Genmab A/S Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 14, 2024

There are 12 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Genmab Full Year 2023 Financial Results Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be the question and answer session. Please be advised that today's conference is being recorded.

Operator

This presentation contains forward looking statements. The words Believe, expect, anticipate, intent and plan and similar expressions identify forward looking statements. All statements other than statements of historical facts included in this presentation, including without limitation, Those regarding our financial position, business strategy, plans and objectives of management for future operations, including development plans and objectives relating to our products are forward looking statements. Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such forward looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future.

Operator

The important factors that could cause our actual results, performance or achievements to differ materially from those in the forward looking statements includes, among others, risks associated with product discovery and development, uncertainties related to the outcome of clinical trials, slower than expected rate of patient recruitment, unforeseen safety issues resulting from the administration of our products in patients, uncertainties related to product manufacturing, the lack of market acceptance of our products, Our inability to manage growth the competitive environment in relation to our business area and the markets our relationships with affiliated entities changes and developments in technology, which may render our products obsolete and other factors Further, certain forward looking statements are based upon assumptions of future events, which may not prove to be accurate. The forward looking statements in these documents speak only as of the date of this presentation. Genmab does not undertake any obligation to update or revise forward looking statements in this presentation nor to confirm such statements to reflect subsequent events or circumstances after the date made or in relation to actual results, unless required by law. At this moment, I would like to hand the conference over to our first speaker today, Jan van der Winkle.

Operator

Please go ahead.

Speaker 1

Hello, and welcome to Genmab's conference call to discuss the company's financial results for the period ending December 31, 2023. With me today to present these results is our CFO, Anthony Pagano and our Chief Operating Officer, Anthony Monsigni. For the Q and A, we will be joined by our Chief Medical Officer, Tay Yamadi. Let's move to Slide 2. As I already said, We will be making forward looking statements, so please keep that in mind as we go through this call.

Speaker 1

Let's move to Slide 3. 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 4. Genome has continued to have transformative growth in all areas of our company.

Speaker 1

This has been possible because of what makes us unique. We firmly believe in the natural ability of the immune system to fight against disease and we use our deep understanding of disease mechanisms, targets antibody biology to invent proprietary technologies. This in house expertise is matched with strategic partnerships that help us to take our products further than we could on our own and they give us access to high quality and unique disease targets and additional cutting edge technologies that can be combined with ours. So we leverage a combination of cutting edge scientific capabilities, Our expertise in translational and precision medicine, data science and AI, as well as strategic partnerships to create a robust pipeline of potentially 1st in class and best in class products. The success of this model can be seen in the events of 2023.

Speaker 1

So let's review these now. Slide 5. 2023 was a truly remarkable year with multiple regulatory approvals for abcuritumab. And as a reminder, Genmab is the commercial lead for Abkinli in both the U. S.

Speaker 1

And Japan. We are pleased with how the launch is progressing so far, But the current approvals are only the first step to potentially establishing aplaritumab as the core therapy across diffuse large B cell lymphoma follicular lymphoma and beyond. In June, we announced positive top line results for the follicular lymphoma cohort of the Phase onetwo APCORE NHL-one trial. This data along with preliminary dose optimization was presented during the ASH Conference in December. It also supported 2 exciting regulatory actions that we announced in November that the FDA had granted breakthrough therapy designation to abcuritumab for adults relapsed or refractory follicular lymphoma after 2 or more lines of systemic therapy and that the EMA had validated the Type 2 variation application for apiritomab for the same indication.

Speaker 1

Together with AbbVie, we are advancing a robust In addition to the data in follicular lymphoma, You can also see this in the multiple Phase 3 studies that we anticipate will be initiated in 2024. Let's move to Slide 6. Abcuritumab is just one example of our maturing pipeline. We also saw progress with TIVDAC last year. As we noted in January, the FDA has accepted an SBLA seeking to convert the accelerated approval of TIVEC in recurrent or metastatic cervical cancer and to a full approval.

Speaker 1

The EMA has also accepted an MAA for TIV DAC in this indication. Both of these regulatory submissions were supported by the positive results from the confirmatory innovative 301 study in cervical cancer. And we look forward to the potential availability of Tiptax to patients in need outside the U. S. In 2023, We also saw positive data from the innovative 207 study for tisotumab vedotin in head and neck cancer.

Speaker 1

And we are pleased with our plans to actively engaged with health authorities on the next steps in this indication as well, along with our partner CIGEN, which is now part of Pfizer. Another program that has cleared a very high bar for continued investment in development is AKAsunlimab or Gen1046, which we are co developing with BioNTech. We were very pleased to announce in November that we have planned engagement with health authorities on the design of the pivotal trial for acasinezolumab in second line non small cell lung cancer. And as we continue to plan to share the data on which this decision was based at a medical conference in the first half of twenty twenty four. In addition to maturing this program, we are also expanding it with a Phase II trial in endometrial cancer, which is currently recruiting.

Speaker 1

Moving to progress, we saw with other pipeline programs. As we also noted in November, we remain very encouraged by the clinical efficacy data we are seeing with GEN-ten forty two, as we are anticipating that we will have the data we need to determine next steps for this program this year. Looking at some of our earlier stage programs, the Phase III trial of GEN-ten forty seven or dual body CD3B-seven eighty four is currently in the dose expansion phase, an important step in progressing our CD3 based bispecific platform in solid tumors. And then 2017, our dual body CD30 started recruitment for our 1st in human clinical trial. Finally, we had 2 IND submissions near the end of last year, JEN1059 or dual body ABKARM 4 1BB, We just saw its 1st patient in a Phase 1 trial, NGN1055 or hexa body OX40.

Speaker 1

Both of these antibodies are being co developed with BioNTech. The success of the Genmab model is also apparent in our move into the therapeutic area of INI with our partnership with argenx. With our deep scientific knowledge of antibody biology and antibody technology An expansion into this therapeutic area was a logical next step. And with 8 approved medicines on the market that are based on our cutting edge innovations, we will continue to have growing recurring revenue streams that we can strategically invest in our company. Finally, Anthony Pagano, our CFO, will outline our capital allocation strategy focused on fueling growth and enhancing shareholder value.

Speaker 1

We are investing in our mid to late stage pipeline and pursuing growth through targeted business development and acquisitions. After prioritizing these areas, we will consider returning capital to shareholders. And here we plan to seek authorization for a SEK 3,500,000,000 buyback at our upcoming ATM. I'm pleased to now turn the call over to Anthony Mancini to take you through our 2023 net product sales. Anthony, the floor is yours.

Speaker 2

Thanks, Jan. I'll review our Q4 and full year 20 3 product revenue performance on Slide 7. Our business is comprised of 2 key revenue streams, Royalty medicines shown here and in market or launch medicines, which we commercialize ourselves with partners. Our portfolio includes 6 main royalty medicines DARZALEX, KOSIMTA, TEPEZZA, TEGVYLE, Rybovant and Talve. DARZALEX showed continued strong demand growth in Q4 with over $2,500,000,000 in net sales, a 22% year over year growth and the full year result was over $9,740,000,000 driven by volume growth, also a 22% year on year growth.

Speaker 2

Over 450,000 patients have been treated with DARZALEX around the world. We're encouraged by the continued market share gains in the first line setting. The J and J focus in this setting is anchored by compelling long term MYAOS data, which is helping establish DARZALEX as a foundation to overall survival in the first line multiple myeloma space. With the recent filing of Perseus, there are continued growth opportunities ahead with DARZALEX subcu based therapies in the frontline transplant eligible multiple myeloma space, including maintenance. DARZALEX is also being combined with both newer and older therapies in myeloma, like 2 of our recently approved DuoBody medicines, TEGFAYLE and TALVAY.

Speaker 2

We expect continued growth and usage of DARZALEX as a backbone in later line settings as well. Cosimpta achieved continued strong demand growth with $640,000,000 in the quarter and $2,200,000,000 for the full year 2023. Cosimpta demand growth is not only progressing well in the United States, but also ex U. S. It is now the NBRx share leader in 7 of 10 major markets outside the U.

Speaker 2

S. Over 85,000 patients have now been treated since the launch in August 2020. On our other royalty medicines, with the acquisition of Horizon by Amgen, Tepesa, the first and only FDA approved treatment for thyroid eye disease, continued to grow in the quarter. TEPEZZA was also approved in Brazil and was submitted for regulatory review in Japan in Q4. European filings are planned in 2024.

Speaker 2

TEGVILI and TALVE, 2 bispecific T cell engagers based on our dual body technology, both in launch mode, continued to perform well in relapsed or refractory multiple myeloma. For Rybovant, another dual body, data from the Phase 3 Mariposa and Phase 3 Mariposa 2 studies have been filed in Q4 In the first line treatment of patients with locally advanced or metastatic EGFR mutation positive non small cell lung cancer as well as in patients with EGFR mutated non small cell lung cancer who failed prior therapy. There have been 3 submissions based on Phase 3 data from the ribo vent clinical development program in the last 4 months of 2023. We expect to see continued strong Genmab revenue growth from our diverse Royalty Medicines portfolio in 2024. Turning to our in market performance, on Slide 8, Atkinley delivered $36,000,000 in net sales in Q4 $64,000,000 for the full year 2023, of which $55,000,000 is from the U.

Speaker 2

S. Market. We're very pleased with McKinley's early launch demand performance across geographies. In the U. S, we continue to see robust uptake across key accounts.

Speaker 2

In Japan, Epkinley was launched in late November after receiving a national health insurance price listing. We're also highly encouraged by the early launch momentum and overall positive response received from our customers in Japan. We've continued to effectively leverage the first to market advantage in the CD3, CD20 class in both the U. S. And Japan.

Speaker 2

At Kinley's clinically differentiated profile is making a meaningful impact in our first indication, 3rd line plus diffuse large B cell lymphoma in an area of very high unmet medical need. Our 3rd line plus DLBCL indication is the first step to establishing Abkinley as the core therapy across B cell malignancies like follicular lymphoma and in earlier lines of treatment. Turning to TIVDAC, TypDac delivered $25,000,000 in net sales in Q4 $90,000,000 for the full year 2023. This represents the 9th consecutive quarter of demand growth. We are pleased with Tibbac's performance and growth, primarily driven by an increasing breadth of ordering accounts.

Speaker 2

DynOnc and MedOnc customers continue to provide positive feedback on the impact TivDac is making on the lives of women with cervical cancer. On January 9, along with Pfizer, we announced the FDA granted priority review for the SVLA for TIVDAC based on innovative 301, which showed meaningful OS data with an FDA PDUFA action date of May 9. The customer reaction to INNOVATIVE-three zero one has been very positive with most stating that this data establishes TIVDAC as a clear standard of care in second line plus recurrent metastatic cervical cancer. As an end to end biotech, we're very pleased with our end market medicines performance and look forward to carrying this momentum into 2024. We anticipate that our in market medicines at Kinley and TIVDAC will contribute just under 40% of Genmapped's total revenue growth in 2024.

Speaker 2

I want to take this opportunity to thank our partners I want to thank the Genmab team across commercialization, research and development and enabling functions for all they do every day to deliver our commitment to the patients we serve. With that, let me hand it off to Anthony Pagano to provide more perspective on our total company performance our guidance for 2024. Anthony?

Speaker 3

Thanks, Anthony. We continue to strengthen our foundation during 2023. To start, as Jan said, together with our partner AbbVie, we've achieved our goal of regulatory approvals and launches for Abkinley in the U. S, Europe and Japan. And as we'll see, our financials for the year were strong.

Speaker 3

Recurring revenues grew by 22% on a reported basis. And this was principally driven by strong royalties from DARZALEX along with significant growth from the other approved medicines based on our innovations, including PIVDAC and Epkinley. 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 we need to succeed. So let's take a look at those revenues in a bit more detail.

Speaker 3

We grew total revenue to around DKK 16,500,000,000 in 2023. And as I've already highlighted, that included a 22% increase in our recurring revenue. And to be clear, that's on a reported basis. Excluding some FX headwinds, which I've described throughout the year, recurring revenues grew by 31% on an operational basis. Operational growth in 2023 continued to be strong, driven by higher DARZALEX royalties as well as royalties from other products and this really illustrates the power of our recurring revenue.

Speaker 3

We also recognized the 1st quarters of net product sales for Abkinley in Q3 and Q4. And we're really pleased with how the launch is progressing so far with around DKK421 1,000,000 in sales since launch. Of note, our Kinley net product sales by Genmab contributed more than 20% of our overall revenue growth in 2023. Overall, our strong recurring revenue growth enables continued highly focused investment as you can see on the next slide. A year ago, we were very clear that we would continue to invest to capture the opportunities we see in front of us.

Speaker 3

And that's exactly what we've done here with total OpEx up 33% in 2023. At that time, I outlined our top four investment priorities. 1st, securing a successful at Kinley launch by investing in our 2 key markets, the U. S. And Japan.

Speaker 3

2nd, continuing to advance our pipeline. Here the lion's share of our investment was directed to our most advanced programs including at Kinley, TIV DAC 10461042. 3rd, investing in our world class discovery engine. And 4th, foundational investments in enabling functions to achieve required scale. Here it's important to note that as we exit Q4 of 2023, we believe we have reached scale in our enabling functions.

Speaker 3

So as you can see, our investments in 2023 were fully in line with these priorities. Now with that, let's take a look at our financials as a whole. Here you can see our summary P and L for 2023. Revenue came in at around DKK 16,500,000,000 That's up 14% on last year. Total expenses were about $10,900,000,000 with 70% being R and D and 30% SG and A and that compares to 68% in R and D and 32% in SG and A in 2022.

Speaker 3

And even with this increased investment, we're still delivering around DKK 5,300,000,000 of operating profit. Moving now to our net financial items. Here we have a gain of DKK 316,000,000 in 2023. This is driven by an increase in interest income due to higher effective interest rates, which offset the negative impact of the weakening U. S.

Speaker 3

Dollar against the Danish kroner. Then we have tax expense of about DKK1.3 billion, which equates to an effective tax rate of 22.8 percent. And that brings us to our net profit of nearly DKK4.4 1,000,000,000 kronor. So as you can see, continued strong underlying financial performance. And with that, let's take a minute to revisit our robust financial framework.

Speaker 3

First off, our revenue profile on the left. With the approval of Abkinley in May and Talvi in August of 2023, There are now 8 products on the market that are generating significant recurring revenues for us and we expect significant cash inflows in the years to come. Moving to the right, we remain focused on our investments as we evolve our organization for continued success. At the top of the list is accelerating and expanding EPCOR with 3 new Phase 3 trials planned for 2024. But that's just one of the exciting opportunities that provide us with a compelling Rational for investing back in our business.

Speaker 3

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 with planned Phase 3s not only for EPCOR but also for TIVDAC and 1046 in 2024. So with that background, let's move to our 2024 financial guidance. Before getting into the specifics, let's cover the highlights. We anticipate strong growth in revenue and operating profit for 2024 at 19% and 10% at the midpoint respectively.

Speaker 3

For revenue, this growth will be driven by our royalty medicines and also importantly, we will have over DKK1.2 billion of growth from Appkinley and TIVDAC. In fact Appkinley and TIVDAC are driving nearly 40% of our total revenue growth in 2024. And note, our revenue growth of 19% will exceed our OpEx growth of 18%. On the investment side, Our OpEx growth is projected to slow down significantly year over year. Last year, we saw growth of 33% And now for 2024, we're projecting 18%.

Speaker 3

And our projected DKK2 1,000,000,000 increase in OpEx for 2024 at the midpoint is down from the $2,700,000,000 increase that we saw in 2023. So clearly, This is a significant reduction in both percentage terms and absolute Danish kroner terms. The vast majority of the increase in our investments in 2024 is directly related to mid to late stage R and D investments. And the increase in SG and A is muted and is primarily related to the annualization or timing impact of investments that came online in 2023 related to the launches of Abkinley in the U. S.

Speaker 3

And Japan. And finally, the significant revenue growth and our continued focused approach to managing our investments translates to a projected double digit or 10% growth in operating profit at the midpoint of the guidance range. So with that background, let's take a look at the components of our strong recurring revenue. For 2024, we anticipate another year of strong underlying revenue growth at 19%. Before I get into the detail, note that these projections are based on an assumed U.

Speaker 3

S. Dollar Danish kroner exchange rate of 6.8. Looking at our total revenue, we're expecting to be in the range of DKK18,700,000,000 to DKK 20,500,000,000 A significant part of this will come from recurring revenue, where we expect around 25% growth at the midpoint. And as a reminder, our recurring revenue is comprised of our royalties and our net product sales and collaboration revenue. We anticipate that DARZALEX sales will continue to ramp up to be in the range of $10,900,000,000 to $11,500,000,000 So we're projecting DARZALEX royalties to be between DKK12.6 billion to DKK13.3 billion.

Speaker 3

Most excitingly, as mentioned, nearly 40% of the revenue growth is projected to come from our 2 marketed products at Kinley and TIVDAC. This really illustrates how we're crystallizing and realizing value from the important and focused investments we've made over the last several years in both R and D and commercialization. Now for our non recurring revenue, we expect this to be $1,500,000,000 at the midpoint. The decrease is primarily related to lower reimbursement revenue. Note that we've included a significant sales milestone related to Casimpta both in the bottom and top end of our guidance range.

Speaker 3

With that, let's take a look at our planned investments for 2024. We expect total OpEx to be between DKK 12,400,000,000 and DKK 13,400,000,000. This fully reflects the evolution of our pipeline and indeed our entire business. We have 2 near term investment priorities. 1st, the continued commercialization, development and expansion of Epkinley including initiating new Phase 3 trials that really maximize its potential.

Speaker 3

2nd is progressing the other promising programs in our pipeline especially 1046 and TIV DAC. These are our immediate priorities, but we're not just focused on today. In line with our vision, we're also very focused on long term value creation. We're investing to maximize the value of our current technologies And we're also investing to generate the next wave of IND candidates and to progress our early stage pipeline. In terms of SG and A, as I highlighted a year ago and mentioned earlier today, We've been super focused on getting this number to scale.

Speaker 3

Evidence of this is that our total Q4 2023 investment and SG and A was around DKK900 1,000,000. So you can see that off this q4 2023 run rate, the growth year in 2024 is minor. So with that, let's break out our 2024 investment profile for you with a few numbers on the next slide. Here we've outlined our incremental investments we're expecting to make for our top priorities in 2024. Starting at the top, you can see the biggest overall increase in investment will be in advancing our portfolio.

Speaker 3

More specifically, the several Phase 3s that we're planning for EPCOR, TIV DAC and 1046 that eventually may support revenue growth in the future. This is an investment for now as well as 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. The continued successful commercialization of Ep Kinley will continue to require our focus and investment especially in our 2 key markets, the U. S. And Japan.

Speaker 3

Now having looked at the framework and the constituent parts, Let's look at how this all comes together. Here you can see our 2024 guidance. We expect our revenue to be in the range of DKK18.7 billion to DKK20.5 billion and that's up 19% at the midpoint. And most of this is made up of recurring revenue, which is comprised of our royalties and net product sales and collaboration revenue from McKinley and TivDAC. And our recurring revenues is expected to account for 92% of our total revenue in 2024 compared to 88% in 2023 81% in 2022.

Speaker 3

This really illustrates the improving quality of our revenue profile. For operating expenses, we expect to be in a range of DKK12.4 billion to DKK13.4 billion That's up 18% at the midpoint. 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 planning for substantial operating profit in a range of DKK4.6 billion to DKK7.1 billion with the midpoint of guidance amounting to a significant growth or significant growth in profitability at 10%. So now having covered our results for 2023 and our guidance for 2024, let me now walk you through Our focused capital allocation strategy aimed at fueling growth and enhancing shareholder value.

Speaker 3

First, we will continue to invest in our proprietary pipeline and technology platforms. In particular, we're focused on investing in our mid and late stage programs. In addition, We need to invest to maintain our leadership and innovation in antibody tech and delivering on our promise of groundbreaking Kyso Medicine. 2nd, we're pursuing focused business development and M and A opportunities. Our objective here is clear, to accelerate our growth trajectory and broaden our portfolio.

Speaker 3

And here we'll seek out opportunities that fit within our core focus areas. As you know, Historically, we focused on external opportunities where we brought in tools and components to augment our research and discovery engine. Now as we further built out our development and commercialization capabilities, we are well positioned to also consider development and commercial stage opportunities. This will allow us to further leverage investments we made in these areas. And finally at our upcoming AGM, we will be asking for the authorization to launch a DKK3.5 billion or approximately $500,000,000 share buyback program.

Speaker 3

This underscores our confidence in Genmab's future and our commitment to delivering value to shareholders both in the short and long term. In summary, our capital allocation strategy is straightforward. Invest in our business and in particular our mid to late stage pipeline and to see growth through focused BD and acquisitions. And after these two priorities are evaluated, We can consider return of capital to our shareholders and that's what we've done here in terms of the proposal at the upcoming AGM. Taken together, this balanced approach positions us for sustained success and long term value creation.

Speaker 3

Now for my final slide, let me provide a few closing remarks. In summary, we had a very solid 2023. Our 2024 guidance highlights our highly compelling growth profile. We created additional growing recurring revenue streams increasingly from our proprietary products including TIVDAC and Epkinley. 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.

Speaker 3

And on that note, I'm going to hand you back over to Jan.

Speaker 1

Thanks, Anthony. So let's move to Slide 21. In 2023, Genmab made great strides towards our 2,030 vision, making for a transformative year and company's history and our patients' care. Our Kaizo antibody medicines have begun a new chapter in transforming the lives of people with cancer and other serious diseases. In 2024, we will continue to work diligently towards this vision with a number of key goals for the company, starting with our currently approved medicines, Abkinli and Tivtec.

Speaker 1

And as I mentioned, we will work with our partner AbbVie to continue to maximize the potential of eparitamab with the initiation of new trials as well as an expanded label with the potential to move into relapsed or refractory follicular lymphoma. We will also work with our new partner Pfizer, pending health authority feedback to advance the development of TIVDAC in head and neck cancer. Turning to our clinical stage programs along with our partner BioNTech, we plan to progress both acasimlimab or GEN1046 and GEN-ten forty two. For acasimlimab, we see the potential to initiate a Phase 3 trial in second line non small cell lung cancer. For GEN-ten forty two, we anticipate Phase 2 data in frontline head and neck cancer that will allow us to determine next steps for the program.

Speaker 1

So we anticipate expanding and advancing these and other clinical stage programs in our Kaizo product portfolio. Fundamental to the success of these programs is having the right team and culture in place. We are very well prepared to continue to scale our company based on our planned portfolio development and business needs. We will be maintaining and enhancing the science driven patient focused courageous and inspirational Genmab culture and doing so with integrity. Finally, we will continue to leverage our financial base to support our growth, including to grow and broaden our exciting products and technology portfolio.

Speaker 1

We will look at both our existing strategy and new opportunities to do just that. We have much to look forward to in 2024. That ends our presentation to Genmab's financial results for 2023. So operator, please open the call for questions.

Operator

Thank you so much. And now we're going to take our first question and it comes from the line of James Gordon. Your line is open. Please ask your question.

Speaker 4

Hello, James Gordon, JPMorgan. Thanks for taking the question. My question is just while we're doing the buyback, just how should we read the buyback? Should we think of this as a badge of confidence that J and J opts in on HexaBody CD38, so this is a great target by the shares? Or is it a bit more opportunistic about your share price in general?

Speaker 4

Or that you aren't finding attractive pipeline you could buy in, but just isn't much out there at good valuations and it's inefficient to have lots of cash on the balance sheet. So how should we read the decision to do the buyback, please?

Speaker 1

So James, the decision to go for the $500,000,000 buyback is actually a sign of confidence in our Capacity to further build value for shareholders, as Anthony and I explained, we first will invest in the pipeline and we are going to put robustly progress Our pipeline and technology platforms this year with multiple Phase 3 trials initiated for at least 3 or more of our programs. Secondly, we really are looking very, very actively at other product candidates, which could actually help us to turbo accelerate our growth trajectory And broaden the portfolio, so we actually can increase revenue much quicker in the coming years than with our own products in the pipeline. And then finally, could see that as a sign of confidence. We believe that this is the right moment to show really strong confidence in our future And then the commitment to deliver value to shareholders. So it's a sign of strength and confidence in our own ability to further build value to our shareholders.

Speaker 1

So there will be a lot of activity this year. Thank you. Thanks, James.

Operator

Thank you. Now we're going to take our next question. And it comes from line of Kaveri Palman. Your line is open. Please ask your question.

Speaker 1

Jafiri?

Speaker 5

Sorry, what's that? Yes, sorry, I didn't hear my name. Yes, good afternoon and thanks for taking my question. My question is basically on F Kinley. Now that it has a well established profile, any thoughts of developing it for autoimmune diseases?

Speaker 1

Right now, we are focusing on B cell cancers that we're going to dramatically expand into different cancers, Not only diffuse large B cell lymphoma and follicular, but we're also certainly going to press forward in CLL as well as potentially some other B cell cancers. And we are not considering to move into autoimmune at this moment, Kaveri, but that may very well change in the future.

Speaker 5

Got it. Thank you.

Speaker 3

Thank you.

Operator

Now we're going to take our next question. And the next question comes from the line of Peter Verdult. Your line is open. Please ask your question.

Speaker 6

Yes, thanks. Pippa Lop from Citi. Just one question maybe for Udit or Tahi, just on scene setting 1046 in the second line non small cell lung cancer trial. Could you just remind us how many patients and duration of follow-up you have on which you base that decision? And then just what would you consider to be the PFS and OS hurdles you would be looking to beat in that setting?

Speaker 6

Thank you.

Speaker 1

Thanks, Peter, for the question. So I hand it over to Tahi. Tahi, you're best placed, I think, to answer this question for Peter.

Speaker 7

Yes, sure. Thanks for the question. Well, I mean, we've decided we never really commented on what number we actually base the decision, but trial as it is designed was enrolling 40 patients in different cohorts and these patients we have and so the follow-up is reasonably robust. There will be An earlier look that will be presented at in an abstract that was submitted in the near future will be presented at the conference and there will be a more updated look at that conference on that data also with longer follow-up. What PFS is actually me and PFS is a little bit problematic if you think about all the fair trials because of this in the population broadly driven by the patients who are actually not So a better way to think about this is actually landmark PFS.

Speaker 7

So how many patients are actually still in remission or have not progressed and not died at, let's say, 6 months, I think that would be something where I would guide you to pay attention to Because that tail presumably is also what's going to drive the next part, which is the overall survival question. I think There is plenty of data sets that the oversaw somewhere harvest around 11 months. And so we look at this as a since this is an IO opportunity, But the strength of the data comes to the duration of the response that we're observing in those patients where Traditionally, it has been incredibly hard to get any response within IO approach since they have already exhausted IO as an approach. And we also believe that this actually increases the probability of success in winning on these charts given the fact that A number of trials have been negative where the focus was maybe a little bit too much on initial tumor reduction, but not on durability of responses, if that makes sense.

Speaker 6

Thanks, Thij.

Speaker 1

Thanks, Thij. Thanks, Peter, for the question. Let's move on to the next one, operator.

Operator

Yes, of course. Now we're going to take our next question. And it comes from the line of Sachin Jain. Your line is open. Please ask your question.

Speaker 8

Hi, thanks for taking my questions. Just to go back on the capital allocation, I wonder if you could just clarify, Anthony, The size of the BD opportunities you're looking at, I think you phrased them as more later stage than what you've done before. So if you could just give us a sense of what stage development commercial stage size of assets? And then just a quick follow-up question. So, HEX1 CD38 Really mentioned today, you thank you for clarifying the 1046 data will become in 1H.

Speaker 8

Should we expect any further dose expansion data From the cohort, we saw ash, but at any point, 1H pre the head to head 2H? Thank you.

Speaker 1

Thanks, Sachin, for the question. So Anthony Farfano, on the capital allocation and then maybe Tay, you can give a bit more color on the head to head data with the HexaBody CD38 next. Maybe Anthony, you can start.

Speaker 3

Yes, sure thing. Thanks Sachin. Yes, as you highlighted and just reiterated what I said on the call, What I talked about, I think, a little bit more informally over the last year or so that we would be willing to open up the aperture in terms of what we would be thinking about for external opportunities. This is fully in line with you think about the concept of natural ownership, where you're good evaluator and then good owners. And over the last couple of years, We've invested quite a bit to build out our mid to late stage development capabilities as well as our commercialization capability.

Speaker 3

So we're looking to leverage those investments as we move forward. And here, we're then therefore pursuing potential BD and M and A opportunities that align with our core focus areas. And of course, as you would expect, Satya, any external opportunities will be carefully evaluated. And only if they clear the high bar that we set for ourselves both internally but also for these external opportunities. So they clearly high bar will be move forward.

Speaker 3

We're going to take that same focused and disciplined approach that we've utilized in evaluating our organic investments as well as that the same approach we've taken making the discovery oriented inorganic investments that we've made here historically. And any external opportunities and we carefully selected again, this is really important to align with our core focus areas and to complement our existing portfolio, bring in novel antibody technologies or and our presence in some key therapeutic areas. Further, any focus BD and M and A for clinical or commercial stage programs is really going to an important point to allow us to leverage the investments we made and the capabilities we built out in these key areas over the last number of years. Particularly on your question, Sachin, in terms of deal size, I'm not going to provide any guardrails out there right now. But again, as you would expect, The starting point will be to ensure that any external opportunity fully aligns with our strategic objectives and our core focus areas.

Speaker 3

And most importantly, right, it offers a clear path to creating value for our shareholders. So hopefully that gives you a little bit more color, but at this point, we're not going to put out any specific guardrail.

Speaker 1

And to add to that, Anthony, these molecules will need to be best in class or 1st in class at the minimum Sachin, so we are going to be very, very critical there and we have firepower and we have the ability to execute and leverage on the investments made over the last few years. Let's move to Tay now and maybe ask Tay to give some further color on the hexapled CD38 data this year.

Speaker 7

I will try my best. I mean, I think there is not much to add to the commentary we have made over the last couple of ones essentially. And that the head to head is ongoing, is on track in the time lines on the VAS. We are actively and successfully enrolling these patients. And we are on track to have all patients enrolled and then with a sufficient follow-up and to then have that discussion with Janssen once we have that follow-up.

Speaker 7

And it's important to understand follow-up as important as getting the patients in because it will in the end be a decision made on I suspect response rate, but also depth of response percentage of patients who achieve VGPR are better. And of course, also Under the assumption that the safety profile is not materially different from DARZALEX given the fact that the success of DARZALEX, large degree is also dependent on the relative ease of combination. So that's what we are generating right now. And when we have the data, we'll the conversation with our colleagues at Janssen and eventually also present that to the public. And the plan is on track.

Speaker 8

Tay, apologies. The question was whether we would get any further dose expansion data relative to what we saw at ASH?

Speaker 7

No. We went right straight into the headlight because that's really the relevant dataset. So The next data update that you will get is the actual head to head, which I think will be most informative for all parties involved, including you.

Speaker 8

Thank you.

Speaker 1

Thanks, Sascha and thanks, Thijs, for the answer. Let's move on to the next question operator.

Operator

Thank you. And the next question comes from the line of Jonathan Chan. Please ask your question. Your line is open.

Speaker 9

Hi guys. Thanks for taking my question. On the 2024 net product sales and expense guidance, Are you able to provide any more color around how those breakdown by program? And maybe just adding on that on the early epridumab launch, How has that impacted your thinking on the CD20xCD3 competitive landscape and your ability to be the market leader in this space? Thank you.

Speaker 1

Thanks, Jonathan, for the question. So the first one can I think be handled by Anthony Parcano? And the second one, certainly Anthony Monsigny can give you a bit more color there. We're very optimistic about Abkinley. Anthony Pagana, maybe you can start.

Speaker 3

Yes. Thanks, Jonathan. I think in my prepared remarks, I gave quite a bit of detail in terms of breaking down both the overall composition of Our revenue as you can see we kind of took it to a different level in terms of breaking out the net product sales and the collaboration revenue gave kind of very explicit guidance there, combining at Kinley and TIVDAC to give you a good sense of the overall trajectory. We're not going to provide specific guidance for at Kinley or TIVDAC at this stage. You would also have noted Jonathan did highlight in terms of the non recurring revenue, the step down being driven by reimbursement revenue declining and that being partially offset by an increase in milestones.

Speaker 3

There are highlighted Casimpta. I can also share with everybody on the call that in addition to the significant sales milestone of CIMTA, we also have a relatively significant milestone related to eprudimab With the filing and acceptance of the filing in the U. S. For the refractory late line FL indication, another significant milestone. So it's probably about as much detail as we can give on revenue.

Speaker 3

In terms of OpEx, Again, here I think if you look at the detailed page that we presented, really highlighting where the vast majority of the growth is going to our mid to late stage programs. Particularly, epridumab is driving a fair amount of the year over year increase. And then secondly behind that you have 1046 and TIVDAC with the potential launch of the Phase 3 there. And then there is still a substantial increase in investment doing continued expansion work for 1042 and also a fair amount of expansion work and other related work for our CD3 B7 H4 program. As you can see, that's driving around in totality, the points that is mentioned are driving around DKK1.6 billion of our total investment increase.

Speaker 3

And I provided a lot of color in terms of SG and A And how we're really getting that number to scale, it's been a key focus area in terms of really driving operational performance, if you like, in our business getting that number to scale and as we exit Q4 of 2023, we feel we've made a ton of progress here moving forward. That's the additional color I'd provide in terms of the top line revenue and the investments. Maybe Anthony Mancini, you want to provide maybe any additional color, particularly as it relates to Abkinley?

Speaker 2

Yes. Thanks, Anthony, and thanks, Jonathan, for the question. I think if I understand the question, it's a little bit about based on how our start has gone, what confidence do we have in our performance going forward to be the market leader? And I would say that the healthy uptake we've seen, Driven really by strong execution, it gives us a high degree of confidence that we can continue to retain our market leader status, particularly the reactions that we're getting, the strong access that we're getting in the U. S.

Speaker 2

And now that we know more about the profile, really the feedback that we're getting from customers and the enthusiasm based on the reactions they're seeing with patients around not just the power of the overall responses, but the manageable safety profile and the seamless and efficient step up dosing and subcutaneous administration as well as reduced patient in office administration time and efficiency and throughput, We think we're really well positioned to continue to retain the market leadership position and we're really excited about additional launches in the B cell malignancy space with FL being next on the docket. So Jonathan, we feel really confident we can continue to perform strongly going forward.

Speaker 1

Thanks, Anthony. Thanks, Jonathan. Let's move to the next question.

Operator

Yes, of course. Now we're going to take our next question. And the next question comes from the line of Michael Schmidt. Your line is open. Please ask the question.

Speaker 10

Great. Thanks for taking our question. This is Paul on for Michael. My question was touched on a bit in prior questions, but generally what can we expect from your immunology efforts in the coming year either internally or Is this possibly an area of BD focus? And then along those lines, on your collaboration with argenx, which I think is approaching a year, in near term plans to disclose target or program from that either in oncology or immunology?

Speaker 10

Thank you.

Speaker 1

Thanks, Paul. I think I can handle those questions. So we have a lot of activity in the I and I area. And these are twofold. Basically, we have our own programs.

Speaker 1

We have a number of programs that CNMOP is working on itself. And we actually have a number of programs and we actually expanded the number together with argenx where we actually work in I and I as well as in oncology. This year, you'll probably not hear a lot from those programs, Paul, because we only actually speak about these programs once we have a clinical candidate selected to move into the clinic imminently because we learned it in the hard way in the past. We don't get any credit basically for early stage problems which we flag up, but we get credit once they move into the clinic and they begin to build further value for the company, for stakeholders. And so not from the argenx or from our own programs, I think there are 2 early states.

Speaker 1

We are in the process of selecting the clinical candidates, but we are certainly looking as it relates to investments in BD into candidates Outside of the company and that could be a way, Paul, to actually accelerate the development in the I and I area for Genmab By simply acquiring a product candidate in late stage development or even commercial stage to develop further and then as Anthony Pagano explained, Leverage our considerable investments in development and also large scale development of antibody based medicines in that area. I think it's too early to say more explicitly speak about that, but we certainly are looking very, very proactively at the landscape and we are looking at some candidate targets and timing is very difficult to give further color on. But actually that is a realistic area where you could I think we should move on to the next question, operator.

Operator

Yes, of course. Thank you. Now we're going to take our last question for today. And it comes from the line of Peter Welford. Your line is open.

Operator

Please ask your question. Excuse me, Peter, your line is open. You're more welcome to ask your question.

Speaker 11

Hi, sorry. Can you hear me?

Speaker 1

Yes. Yes, Peter?

Speaker 11

Yes, sorry. I was disconnected briefly. So just a question on the outlook, please, I guess, for Anthony. Really, the question is so I'm trying to just piece together the pieces in so far as you talk about the fact that the reimbursement revenue that you're assuming within 2024 is going to decrease. But equally, you talk about a significant part of the investment in R and D is related to 1042 and 1046, which obviously are shared, I guess, with BioNTech.

Speaker 11

So I guess I'm trying to square that given that presumably 50% will be paid back to you and equally why the gross profit guidance less the forecast for the operating expenses doesn't give you the EBIT outlook. So what the sort of disparity is to get from gross profit down to EBIT based on your OpEx outlook? Thank you.

Speaker 1

Thanks, Peter. Anthony?

Speaker 3

Yes. Thanks, Peter. In terms of the reimbursement revenue and Well, you're pointing out that number coming down, but investment in 1042 and 1046 and other BioNTech partnered programs going up. This is all True and both true at the same time. In terms of what's driving that there are probably there are 2 things.

Speaker 3

First is the composition of the work that's being done by the parties. So to the extent that BioNTech is doing more work for certain of the programs that will not flow through reimbursement revenue will only pick up half of the cost. And secondly, for some of the larger investments we're making for 1042 and 1046, We have just looked at our overall setup with BioNTech in terms of how some of those contracts were set up with 3rd parties and looking to optimize our cash flow And some of that then translates through into slightly different accounting, where I'm only picking up half of the cost in my P and L and not picking up 100% like we had done historically, And then 50% coming back through the reimbursement line, Peter. In terms of your more granular question on this sort of very specific thing, I'm going to have to suggest that we take that, have you follow-up with Andrew, we can work through the mechanics of your other question, as it relates to how the P and L, all flows together.

Speaker 1

Thanks, Anthony. Yes. I think back to the operator.

Operator

Thank you. There are no further questions for today. I would now like to hand the conference over to your speaker Jan van der Winkle for any closing remarks.

Speaker 1

So thank you all for calling in today to discuss Genopt Financial Results for 2023. And if you have additional Questions that is certainly possible, then please reach out to the Investor Relations colleagues from Genmab. We hope that you all stay safe, keep optimistic and remain healthy. And we very much look forward to speaking with you all again soon.

Operator

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.

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Earnings Conference Call
Genmab A/S Q4 2023
00:00 / 00:00