMC, we might be going through some validation lots. We might be going through getting ready a year before IND with the first batches of CMC to get ready. So they can be, I know, a little lumpy on project to project. But now that we're going from 2 products in '17, 4 products in '18, 7 products by the end of '19, we'll have a more balanced basket of products overall. So I don't think there will be too much variability, and I can't think of anything that sort of says this is a really large significant cost in 2019 that will suddenly disappear in 2020.

And unfortunately, due to time constraints, we can't take any more questions today, so I'll pass the call back to the speakers for closing remarks, please.

So, thank you for calling in today to discuss Genmab's financial results for 2018, and we very much look forward to speaking with you all again soon.

Thank you very much, indeed, sir. And with many thanks to both our speakers, that does conclude the conference. Thank you all for taking part and you may now disconnect. Thank you, gentlemen.

Thank you, Jenny.

All the very best to you. Thank you. Cheerio.

Well done. Bye.

Thank you, bye-bye.

Thank you, Rachel.