Genmab A/S Q3 FY2021 Earnings Call

Hello, and welcome to the Genmab Q3 2021 Conference Call. Throughout the call, all participants will be in a listen-only mode, and afterwards there will be a question-and-answer session. And just to remind you, 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 Genmab and our privacy policy. So, today, I’m pleased to present Jan van de Winkel. Please go ahead with your meeting.

So, hello and welcome to the Genmab conference call to discuss the Company's financial results for the first nine months of 2021. With me today to present these results is our CFO, Anthony Pagano, and for the Q&A, we will be joined by our Chief Development Officer, Judith Klimovsky, and our Chief Operating Officer, Anthony Mancini. Let’s move to slide 2. 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 3. Genmab has a science-focused and innovation-based culture, and collaborations and partnerships have always been part of our DNA. During today’s presentation, we will reference some of the products being developed under the strategic collaborations, and this slide acknowledges those relationships. Let’s move to slide 4. Genmab has never been in a better position to achieve our ambitious vision of transforming cancer treatments. The solid foundation we have built is supporting our evolution into a fully integrated biotech innovation powerhouse. We achieved a major milestone in this evolution during the third quarter with the FDA approval of tisotumab vedotin as TIVDAK. Let’s move to slide 5. Throughout Genmab’s history, we have been focused on using our deep antibody expertise to create and develop antibody products that have the potential to improve patients’ lives. Our five products on the market incorporate our innovation, and for the first time we in collaboration with our partner TIVDAK, Seagen, are in a position to bring our own medicine to patients. In September, approximately three weeks before the PDUFA date, the FDA granted accelerated approval for TIVDAK for recurrent or metastatic cervical cancer with disease progression on or after chemotherapy. As the first and only ADC approved in this indication, TIVDAK may provide a much-needed new treatment option for patients. This incredible achievement was only possible because of the efforts of our dedicated and talented team, the excellent collaboration with Seagen and the patients, families and caregivers, as well as the nurses, physicians and study teams who participated in our clinical trials. TIVDAK was available for qualifying patients 48 hours following approval, and Genmab and Seagen are promoting TIVDAK in the USA. We look forward to providing you with further updates on the launch of TIVDAK in due course. So, now, let’s look to slide 6 and look at some of the other recent achievements in our pipeline and beyond. In addition to the exciting approval in collaboration with Seagen, we also have a broad clinical development program in place for tisotumab vedotin. Notably, data from the innovaTV 205 study, which combines tisotumab vedotin with other therapies, and then earlier line of cervical cancer was presented during an oral session at ESMO in September. Also in September, dose escalation data from the EPCOR NHL-1 study of epcoritamab, a product in development at AbbVie, was published in the Lancet. More recently, as announced, abstracts accepted for presentation. We’re very pleased that there will be multiple presentations of epcoritamab data, including preliminary results of CLL, as well as data for epcoritamab in combination with R-CHOP and in combination with Revlimid and Rituxan. Some of our other DuoBody programs will be featured later this week at the SITC conference. Presentations during this event include the first preclinical presentation of a new DuoBody program, DuoBody CD3xB7H4, and for the products we are developing with BioNTech, there will be a rapid oral on dose escalation data for GEN1042, and a poster presentation on the expansion cohort data for GEN1046. Excitingly, there are also pipeline updates for both of these programs. A Phase 2 study of GEN1046 as monotherapy and in combination with pembrolizumab in patients with recurrent or refractory metastatic non-small cell lung cancer is anticipated to start before the end of this year. In addition, the ongoing Phase 1/2 study of GEN1042 was recently updated to include multiple expansion cohorts in combination and in additional indications. These include GEN1042 in combination with pembrolizumab in first-line non-small cell lung cancer, in first-line head and neck squamous cell carcinoma, and in first-line melanoma, and in combination with pembrolizumab and chemotherapy in first-line head and neck squamous cell carcinoma and in first-line pancreatic ductal adenocarcinoma. At this time, we would also like to inform you about some further changes to our pipeline. Following the recommendation of our portfolio board, we have decided that we will not advance the development of HexaBody-DR5/DR5 and in agreement with our partner, AbbVie, DuoBody-CD3x5T4. As I stated previously, at Genmab, we have very high efficacy standards for our clinical pipelines and we are rigorous in decision-making. Our decisions are driven by data. Initial results for both programs showed that they were insufficiently competitive compared to other product candidates in a robust next-generation antibody product pipeline. With our goal of transforming the lives of patients and minds, we look forward to continuing to progress our strong clinical candidates and to bringing additional candidates into our pipeline, as we continue to create and develop truly differentiated antibody products. In this context, I’m pleased to inform you that we expect to dose the first patients of DuoBody-CD3xB7H4 imminently. The power of Genmab’s innovation is also reflected in products being developed by other companies. Just last month, Janssen received a positive opinion from the CHMP, recommending conditional marketing authorization in the EU for amivantamab for the treatment of adult patients with advanced non-small cell lung cancer with activated eGFR exon 20 insertion mutations, after failure of platinum-based therapy. If approved by the European community, it will be the first approval of a therapy created using our proprietary DuoBody technology. Further validating for the DuoBody technology is reflected in two other areas. First, multiple DuoBody products in development with our collaboration partners are anticipated to enter Phase 3 developments. These include Janssen’s teclistamab and Novo Nordisk’s Mim8, which are both published on clinicaltrials.gov. Second, as you may have recently seen, there will be data from Janssen’s teclistamab and talquetamab at ASH, including in combination with daratumumab. We’re very encouraged to see focus in various DuoBody programs and look forward to seeing data from products leveraging our world-class DuoBody technology at ASH in December. DARZALEX continues to evolve, and subcutaneous daratumumab is now the only approved therapy for AL amyloidosis in China and Japan. Sales in the first nine months of the year were also strong. J&J reported $4,378 million in net sales, an increase of 49% over the first nine months of 2020, resulting in DKK 4,157 million in royalties to Genmab. I will now turn the call over to Anthony who will discuss our revenue in more detail. Anthony, the floor is yours.

Great. Thanks, Jan. Let’s move to slide 7. As I’ve done in the past, I’ll start with an overview of our financial framework and the related key drivers. First off, let’s think about our revenue profile. At the beginning of 2020, we had just one product on the market, which was DARZALEX, and today, we have five. For me, that’s just remarkable, to go from one to five products in less than 24 months. Now, on the left, you can see our recurring revenue streams, as TIVDAK, DARZALEX, Kesimpta TEPEZZA and RYBREVANT. Taken together, we expect them to generate significant cash flows for us in the years to come. Moving to the right-hand side of the page, as always, we continue to be focused in our investments. In particular, we are accelerating and expanding the potential winners in our pipeline. We’re also investing in our commercialization capabilities for TIVDAK, ensuring we are ready to launch should epcoritamab be approved. So, with that background, let’s jump into our Q3 numbers and take a look at DARZALEX sales on slide 8. We saw continued strong performance for DARZALEX in the first nine months of the year. You can see that in the chart on the left. Overall, DARZALEX sales grew by 49%, that’s net sales of approximately $4.4 billion, which translates to DKK 4.2 billion in royalty revenue. This exceptional growth was driven by continued strong market shares, across all lines, and by the strong uptake of the SubQ formulation. So, DARZALEX remains a key driver of our revenue, as you can see on slide 9. Our recurring revenues grew by 52% in the first nine months of the year, primarily due to the higher DARZALEX royalties. We’ve already spoken about DARZALEX and the very strong performance there. Moving to Kesimpta, we’re encouraged by the nice quarter-over-quarter growth seen in the first nine months of the year. Here, sales grew by 64% in Q3 versus Q2. As you know, we didn’t report any royalties for TEPEZZA in the first quarter due to the supply chain disruption. But Horizon recommenced supply in April and reported strong sales in the second and third quarters. Here, sales grew by 36% in Q3 versus Q2. Taken together, Kesimpta and TEPEZZA generated DKK 524 million of royalties for the nine months ended 2021, compared to DKK 179 million for the same period last year. That’s growth of DKK 345 million, and this really illustrates the power of our recurring revenues. We’re also enthusiastic about the approvals of RYBREVANT and TIVDAK and look forward to seeing how sales progress for both of these. So, our revenue profile continues to get stronger with increases both, in recurring and non-recurring revenue, after excluding of course, the one-time upfront payment from AbbVie in 2020. And we’re taking our strong recurring revenues and investing in a highly focused way, as you can see on the next slide. Total operating expenses grew 38% in the first nine months of the year. Here, you can see where we invested. We continue to accelerate our investment in our product portfolio, especially the expansion of both epco and DuoBody-PD-L1x4-1BB. We’ve also continued to invest strategically in expanding our team, hiring key team members to support our growing product pipeline. And we continue to build our commercialization and broader organizational capabilities to support our expanding pipeline and increasing capabilities for our own commercial products. And finally, we’re leveraging the AbbVie collaboration by utilizing their expertise and significant financial contributions to further expand and accelerate our partnership programs. Now, let’s take a look at our financials as a whole on slide 11. Here, you can see our summary P&L. For the first nine months of the year, revenue came in at approximately DKK 5.9 billion. That’s up 60% on last year, if we exclude the one-off payment from AbbVie in 2020. Total expenses were about DKK 3.7 billion, with 79% being R&D and 21% G&A. Our operating income came in at a very strong DKK 2.2 billion. Our net financial items amount to an income of $808 million, which was primarily driven by the strengthening of the U.S. dollar against the Danish kroner on our U.S. dollar-denominated cash and investments. Then, we have our tax expense of $725 million, which equates to an effective tax rate of 24%. That brings us to our net income of around $2.3 billion. As you can see, extremely strong financial performance for the first nine months of the year. Now, let’s take a look at our guidance on slide 12. Given the continued strong numbers in the last quarter, we once again improved our 2021 guidance. We now expect our revenue to be in the range of DKK 7.9 billion to DKK 8.5 billion, driven primarily by the continued strong growth of DARZALEX. Our OpEx guidance is now in the range of DKK 5.3 billion to DKK 5.6 billion, a decrease compared to the previous guidance, driven primarily by the timing of some of our investments in R&D activities and organizational capability built. We anticipate that we’ll continue to step up our investments in Q4 and the following quarters in line with our overall strategy and key priorities. Putting this all together, we’re planning for substantial operating income in 2021 in a range of DKK 2.3 billion to DKK 3.2 billion. And now, to my final slide, let me provide a few closing remarks. In summary, we’ve had a very strong first nine months. We’ve created growing recurring revenue streams based on products with exceptional growth profiles. And that gives us a backbone of significant underlying profitability, and we’re investing those revenues in a highly focused way to realize our vision and capitalize on the significant growth opportunities in front of us. On that note, I’ll hand it back to Jan to discuss our key priorities.

Thanks, Anthony. Let’s move to slide 14. As you can see, due to events in the third quarter, we met a number of our 2021 key priorities and we anticipate meeting more of these very soon with the presentation of first-in-class, bispecific next-generation checkpoint immunotherapy data at SITC. We’re also looking forward to ASH this year. We will hold a virtual 2021 R&D update and ASH Data Review events following ASH on December 14th. Details about this event will be available on our website in the coming days. And over the past nine months, we have made great strides in our evolution into a leading, fully integrated biotech innovation powerhouse. We are looking forward to the rest of what has already been an extremely strong year. Let’s move to our final slide. That ends our presentation of Genmab’s financial results for the first nine months of 2021. Operator, please open the call for questions.

Our first question comes from Wimal Kapadia from Bernstein. Please go ahead.

Great. Thank you very much for taking my questions. So, could I just ask, there is a lot of attention on SITC on 1042, but I’m actually just curious more on the B7H4 target. First, I was unaware of it. So, just we’re seeing some preclinical data. I’m just curious to hear more, given that the expression of B7H4 is believed to be inversely correlated to PDL1. And given that combined with interesting preclinical data, how should we really think about this target and how you think it stacks up with the rest of your pipeline? And then, my second question is just on talquetamab, the GPRC5/CD3 bispecific, the ASH abstracts look quite compelling, particularly in combination with dara. So, I’m just thinking about how should we think about the profile of this molecule and how it stacks up versus some of the other BCMA bispecifics in development? Thank you.

Thanks, Wimal, for the questions. I will part the first one because I will hand that over to Judith Klimovsky, and then let me address briefly talquetamab. I mean, talquetamab is an antibody from Janssen, and they are just using our DuoBody technology platform to actually target the GPRC5D molecule that seems to be very, very efficacious. I think it’s up to Janssen to actually provide further perspective, Wimal, on how this one stacks up against the BCMA and against other targets. It’s probably not good for me to do that. But I will refer to Janssen to give more perspective, and they will certainly do that at ASH because they are very, very excited about that program, I know. The data is already flagged up together with dara looks really encouraging, the first data. So, I think they have to position this one versus teclistamab, which just got into Phase 3 last week, recording the first patient. So, let me pause there, Wimal, and hand the first question over to Judith. Maybe Judith, you can give a bit more perspective on the CD3xB7H4 program. And we will have preclinical data, Wimal, also at SITC, which is upcoming. Judith?

Can you hear me now? Yes, yes. Please go ahead, Judith. I think we cannot hear you now. I think there’s a connection issue, Judith. So, should I answer this question then? So, B7H4, Wimal, is expressed very nicely on a number of solid cancers, and also at expression level, so it makes it a very, very good target for a CD3 bispecific retargeting approach. We have some very exciting preclinical data. Some of that data will be shared with all of you at SITC. We believe it fits up very nicely versus some other targets we are working on with CD3 retargeting approaches in our preclinical pipeline. We are very excited to actually start dosing the first patient almost imminently in the coming days or weeks, for sure. Then, we will do dose escalation and see how the safety profile looks in our hands. I think there will be a lot more detail at SITC in the coming days. Maybe handing it back to the operator.

And the next question comes from the line of James Gordon from JP Morgan. Please go ahead.

Hello. James Gordon from JP Morgan. Thanks for taking the questions. One was also about SITC and the abstracts and for GEN1042 and GEN1046. Starting with GEN1042, I know there has been quite a bit of excitement about this product. But, if I read the abstract right, it looked like that 2 out of 49 patients had a response. So, it didn’t look like a very high ORR so far. But, what is it then that’s driven the excitement? Is it that there is a certain dose or tumor type or some other way in the data that looks a lot more exciting? And for GEN1046, the lung data looks good. I know there were these other nine cohorts. Have you seen data for other cohorts that do look promising for GEN1046, or should we really think about this as a drug that is for high PD-L1 expression lung cancer but probably not for other areas? But just based on this, we haven’t seen anything else in the 12 months since the last SITC. And then, sort of a question is really just timing, and for EPCOR, the abstract looks very good. But in any update on what you’re thinking on timing for potentially earliest you could file it? Could that still be potentially a 2022 filing? And J&J arbitration, could that still be maybe H1 next year we might hear anything? What’s the latest thinking on timing for that and why that’s taking longer?

Thanks, James. Sneaking in four questions, actually, and you are allowed only one. But we will answer them, all four, I can assure you. The first two, I’ll probably hand over to Judith Klimovsky, if we can. Oh, I think we have a real connection problem there. But, let me start with the EPCOR question, James. We definitely are on schedule and we’ll aim for potential filing in '22 for at least one indication. We are very much I think aligned with AbbVie and the teams to allow us to do that. So, next year will be very exciting for epcoritamab. I think the abstract data looks good. I think the actual data at ASH which will be presented will be an update to the data and the abstract, James. We very much look forward to the ASH conference this year. Then, the final question, the J&J arbitration, I cannot really provide any further comments on timing because this is up to the arbitrators. What I can tell you is that the process is in full swing. I think it’s going well from a technical side, and we very much hope that we will soon hear from the arbitrators on the potential binding verdicts there to remove this potential overhang on the company as soon as possible, and we definitely look forward to that. So, let’s see if I can bring Judith online here for 1042 and 1042.

Yes. Thank you. Can you hear me now? Yes. Perfect. Okay. So, I will start by CD3xB7H4. As we know, bispecifics have been successful in hematologic malignancies and also in solid tumors. We think that our technologies and knowledge of the target put us in a better position to try to tap this holy grail of oncology. So, in essence, B7H4 is a great target because it’s expressed in tumor cells, but not expressed in normal tissue. It’s expressed, as we alluded in the abstract, and we see more data in very common tumor types, but are unfortunately not well served today, particularly breast cancer, ovarian cancer, lung cancer, and is inversely related, as you said, with the expression of PDL-1 pre-clinically. So, we are ready to move this to the clinic in the near future. We just need to test because, as we know, bispecifics or cell therapies have been able to modify that treatment paradigm of solid tumors. So, this is the tumors that we will initially study after the dose escalation and see a signal. This is with regard to CD3xB7H4. With regard to the second question, was on GEN1042, correct? Yes. The question was basically why are we so excited, but only 2 out of 49 respond, or that is what James asked. What drives the enthusiasm, maybe a bit more color on 1042, Judith? Yes. Thank you. So, as you say, we have two confirmed PRs, one in melanoma, one in lung, but we are all overall enthusiastic about the 51% disease control rate, which is not to be disregarded, particularly taking into account the patient population which exhausted every prior line of therapy. As you know, with immunotherapy, ORR is only one part of the story. But the way that immunotherapy works is usually modifying the time to event curve, not so much on ORR. So, we are excited because given the patient population and given the CD40 target plus 4-1BB, we really expected limited activity in terms of tumor shrinkage. But the DCR, disease control rate is relevant in these tumor populations. Yes. I don’t know if there were more questions when I was disconnected. I’m sorry again.

Just one more question on 1046. We basically have good data, and lung data which will be described, of course, at SITC. And the question is, well, did we also see data in other cancers to drive our enthusiasm, or is a lung cancer-only type program?

Yes. So, you will see more data in the poster soon, which is on November 12. But just what we decided of the Phase 1 with expansion was to learn on the biology of this asset, which is so novel, particularly 4-1BB, to guide us on next step, and the totality of the data including in other tumor types speaks to the same facts that we have seen in non-small cell lung cancer. So, the totality of the data is helping us to guide us on next step, lung and not lung.

Hi. Thanks for taking the question, and congrats on the commercial progress here. Maybe two questions if I may. So, for Judith, relating to GEN1042, I wonder if you can talk a little bit more about the rationale behind the dose decision there. You mentioned that this is a little bit of sort of the Goldilocks drug, right? Just treating to the absolute max tolerable dose, potentially isn’t the right way to go here. So again, wanting to understand the rationale behind the dose decision there? And then, maybe for Jan, as you’re narrowing the pipeline here, I’m always curious what in the early-stage pipeline you’re most excited about next.

Thanks, Kennen. I would like you to consider the question regarding 1046. I can assure you that we are thorough in our decision-making related to the pipeline. We have halted two programs, the 5 program and the 5T4 program, as I mentioned earlier. The early-stage pipeline is very promising, and we are particularly excited about the Duo HexaBody-CD37 program. We expect to provide a brief update this year and present more data next year, including comprehensive dose escalation data. The HexaBody-CD38 program is also of significant interest and is progressing well. You can anticipate a brief status update from us this year regarding that, with further details on the dose escalation data next year. We plan to introduce at least two, possibly more new products into the clinical pipeline in 2022. This year holds a lot of promise for the company, not only with the potential filing for EPCOR and initial funding for it but also with the goal of advancing one or two programs into late-stage clinical development, which may include programs like 1042 and 1046 that are now on everyone's radar. Our pipeline has never been as robust as it is at this moment. It is essential to continuously evaluate and identify the true winners and potential successes, while discontinuing other programs, as maintaining focus is crucial. This focus has been key to Genmab’s success, concentrating on the right molecules and technologies to develop differentiated antibody medicines. We are improving our capabilities in this regard. The quality of the pipeline is enhancing, and while not every initiative may succeed, it is often because they do not meet our internal high standards for competitive novel products. We believe our efforts should be directed towards molecules that can bring transformational change. We are confident that epcoritamab will be transformative for B-cell cancers, and the data will support this, which we hope to share at ASH. We have mobilized significant resources at AbbVie behind this program. The pipeline is in excellent condition, and we are very satisfied with it. Let me pass it over to Judith to elaborate on the selection of doses for 1046.

Yes, thank you, Jan. We are presenting a poster at SITC on a semi-mechanistic PK/PD model where we incorporated a significant amount of preclinical and clinical data. As you mentioned, we observed a Goldilocks effect or bell-shaped curve, which guided us in selecting the 100 milligram dose as the optimal amount for trimer formation. This pertains to the interaction between PD-L1, the bispecific, and 4-1BB. Interestingly, when we applied the model along with translational data, the findings were very robust, confirming that 100 milligrams is the dose that maximizes trimer formation and enhances the agonistic effect for 4-1BB. We are very confident in the dose selection, which is supported by numerous data points used in the model.

Thanks, Judith. Hopefully, that pleases you, and then more to come at SITC in a few days. Back to the operator. Thanks, Judith.

And the next question comes from the line of Jonathan Chang from SVB Leerink. Please go ahead.

Hi, guys. Thanks for taking the questions, and congrats on all the progress. First question on the epco ASH abstract and relapsed/refractory CLL. I’m curious to get your thoughts on what the appropriate benchmarks are in this late-line CLL setting. What kind of data would you need in this later-line study to support development in earlier-line CLL setting?

Thanks Jonathan for the question. I will hand it over to Judith. Maybe Judith, you can give some perspective on benchmarks for the very heavily pre-treated CLL for patients as we included in the first epco study.

Thank you for the question. The answer depends on both the previous lines of therapy and the types of agents the patients received, especially whether they have already used BTK inhibitors and Venclexta. The patients we enroll tend to be heavily pretreated, with most having received BTK inhibitors and having poor biological prognostic characteristics, such as 17P deletions. Unfortunately, this sets a low benchmark for these patients, so achieving any level of remission and maintaining it becomes crucial. It's not just about one single factor; as you know, factors come into play later on. Therefore, response, durability of that response, and tolerability are all important considerations.

The next question comes from the line of Michael Schmidt from Guggenheim Securities. Please go ahead.

Hey, guys. Thanks for taking my questions. I had two questions. Another one on 1046, I think I heard you say that you’re planning a Phase 2 study in combination with pembro in relapsed-refractory non-small cell lung cancer patients. I’m trying to understand the rationale given that the bispecific antibody probably already blocks the PD-1 interaction. I’m just curious how much added or synergistic efficacy one would expect there and why. And then, the second question was on epcoritamab. I know you have the R-CHOP combo Phase 1 data at ASH. I was just curious how you think Roche’s POLARIX result may potentially affect your plan to move epco into first-line DLBCL down the road. Thanks so much.

Thanks, Michael for the questions. I think I will hand them over to Judith and then see whether I can add further perspective there. Maybe Judith, you can address both, the 1046 question and the epco R-CHOP question.

So, let’s start with 1046. As you have seen in the abstract, there are very important biological observations. In 26 patients that had tumor more samples to assess PDL-1 presence, those that were PDL-1 positive that were only 10 tumor samples from 10 patients, 7 had a tumor shrinkage. On the converse, 16 patients or tumor samples belonging to patients that were PDL-1 negative, most of them, like 12 out of 16 had no tumor shrinkage. There is a clear association between PDL-1 presence and the activity of this compound. We also show in the PK/PD model that the receptor occupancy for PDL-1 is not optimal, which is 100%. With PDL-1 4-1BB, because I said before that dose was selected to optimize the agonistic effect. We leave PDL-1 30% without inhibition. We know from other PD-1, PDL-1 inhibitors in the market that for them to be fully active, we need like 100% of receptor occupancy. These plus the fact that as we show in the abstract, the activity that what we saw in the expansion is much higher for those patients that were treated with the PD-1, PDL-1 inhibitor in the last eight months, and the receptor occupancy is still there than the patients that didn’t, gives us the rationale that combining with a PD-1 inhibitor is the right next step to optimize the potential benefit of 1046.

Then maybe the epco question, well, how the POLARIX may impact or diffuse large B-cell lymphoma front-line development strategy, Judith?

Yes. Thank you. We will hear more details on the POLARIX data at ASH. We only hear what everybody knows, like the high-level results. Based on the actual data, we will assess whether expanding more our clinical development plan or amending if necessary, and we will react accordingly. We are waiting for more results to understand how this could impact our clinical development plan.

And the next question comes from the line of Sachin Jain from Bank of America. Please go ahead.

I’ve got a couple on 1042 and 1046, if I may. So, on 1042, Jan, I think the introduction listed a bunch of combination studies with KEYTRUDA or KEYTRUDA chemo combination. If I heard you correctly, the lung is a bit tough. And so, I just wondered what combination data you have that are supporting those combinations studies versus the mono data we’ve seen in the abstracts. The second question is, you very clearly commented on ORR and why we should focus on the disease control rate? I wanted you to comment on the second aspect that has been investor focus, which is the one grade 4 liver event? And how you think about that? And any further data you got on liver-tox there? The second question was on 1046. You referenced further development. I think your partner BioNTech said that the Phase 2 study was going to start in 4Q '22, next year. So, just wondering what’s taking so long for that study start? And then, I had a clarification question on what’s coming at SITC. It seems from Judith’s answer that we will be getting updated lung data and updated data on other cohorts, rather than just markers of response in lung, as we saw in the aspects. So, I just wanted to clarify that.

Thanks, Sachin. So, 1042 and 1046 are very popular, for sure. That keeps Judith quite busy. So, I will hand over both questions to you, Judith, and then I see that I can add. Maybe start with 1042 and the combi data, what events we have preclinically I think is probably the right angle here.

Thank you, Jan. As mentioned, we have very compelling preclinical data regarding the synergy between 1042 and pembrolizumab. The combination cohorts of 1042 and pembro are listed on clinicaltrials.gov, and I am happy to say we are actively enrolling participants. We anticipate having actual clinical data on this combination in the coming months. This is progressing well. Regarding 1042, there was also a question about liver toxicity or toxicity in general. Overall, 1042 is very well tolerated, with most safety events classified as grade 1 or grade 2. We observed a 10% increase in AST/ALT levels in 10% of patients, and only 6% experienced grade 3 or higher events, which amounts to two patients. We are monitoring these cases, but so far, they appear to be manageable. The percentages are within what we consider a very well-tolerated range. This is all concerning 1042. Are there any other questions about it that I might have overlooked?

No. I think you can move to 1046. And the timing of the Phase 2, I think that caused some confusion, I think caused by our friends at BioNTech.

So, we are expecting to finalize a randomized Phase 2 to assess more data. We have some expansions ongoing in different combinations or in different settings that will guide us on the next steps on the randomized Phase 2. Everything is moving. So, we are waiting for data sets coming from the current expansions to guide us for the activation of the randomized Phase 2, which will occur next year.

Thanks, Judith. And then, maybe some comments on the data from other cancers within 1046 at SITC, maybe a bit on what type of data basically?

Yes. Thank you. I mentioned earlier that the data presented in the poster is consistent with the biological signals we observed for non-small cell lung cancer. This includes PD-L1 expression and developing a biological rationale for our next steps, which encompasses non-small cell lung cancer as well as other tumor types.

Thank you. Can I ask a cost question please? So, obviously, a key element of the guidance raised for this year was a change in the cadence of spending. I’m very interested in how the change in cadence of spending is then going to run into 2022. Jan, you’ve outlined a raft of new trials, which are starting. Clearly, you have a lot of commercial opportunity in terms of setting the scene for your early portfolio and the launch. Any comment on how we should anticipate the cadence of costs going into ‘22 would be very helpful. Thank you.

Thanks, Matt, for the question. I will hand it over to Anthony Pagano. As you know, he will give guidance in February next year. But, maybe let’s see whether Anthony can provide a bit more color for you, Matt. So, Anthony, please go ahead.

First of all, you’re right. With the expense run rate for the first nine months, costs were a bit on the low side relative to our previous full-year guidance. Our revised guidance and range of DKK 5.3 billion to DKK 5.6 billion in OpEx, as you’re kind of pointing out, is due really to timing of our investments for certain R&D activities and overall organizational capability we have built. The R&D expenses were impacted really around phasing of costs related to various pipeline programs. So, here for me, it’s really a matter of timing, and we expect costs related to our R&D activities to ramp up in the coming quarters. Again, but it’s important to understand, this is really aligned with our overall strategy and our key priorities, and we’ll continue to be focused and disciplined as we move forward. As a reminder, Jan alluded to this, for epco together with AbbVie, we are planning to start a number of late-stage trials in the coming quarters. On SG&A, our focus in the short-term is really on the launch of TIVDAK and also preparing for potential epco launch. It’s important here to highlight that this will also entail additional investments in building the commercialization infrastructure and pre-launch activities. So overall, the revised ‘21 guidance on OpEx primarily reflects shift or phasing. I think Matt, the key takeaways is that we have a wonderful business, a solid set of technologies, an exciting pipeline, and we’re evolving to become this fully integrated biotech. We’re starting off with TIVDAK. We’re super excited about the opportunity there. Moving forward, we are all eyes and we’ll be super focused on epco as we move forward, both from a development as well as a commercialization readiness perspective. More to come in terms of our exact business plan activities and our guidance, ultimately here for 2022 as we move forward, particularly around our ‘21 earnings release in February.

I’ve got just two left. Firstly just on 1042, wonder if you just talk a little bit about the selection of the dose for that molecule? You talked a bit about 1046. 1042, are you also looking to optimize the transformation and also the agonistic effect for 4-1BB? Or are there other factors to bear in mind for this? Can you just talk a little bit about how you got to the recommended beta test for the expansion cohorts? And then, secondly, just with regards to the J&J DuoBodies. It might just be an omission and for simplicity’s sake. But it looks as though, according to your pipeline chart that other than teclista and talquetamab, I said this right, so, the other programs like CD3, CD33, PSMA, are now omitted; they are in the clinic. Is that just the simplicity, or has J&J decided to focus its DuoBody collaboration now on teclistamab and talquetamab in the remaining programs? Thank you.

I hand over the both questions actually to Judith, and then see where I can add on the J&J question. Judith, maybe on 1042, a bit more color on the dose selection and the dose finding?

In the case of CD40, 4-1BB, both are agonistic targets, and both have what we call the goldilocks effect. We did a model based on PK/PD. The dose of 100 milligrams is the dose that optimizes the trimer formations for both targets, CD40 and 4-1BB. We are confident that this is the dose. This is why we didn’t even escalate till MTD, because we have the optimal biological dose at 100 milligrams. So, we feel very confident with the dose. The second question was regard to the J&J DuoBody platform. This was a question on other assets? Yes. I mean, what we know is what is in the public domain and the assets that have data in the public domain make us excited about, for sure. Amivantamab, teclistamab and talquetamab. They are early on, and there is no too much in the public domain for us to be excited about.

Exactly, Peter. So, they’re still in the clinical development; some of them are post recruiting, others are basically recruiting as we know standard that we actually decided to focus on the more interesting, exciting ones that either moving into Phase 3, like teclistamab or are already on the market, like amivantamab, and also in Phase 3 and talquetamab is triggering a lot of enthusiasm right now; it’s in Phase 2 and probably also will move to further lines of clinical developments soon.

Our last question comes from the line of Asthika Goonewardene from Truist Securities. Please go ahead.

I’d like to start off, maybe one to Judith. On GEN1042, two-part question here. Is there any rationale for this drug in the monotherapy setting, or is this largely going to be a combination? And then, also on GEN1042, will you be looking at serial biopsies? What do you expect to see in terms of T-cell infiltration into the tumor microenvironment? And I’ve got a couple of follow-ups.

Thanks, Asthika, for the questions. And Judith, I think I will keep you busy today. So, these will both be for you.

Thank you for the question. We think that GEN1042 should be developed in combination because of the biology of CD4 and 4-1BB. We are adding combinations early on. I said we are already enrolling 1042 plus pembro and there are two other cohorts in clinicaltrials.gov in combination with chemo plus/minus pembro. The biology of these compounds needs something else, and this is why we are adding to the combination. Your second question is a great question. One of the cohorts in 1042 is a melanoma cohort with a very heavy translational research component. Part of it is paired biopsies that will allow us to understand in-depth the integration of the tumor with lymphocytes and other pharmacodynamic markers of activity, which are really relevant because of the novelty of the target. As we put in the poster and put in the abstract and you will see more data in the Phase 1, we’re able to modulate a TARC, which is very important because that means that this compound is really targeting CD40 and activated dendritic cells, which is what we want from 1042. More to come as we gather more data that the biological rationale and premise behind the compound is being shown in the Phase 1 and with the pharmacodynamic markers, and we are including these in the abstract and you will see more in the poster.

Great. Thanks for taking my question, guys. Thank you. Thanks, Judith. Operator, are there any further questions?

There are no further audio questions. I’m handing back to you.

All right. So, thank you for calling in today to discuss Genmab’s financial results for the first nine months of 2021. If you have any additional questions which later come up, please reach out to our Investor Relations team. We hope that you all stay safe and remain healthy and optimistic. We very much look forward to speaking with you again soon.

This concludes the conference call. Thank you all for attending. You may now disconnect your lines.