Genmab A/S

Hello and welcome to the GenMav Q3 2022 conference call. As a reminder, this conference call is being recorded. During this telephone conference, you may be presented with forward-looking statements that include words such as beliefs, anticipates, plans or expects. Actual results may differ materially, for example, as a result of delayed or unsuccessful development projects. GEDMAP is not under any 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 GEDMAP may hold your personal data as indicated by you as a part of our investor relations outreach activities in order to update you on GEDMAP going forward. Please refer to our website for more information on GEDMAP and our privacy policy. I would now like to hand the conference over to your first speaker today, Jan van de Winkel. Please go ahead.

Hello and welcome to the GENROP conference call to discuss our financial results for the first nine months 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 Medical Officer Taya Ahmadi. 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. GenMob has a science-anchored and 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. When we presented this slide during our first quarter earnings goal, we said that we have never been in a better position to achieve our ambitious vision of transforming cancer treatments. We made that assertion on the basis of our consistent track records, our world-class team, and our strong financial foundation. Since Q1, we have strengthened our position. In the first nine months of the year, we increased the number of cumulative INDs The number of approved medicines powered by GenMob's innovation and the number of clinical stage products in our own pipeline. We have also grown and strengthened the team. And our financial foundation is even more robust. So we continue to feel really well positioned for growth moving forward. Excitingly, we have the potential to further increase the number of approved products in the coming year. You can see that on the next slide, which covers our recent key updates. Let's move to slide five. As we announced over the summer, GENMAP and our partner, APVI, intended to submit applications for regulatory approval of APCO-Retamab in the US and Europe during the second half of this year. I'm thrilled to say that these submissions have now occurred. An important step in potentially bringing abcaritumab to people living with certain hematological malignancies who are in need of a new therapeutic option. If approved, abcaritumab would also become our second medicine on the market and the third dual body-based therapy to receive regulatory approval. I'm also excited to announce that the broad potential of abcaritumab will be on display at this year's prestigious ASH annual meeting in New Orleans. 19 total abstract showcasing our work in hematological malignancies were accepted, including 10 highlighting data from abcaritumab clinical studies, four of which are oral presentations. These presentations include initial data of abcaritumab in patients with Richter syndrome from the APCOR CLL1 trial and data from three arms of the APCOR NHL2 study. updated data for abcaritumab in patients with relapsed or refractory follicular lymphoma or diffuse large B-cell lymphoma, as well as initial results in first-line follicular lymphoma. Our earlier stage investigational medicines will be recognized at this year's ASH with a poster presentation on preliminary dose escalation results for hexabody CD38 and preclinical data for dual-body CD3, CD30. If we look beyond our own pipeline and include all products that are powered by GenMob's innovations, there are more than 50 total abstracts accepted for presentation at this year's ASH. Ten of them oral presentations. In addition to ASH, we are looking forward to preliminary dual-body CD40x41BB data at ESMO-IO in December in Geneva. and later this week, preclinical presentations at CITC for Duobody CD3-B7H4 and two of our investigational medicines in development with BioNTech, Duobody PD-L1-415B and Hexabody CD27. For Hexabody CD27, this will be the first preclinical disclosure. Beyond our own pipeline, Janssen has announced that they received approvals in both Europe and the U.S. for SubQ-Tecvile. for the treatment of patients with relapsed or refractory multiple myeloma. DECVILI, created and developed by Janssen, is the second approved medicine created using our dual body platform. Further support of this innovative bispecific antibody technology came from Novo Nordisk's announcement last week that treatment was initiated in the first phase three study of MIM-8 in hemophilia. As we look forward to next steps following the regulatory submissions for abcaritumab, we are optimistic that dual-body-based medicines will continue to become new treatment options for people with unmet medical needs. And of course, Darcelex continues to redefine the treatment of multiple myeloma. As you have seen, J&J net sales for Dara are up 35% so far this year, and that's generating more than 7 billion Danish kroner in royalties for us. contributing materially to the robust financials I spoke about earlier. I'm pleased to now turn the call over to Anthony Pagano to take you through our first nine months financial results. Anthony, give it a go.

Great. Thanks, Jan. Let's move to slide six. We continue to strengthen our foundation during the first nine months of 2022. To start, as Jan just mentioned, together with our partner AbbVie, We achieved our goal of regulatory submissions for EFCO in both the US and Europe. And as we'll see, our financials are exceptionally strong. We drew operating profit by 67% in the first nine months of the year. We also increased recurring revenues by 81%. This was driven by strong royalties from Darzalex and other approved medicines. You'll remember, of course, that we didn't have any Tepeza 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. And we continue to do that in a very focused and disciplined way. And especially in these volatile times, the strength of our financial profile really does stand out. And an important part of this has been to continue to build the team and capabilities to enable us to succeed. So let's look at those revenues in a bit more detail on the next slide. We saw continued strong performance for Darzalex in the first nine months of the year. As you can see in the chart, overall net sales grew by 35%. That's net sales of $5.89 billion, which translates to over 7 billion kroner in royalty revenue. This exceptional growth was driven by continued strong market shares 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 over 9.3 billion kroner in the first nine months of the year. And as I've already highlighted, that included an 81% 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 582 million kroner in royalties compared to last year. In addition to royalties, our recurring revenue also includes collaboration revenue. And for Q3 of this year, here we have a one-off payment from CGEN of approximately $15 million. This revenue reflects our 50% share of payments received by Cgen related to the deal with Xilab for Tzodimab-vidotin in China. Now taken together, this growth really illustrates the power of our recurring revenue. And finally, we are seeing some pretty significant tailwinds, particularly for our royalty revenue related to some positive foreign exchange rate impacts. And I'm going to come back to that in just a bit. So in summary, our revenue profile continues to get stronger. And we're using our strong recurring revenue to continue 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 55% in the first nine months of the year. In R&D, we've accelerated our investment into our product portfolio especially the advancement of EFCO and multiple other pipeline projects. We've also further strengthened the GEDMAP team to support our growth and commercialization and our expanding pipeline. That includes supporting TIBDAC and the filings and potential launch for EFCO. And finally, we're leveraging the ABDII collaboration by utilizing their expertise and significant financial contributions to further expand EFCO. Now, let's take a look at our financials as a whole on slide 10. Here, you can see our summary P&L for the first nine months. Revenue came in at over 9.3 billion kroner. That's up 60% on last year. Total expenses were about 5.7 billion with 69% being R&D and 31% SG&A. And that brings us to our very strong operating profit of nearly 3.7 billion. And for me, this result continues to be particularly impressive given the context. And why do I say that? Through Q3, we have lower non-recurring revenue this year. And we've also increased our total investment by more than 2 billion kroner. And even considering these items, we still delivered a 67% increase in operating profit. Now, moving to our net financial items, here we have income of nearly 2.7 billion, which is primarily driven by the same two partially offsetting items that we highlighted in both Q1 and Q2. 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 licensing deals. Then we have a tax expense of around 1.4 billion, which equates to an effective tax rate of 22.5%. And that brings us to our net profit of over 4.9 billion kroner. So as you can see, extremely strong financial performance. Now, before we take a look at our improved 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, Darzelex was our only product on the market. Today, we have six. And that provides us with expected recurring revenue growth of 69% in 2022. And there's a clear path and potentially expand the number of approved products with the recent submissions for EPCO. 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. At the top of the list is accelerating and expanding EPCO. Based upon the work that we've done so far and the data we've seen, we're convinced EPCO is a drug and many more. Thank you. last week. We now expect our revenue to be in a range of 13.5 to 14.5 billion kroner. And that's an increase of 1.5 billion to both the bottom and top end of our range. There are four items driving this increase. First, based on the strong performance so far this year, we've increased the bottom end of the range for Darzell ExNet sales. Our new range is 8 to $8.2 billion. Second, the upper end of our revenue range now assumes an additional milestone. Specifically, we've included a significant milestone associated with the potential acceptance of the EPCO VLA for review by the FDA. Third, our revenue continues to be positively impacted by the strong U.S. dollar. and fourth, the largest driver for our increased revenue guidance is related to a significant tailwind for our Darzalex royalties. Under our Darzalex agreement, for purposes of calculating our royalties, sales outside of the U.S. are translated to U.S. dollars at a specified annual hedged foreign exchange rate. The positive impact of this has increased throughout the year and it has become more significant as we've gotten into Q3 and looking ahead to Q4. More specifically, as the US dollar has strengthened materially against most major currencies this year, there could have been an expectation that we would have seen a significant headwind for reported DARA net sales. However, we've not only maintained our total Darzalex net sales guidance, we've actually been able to raise our guidance throughout the year. So in many respects for Darzalex Royalties in 2022, we've been pretty fortunate. I guess you could say we've gotten our cake and eaten it too. But that's a pretty unusual situation. So we certainly shouldn't count on it moving forward. To summarize, the main takeaway here for Darzalex Royalties is that in addition to the very strong year over year operational growth, we have a significant benefit in 2022 due to this contractual hedge rate. And as you think about updating your models for Darzalex royalties moving forward, you should not use 2022 Kroner denominated royalties as a base. Now, one final comment on revenue. Overall, our increase in revenue is approximately 30% operational and 70% FX. Now, having covered revenue, let's turn 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 8 to 8.4 billion kroner. This increase is primarily driven by the negative impact of the strong US dollar. Putting all this together, we're planning for substantial operating profit in a range of 5.1 to 6.5 billion kroner. Now, as I've already highlighted, we've continued to see a material appreciation of the dollar so far this year. Taking this into account, we've updated our guidance rate for the Danish kroner, US dollar, from 6.8 to 7.2. And finally, to give you a bit more color on FX, every 10-point move in the exchange rate relative to our guidance rate is worth around 30 million kroner in operating income for the balance of the year. Now, for my final slide, let me provide a few closing remarks. In summary, we've had an exceptional first nine months of 2022. 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'm going to hand you back over to Jan.