Genmab A/S

Hello, and welcome to the GenMab Q2 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 this 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 processes, GenMab is not under any obligation to update statements regarding the future, nor to confirm such statements in relation to actual results, unless this is required by law. 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. Today, I'm pleased to present Jan van de Winkel. Please begin.

Hello and welcome to the GENMAP conference call to discuss the company's financial results for the first half of 2022. With me today to present these results is our CFO Anthony Pagano. And then for the Q&A, we will be joined by our Chief Development Officer Judith Klimovsky, our Chief Operating Officer Anthony Mancini, and our Chief Medical Officer Tahir Yamadi. Let's move to slide two. As already said, we will be making forward-looking statements, so please keep as we go through this call. Let's move to slide three. GenMob 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 now move to slide four. JanMob has experienced significant growth over the past few years in all areas of our business. Based on this progress, our executive committee determined that it was time to look beyond our 2025 vision for the company to see how we can continue to impact the lives of patients and the healthcare community even further into the future. Working with a broad cross-functional team of JanMob colleagues, We created our updated core purpose and 2030 vision that you see here. The biggest change between our 2025 and 2030 visions is the expansion in our focus from just cancer to cancer and other diseases. We know that our antibody know-how, assets and technologies can be applied to diseases outside of cancer. The approvals of Novartis' Casinta in relapsing MS and Orison Stepata in thyroid eye disease are proof of this. So while we will continue to create and develop new treatment concepts in oncology, we will remain open to other publications outside of cancer with the ultimate goal of improving the lives of as many people as possible through our innovative and differentiated antibody therapeutics. So now let's take a look at some of the recent events that propelled us closer to our 2025 and our 2030 visions on the next slide. Slide 5. GenMob's innovative excellence and the hard work and commitment of our unstoppable team has been on display recently with a number of important events. At the end of June, we announced our intent to submit a BLA to the FDA for Epruritumab for the treatment of patients with relapsed or refractory large B-cell lymphoma in the second half of this year. Subsequently, in July, we announced that EPSI will submit a conditional MAA to the EMA in Amsterdam for the treatment of patients with relapsed or refractory diffuse large B-cell lymphoma also in the second half of this year. And as a reminder of our collaboration details, Genwap and EPFI share commercial responsibilities in the US and in Japan, with EPFI responsible for further global commercialization. The submissions will be supported by results from the LBCL cohort of the pivotal EPCOR NHL I study. We and EPFI announced the top-line results from this study in April. They're primarily presented in a late-breaking oral presentation as part of the prestigious Presidential Symposium at the EHA conference in Vienna in June. The results from this study support our belief that abcurritumab has the potential to offer people living with LBCL a new therapeutic option with a manageable safety profile, and we are very much looking forward to next steps. The late-breaking abcaritumab presentation at EHA was one of the many recent data presentations. There were multiple abcaritumab poster presentations at ASCO with NCORS at EHA, highlighting data in a variety of treatment settings and hematological malignancies. In addition, we and our partner, Segen, were pleased that several abstracts evaluating T-sotamab-predotin and various tumor types were presented at ASCO. These included an oral presentation of the innovative 205 study evaluating Tisotamab-Fedotin with carboplatin or Pembrolizumab in first-line patients with recurrent or metastatic cervical cancer. The data presented recently for both Abcurritumab and Tisotamab-Fedotin are reflective of our commitments and the commitment of our partners to investigating these therapies across different lines and combinations. Turning to our earlier stage pipeline, as it relates to DUA-HEXABODY CD37, one of our assets with Aptree, we will discontinue the co-development with Aptree and GenMob will continue development of this program on its own. As we continue to explore this program, we look forward to providing you with further updates. I'm excited to announce an additional update to our product pipeline, a new antibody in the clinic by the end of this year for solid tumors. Hexabody CD27, also known as GEN1053. The development of this hexabody-based product is part of our learning partnership with BioNTech. And like GEN1046 and GEN1042, we will be co-developing this investigational medicine with BioNTech 5050. The foundation of our differentiated product pipeline is our proprietary technologies. and I'm extremely pleased to share with you that our HexElect technology was recently featured in an article in the journal Nature Biotechnology. The HexElect technology is an approach to enhance the functional selective of therapeutic antibodies by making their activity dependent on clustering after binding to two different antigens expressed on the same target cell. The potential of this technology is another example of the innovative spirit of our world-class team. I'm also enthusiastic about the fact that Janssen has announced a positive CHMP opinion for Tecvioli or teclistamab, recommending conditional marketing authorization for the treatment of patients and refractory multiple myeloma. Should Tecvioli receive approval in either Europe or in the US, where Janssen's BLA is currently under review, there would then be six medicines on the market that leverage GenMabs innovation and technology. including two medicines, Janssen's Ribrafant and Dekweili, created using our proprietary DuoBody technology platform. As we look forward to regulatory submissions for abcaritumab, the medicines created with our DuoBody platform will continue to become new treatment options for people with unmet medical needs. Darzalex continues to redefine the treatment of multiple myeloma, with strong sales for the first half of the year, as we reported $3,842 million in net sales by J&J, an increase of 37% over the first half of 2021, resulting in 4,020 million kronen in royalties to GenMob. This brings me to our new arbitration with Janssen relating to our Daratumab license agreements. As we announced in the beginning of April, in the original arbitration, the tribunal ruled in favor of Janssen on the question as to whether GenMob is required to share in Janssen's royalty payments to Helozyme, for its technology used in the subcutaneous formulation of Daratumab. The tribunal, basing on the finding that Darcelex FastPro constitutes a new licensed product under the license agreement. In the new arbitration, we are seeking an award of $405 million plus interest in accrued milestone payments for Darcelex FastPro and a declaration that we are entitled to a new 13-year royalty term from the date of Darcelex FastPro's first commercial sale. As the arbitration is confident, outside of our disclosure obligations, we do not intend to comment further. And we look forward to our continued collaborations with Janssen. I'm pleased to now hand over the call to Anthony Pagano to take you through our first half financial results. Anthony, the floor is yours.

Great. Thanks, Jan. Let's move to slide six. We continue to strengthen our foundation during the first half of 2022. to start the track for regulatory submissions for EPCO in both the US and Europe in the second half of this year. And as we'll see, our H1 financials are exceptionally strong. We grew operating profit by 34%. And importantly, we also increased recurring revenues by 86%. This was driven by strong royalties from Darzalex and other approved medicines. You remember, of course, that we didn't have any revenues in Q1 of last year. Our strong balance sheet, growing recurring revenues and significant underlying profitability allow us to continue to invest in our business and our pipeline in a very focused and disciplined way. Especially in these volatile times, the strength of our financial profile really stands out. And an important part of this has been to continue to build a team and our capabilities to enable us to succeed. 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 half of the year. As you can see in the chart, overall net sales grew by 37%. That's net sales of $3.84 billion, which translates to over 4 billion kroner in royalty revenue. This exceptional growth was driven by continued strong 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 eight. We grew total revenue to almost 5.3 billion kroner in H1. And as I've already highlighted, that included an 86% increase in our recurring revenue. We've already spoken about Darzalex and the very strong performance there. Turning to Casimta and Tepeza, we saw an increase of 452 million kroner in royalties compared to last year. Taken together, this growth really illustrates the power of our recurring revenue. In fact, over 90% of our H1 revenue was recurring. So our revenue profile continues to get stronger. And we're taking our strong recurring revenue and investing in a highly focused way as you can see on the next slide. In line with our significant growth opportunities, total operating expenses grew 58% in the first half. In R&D, we've accelerated our investment into our product portfolio, especially the advancement of both Epto and dual-body CD40-41BB. We've also further strengthened the GemMap team to support our growth and commercialization and our expanding pipeline. And that includes supporting TIVDAC and preparing for the filings and potential launch for EPCO. Finally, we're leveraging the AbbVie collaboration 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 the first came in at approximately 5.3 billion kroner. And that's up 49% on last year. Total expenses were about 3.5 billion with 69% being R&D and 31% SG&A. And that brings us to our very strong operating profit of nearly 1.8 billion. And for me, this result is particularly impressive given the context. and why do I say that? Last year's H1 makes for a somewhat tough comparator as it included more than 700 million of milestone revenue. And this year, we've also increased our total investment in H1 by nearly 1.3 billion kroner. And even considering these items, we still delivered a 34% increase in operating profit in H1. Moving to our net financial items, Here we have income of 1.3 billion, which is primarily driven to partially offsetting items that we highlighted in Q1. First, we've got 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 745 million, which equates to an effective tax rate of 24%. And that brings us to our net profit of nearly 2.4 billion kroner. So as you can see, extremely strong financial performance for H1. Before we take a look at our improved guidance, I want to take just 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. 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 53% in 2022. And there's a clear path to potentially expand the number of approved products with Janssen's BLA and MAA for teclistamab, and most excitingly, are planned submissions for EPCO later this year. Taken together, we expect significant cash inflows in the years to come. Moving to the right, we continue to be focused on our investments as we evolve our organization for continued success. And right at the top of the list is accelerating and expanding EPCO. Based on 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're doing. So with that background, let's look at our approved guidance on slide 12. Driven by continued strong Darzalex growth and the positive net impact of the strong US stock, we raised our 2022 guidance earlier in the week. We now expect our revenue to be in a range of 12 to 13 billion kroner, an increase of 1 billion to both the bottom and top end of our range. This increase is driven by higher Darzalex royalties following the strong H1 performance. Here, we've increased our guidance for Darzalex Net Sales to a range of 7.8 to $8.2 billion. Our revenue also continues to be positively impacted by the strong US dollar. Turning to our investments, we remain focused on executing against our strategy and key priorities and creating long-term value. Here, we are increasing our OpEx guidance to a range of 7.6 to 8.2 billion kroner. This is driven by pipeline progression and accelerated F-Pyridamab launch readiness activities, as well as the strong dollar. Putting all this together, we're planning for substantial operating profit in a range of 3.8 to 5.4 billion kroner. Now, clearly, we've all seen a material appreciation of the dollar so far this year. Taking this into account, we've updated our guidance rate for the Danish kroner to reflect the year-to-date as well as consensus. Overall, our increase in revenue is approximately 40% operational and 60% FX. And the increase in operating costs is roughly evenly split between operational items and FX. And finally, to give you just a bit more color on foreign exchange, Every 10-point move in the exchange rate relative to our guidance rate is worth around 50 million kroner in income for the balance of the year. Now for my final slide, let me provide just a few closing remarks. In summary, we've had an exceptional first half of 2022. We've created growing recurring revenue streams, and that gives us a strong backbone of significant underlying profitability. And we continue to invest those revenues in a highly focused way to realize our vision and capitalize on the very significant growth opportunities. Now on that note, I'm gonna hand you back over to Jan to discuss our key priorities for 2022.