Genmab A/S (GMAB) 2019 Q4 法說會逐字稿

Ladies and gentlemen, 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 the late or unsuccessfully 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 it 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.

I would now like to hand the conference to your first speaker today, Chief Executive Officer, Mr. Jan van de Winkel. Thank you. Please go ahead, sir.

So hello, and welcome to the Genmab conference call to discuss the company's financial results for the period ended December 31, 2019. Our CFO, David Eatwell, is joining me on today's call, as is Anthony Pagano, who, as you know, will be stepping into the role of CFO very soon.

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. I became CEO of Genmab in 2010 and presenting the financial results from that year, I told you that Genmab will deliver on our commitments and continue to focus on our core competencies, turning science into medicine and building a profitable and successful business. Looking back on 2019, I can very confidently say that we are over-delivering on Genmab's commitments. 2019 was Genmab's best year so far, with strong advancements in our proprietary pipeline and growth of new competencies to solidify our organization.

At the end of the year, there were 18 Genmab-created products in clinical development, and this number recently increased to 19, with the addition of Mim8, M-I-M-8, a DuoBody product in development by Novo Nordisk for hemophilia, which has begun dosing patients in a Phase I/II trial. Mim8 is the first DuoBody product candidate being evaluated in an indication outside of oncology. Of the Genmab-created products in clinical trials, we own 6 of them at least 50%. And soon, we will have 7, as we submitted an IND for the first DuoHexaBody product candidate, DuoHexaBody-CD37, at the end of 2019.

Our key highlights for the developments of our pipeline in 2019: we are completing an enrollment in the potentially registrational Phase II innovaTV 204 study of tisotumab vedotin; advancing the escalation phase in our 2 DuoBody programs with BioNTech; and presentations of data at major medical conferences, including the initial data for DuoBody-CD3xCD20, which recently received the international nonproprietary name epcoritamab.

In addition to the growth of our pipeline, our track record of success is also demonstrated by the 3 Genmab-created products currently on the market, including, of course, DARZALEX developed by Janssen, which is redefining the treatment of multiple myeloma across all line of therapy. I will talk more about DARZALEX in just a moment.

Ofatumumab, originally approved as Arzerra for certain CLL indications now has the opportunity to change the lives of patients with relapsing multiple sclerosis. Novartis, which is developing ofatumumab, presented very positive data for subcutaneous ofatumumab in relapsing MS at ECTRIMS last year and based on that data, submitted applications for approval to health authorities in the U.S. at the end of 2019 and in Europe at the beginning of this year. If approved, ofatumumab could be on the market in the U.S. in 2020, and we are very much looking forward to the potential launch of ofatumumab in this new indication.

The third Genmab-created product on the market is teprotumumab in development by Horizon Therapeutics, which just last month was approved by the FDA as TEPEZZA for thyroid eye disease. Teprotumumab was originally developed as part of Genmab's 2001 collaboration with Roche, and now with Horizon. It is the first and only FDA-approved medicine for the treatment of this disease.

Partnerships like those I just referenced, have been and will continue to be key components of Genmab's growth. In 2019, we entered into multiple new strategic collaborations, including agreements with CureVac, Tempus and another agreement with Janssen, this time involving HexaBody-CD38, a next-generation human CD38 monoclonal antibody product.

Our financial position has also, like our pipeline, strengthened exponentially. In 2019, along with our incredibly successful U.S. IPO, Genmab had its seventh year of profitability. Similar growth can be seen in our highly skilled and dedicated team as we ended the year with almost 550 full-time employees. We have continued to strategically add new capabilities and competencies, which will allow Genmab to stay on the cutting-edge of innovation and help us to continue to add to our already robust and exciting pipeline.

Most of Genmab's growth over the past few years is related to the incredible success of DARZALEX. So now let's move to Slide 4 for additional details on this remarkable product. Over 100,000 patients have now been treated with DARZALEX since its launch in 2015. And last year, it received key approvals in frontline multiple myeloma indications, including the highly anticipated approval in the U.S. of DARZALEX in combination with Revlimid and dexamethasone.

I would also like to mention 2 more recent events. In January, DARZALEX was approved in Europe in combination with bortezomib, thalidomide and dexamethasone. Previously approved in the U.S. in this indication, in both territories, it is the first DARZALEX-containing regimen approved for transplant eligible patients. Just this month, Janssen announced that it has submitted an sBLA to the FDA based on the CANDOR trial of DARZALEX in combination with Kyprolis and dexamethasone for relapsed or refractory multiple myeloma. Also of key significance for DARZALEX going forward, last year, Janssen applications for approval in both the U.S. and Europe for a subcutaneous formulation of the drug, based in large part on the positive results from the Phase III COLUMBA study. This will be a game changer for both patients and physicians, as it reduces the time needed for dosing daratumumab from several hours to just 5 minutes.

DARZALEX also continues to be a commercial success, reaching near triple blockbuster status in 2019. As anticipated, Genmab achieved 2 sales-based milestones for 2019: a $100 million milestone for sales of $2.5 billion in the calendar year; and a $850 million milestone for sales of $3 billion in the calendar year. As a reminder, sales milestones are calculated on the basis of the terms of the license agreement between Genmab and Janssen. I'm pleased to now turn the call over to David to present our financial results for 2019. David?

Thank you very much, Jan. Moving over to Slide 5 and the income statement for 2019 versus 2018. 2019 was another record-breaking year for Genmab, with record revenues, record operating income and record net income. So a good year for me to finish on. In 2019, revenue came in at DKK 5.4 billion, an increase of DKK 2.3 billion or 77% compared to 2018. The increase was primarily driven by higher DARZALEX royalties and milestones.

The total expenses in 2019 were DKK 2.7 billion, with 87% of the expense base being in R&D and 13% in G&A, the same proportion as 2018. The total expense increase of DKK 1.1 billion or 66% was driven by the advancement of our clinical pipeline and the increase in employees to support the pipeline expansion and our commercial ambitions. We had an operating income of DKK 2.60 billion for 2019 compared to DKK 1.4 billion in 2018. The increase of DKK 1,258 million or 91% was driven by the higher revenue, which was partially offset by the increased operating expenses in 2019.

Moving to the net financial items. These are similar in both years, with net income of DKK 221 million in 2019 compared to DKK 232 million for 2018. The corporate tax expense was DKK 693 million in 2019 compared to DKK 140 million in '18, corresponding to an effective tax rate of 24% for '19 and compared to just 9% in 2018 because 2018 had a larger benefit relating to deferred tax assets. And that brings us to the new record net result, reporting a net income of DKK 2,166 million for 2019 compared to DKK 1,472 million in 2018, an increase of DKK 694 million or 47%.

Now let's move on to the revenue on Slide 6. Our revenue breakdown by category is shown on the left-hand side of the slide. In 2019, the royalties were the largest portion of revenue at DKK 3,155 million compared to DKK 1,741 million in 2018. The increase of DKK 1.4 billion was driven by the higher DARZALEX royalties. Milestones were the second largest portion of revenue of DKK 1,869 million in 2019 compared to DKK 687 million in 2018. The increase of around DKK 1.2 billion or 172% was mainly driven by the overall DARZALEX milestones in 2019 compared to the previous year, including those 2 sales-based milestones Jan just mentioned. And as we have said before, these are the last of the sales-related milestones under the daratumumab agreement.

There was no license fee income in 2019 and license fees amounted to DKK 348 million in 2018. And you recall that, that was driven by the USD 50 million onetime payment from Novartis. Reimbursement income increased in 2019 to DKK 342 million compared to DKK 249 million in 2018, and that increase was driven by the reimbursement payments from our collaborations with Seattle Genetics and BioNTech.

The graph on the right bridges the revenues between the 2 periods. Again, the largest increase in revenue was the DARZALEX royalties, which grew from DKK 1.7 billion to DKK 3.1 billion, a healthy increase of DKK 1.4 billion or 83%. The royalties were based on Janssen DARZALEX net sales of USD 2,998 million, so just a tad under $3 billion, compared to $2,025 million for the same period in 2018. The impressive increase in sales of $973 million or 48% was driven by continued strong uptake of DARZALEX. The second largest increase was the DARZALEX milestones, which grew from DKK 586 million to DKK 1,778 million in 2019, an increase of just under DKK 1.2 billion or over 200%, again, driven by those sales milestones.

And now for my very final slide, moving to Slide 7 and the expenses and the operating income. The change in expenses between 2018 and 2019 is shown on the graph on the left. There was increase in the operating expenses of DKK 1.1 billion, which was driven by the accelerated investment in our product portfolio. 54% of the increase was due to the additional investment in our product pipeline, including the advancement of tisotumab vedotin and enapotamab vedotin, and the advancement of our clinical and preclinical programs. At the beginning of 2019, I estimated that 50% of our total expense base would be spent on our top 10 programs.

Looking back at our actual results for 2019, we spent DKK 1,327 million on the top 10 programs, which was indeed 49% of our total expense base of DKK 2,728 million. FTE costs have also increased year-over-year as we hired key personnel to support our growing product pipeline and continued efforts to build commercial capabilities. During 2019, we increased our headcount by 171 FTEs, and these were evenly distributed over our 3 key locations, with an additional employee added to our new location in Japan. Also, 145 of those new colleagues are working in R&D.

Looking at the chart on the right, you can see an increase in our operating income from DKK 1,380 million to DKK 2,638 million. This compares to our original guidance for 2019 of an even DKK 2 billion and our last published guidance of DKK 2.35 billion for 2019. So overall, a very satisfying result for 2019. And now I'd like to hand back to Jan to introduce our plans for 2020. Jan? Are you still there? Brian?

Yes, we are still reaching out to Mr. Jan van de Winkel. His line just got disconnected.

(technical difficulty)

I'm back now. Sorry, I lost the connection. So let's move to Slide 8. Before we discuss our 2020 guidance, I would like to first highlight the areas in which we plan to strategically invest in the coming year. To continue to deliver on Genmab's promise of developing truly differentiated antibody therapeutics, we intend to significantly increase our investment in both DuoBody-CD3xCD20 and DuoBody-PD-L1x4-1BB and accelerate their clinical development. We are focusing on these particular products, given our belief in their potential to become important new treatments, should they eventually be approved.

Starting with DuoBody-CD3xCD20, we believe this could be a best-in-class product. This confidence comes from both the preclinical and early clinical data we have seen and from its subcutaneous route of administration, a feature that differentiates it from other CD3xCD20 product candidates. We are planning a highly comprehensive and aggressive development plan for this product across a variety of hematological malignancies and lines of treatment.

DuoBody-PD-L1x4-1BB, one of the products that we are developing along with BioNTech has the potential to be first-in-class and to provide Genmab a truly differentiated PD-L1 products. There is a high unmet medical need to improve on checkpoint blockers, and we have seen strong preclinical data and encouraging early signs of activity in patients who failed PD-1 and/or PD-L1 checkpoint blockers for DuoBody-PD-L1x4-1BB. The escalation phase of the first-in-human clinical study in solid tumors is ongoing.

Given the potential for these products to be either best or first-in-class, their significant potential across multiple oncology indications and the unmet medical need for patients, we are accelerating these programs to continue to deliver on Genmab's promise of developing differentiated therapeutics for patients. Our track record of previous success gives us confidence that we will be able to capably maximize the potential of these product candidates towards key oncology markets.

Let's move to Slide 9. In addition to our targeted investments in the clinical-stage product candidates I just discussed, based on our world-class science, we are continuing to strengthen our pipeline with novel product candidates you can see here. We are also investing in new cutting-edge technologies. Our agreement with CureVac will allow us to combine their messenger RNA technology with Genmab's proprietary next-generation antibody technologies. This will facilitate our ability to continue to create breakthrough products for ourselves and for partners.

Another important space in which we are investing is data sciences. An example of this is our partnership with Tempus. This partnership gives us access to a massive amount of clinical genomic and biomarker data, which will help us to identify which patients may benefit the most from our products. In addition, this breadth and depth of information may allow us to identify potential new and better cancer targets and to significantly accelerate clinical developments. Of course, we will also continue to focus on our core competency of antibody research. This includes an expansion of our early discovery programs and bolstering of translational medicine capabilities in the U.S.

Together, these investments will allow Genmab to maintain its position as an innovation powerhouse. We have a nimble and science-focused, fully integrated R&D organization, and this positions us competitively to continue to build on our impressive track record of success by continuing to generate and develop new first and best-in-class products that can create substantial value for both patients and for shareholders. I would now like to turn the call over to our incoming CFO, Anthony Pagano, who will present our financial guidance for 2020. Anthony?

Thanks, Jan. It's a real pleasure to be taking over this role. Some of you will know that I've been here at Genmab since 2007, and I can honestly say that there's never been such an exciting time for the company. And great to be taking over from David, who leaves the business in such a strong position.

Let's move to Slide 10. Before I provide you with the guidance for 2020, I'd like to spend a moment explaining the underlying framework and the related key drivers. First off, let's think about our revenue profile. On the left-hand side, you can see the component parts of our current and future recurring revenue streams. After another strong year in 2019, we are looking forward to the continued growth and expansion of DARZALEX in 2020 and beyond. You can also see ofatumumab and TEPEZZA, and there's a lot to be excited about here. As you've heard from our partners, these are both potential blockbuster products. We expect approvals for both of these products in 2020. And in fact, TEPEZZA was already approved in January. While we don't expect any material revenues this year, we remain really excited about the potential of adding 2 additional recurring revenue streams in the years to come.

Now on to our focused approach of investing in R&D, which is shown on the right. We'll continue to invest in our pipeline in 2020. And as highlighted by Jan, we'll focus our investment and expand and accelerate our potential winners. As well as investing, we'll of course remain focused on the bottom line. And we fully intend to deliver an eighth consecutive year of profitability. And as you'll see for 2020, that should be at a substantial level. Finally, our guidance does not take into account any potential upside from partnering or deals.

Let's take a closer look at an important component of our recurring revenue growth, DARZALEX sales, on Slide 11. As you know, continued strong market growth led DARZALEX to near triple blockbuster status in 2019. And for 2020, we anticipate that sales will continue to ramp up significantly. We expect sales to grow somewhere between 30% and 40% and be in the range of $3.9 billion and $4.2 billion. There are 3 drivers underpinning this growth. First, following the MAIA and other approvals in 2019, we expect further market share gains in front line. Second, the expected approval of the subcu formulation of DARZALEX this year. And third, we anticipate continued strong market share across all lines of therapy and geographies as DARZALEX gains further traction globally. So DARZALEX is really continuing to deliver for us and on a clear path to market leadership in multiple myeloma.

Now let's take a look at the components of our revenue on Slide 12. Based on the strong sales expected in 2020, we're projecting DARZALEX royalties to be in the range of DKK 4.08 billion to DKK 4.48 billion. That's up 30% to 43%. As mentioned earlier by David, we benefited from DKK 1.68 billion of sales milestones in 2019. These will not recur in 2020. Cost reimbursement revenue is expected to increase, driven by our Seattle Genetics and BioNTech collaborations. So our 2020 guidance here is DKK 475 million. Other revenue consists of other milestones and royalties with a 2020 guidance of DKK 200 million. Included within this number are some modest figures for royalties from ofatumumab and TEPEZZA. As a reminder, we'll receive a 10% royalty on ofatumumab sales in RMS and a mid-single-digit royalty from TEPEZZA. Without any large milestones as in 2019, we are still expecting revenue to approach nearly DKK 5 billion at the midpoint of our 2020 guidance.

Now let's move to Slide 13 to take a look at our investment profile for 2020. On the top of the slide, we show that we are investing in 4 main areas: project investment; personnel costs; business support; and depreciation and amortization. Our total investment is increasing to DKK 3.9 billion in 2020 due to the continued success and advancement of our pipeline. More than half of our total investment is related to our project costs. And these costs also account for more than half of the growth of our cost base in 2020.

The next largest cost relates to our very talented team here at Genmab. At the end of 2019, we had roughly 550 FTEs, and we anticipate this will increase to about 725 by the end of this year. Again, the increased resource is directly driven by the success of our pipeline. Business support relates to our support functions, and the growth is across all support areas, and notably includes enhanced technology and systems, data science and focused investment in medical affairs and commercial.

Turning to the bottom of this slide, I've broken out our project costs in more detail. On the left, we have our total project investment of DKK 2.2 billion. Of note, 38% of the amount will be invested in DuoBody-CD3xCD20 and DuoBody-PD-L1x4-1BB, 2 of the programs we are looking to expand and accelerate in 2020. On the bottom right of the slide, you can see that 87% of the increase in our project investment relates to the same 2 programs. This is in line with our focused investment approach where we invest in our pipeline and accelerate and expand the development of our potential winners.

Now having looked at the framework and its individual parts, let's look at what that means for our 2020 guidance as a whole, which is on Slide 14. Here, you can see our 2020 guidance. We expect our revenue to be in the range of DKK 4.75 billion to DKK 5.15 billion. That's down modestly from last year as a result of nonrecurring DARZALEX sales milestones of DKK 1.68 billion, which I mentioned earlier. We anticipate our 2020 operating expenses to be in the range of DKK 3.85 billion to DKK 3.95 billion. This step-up in investment represents our enthusiasm for our pipeline for all of the reasons we've already covered. Putting all of this together, we're planning for substantial operating income in 2020 in a range of DKK 0.85 billion to DKK 1.25 billion.

Now let's move to Slide 15 for my key takeaways for the year ahead. We're on track for a transformative year. We expect continued strong growth in recurring revenue, driven by the growth and expansion of DARZALEX. Potential approvals for 2 blockbusters, ofatumumab and TEPEZZA. These are additional recurring revenue streams, but with limited contribution in 2020. We'll continue to invest in our pipeline in 2020. Here, we'll focus our investment on DuoBody-CD3xCD20 and DuoBody-PD-L1x4-1BB. And we fully intend to look -- to deliver around DKK 1 billion of profitability in the year. Finally, our guidance does not take into account any potential upside from partnering or deals such as a potential agreement for DuoBody-CD3xCD20. Now back to Jan to discuss our key priorities for 2020.

Thank you, Anthony. Let's move to Slide 16. In 2020, we anticipate that we will continue to build on the momentum from 2019 with solid progress across our pipeline. As you can see, the most significant area of advancement is expected to be with our own proprietary pipeline of product candidates, where we are responsible for at least 50% of development. We are anticipating new readouts for data, including for DuoBody-PD-L1x4-1BB. This is a goal that has been added to this list since we first presented it at ASH last year.

As Anthony and I both discussed, we are planning for advances with ongoing clinical trials, including potentially new product candidates in the pipeline, with planned IND and CTA filings for HexaBody-CD38 and DuoBody-CD3x5T4. We expect daratumumab to continue to evolve with additional data readouts and regulatory submissions. Most importantly, and as I referenced earlier, we very much look forward to the potential approval of the subcutaneous formulation of daratumumab in both the U.S. and in Europe. Similarly, we are highly anticipating the potential approval in the U.S. of subcutaneous ofatumumab for relapsing MS. The final milestone we have on our list, the approval in the U.S. of teprotumumab, as I mentioned has already been achieved. This is an excellent start to the new year.

To conclude, I would like to once more look back. Over the past 10 years, there are a few years that stand out as bringing transformative change to the company. I believe that 2019 was one of those years. From the U.S. IPO, the second largest U.S. IPO ever for a biotech company, to the expansion of our own pipeline and in-house capabilities and the success and evolution of our partner products, 2019 was truly a remarkable year. Looking forward, it's clear that build on the strong foundation of our first-in-class or best-in-class innovative product pipeline of proprietary technologies, talented and passionately committed employees and solid financials, Genmab will have remarkable years to come as we work to transform the treatment of cancer.

Before I move on to the Q&A, I would like to once again acknowledge the tremendous contributions that David Eatwell has made to Genmab during his tenure. David, I want to thank you again on behalf of the entire Genmab organization for your service. And I warmly welcome Anthony Pagano, who will step into the role of CFO on March 1. Anthony has also played an important role in Genmab's success, and I look forward to you all getting to know him as well as you know David.

So now let's move to Slide '17. That ends our presentation of Genmab's 2019 financial results. Operator, please open the call for questions.

(Operator Instructions) And your first question comes from the line of Kennen MacKay from RBC Capital Markets.

Congrats on the full year results and the guidance. I had a question on epcoritamab and maybe referring to the CD20/CD3 here, with some time to dig into the data that we saw at ASH. Can you maybe speak a little bit about how you see this agent differentiating from the other CD20/CD3s, both in relapsed refractory settings as well as thinking about the agent sort of moving forward into standard of care and earlier lines of treatment? And on that, should we think a final partnership decision might be dependent on getting the final dose escalation data and getting to that recommended Phase II dose?

Thanks, Kennen, for the compliments and for the questions. Epcoritamab is a -- we believe is very differentiated from the other CD3/CD20 biospecifics, which are in the clinic from Roche and from Regeneron, because it's like preclinically, like a hundredfold more potent in killing -- in its ability to kill target cells. On top of that, Kennen, it's also a subcutaneous formulation rather than an IV formulation. And what we have seen in early clinical data, as you know, from ASH, is that we don't seem to get cytokine release syndrome to the magnitude the other CD3/CD20 seem to give in patients with very encouraging efficacy.

We are now beyond the dose escalations, Kennen, which we have shown at ASH. And I can tell you that the data looks very, very good. We expect to release data this year. And we are also in very active discussions with potential partners. Several who we are speaking with in parallel. And the enthusiasm level is sky high. We intend to broaden the development plan quite a bit, even in the absence of a closed end-of-partnership agreement, Kennen, because we don't want to get any further delay versus Roche and Regeneron programs.

We're going to massively increase the programs that we are going to move into multiple B-cell malignancies initially in later lines of therapy, but hopefully, with a partner on board potentially even in the second half of this year, progressing into multiple Phase IIIs in several lines of therapy and different B-cell malignancies. That's probably where I should keep it at this moment, Kennen, but the enthusiasm level inside the company and with potential partners is super high.

And your next question comes from the line of Wimal Kapadia from Bernstein.

Wimal Kapadia from Bernstein. Just a quick one on the dara guidance 2020, please. So dara added just under DKK 1 billion in revenues year-on-year in 2019. And yet your expectations for 2020 at the low end are an incremental DKK 0.9 and even at the midpoint, an incremental DKK 1.05 billion. So is it fair to assume very conservative assumptions for impact on subcu in your guidance? Or do you expect the subcu only allows for continued steady penetration? Or should we expect a slowdown in 1H, driven by underlying slow penetration and then an inflection in the second half when the subcu kicks in? I'm just trying to get a better sense on how you're thinking about the impact -- subcu impact on revenues in your guidance?

Thanks, Wimal. I will turn the question over to Anthony, who has been instrumental for the guidance for 2020, and then I may add to that. Anthony, the floor is yours.

Great. Thanks, Jan. First, we believe DARZALEX is really on a clear path to overall market leadership in multiple myeloma. This is supported by the market share gains we've seen in 2019. As we sort of think about 2020, there are a number of key catalysts, including the approval of subcu. Taken together, we're confident that we'll see another very strong year for DARZALEX in 2020 and beyond. So I think if we think about our guidance and the range, obviously, that sort of takes into account a range of outcomes and factors. On balance, we feel we have a fair number of tailwinds and positive catalysts as we start 2020 and are confident in our overall sales guidance range.

Just one final point to remind everybody that in 2019, that did include the positive one-off contribution related to the completion of pricing and reimbursement decisions. Obviously, we don't have any expectation that, that would recur in 2019. So overall, very excited about what DARZALEX is providing for patients and for Genmab, what it means in terms of our recurring revenue streams and very confident in our 2020 guidance.

Thanks, Anthony. I think very little to add, apart from that we're seeing already in February, we got the IMS numbers, too, Wimal, a 2-week delay, a very nice pickup in the U.S., and also the Brands Impact numbers from December show, they look at new patient starts in front line, you see already 12% of the patients in front line getting dara-containing regimens and then second line is up to a stunning 45% of new patients. So we believe that the traction is really there for daratumumab, and we also expect a pretty quick approval for the subcutaneous formulation. So I think very solid momentum behind daratumumab.

And your next question comes from the line of Matthew Harrison for -- from Morgan Stanley.

This is Connor on for Matthew. Just 2 quickly. So we're just wondering what you might expect the bar is for tiso. And you have mentioned sort of the response rate in Keytruda before, and Seattle Genetics has mentioned the same thing and we were just wondering sort of if your view is still the same on tiso in terms of bars for success. And then just one after that quickly.

Thanks, Connor. What I can say about it is I will say exactly the same as a partner, Seattle, where you would see roughly the type of efficiency as we have seen in the early study around 20% response rate and a duration of 6 months or longer. It will be a very competitive product. We cannot disclose the exact bar which we have agreed with the U.S. authorities. We expect that the trial -- the innovaTV 204 study will read out in the first half of this year, and we continue to be very excited about that potential product, where we would see roughly the same data as you have seen in earlier stage studies, Connor. We think that it is a product which we can file for approval.

Great. And then just quickly on AXL. We're just wondering what your thoughts on the process forward might be and sort of your thoughts on potentially enriching the population. And I guess, generally, if you're going to look at potential for combination studies with PD-1?

Absolutely. What we're doing right now is we're testing some further dosing and dosing frequencies with enapotamab vedotin. And we are working with VENTANA on companion diagnostics or biomarkers, Connor. And we believe that we need to enrich it in certain tumor populations because that is consistent with the biology of AXL is overexpressed on tumors which are refractory or resistant to chemotherapy or to small molecule inhibitors as we have shown preclinically.

And I think it makes sense actually to select patients based on the expression of AXL and potentially other biomarkers. We're actually advancing quite quickly. We are correlating the data on biomarkers with the clinical data which we observe, and we are currently at 6 escalation cohorts also in other types of tumors and the lung cancers you have seen. And we expect the data of both the biomarker studies as well as the clinical escalation cohort data in the second half of this year, Connor. We continue to be enthusiastic about the potential of that product.

And your next question comes from the line of Michael Schmidt from Guggenheim.

This is Kelsey Goodwin on for Michael Schmidt. With regards to DARZALEX, are you able to provide the specifics of the uptake and market share that you've seen across the lines of therapy, kind of where we ended up at the end of '19? And then also for sales by U.S. versus ex U.S.? I guess ex U.S. has been a bit faster than I think we all kind of expected. Do you have a sense of kind of what the key drivers or the dynamics at play there are?

Thanks, Kelsey. I thank you for the questions, and I will hand them over to David. David?

Thank you. Yes. If we first off, look at the Brands Impact data. As a reminder, the Brands Impact data is market research data. It's a 3-month rolling average, and what I -- I'll give you a few numbers comparing December 2019 with December '18. So we've seen some pretty nice developments during 2019. First off, with the overall market share. We ended 2019 with 21% market share. That's a nice increase from December '18, which was 15%.

Front line also growing nicely. At December '19, we ended up with an 8% market share, and this time last year, of course, we were very low, only 2%. And as Jan mentioned a few minutes ago, we are now seeing the new patient starts in the front line coming through at around 12%. So plenty of room, obviously, to grow in 2020 in the front line. And of course, we'll have the full year benefit in 2020 with the approval, with the [RB] just being in June 2019.

On the second line, that continues to develop very nicely. December '18 was 27% market share. Quarter-on-quarter every quarter, we've seen it growing and it ended up at 36% market share in December 2019. And we're still seeing those new patient starts, as Jan mentioned, 45% new patient starts in the second-line setting, which still shows us that there is room to grow and expand in that second-line setting. If we look at the third and the fourth line, they're still maintaining both over their 40% market share.

With the third line in December was about 44%; fourth line about 42%. We've seen a little bit of movement down on those ones, which is exactly this time last year what we predicted, that the fourth line market share would fall slightly and indeed, that's what it's done. So overall, with the total sales, very pleased with how those have developed. In terms of the split for the year, we had total sales of $2,998 million, as you know, just under that $3 billion on Janssen reported net sales. U.S. sales were $1,568 million, and the rest of the world was $1,430 million. Anthony, I don't know if you want to make any comment about expectations for geographic split for 2020.

Yes. Thanks, David. I can try to provide a bit more color. Overall, we expect strong market shares in all lines in all geographies next year and moving forward. We're overall very pleased with the trends we're seeing in DARZALEX market shares, as David just highlighted. As we think about the U.S. versus rest of world split for DARZALEX, I think it's useful to reflect on where we've been. In 2017, in rough terms, we had around 70% U.S., 30% rest of world. 2018, roughly 60-40; 2019 came a lot closer to 50-50, at 52% U.S., 48% rest of world. For 2020, we have catalysts in the U.S., but in also many other parts of the world. In terms of the split moving forward in 2020, directionally, we believe it's likely that we're looking at something very similar to what we've seen in 2019, i.e., something much closer to 50-50 versus 60-40. That's probably where we'd leave it, but overall, remain very, very excited about what we're seeing in DARZALEX globally.

And your next question comes from the line of Emily Field from Barclays.

I know you guys don't make the pricing decisions for DARZALEX. But in your view, would it be reasonable for Janssen to take a price increase for the subcutaneous formulation and is any such price increase included in your guidance? And then also, similarly, going into guidance. Are you factoring in any impact to DARZALEX from the potential launch of isatuximab? And just if you could just give any commentary on whether or not you are expecting that Janssen's commercial behavior in the field would need to change at all, assuming that asset is launched?

Thanks, Emily. I will pass on these 2 questions to Anthony.

Great. Thanks, Jan, and thanks, Emily, for the question. I guess, first of all, in terms of pricing in subcu, certainly appreciate why you'd like to get some more information on that, but really, this is with Janssen in terms of any pricing decisions specifically related to subcu, really, we can't provide any color. As it relates to your 2 questions around guidance.

First of all, in terms of impact of subcu pricing, but then also competition. It goes back to what I said earlier in terms of our range for 2020. We have a range of $3.9 billion to $4.2 billion. We like where we're at in terms of what we're seeing in the year-end market shares. We look forward to continued progress in 2020. We have a number of key catalysts, including the potential approval of subcu in 2020. So a lot to be super excited about. In terms of our partner, overall, I think we have a fantastic partner with Janssen in terms of their marketing and overall commercial capabilities in multiple myeloma. And overall, we're very, very comfortable with them. And overall, very confident in our 2020 guidance of $3.9 billion to $4.2 billion.

And your next question comes from the line of Peter Verdult from Citi.

Pete Verdult, Citi. Jan, just a question for you on CD3/20. A year ago, you were very confident that there will be a partnership deal signed. Obviously, it's taken a little bit longer than expectations. The data looks good. So I just want to understand why it's taking longer given the promising data? And secondly, and it's part B to the same question, Roche are talking about moving both their biospecific programs forward into Phase III across lines of therapy and maybe even across malignancies. Should get accelerated approval of Priority Review, would that complicate your efforts to try and close the gap? I'm just trying to understand what's going on in terms of the partnership and what's holding it up? And also some of the change in the competitive landscape and how that would affect your ability to close the gap. So if you could address that, would be very helpful.

Thanks, Peter, for the questions. I don't think it's taking any longer because it has full momentum, as already said on the call and in answer to a previous question, we have a very, very high level of attention. And -- but it simply takes time to close agreements like this, especially, Peter, because we are very picky. We really want to book sales in the U.S. for this molecule, and we want to do it through 50-50, with a very established military machine who can really execute really, really well with this molecule because we believe it's a potentially best-in-class, actually against the CD20 targets. So we are having good momentum.

We have guided for mid this year for a partnership or sooner. And I think that is well on time. And even in the absence of partnership, we will actually accelerate, we will accelerate the program ourselves with multiple Phase II, so potentially even Phase III starting up in the second half of this year. So we are keeping the momentum, and we are actually trying to shorten the time between the Roche and Regeneron programs and our programs. And I think we can. So certainly more to come this year.

And your next question comes from the line of Richard Parkes from Deutsche Bank.

So firstly, just a clarification on CD20/CD3. I'm assuming you obviously continue to dose escalate since the data at ASH. Can you confirm that you're still not seeing Grade 3 or worse CRS when you look at higher doses and whether you've decided to progress beyond the 24-milligram dose yet? And then I just wondered if I could squeeze in a second. Just wondered if you could clarify on DR5, whether you've continued to see clinical activity since lift of the partial hold, I think that included some provisions for dose reductions.

Thanks, Richard. So we are, with the CD3/CD20 DuoBody, we are beyond the escalation level, which we showed data of at ASH. And the safety data, it still looks good. And more of that will probably be presented at a medical conference this year, Richard. So we are very excited about the profile, also with higher doses and clinical data will come this year. Then for the HexaBody-DR5/DR5 program, we are treating patients. I think it's a bit too early to say more on clinical activity, but what we have seen is some very encouraging data in a number of patients. And the trial is now, again, open for recruitment. We are treating patients and second half of this year, Richard, we will get more clinical data.

Okay, great. And could I just also say best of luck to David. It's been a pleasure collaborating over the years.

Thank you very much, Richard.

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

It's Michael from Nordea. In coming to the DARZALEX guidance, do you think there's a probability to see the GRIFFIN data in NCCN guidelines, even though it's only Phase II data? Or do you assume as a base assumption that we should wait for the PERSEUS data, the Phase III, to read out? Just to get a feeling for what is actually implied in the guidance also. And then on the CD3/CD20, just another follow-up to partnering discussions.

Just also looking back on your communication last, let's say, 12 to 15 months, especially around ASH, and now going more full throttle on your own, not waiting. Is there a preference for a partner? Or would you just have an equally strong preference to just to do it alone if you don't get the right sort of terms, especially in terms of U.S. sales split? Just to get a feeling for where the actual preference is on this program rather than just the market focus on the partnership deal.

Absolutely. Michael, thanks for both of the questions. So as it relates to DARZALEX guidance, what we understand is that Janssen is definitely trying to publish the data from the GRIFFIN study and is fully aiming for getting it potentially included in the NCCN guidelines before the Phase III readout, Michael. So we believe that, that is possible. The data is very, very strong and continues to get stronger. And -- but you need a peer-reviewed paper, and that is happening as we speak, that whole process.

Then as it relates to the CD3/CD20 DuoBody epcoritamab, we absolutely have a preference for a partner because we believe that as a small biotech company, Michael, we have actually little chance to compete with a powerhouse like Roche in the B-cell therapy area. We need a very, very experienced company to work with us to put into motion a military program. And I can assure you that we have very active discussions, and there are also productive discussions. We want to have a partner, that is a clear preference.

And yes, we are going to demand booking U.S. sales ourselves. And these discussions are ongoing, but I can tell you that, that has already been agreed by a number of the parties. So we're very, very confident that we can close and enter a productive partnership. And up to that moment of signature, Michael, we are not going to lose any day of delay and we going to actually scale it up ourselves, as we have said very clearly today during the conference call and in the Q&A.

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

Only really one left for me. What have you seen for the PD-1 4-1BB program that has led to such a prioritization over some of the other programs like DR-5 or CDx antibody?

Thanks, James, for the question. We are super excited about the PDL-1 4-1BB program because of the preclinical characteristics and the very strong preclinical validation, which we have worked on together with BioNTech. This is a very special 4-1BB arm and a very, very unique PD-L1 arm in this biospecific. And we used the DuoBody technology to make very large panels of biospecifics and then empirical screen for the most active one. And what I've said already in the introduction to the call today is that we have seen in patients which are absolutely unresponsive to PD-1 or PD-L1 blockers, James, we have seen some very good early signs of clinical activity, which leads us and our partner BioNTech to be super enthusiastic about the potential of this molecule.

So we are -- we are scaling it up very significantly. Because we believe we have a totally unique immuno-oncology asset in our hands. Remember, it's a 50-50. So it fits with our strategy to build the next phase of Genmab into an iconic oncology powerhouse, and I think this is one of the molecules that has a very good chance of getting us there. That's probably where I want to leave it at until you hear more on the clinical data from us and from BioNTech in the second half of this year.

And can I just quickly follow up on the rest of the pipeline as well? Where does that leave the rest of the pipeline in terms of prioritization? You've now got tisotumab, enapotamab, CD3/CD20 and 4-1BB PD-1 as sort of key assets. How are you thinking about the rest of the pipeline and how that gets allocated capital? Does it need to be within Genmab anymore? Or would you look to out-license it?

Yes, very good question, James. And I've been very public about that. This year, it's about identifying the 2 winners, the 2 clear winners. And I think we already have a pretty good view of what those winners are. The other programs are either already developed with a partner, like tisotumab vedotin. It's a 50-50 with Seattle Genetics, and Seattle is operationalizing more and more of the clinical trials.

But we are in a very, very productive partnership there. Then with the other earlier-stage clinical programs, we may either shut them down, so kill them quickly when we are not seeing that they have a differentiated clinical efficacy profile; or we will actually put them on the shelves, James, to actually to focus our resources on the winners, initially. Or we could actually partner them with partner companies because remember, we are very good in creating such molecules.

Genmab has an unprecedented track record of creating these differentiated molecules now, that we could actually partner it with a development partner, let them spend money on it. And potentially keep an option for 50% co-ownership if the partner has shown convincing clinical evidence of potential in a certain market. And then, actually, at that point, when we know it's a winner, start spending money on it. So what we should aim for, for this year is identify the 2 clear winners, maximize their potential and then the rest will be deprioritized or potentially partnered or potentially killed, James, and that is exactly what you want us to do to build a very, very strong company towards the future. In biotech, it's all about the winners. It's not about keeping all the programs in the end. It's about identifying the winners early, and then maximize their potential. And that's exactly what we're going to. So what I said already in my introductory presentation, I think that 2020 has the potential to be even better than 2019. And that was the best year ever for our company up to now.

And your next question comes from the line of Peter Welford from Jefferies.

Just a quick one. Swinging back to the PD-L1x4-1BB program, just curious there on the timing and I guess your plans with regards to combinations, both in regards to what sort of timing should we think about before you potentially initiate treatment combos and also I guess other potential IO combos? And on that basis as well, are you looking in the current dose escalation studies, are you screening at all by PD-L1 status? Or is the objective to actually get deliberately PD-L1 low patients? What sort of work are you doing on that at this early stage?

Thanks, Peter. It's a bit early to go into the exact planning. What we're doing right now is we're actually determining the exact dose, the optimal dose for the PDL-1x4-1BB, then we do dose -- we do escalation cohorts in different cancers where we have seen signs of activity. And then we will, for those cohorts, when we are in those cohorts, we will actually determine combination protocols. So it's a bit too early, I think, to comment on that for me at this point. We are doing a lot of biomarker work on the trials. By -- Genmab is operationalizing the clinical study with PDL-1x4-1BB, Peter. And we are doing a lot of biomarker work with a translational medicine team headed by Kate Sasser. So we are looking at PD-L1 expression levels as well as several other biomarkers. And then trying to correlate that with clinical responses. So it's a bit too early to further comment on that.

And your next question comes from the line of Asthika Goonewardene.

Asthika Goonewardene from SunTrust. Jan, we heard -- I think this is the first time I'm hearing about the HexElect product. And I wanted to get -- to bounce that off you and get your ideas as to what are the potential applications of HexElect? Is this something that can produce enhanced cross-linking? And also, I'm curious to know if the Fc mutation nullifies [EDC increasing] capabilities of that antibody, potentially giving you activity against -- giving you activity for agonist activity on immune cells? Then also, it's been a while since SITC, where we saw that interesting data of CD38 sequencing after PD-1. I'm wondering if you've had a chance to discuss this in more detail with Janssen and try and change their mind about thinking about solid tumors again.

Thanks, Asthika, and welcome. Welcome to this call and to covering us. We are very, very pleased with that. HexElect is a unique new technology, which is based on 2 HexaBody molecules, which can only hexamerize, so form groups of 6, when they actually hetero hexamerize. So it's a super clever technology, which will allow you to go to much more selective targeting. Many times therapeutic targets, Asthika, are not entirely tumor specific. But when you combine 2 antibodies, and make the killing ability contingent on them both binding on the same cell, you can make targeting far more selective.

We have fantastic preclinical proof-of-concepts. We're now selecting clinical candidates and in the process of this year, we'll likely identify some for slotting towards the clinic. So this will make a targeting of very potent antibodies far more selective than ever before. We are very excited about the potential of that technology. We think it will be ideally suited for certain categories of targets. We have not disclosed yet what those are as I think we have IP protecting that as we speak. And we are very excited about that new technology platform. And actually, we have a number of potential clinical programs already in the works at Genmab. So more to come this year, potentially at our Capital Markets Day in upcoming November.

Then the use of daratumumab after a PD-1 or PD-L1 checkpoint blockers in solid tumors, that's entirely up to Janssen. Janssen is following the field. They are looking at the Sanofi work with isatuximab, and they have already said publicly that they are willing to move into solid tumors again with daratumumab, but then they will use subcu daratumumab. And don't forget that we now have also this new HexaBody-CD38 program, which will go into the clinic this year, which Genmab will drive, Asthika.

That molecule is so much more potent than daratumumab preclinically, that we think that also, that molecule has the potential to move into trials in solid cancers. So CD38 is and will continue to be a very, very important component in the product portfolio for Genmab, I believe. I should probably leave it at that.

And your last question comes from the line of Graig Suvannavejh.

Congrats on all the progress. I had a question just on partnership and how you think about CD3/CD20, and I'm wondering if the decision around partners is dictated really more around your ability to get the economics that you're looking for? Or is it really driven more by kind of who you think you can compete effectively against the likes of a Roche?

Thanks, Graig, for this question. I have to say the most important for me is to get the right partner onboard because we want a military machine who is as aggressive as some of our competitors are and as experienced also in that field. We want a partner, Graig, which already has 1 or 2 products on the market in that area. They are potentially ready. They very -- they have a very good knowledge already of developing drugs in those areas and has new molecules which are not yet on the market, but which are prepared towards the market, which can be combined early on already with epcoritamab. And I can assure you that what we're already negotiating is that will also be an attractive -- financially attractive partnership because the interest level is very high.

We are in very active negotiations, and we have already some very good terms on the table, Graig. So I think we can get both. But the most important to me and to the company is to get the right partner, which is competitive and can help us to maximize the potential of that, what we believe is a potentially best-in-class product.

Thank you, sir. And no further questions at this time. You may go ahead.

All right. So thank you all for calling in today to discuss Genmab's financial results for 2019. And we look forward to speaking with you again soon.

Thank you. And that does conclude our conference for today. Thank you all for participating. You may all disconnect.