Genmab A/S

Hello and welcome to the GENMAB's first quarter 2023 financial results 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 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 GENMAP 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 GENMAP's conference call to discuss the company's financial results for the period ending March 31st, 2023. 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. During today's presentation, we will reference products being developed under some of our strategic collaborations. This slide acknowledges those relationships. Let's move to slide four. Before we look at our first quarter results, I want to remind you of our consistent track record of success. or proprietary technologies fuel our robust product engine, which is both expanding and maturing. By the end of this year, there is the potential for eight approved medicines powered by our innovation, half of which would be dual-body based bispecifics. This is validation of the dual-body technology's potential to create truly differentiated bispecific antibody therapeutics. and our growing recurrent revenue streams allow us to continue to invest in our pipeline and in our people. Our world-class team of experienced and dedicated colleagues drives our innovation, motivated by the passion for making a difference in the lives of people living with cancer and other serious diseases. Let's now turn to recent accomplishments that will support our future success. Slide five. In the first quarter of the year, we continue to lay the groundwork for the potential approval of Abcorritumab and we are very excited for the potential upcoming launch and the opportunity to serve patients with third-line plus diffuse large B-cell lymphoma. The Alliance Steel teams across sales and marketing, medical and market access are all in place and have been fully prepared for the launch. And our patient services team is also in place and fully ready. We are actively engaging with the FDA and look forward to the future ahead with the May 21st PDUFA dates. Pending approval, we anticipate abcaritumab will benefit turpline plus diffuse large B-cell lymphoma patients where the level of unmet needs remains high. This indication will be the first that will enable abcaritumab to become the potential core therapy across diffuse large B-cell lymphoma, follicular lymphoma, and beyond. As part of our effort to deliver abcurritumab to relapsed or refractory diffuse large B-cell informal patients together with FV, we launched our first pre-approval and expanded access program. This program provides access to abcurritumab to eligible patients in the US and Europe prior to potential regulatory approvals. Looking beyond relapsed refractory diffuse large B-cell lymphoma together with F3, we are committed to a robust clinical development program evaluating abcaritumab in a variety of patient populations and treatment settings. This includes frontline diffuse large B-cell lymphoma, and I'm just very pleased to say that in February and March, the first patients were dosed in two frontline diffuse large B-cell lymphoma studies. The Phase 3 EPCOR Diffuse LAS B-Celin Format 2 study in combination with RCHOP and the Phase 2 EPCOR Diffuse LAS B-Celin Format 3 study with or without lenalidomide in elderly patients. Turning to recent and upcoming data presentations, Multiple apcaritumab abstracts were accepted for presentation at ASCO, including an oral presentation of data from one of the arms of the APCOR NHL2 trial, looking at apcaritumab in combination with tradtuximab and lenalidomide in patients with high-risk relapsed or refractory follicular lymphoma. We and our partners also had several abstracts accepted for presentation at last month's AACR meeting. These included data from an interim analysis of Part C from the Phase 2 Innovative 207 study of Tisotima Fadotum in head and neck cancer, or small cell carcinoma of head and neck. Though the number of patients including this in this initial data was small, just 15, The results demonstrated encouraging preliminary anti-tumor activity and an acceptable safety profile, highlighting Tisotamab-Fedotin's potential in swallow tumors beyond cervical cancer. Regarding programs powered by our innovations, Darfalex continues to redefine the treatment of multiple myeloma. As you have seen, J&J's net sales for Daratumumab were up 22% over the first quarter of 2022. and that is generating almost 2 billion Danish Krone in royalties for us, contributing materially to our robust financials. This brings me to the initial resolution of our second arbitration with Janssen, relating to our Dara Tumumab License Agreement. As we announced last month, the arbitration panel dismissed our claims, though one of the three arbitrators dissented. Subsequently, we announced our decision to file a request for review of the awards and as the arbitration is confidential, we do not intend to comment further and we look forward to our continued collaborations with Janssen. I would also like to acknowledge the appointment of Martine van Vugt to Chief Strategy Officer. Martine has been an integral part of GenMob almost from the beginning. In her new role, she will be responsible for overseeing the key areas of corporate strategy, corporate development, business development and licensing, and alliance management. Martine's addition to executive management further strengthens our already exceptional team and will help us to effectively deliver on our 2030 vision. Finally, I would like to bring to your attention an announcement in March from Lundbeck, Japan. LU-AF-A2422, which was created by GENMAP as part of an agreement with Lundbeck, has been granted a pioneer drug designation for the treatment of multiple system atrophy in Japan. And this designation provides further support for the potential of our innovative antibody therapeutics outside of oncology. Let's move to slide six. When we unveiled our updated vision last year, we noted that while we would continue our commitment to antibody therapies for oncology indications, we would also look to move into an additional therapeutic area where our antibody expertise could make an impact. I'm very pleased to announce that we are entering the therapeutic area of immunology and inflammation as a stepping stone to achieving our inspirational 2030 vision. As we announced in April, we entered a multi-year collaboration with Algenics to jointly discover, develop, and commercialize novel therapeutic antibodies with applications in immunology as well as in oncology. By partnering with Algenics, we will be able to combine our company's deep knowledge of the biology and therapeutic power of antibodies and have an opportunity to address patient needs in oncology as well as in immunology and inflammation. We look forward to a successful partnership with Algenics and to providing you with updates on the progress of this collaboration once we are ready to bring new product candidates to the clinic. This, of course, will take some time. I'm pleased to now hand over the call to Anthony to take you through our Q1 2023 financial results. Anthony, the floor is yours.

Great. Thanks, Jan. We continue to strengthen our foundation in Q1. and of course, top of mind for everyone is the potential FDA approval of EPCOR later this month. And as we'll see, our financials remain strong. Recurring revenues grew by 33% in Q1. This was principally driven by strong royalties from Garzelex and other approved medicines. Our solid 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 a bit more detail. We saw robust performance for Darzelex in the first quarter of 2023. As you can see in the chart, overall net sales grew by 22%. That's net sales of over $2.2 billion, which translates to almost 2 billion kroner in royalty revenue. This growth was driven by continued strong market shares, including strong adoption of the sub-Q formulation. For our royalties, we benefited from a higher effective royalty rate and an FX tailwind. And this is partially offset by a negative contractual hedge rate adjustment. So as you can see, Darzelex remains a key driver of our revenue. We grew total revenue to nearly 2.9 billion kroner in Q1. And as I've already highlighted, that included a 33% increase in our recurring revenue. And here, to be clear, that's on a reported basis. Excluding some FX tailwinds, recurring revenues grew by 28% on an operational basis. This strong growth was driven by Darzalex and Cosimta. It was partially offset by lower Tepeza net sales, which according to Horizon, were negatively impacted by seasonality. Now taken together, this growth really illustrates the power of our recurring revenue. In line with our significant growth opportunities, total OPEX grew 51% in Q1. In R&D, we've accelerated our investment into our product portfolio, especially the advancement and expansion of EPCOR, and of course, other pipeline projects. We've also further strengthened our team to enhance our commercial capabilities and support our expanding pipeline. And of course, that includes the potential launch for EPCOR. Now, let's take a look at our financials as a whole. Here you can see our summary P&L for Q1. Revenue came in at nearly 2.9 billion kroner. That's up 35% on last year. As mentioned previously, that's favorably impacted by a small FX tailwind. Total expenses were about 2.4 billion with 72% being R&D and 28% SG&A. And here, even with the increased investment, We're still delivering over 430 million kroner of operating profit for the quarter. Moving to our net financial items. Here we have a loss of around 150 million, which was primarily driven by two partially offsetting items. First, we've got the weakening of the US dollar against the Danish kroner in Q1, and this is negatively impacting the value of our cash and investments. On the other side of the ledger, we have an increase in interest income due to higher effective interest rates. Then we have tax expense of 60 million, which equates to an effective tax rate of 21.2%. And that brings us to our net profit of over 220 million kroner. So as you can see, very solid financial performance to start the year. So with that, let's take a minute to revisit our robust financial framework. First off, our revenue profile on the left. There are currently six products on the market that are generating significant recurring revenues. And we see a clear path to potentially expand the number of approved products with the potential approvals for EPCOR and Janssen's Taquatamab. Taken together, we expect significant cash inflows in the years to come. Now 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 EPCOR. But that's just one of the exciting opportunities that provide us with a compelling rationale for increasing our investment. As we've 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 now take a look at our guidance. To start, we're on track to meet the financial targets that we outlined back in February. As a reminder, note these projections are based on an assumed US dollar Danish kroner exchange rate of 6.8. If we look at our revenues, we're off to a strong start with marketed products that are generating significant recurring revenues. So we continue to 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. And as I just noted, for Q1, we're at 28%. For operating expenses, we expect to be in a range of 9.8 to 10.6 billion kroner. As I've 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 on track to deliver another year of substantial operating profit in a range of 3.9 to 6.2 billion kroner. So with that, let me provide a few closing remarks. In summary, we've had a very solid start to the year. 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 gonna hand you back over to Jan.