Genmab A/S

Hello and welcome to GENMAB's second 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 delays 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 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 GENMAB's conference call to discuss our financial results for the period ending June 30, 2023. 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, and our Chief Operating Officer, Anthony Mancini. As already said, we will be making forward-looking statements, so please keep that in mind as you go through this call. During today's presentation, we will reference products being developed under some of our strategic collaborations, and this slide acknowledges those relationships. In May, APKINDY became the first T-cell engaging bispecific antibody approved for use in the US for turpline plus diffuse large B-cell lymphoma. With this approval, we achieved an important milestone both for GENMOB and, most importantly, for patients with turpline plus diffuse large B-cell lymphoma who are in need of an innovative treatment option administered subcutaneously. Our teams, along with our partner APVI, were in place and fully prepared prior to launch. Now they are actively engaging key stakeholders and we are encouraged by the overall positive response we have received as we deliver APKinley to appropriate patients. And we look forward to the potential for additional opportunities for APKinley as we work with APVI to progress development into a variety of patient populations and treatment settings. The third line plus diffuse large B-cell lymphoma indication is the first step to potentially establishing Abkinley as the core therapy across diffuse large B-cell lymphoma, follicular lymphoma and beyond. Abkinley's approval is also a testament to our team's dedication to turn novel science into medicine and to develop differentiated antibody therapeutics with the goal of improving the lives of patients. It is the third approved therapy to be developed using our proprietary dual body technology. And overall, it's the seventh medicine based on our innovation. I would like to thank the patients and investigators who took part in the EPCOR NHL 1 trial that was the basis for this approval. our partners at APVI for an excellent collaboration and the unstoppable team at GenMob responsible for the discovery, development and now commercialization of APKinley. Let's now turn to our other recent highlights. In June, we announced that APKolitumab has been added to the NCCN guidelines for B-cell lymphomas with a category 2a designation. As these guidelines are an important resource for providing US healthcare providers with the information they need to make optimal treatment decisions, we were pleased that they were updated to include abcaritumab so soon after approval. Looking beyond the US approval, we were pleased to announce in July that AbbVie received a positive opinion from the CHMP recommending the conditional marketing authorization of abcurritumab for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma after two or more lines of systemic therapy. And if approved, Abcurritumab would become the first and only subcutaneous bispecific antibody conditionally approved in Europe as a monotherapy in this indication. As I mentioned, together with Epsi, we are advancing a robust clinical development program for Abcurritumab across B-cell malignancies, including diffuse-slash-B-cell lymphoma and follicular lymphoma. And to this end, also in June, we announced positive topline results from the folliculon and formacohort of the Phase 1-2 EPCOR NHL-1 trial. The results showed an overall response rate of 82%, which exceeded the protocol's pre-specified threshold for efficacy. The observed medium duration of response was not reached, and no new safety signals were observed. These results are encouraging for patients with relapsed or refractory follicular lymphoma that are in need of new treatment options, and based on the data, together with APFI, we will engage with global regulatory authorities to determine next steps. The full results will be submitted for presentation at a future medical congress. As we noted last quarter, We had data presentations at a number of recent medical conferences covering a variety of our investigational antibody therapeutics, including abcaritamab. We also continued to grow our pipeline last quarter with an IND submission for GEN3017 or dual-body CD3-CD30, which has potential in hematological malignancies. Turning to other programs that incorporate our innovation, Last month, Janssen announced that they had received positive CHMP opinions for both Talve or Talquetamab and Tecvaili, both of which were created via our NeuroBody platform. The CHMP recommended conditional marketing authorization for Talve as monotherapy for patients with relapsed or refractory multiple myeloma who have received at least three prior therapies, including an immunomodulatory agent, a proteasome inhibitor and an anti-CD38 antibody and have demonstrated disease progression on the last therapy. The CSMP also recommended the approval of a type 2 variation for teclistamab, providing a reduced bi-weekly dosing schedule of 1.5 mg per kg every other week in patients who have achieved a complete response or better for 6 months or longer. Darcelex also continues to redefine the treatment of multiple myeloma. As you have seen, J&J's net sales for Dara were up 22% over the first half of 2022. And that is generating 4.9 billion Danish kroner in royalties for us, contributing materially to our robust financials. I will now hand over the call to Anthony Pagano to take you through our first half 2023 financial results. Anthony, the floor is yours.

Great. Thanks, Jan. We continue to strengthen our foundation over the first half of the year. Of course, top of mind for everyone is the FDA approval of Epkinley. And as we'll see, our financials continue to be strong. recurring revenues grew by 27% in H1. This was principally driven by strong royalties from Darzalex 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 a 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 H1. As you can see in the chart, overall net sales grew by 22%. That's net sales of nearly $4.7 billion, which translates to over 4.9 billion kroner in royalty revenue. This growth was driven by continued share gains and strong performance in the frontline setting. So, Starzelex remains a key driver of our revenue. In H1, we grew total revenue to over 7 billion kroner. And as I've already highlighted, that included a 27% increase in our recurring revenue. And to be clear, that's on a reported basis. excluding some minor FX headwinds, recurring revenues grew by 30% on an operational basis. And as a reminder, last year's H1 results make for a somewhat tough comparator, given that in 2022, we had significant FX tailwinds. And this is primarily related to the benefit from the Darzalex currency head rate. The strong operational growth in H1 for this year was driven by higher Darzalex royalties, as well as royalties from other products. Taken together, this really illustrates the power of our recurring revenue. In Q2, we also recognized net product sales for Epkinley, and we're pleased with how the initial launch is progressing so far. It's, of course, super early days at this stage, so we shouldn't draw too many conclusions from a single month of sales. Nevertheless, we remain excited by ECOR's potential to transform the lives of patients. And as we said, 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 OPEX grew 45% in H1. In R&D, we've accelerated our investment into our product portfolio, especially the advancement and expansion of EPCOR and 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 launch of EPCINLY. Now, let's take a look at our financials as a whole. Here you can see our summary P&L. Revenue came in at over 7 billion kroner. That's up 34% on last year. As mentioned, that's negatively impacted by a small FX headwind. Total expenses were 5.1 billion with 70% being R&D and 30% SG&A. And even with this increased investment, we're still delivering over 1.9 billion of operating profit. Moving to our net financial items, here we have a gain of 75 million so far in 2023. And this is driven by two partially offsetting items. First, we've got the weakening of the US dollar against the Danish kroner, and that's 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 426 million, which equates to an effective tax rate of 21.2%. And that brings us to our net profit of nearly 1.6 billion kroner. So as you can see, strong financial performance for H1. With that, let's take a minute to revisit our robust financial framework. First off, are revenue profile on the left. With the approval of Epkinley and May, we now have seven 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 approval of Janssen's Talquetamab. Taken together, we expect significant cashew flows for 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 EPCOR. But that's just one of the exciting opportunities that provide us with a compelling rationale for increasing 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 take a look at our guidance. As you will have seen, we updated our 2023 guidance last week. We now expect our revenue to be in a range of 15.5 to 16.5 billion kroner. And that's an increase to both the bottom and top end of our range. This increase is driven by continued strong recurring revenue growth, including higher total royalty revenues from Darzalex and other marketed products. For Darzalex, following strong H1 performance, we've increased the low end of our guidance for net sales and now estimate a range of $9.8 to $10 billion. Turning to our investments, as always, we remain focused on executing against our strategy and key priorities and at the same time, creating long-term value. So we're investing to capture the significant opportunities in front of us. And here, we're increasing our OPEX guidance to a range of 10.4 to 10.9 billion kroner. This is primarily related to increased and accelerated investment in epcaritamab and the progression of other pipeline products. More specifically for EPCOR, our higher investment reflects increased and accelerated dose optimization work to potentially achieve a best in class profile. We are also accelerating our investment for our frontline trial in FL. As you know, this is a significant value driver for the EPCOR franchise, and we're doing everything we can to accelerate this opportunity. Putting all this together, we're on track to deliver another year of substantial operating profit in a range of 4.5 to 6 billion kroner. And finally, as a reminder, note that these projections are based on an assumed US dollar Danish kroner exchange rate of 6.8. Now, let me provide a few closing remarks. In summary, We've had a very solid H1. We've created growing recurring revenue streams, including now two of our own products on the market. 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.