Genmab A/S

Hello and welcome to the GenMab 4 Year 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 believes, anticipates, plans or expects. Actual results may differ materially, for example, as a result of delayed or unsuccessful development projects. GenMab is not under any obligation to update statements regarding the future Please refer to our website for more information on GenMab 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 GenMob's conference call to discuss the company's financial results for the period ending December 31st, 2022. With me today to present these results is our CFO Anthony Pagano. 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 Tahya Mahdi. 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. Genwap 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 products being developed under these strategic collaborations, and this slide acknowledges those relationships. Let's move to slide 4. Chemapass had transformative growth in all areas of our organization, as we transitioned into an integrated biotech that brings our own medicines to patients. Certain fundamental aspects of our business, however, will remain unchanged. And these include innovative sciences at our core, and we strive to be forward-thinking in all areas of our business. and we have an unstoppable team that aspires to use our innovations in antibody therapeutics to fundamentally transform the lives of patients. These foundational pillars led to great progress last year, setting us on the path that inspired our 2030 vision, which we unveiled in 2022. Let's turn now to recent accomplishments that will support our future success. Slide five. 2022 marks the 10th year of profitability for GenMob. As Anthony will describe in detail, this success is due to both our growing recurring revenue streams and our investing this revenue in a focused and disciplined manner. Throughout the past year, we continue to invest in the strategic growth of our team and the maturation and expansion of our differentiated innovative product pipeline. In September of last year, we, together with our partner Cgen, celebrated the first full year of TIFTAC being available for cervical cancer patients in the US. At the beginning of this year, the NCCN updated their cervical cancer treatment guidelines, upgrading TIFTAC to a preferred regimen for second line or subsequent therapy in recurrent or metastatic cervical cancer. This update is important for patients who are entering their second line of therapy and applies regardless of their biomarker status. For this patient population, TIFDAC is the only non-IO preferred treatment regimen across the second line setting for all comers regardless of PD-L1 status. Based on the high unmet needs and the strong efficacy results we have seen in clinical trials supported by the NCCN updates, We believe that TIFDAC is on the way to becoming the clear second-line choice for women with recurrent or metastatic cervical cancer. Turning to our next potential medicine, 2022 was a critical year in the development of Apcoritumab. We have spoken both following our Q3 results last year and our 2022 ASH investor events about the BLA and NAA submissions by GenMob and our partner, Apvi, respectively. We are pleased to add to this our submission of a Japan NDA at the end of December for abcaritumab for the treatment of patients with relapsed or refractory LBCL after two or more lines of systemic therapy. With these regulatory submissions, we are one step closer to potentially delivering abcaritumab as a new therapeutic option for people living with certain hematologic malignancies in the US, Europe, and Japan. Together with our partner AbbVie, we believe that abcurritumab has the potential to become a core therapy for patients around the world with B-style malignancies, and we are committed to progressing a comprehensive development program evaluating abcurritumab across a broad range of B-style lymphomas. And we look forward to receiving feedback from the US FDA by the PDUFA date of May 21st. The past year was also notable for our data presentations and publications. These highlighted investigational medicines across our portfolio, including a December article in the Journal of Clinical Oncology on the Phase 1-2 Apcolytumab dose expansion data. The expandable pipeline in 2022 with new investigational medicines entering the clinic. One of these, Hexabody CD27, is part of an expansion of our thriving collaboration with BioNTech. I would also like to mention that, as you can now see on clinicaltrials.gov, there is a new arm in the Phase 1-2 trial of Hexabody CD38, comparing it to subcutaneous daratumumab. This will be a head-to-head evaluation to determine whether Hexabody CD38 may be more potent in CD38 antibody-naive patients with relapsed or refractory multiple myeloma. We very much look forward to seeing how this trial progresses. So let's now move to the next slide and a brief reminder of the impact of our innovation beyond our own pipeline. Slide six. Partner-owned programs powered by our world-class innovation and especially our proprietary dual-body platform also saw great progress in 2022. Novo Nordisk's MIM-8 entered phase 3a development and for both the CLISTA-MAP and TORCRETA-MAP, Janssen posted multiple new phase 3 trials on clinicaltrials.gov, including in combination with DARA Tumormab. In 2022, Janssen-Steck-Weilly became the second duobody-based medicine to receive regulatory approval. With the submission of a BLA for talcretumab in December, as well as a submission in Europe in January of this year, there is the potential for a third approved medicine from a duobody agreement with Janssen. If both Apcaritamab and Talcaritamab are approved in 2023, there will be eight approved medicines that incorporate GenMabs innovation available for patients, half of which will be powered by our dual-body technology platform. I also want to briefly mention some exciting recent news. Last week, the British Pharmacological Society announced that the team behind the development of amivantamab has been awarded its prestigious drug discovery of the year 2023. The creation of amivantamab was a team effort with the two antibody libraries used to produce amivantamab generated by GenMob and the antibody pair used to create amivantamab selected in collaboration with Janssen R&D, which subsequently led preclinical and clinical development by Janssen. This award is further validation of the potential of GenMob's innovative dual-body technology platform to create truly differentiated bispecific antibody therapeutics. Now turning to Darcelex. It continues to redefine the treatment of multiple myeloma. And as you have seen, J&J's net sales for Daratugamab are up 32% over 2021. And that is generating more than 10 billion Danish kroner in royalties for us, contributing materially to our robust financials. I would also like to note that the sales of Casinta passed the $1 billion mark in 2022. Casinta is now the third blockbuster medicine on the market created by JanMob. I will now turn the call over to Anthony Pagano to take you through our 2022 financial results. Anthony, the floor is yours.

Great. Thanks, Jan. Let's move to slide seven. We continue to strengthen our foundation during 2022. To start, as Jan just mentioned, together with our partner AbbVie, We've achieved our goal of regulatory submission for EFCO in the US, Europe, and Japan. And as we'll see, our financials for the year are exceptionally strong. We grew operating profit by 111%. We also increased recurring revenues by 70%. This was principally driven by strong royalties from Darzalex and other approved medicines. But note that favorable FX also had a significant impact here. And I'm going to return to this in just a bit. 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. And an important part of this has been to continue to build the team and capabilities that we need to succeed. So let's take a look at those revenues in just a bit more detail on the next slide. We saw robust performance for Darzalex in 2022. As you can see in the chart, overall net sales grew by 32%. That's net sales of nearly $8 billion, which translates to over 10 billion kroner in royalty revenue. This exceptional growth was driven by continued strong market shares, including further uptake of the sub-Q formulation. and as a reminder for our royalties, we also had a significant FX tailwind. So, Darzalex remains a key driver of our revenue, as you can see on slide nine. We grew total revenue to around 14.6 billion kroner in 2022. And as I've already highlighted, that included a 70% increase in our recurring revenue. We've already spoken about Darzalex and the very strong performance there. Turning to Kesimpta and Tepeza, we saw an increase of 747 million kroner in royalties compared to last year. And impressively, Kesimpta achieved blockbuster status in 2022. Taken together, this growth really illustrates the power of our recurring revenue. Finally, we've seen some pretty significant FX tailwinds, particularly for our royalty revenue related to the strength of the dollar and the contractual head rate for Darzalex. Let me break that out in a bit more detail on the next slide. In aggregate, of the 70% year-over-year growth in recurring revenue, 30 percentage points were related to FX tailwinds. And I make a few points here. First, as we all know, FX can move in both directions. So one year's tailwind can, of course, become next year's headwind. and second, with our 2022 figures enhanced by FX, we've set up a tough comp for 2023. That said, what's super encouraging for me is the 40% underlying operational growth. So in 2022, we've materially strengthened our revenue profile. Now let's take a look at how we're using our strong recurring revenue to continue investing in a highly focused way. As you'd expect, given the investments we're making, total OpEx grew 51% for the year. In R&D, we've accelerated our investment into our product portfolio, especially the advancement of EPCO and other pipeline projects. We've also further strengthened our team to enhance our commercial capabilities and support our expanding pipeline. That includes TIBDAC and the filings and potential launch for EPCO. Now, Let's take a look at our financials as a whole on slide 12. Here you can see our summary P&L for 2022. Revenue came in at around 14.6 billion kroner. That's up 72% on last year, favorably impacted by a significant FX tailwind, as mentioned previously. Total expenses were about 8.2 billion, with 68% being R&D and 32% SG&A. And that brings us to our very strong operating profit of over $6 billion. And that's an increase of 111% compared to 2021. Moving now to our net financial items. Here we have income of nearly $700 million, which is primarily driven by the same two partially offsetting items that we've highlighted recently. First, We've got the strengthening of the US dollar against the Danish kroner positively impacting the value of our cash and investments. On the other side of the ledger, we have losses in our marketable securities due to rising interest rates and some losses on our public equity investments. And finally, there was an increase in interest income due to higher effective interest rates. Then we have tax expense of around 1.5 billion, which equates to an effective tax rate of 21.5%. It's important to note that this rate is positively impacted by some one-time items in 2022. So it isn't reflective of what we would expect moving forward. And that brings us to our net profit of over 5.5 billion kroner. So as you can see, extremely strong financial performance. Now, before we take a look at our 2023 guidance, I want to take a minute to revisit our financial framework on the next slide. First off, our revenue profile on the left. At the beginning of 2020, Darzalex was our only product on the market. Today, we have six, and that will generate continued recurring revenue growth in 2023. And we see a clear path to potentially expand the number of approved products with the recent submissions for EFCO and Janssen submissions for Tapoitamab. Taken together, we expect significant cash inflows in the years to come. Moving to the right, We remain focused in our investments as we evolve our organization for continued success. At the top of the list is accelerating and expanding EPCO. But that's just one of the exciting opportunities that provide us with a compelling rationale for increasing 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 take a look at the components of our strong recurring revenue on slide 14. For 2023, we anticipate another year of strong underlying revenue growth. Before I get into the detail, note that these projections are based on an assumed U.S. dollar, Danish kroner exchange rate of 6.8. And at the risk of stating the obvious, I thought it important to highlight that, as best we can tell, GEMMAP collected consensus has been derived using 7.2. And as a reminder, the average dollar kroner rate in 2022 was 7.1. Now looking at our total revenue, we're expecting to be in the range of 14.6 to 16.1 billion kroner. And more than 85% of this will come from recurring revenue, which is up meaningfully from last year. We anticipate that Darzalex sales will continue to ramp up and be in the range of 9.4 to $10 billion. So we're projecting Darzalex royalties to be between 10.4 to 11.1 billion kroner. Recurring revenues also include a 32% increase in royalties from Tepeza and Cosimta. But we also expect significant FX headwinds. So overall, we anticipate recurring revenues will increase by around 12%. Turning now to non-retiring revenue, we expect this to be 2.1 billion at the midpoint in 2023 compared to 2.7 billion last year. As you'll recall, there were multiple regulatory filings in 2022, and we benefited by the one-time milestones associated with these. Let's now take a look at our recurring revenue in just a bit more detail on the next page. As I said, We're anticipating recurring revenue growth of around 12%. And it's important to note that's only reported basis. What we're really focused on is delivering the 25% operational growth. But this 25% growth is partially offset by the 13% negative FX impact. We're assuming lower dollar to kroner rate compared to 2022. And as I said earlier, it's a tough comp due to the Darzalex contractual hedge rate from last year. Now, I think it's important to step back and really look through this FX noise and focus on the fundamentals of our very, very strong revenue growth. Now, with that, having looked at revenue, let's look at our planned 2023 investment on the next slide. We expect total OPEX to be between 9.8 and 10.6 billion kroner. And this fully reflects the evolution of our pipeline and indeed our entire business. We have three near-term investment priorities. First, initiating new phase two and phase three EPCO trials to really maximize its potential. Second is generating the next wave of data for dual-body PD-L1-4-1-BB and dual-body CD40-4-1-BB. And of course, third, the potential launch of EPCO. These are our immediate priorities. But as I noted, we're not just focused on today. In line with our vision, we're also very focused on long-term value creation. So we're continuing to build out our infrastructure, teams, and systems. We're investing to maximize the value of our current technologies. And we're also investing to generate the next wave of ING candidates and to progress our early stage pipeline. With that, let's break out our 2023 investment profile with a few numbers on the next slide. Here, we've laid out the incremental investments we're expecting to make for our top priorities in 2023. Starting at the top, a successful launch for EPCO will require a significant amount of our focus and investment, especially on building out our two key markets, the US and Japan. And as a reminder, while the initial indication for EPCO is rather modest, over the medium term, we think this can be a meaningful opportunity. In particular, In the US and Japan, where we are the commercial lead and booking net sales, the market is highly competitive. So for a successful launch, we need to focus investment in this area. But of course, it won't be our only focus. You can see the biggest overall increase in investment will be in advancing our portfolio. This is an investment for now and for the future as we look to expand development of our mid to late stage programs as well as the growth of our overall portfolio. As Jan mentioned, when talking about our 2030 vision, we'll also be making investments to move into a new therapeutic area, which is part of scaling up our already world-class discovery engine. Now, having looked at the framework and the constituent parts, let's look at how this all comes together on slide 18. Here you can see our 2023 guidance. We expect our revenue to be in the range of 14.6 to 16.1 billion kroner. And most of this is made up of recurring revenue where we're expecting 25% of operational growth. For OpEx, we expect to be in a range of 9.8 to 10.6 billion kroner. As I previously highlighted, this step up in 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 3.9 to 6.2 billion kroner. Now, for my final slide, let me provide a few closing remarks. In summary, we had an exceptional 2022. We 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.