Genmab A/S

Hello and welcome to the GenMab Q1 2022 conference call. Throughout the call, all participants will be in listen-only mode, and afterwards there'll be a question and answer session. Just to remind you, this conference call is being recorded. During the teleconference, 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. Jan van de Winkel Please go ahead with your meeting.

Hello and welcome to the GenMob conference call to discuss the company's financial results for the period ended March 31st, 2022. With me today to present these results is our CFO Anthony Pagano. Let's move to slide two. 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 three. Tiamat has an innovation-based culture and collaborations and partnerships have always been part of our DNA. During today's presentation, we will reference some of the products being developed under these strategic collaborations and this slide acknowledges those relationships. Let's move to slide four. I would like to begin with a reminder that thanks to our consistent and solid track record of success, Our world-class team and our strong financial foundation, we have never been in a better position to achieve our ambitious vision of transforming cancer treatments. During the first quarter of 2022, we continue to build on this foundation with multiple advancements in our pipeline. So now let's move to slide five and take a look at some of the recent achievements and updates. I'm excited to start with the fact that last month, we at EPFI announced top-line results from the first cohort of the Phase 1-2 study of abcaritumab in patients with relapsed or refractory large B-cell lymphoma, who have received at least two prior lines of systemic therapy, including 38.9% who received prior treatment with CAR-T therapy. In these high-risk, heavily pretreated patients, EPCORITOMAB demonstrated an overall response rate of 63.1% with a median duration of response of 12 months. The data will be submitted for presentation at a future medical meeting and based on these results, together with EPFI, we will engage global regulatory authorities to determine next steps. In March, we announced another important milestone for EPCORITOMAB. that the FDA has granted orphan drug designation for the treatment of follicular lymphoma. So let's now turn to T-soltamab-fedotin. Together with CJEN, we presented T-soltamab-fedotin data at a number of conferences during the first quarter. Key among these presentations was preliminary data from the innovative 207 study of disotomy of fedotin monotherapy in patients with squamous cell carcinoma of the head and neck who experienced disease progression on or after a first-line platinum-containing regimen and a checkpoint inhibitor. Early results showed disotomy of fedotin demonstrated a manageable safety profile and promising preliminary antitumor activity in this patient population with the primary endpoint of confirmed overall response rate per investigator achieved in 16% of head and neck cancer patients. The findings were presented as part of a plenary session at the ASTRO 2022 Multidisciplinary Head and Neck Cancer Symposium in Arizona in February. We also presented interim results from the Innovative 205 study during a virtual oral session at SGO in March. Excitingly, as you may have seen on the ESCO 2022 website, an abstract on the Innovative 205 data was also accepted for oral presentation at ESCO. And this is one of multiple T-Certum aphidotum and Apcaritumab abstracts that have been accepted for presentation. Our clinical pipeline also expanded in the first quarter with the first patient dose in the first inhuman study of dual-body CD3-B7H4. The power of GenMob's innovation was reflected in updates for therapies created by GenMob that are being developed by other companies. A variety of programs either added or initiated clinical studies. With regard to Janssen's product incorporating our dual-body technology, As Janssen announced, they submitted a marketing authorization application to the EMA seeking approval of teclistamab for the treatment of patients with relapsed or refractory multiple myeloma and their US FDA BLA for teclistamab in this indication received priority review from the US FDA. Sales for Darzalex over the quarter were also strong and we reported 1,856 million In net sales by J&J, an increase of 36% over the first quarter of 2021, resulting in 1501 million Danish Krone in royalties. This brings me to the resolution of our arbitration with Janssen, relating to our Daratumumab license agreement. As we announced in the beginning of April, the arbitral tribunal decided both issues in favor of Janssen. We did not seek a review of the awards and it is now final. As the arbitration is confidential, we do not intend to comment further and we look forward to our continued collaborations with Janssen. Finally, we expanded our executive management team on March 1st with the appointment of Birgitte Stevenson to Chief Legal Officer and Chris Cozic to Chief People Officer. These appointments elevate the critical work of their groups as well as further strengthens our world-class executive management team. I'm pleased to now turn the call over to Anthony Pagano to take you through our first quarter financial results. Anthony, go ahead.

Great. Thanks, Jan. Let's move to slide six. First off, as Jan just said, we're not going to comment any further on the arbitration. But as a reminder, we already assumed a royalty reduction of around 700 million kroner and we issued our 2022 guidance in February. Now with that behind us, let's take a look at Q1 where we continue to strengthen our foundation and drive towards our 2025 vision. Our first commercial launch bringing TIVDAC to US cervical cancer patients is progressing well. We grew recurring revenue by 84% in Q1. This was driven by strong royalties from Darzalex and other approved medicines. You'll remember, of course, that we essentially had no CIPESA revenues in Q1 of last year. Now, especially in these volatile times, the strength of our financial profile really stands out. Our strong balance sheet and growing recurring revenues allow us to continue to invest in our business and our pipeline in a very focused and disciplined way. And an important part of this has been to continue to build the team and capabilities to enable us to succeed. So let's take a look at those revenues in a bit more detail on the next slide. We saw continued strong performance for Darzelex in the first quarter. You can see that in this chart. Overall, net sales grew by 36%. That's net sales of $1.86 billion, which translates to 1.5 billion kroner in royalty revenue. This exceptional growth was driven by continued strong market share across all lines and continued uptake of the sub-Q formulation. So Darzalex remains a key driver of our revenue as you can see on slide A. Our recurring revenues grew by 84% in the first quarter of the year. We've already spoken about Darzalex and the very strong performance there. We're also encouraged by the growth of Casinta and Tepeza, where we saw an increase of almost 300 million kroner in royalties compared to last year. This growth really illustrates the power of our recurring revenues. In fact, 88% of our Q1 revenue was recurring revenue, and that's compared to 64% in Q1 of last year. So our revenue profile continues to get stronger. And we're taking those revenues and investing in a highly focused way, as you can see on the next slide. In line with our significant growth opportunities, total OpEx grew 53% in the first quarter. And here you can see where we invested. We accelerated our investment into our product portfolio, especially the advancement of both EPCO and Duobody CD40-41BB. We've also further strengthened the GEDMAP team to support our growth in commercialization and our expanding pipeline. That includes supporting TIBDAC and preparing for the potential filing and launch for EFCO. Finally, we're leveraging our collaboration with AbbVie by utilizing their expertise and significant financial contributions to further expand and accelerate our partnership programs. Now, let's take a look at our financials as a whole on slide 10. Here, you can see our summary P&L. Revenue for Q1 came in at approximately 2.1 billion kroner. That's up 34% on last year. Total expenses were about 1.6 billion with 72% being R&D and 28% SG&A. We expect our investment levels to ramp up during the year as our pipeline and launch readiness activities continue to progress. And we again reported very strong operating profit. For me, this result is particularly impressive given the context. And why do I say that? Last year's Q1 makes for somewhat a tough comparator. as it included more than 400 million kroner of milestone payments. And this year, we've also increased our total investment in Q1 by more than 500 million kroner. So even considering these items, we still delivered some 514 million kroner of operating profit for the quarter. Turning now to our net financial items. Here, we have income of 98 million, which was primarily driven by two partially offsetting items. First, we have the strengthening of the US dollar against the Danish kroner positively impacting the value of our cash and investments. And on the other side of the ledger, we have losses on our marketable securities due to rising interest rates and some losses on our public equity investments that we made in conjunction with recent licensing deals. Then we have tax expense of 147 million, which equates to an effective tax rate of 24%. And that brings us to our net profit of 465 million kroner. So as you can see, extremely strong financial performance for the first quarter of the year. Now, before we turn to our 22 guidance, I want to take a minute to revisit our robust financial framework on the next slide. First off, let's think about our revenue profile, which you can see on the left. At the beginning of 2020, Darzalex was our only product on the market. Today, we have five. And that provides us with expected recurring revenue growth of 40% in 2022. And there's a clear path to potentially expand the number of approved products with Janssen's BLA for teclistamab and our plan submission for EFCO this year. Taken together, we expect significant cash inflows for us in the years to come. Moving to the right, we continue to be focused in our investments as we evolve our organization for continued success. At the top of the list is accelerating and expanding the development of EPCO. Based upon the work we've done so far and the data we've seen, including the recent top line data, we're convinced EPCO is a drug that has the potential to really make a difference for patients. And EFCO is just one of the exciting opportunities that provide us with a compelling rationale for increasing our investment. As we told you before, if we want to seize these meaningful opportunities, we've got to invest. And that's exactly what we continue to do. So with that background, let's look at our guidance on slide 12. Driven by strong Darzalex growth, we're updating certain aspects of our 2022 guidance. We now expect our revenue to be in a range of 11 to 12 billion kroner, and that's an increase of 200 million to the bottom end of our range. This increase is primarily driven by higher Darzalex royalties following the strong Q1 performance. Here, we've increased the bottom end of our guidance range for Darzalex net sales from $7.3 billion to $7.5 billion, while keeping the upper end of our range at $8 billion. Our OPEX guidance remains in the range of $7.2 to $7.8 billion kroner. As I've previously highlighted, this investment is fully in line with our strategy and our focus on creating long-term value. Putting all this together, we're planning for substantial operating profit in a range of 3.2 to 4.8 billion kroner. Finally, we've maintained our guidance rate for the Danish kroner US dollar at 6.4. Clearly, as we've all seen, there's been some rather significant volatility here, and that may continue. Now, to give you just a bit of color on this topic, Every 10 point move in this exchange rate relative to our guidance rate is worth around 70 million kroner in our operating income. Now for my final slide, let me provide a few closing remarks. In summary, we've had a very solid start to the year and we continue to execute against our 2025 vision. We've created growing recurring revenue streams and that gives us a strong backbone of significant underlying profitability. And we're investing those revenues in a highly focused way to realize our vision and to capitalize on the very significant growth opportunities in front of us. And on that note, I'll hand you back to Jan to discuss our key priorities for 2022.