Genmab A/S Q1 FY2023 Earnings Call

Hello, and welcome to Genmab's First Quarter 2023 Financial Results Conference Call. This call is being recorded. During this conference, we may discuss forward-looking statements that use terms like believes, anticipates, plans, or expects. Actual results may vary significantly, for instance, due to delayed or unsuccessful development projects. Genmab is not required to update future statements or confirm them against actual results unless legally mandated. Additionally, Genmab may retain your personal data for the purpose of Investor Relations outreach to keep you informed about future developments. For more information on Genmab and our privacy policy, please visit our website. I will now turn the call over to our first speaker today, Jan van de Winkel. Please go ahead.

Hello, and welcome to Genmab's conference call to discuss the company's financial results for the period ending March 31, 2023. With me today to present these results is our CFO, Anthony Pagano. 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. 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. Before we look at our first quarter results, I want to remind you of our consistent track record of success. Our proprietary technologies fuel our robust product engine, which is both expanding and maturing. By the end of this year, there is the potential for 8 approved medicines powered by our innovation, half of which would be DuoBody-based bispecifics. This is validation of the DuoBody technology's potential to create truly differentiated bispecific antibody therapeutics, and our growing recurring revenue streams allow us to continue to invest in our pipeline and in our people. Our world-class team of experienced and dedicated colleagues drives our innovation motivated by the passion for making a difference in the lives of people living with cancer and other serious diseases. Let's now turn to recent accomplishments that will support our future success. Slide 5. In the first quarter of the year, we continue to lay the groundwork for the potential approval of epcoritamab, and we are very excited for the potential upcoming launch and the opportunity to serve patients with third-line plus diffuse large B-cell lymphoma. The Alliance steel teams across sales and marketing, medical and market access are all in place and have been fully prepared for the launch. And our patient services team is also in place and fully ready. We are actively engaging with the FDA and look forward to the future enhancement at May 21 PDUFA date. Pending approval, we anticipate epcoritamab will benefit third-line plus diffuse large B-cell lymphoma patients, where the level of unmet need remains high. This indication will be the first that will enable epcoritamab to become the potential core therapy across the diffuse large B-cell lymphoma, follicular lymphoma and beyond. As part of our effort to deliver epcoritamab to relapse or refractory diffuse large B-cell lymphoma patients together with AbbVie, we launched our first pre-approval and expanded access program. This program provides access to epcoritamab to a lot of our patients in the U.S. and Europe prior to potential regulatory approvals. Looking beyond relapse refractory diffuse large B-cell lymphoma together with AbbVie, we are committed to a robust clinical development program, evaluating epcoritamab in a variety of patient populations and treatment settings. This includes frontline diffuse large B-cell lymphoma, and I'm just very pleased to say that in February and March, the first patients were dosed in 2 frontline diffuse large B-cell lymphoma studies. The Phase III EPCORE diffuse large B-cell lymphoma II study in combination with R-CHOP and the Phase II EPCORE diffuse large B-cell lymphoma III study with or without lenalidomide in elderly patients. Turning to recent and upcoming data presentations. Multiple epcoritamab abstracts were accepted for presentation at ASCO, including an oral presentation of data from one of the arms of the EPCORE NHL-2 trial, looking at epcoritamab in combination with rituximab and lenalidomide in patients with high-risk relapsed or refractory follicular lymphoma. We and our partners also had several abstracts accepted for presentation at last month's AACR meeting. These include data from an interim analysis of Part C from the Phase II innovative 207 study of tisotumab vedotin and head and neck cancer or small cell carcinoma of head and neck. Though the number of patients including this in this initial data was small, just 15, the results demonstrated encouraging preliminary antitumor activity and an acceptable safety profile, highlighting tisotumab vedotin potential in solid tumors beyond cervical cancer. Regarding programs followed by our innovations, DARZALEX continues to redefine the treatment of multiple myeloma. As you've seen, J&J's net sales for daratumumab were up 22% over the first quarter of 2022. And that is generating almost DKK 2 billion in royalties for us, contributing materially to our robust financials. This brings me to the initial resolution of our second arbitration with Janssen relating to our daratumumab license agreement. As we announced last month, the arbitration panel dismissed our claims, though 1 of the 3 arbitrators dissented. Subsequently, we announced our decision to file a request for a review of the awards. And as the arbitration is confidential, we do not intend to comment further, and we look forward to our continued collaboration with Janssen. I would also like to acknowledge the appointment of Martine van Vugt to Chief Strategy Officer. Martina has been an integral part of Genmab almost from the beginning. In a new role, she will be responsible for overseeing the key areas of corporate strategy, corporate development, business development, and licensing and alliance management. Martine's addition to executive management further strengthens our already exceptional team and will help us to effectively deliver on our 2030 vision. Finally, I would like to bring to your attention an announcement in March from Lundbeck, Japan. Lu AF82422, which was created by Genmab as part of an agreement at Lundbeck, has been granted pioneer drug designation for the treatment of multiple system atrophy in Japan. And this designation provides further support for the potential of our innovative antibody therapeutics outside of oncology. Let's move to Slide 6. When we revealed our updated vision last year, we noted that while we would continue our commitment to antibody therapies for oncology indications, we would also look to move into an additional therapeutic area where our antibody expertise could make an impact. I'm very pleased to announce that we are entering the therapeutic area of immunology and inflammation as a stepping stone to achieving our inspirational 2030 vision. As we announced in April, we entered a multiyear collaboration with Argenx to jointly discover, develop and commercialize novel therapeutic antibodies with applications in immunology as well as in oncology. By partnering with Argenx, we will be able to combine our company's deep knowledge of the biology and therapeutic power of antibodies and have an opportunity to address patient needs in oncology as well as in immunology and inflammation. We look forward to a successful partnership with Argenx and to providing you with updates on the progress of this collaboration once we are ready to bring new product candidates to the clinic. This, of course, will take some time. I'm pleased to now hand over the call to Anthony to take you through our Q1 2023 financial results. Anthony, the floor is yours.

Great. Thanks, Jan. We continue to strengthen our foundation in Q1. And of course, top of mind for everyone is the potential FDA approval of EPCORE later this month. As we'll see, our financials remain strong. Recurring revenues grew by 33% in Q1. This was principally driven by strong royalties from DARZALEX and other approved medicines. Our solid balance sheet, growing recurring revenues and significant underlying profitability allow us to continue to invest in our business and our pipeline in a very focused and disciplined way. And an important part of this has been to continue to build the team and capabilities that we need to succeed. So let's take a look at those revenues in a bit more detail. We saw robust performance for DARZALEX in the first quarter of 2023. As you can see in the chart, overall, net sales grew by 22%. That's net sales of over $2.2 billion, which translates to almost DKK 2 billion in royalty revenue. This growth was driven by continued strong market shares, including strong adoption of the subcu formulation. For our royalties, we benefited from a higher effective royalty rate and an FX tailwind. And this is partially offset by a negative contractual hedge rate adjustment. So as you can see, DARZALEX remains a key driver of our revenue. We grew total revenue to nearly DKK 2.9 billion in Q1. And as I've already highlighted, that included a 33% increase in our recurring revenue. And here, to be clear, that's on a reported basis. Excluding some FX tailwinds, recurring revenues grew by 28% on an operational basis. This strong growth was driven by DARZALEX and Kesimpta, but was partially offset by lower TEPEZZA net sales, which according to Horizon were negatively impacted by seasonality. Now taken together, this growth really illustrates the power of our recurring revenue. In line with the significant growth opportunities, total OpEx grew 51% in Q1. In R&D, we've accelerated our investment into our product portfolio, especially the advancement and expansion of EPCORE and, of course, other pipeline projects. We've also further strengthened our team to enhance our commercial capabilities and support our expanding pipeline. And of course, that includes the potential launch for EPCORE. Now let's take a look at our financials as a whole. Here, you can see our summary P&L for Q1. Revenue came in at nearly DKK 2.9 billion. That's up 35% on last year. As mentioned previously, that's favorably impacted by a small FX tailwind. Total expenses were about $2.4 billion, with 72% being R&D and 28% SG&A. And here, even with the increased investment, we're still delivering over DKK 430 million of operating profit for the quarter. Moving to our net financial items. Here, we have a loss of around $150 million, which was primarily driven by 2 partially offsetting items. First, we've got the weakening of the U.S. dollar against the Danish krone in Q1, and this is negatively impacting the value of our cash and investments. On the other side of the ledger, we have an increase in interest income due to higher effective interest rates. Then we have tax expense of $60 million, which equates to an effective tax rate of 21.2%. And that brings us to our net profit of over DKK 220 million. So as you can see, very solid financial performance to start the year. So with that, let's take a minute to revisit our robust financial framework. First off, our revenue profile on the left. There are currently 6 products on the market that are generating significant recurring revenues, and we see a clear path to potentially expand a number of approved products with the potential approvals for EPCORE and Janssen's talquetamab. Taken together, we expect significant cash inflows in the years to come. Now moving to the right. We remain focused in our investments as we evolve our organization for continued success. At the top of the list is accelerating and expanding EPCORE, but that's just one of the exciting opportunities that provide us with a compelling rationale for increasing our investment. As we've told you before, if we want to seize these meaningful opportunities, we've got to invest, and that's exactly what we're doing. So with that background, let's now take a look at our guidance. To start, we're on track to meet the financial targets that we outlined back in February. As a reminder, note these projections are based on an assumed U.S. dollar-Danish krone exchange rate of 6.8. If we look at our revenues, we're off to a strong start with marketed products that are generating significant recurring revenues. So we continue to expect our revenue to be in the range of DKK 14.6 billion to DKK 16.1 billion. And most of this is made up of recurring revenue, where we're expecting 25% of operational growth. And as I just noted, for Q1, we're at 28%. For operating expenses, we expect to be in the range of DKK 9.8 billion to DKK 10.6 billion. As I previously highlighted, this step-up in investment is fully in line with our strategy and our focus on creating long-term value. Putting all this together, we're on track to deliver another year of substantial operating profit in a range of DKK 3.9 billion to DKK 6.2 billion. So with that, let me provide a few closing remarks. In summary, we've had a very solid start to the year. We've created growing recurring revenue streams, and that gives us a strong backbone of significant underlying profitability, and we're investing those revenues in a highly focused way to realize our vision and to capitalize on the very significant growth opportunities in front of us. And on that note, I'm going to hand you back over to Jan.

Thanks, Anthony. In the first quarter of 2023, we continue to work towards our 2030 patients, where our KYSO antibody medicines are fundamentally transforming the lives of people with cancer and other serious diseases. As we near the PDUFA date for epcoritamab, we are enthusiastic about its potential launch. We are also looking forward to working with AbbVie to continue to expand EPCORE development with new studies. We are collaborating with our partner Seagen to establish Tivdak as a clear choice for patients with metastatic cervical cancer. And together, we will continue to broaden the tisotumab vedotin clinical development program. We also look forward to data from the clinical expansion cohorts and progress to the next steps of both DuoBody molecules targeting 4-1BB that are in development with BioNTech. We anticipate expanding and advancing other early-stage programs, including the potential for multiple INDs or CTAs this year. Fundamental to our success is having the right team and culture in place. We intend to continue to scale our organization on our planned portfolio development and business needs. Finally, we will continue to leverage our solid financial base to support our growth. We have a lot to look forward to in the coming months. So that ends our presentation of Genmab's financial results for the first quarter of 2023. Operator, please open the call now for questions.

Your first question comes from the line of Michael Schmidt.

As we head closer to the epcoritamab PDUFA date here later this month, could you just talk about your expectation for potentially required inpatient monitoring around EPCORE and hospitalization that may be required, how that might affect commercialization? And any other expectations as we sort of look forward to seeing the FDA-approved label for the therapy? And then secondly, could you just remind us of your go-forward plans for filing in other indications this year, perhaps, for example, in follicular lymphoma or other cancer types?

Thanks, Michael, for the questions. I can handle both. With regard to the potential label and hospitalizations, that is, of course, a question for the authorities for the FDA. We are actively discussing with the FDA how to ensure both safe and appropriate use of EPCORE. And I can tell you that, actually, you will see it from the label discussions what the outcome will be as it relates to hospitalization. I think we're in very productive discussions with the authorities, and it's up to them to decide, and then we'll come back to that once we hear the label. But we are very pleased with the progress of the discussions, and we look forward to basically the coming weeks, Michael. I think it will be exciting times. And as it relates to further submissions, definitely the follicular lymphoma data will come this year. And we are fully scheduled to actually submit based, of course, on positive data from the study to the regulatory authorities and potentially in different territories this year. I will give you further updates, Michael, during this year once we have the data.

Your next question comes from the line of Jonathan Chang.

On the appeal of the second arbitration resolution, are you able to provide any color on how we should be thinking about time lines and your level of confidence on the outcome? And then second question, maybe just more specifically on GEN1047. Can you discuss how the study is progressing and when we might see the initial clinical data from this program?

Thanks, Jonathan, for the questions. Unfortunately, we cannot give you too much information on the appeal. We definitely will file an appeal to the second arbitration. The timeline should still allow for a verdict on that appeal this year and probably after the summer, immediately after the summer. But it's, of course, up to the arbitrators, Jonathan. It's inherently uncertain what the exact timing will be, but we hope definitely for an outcome this year. And levels of confidence, we believe that we are adequately and morally on the right side of the line. And actually, we believe that the awards from the first arbitration is very, very clear and that as we understand it will lead to the conclusion that actually the subcutaneous formulation of DARZALEX is a separate product according to the contract, and that is exactly what you will ask the arbitrators in the second arbitration to judge on. And I think we are confident that we're doing the right things. But in the end, it's down to the legal system. I cannot give you any further feedback on that. Then for 1047, we are still doing dose escalation. It's going well. And once we have the whole dose escalation data set enhanced, Jonathan, we will actually present the data as we usually do now for all of our early-stage clinical programs. We want to collect all of the data for the dose escalation, and then we'll actually present at a medical conference and also flag it up to the outside world. So it's going well, and we are progressing with the dose escalation. That's all I can say at this point.

And the question comes from Peter Welford.

I have three quick questions, if that's okay. First, regarding epcoritamab in third-line follicular lymphoma, could you outline what you believe might be necessary to support a regulatory filing this year? Specifically, I'm interested in response rates, complete response rates, and the duration for which these responses are sustained. Can you share your thoughts on the minimum amount of data needed to approach the regulators, particularly the FDA? Secondly, about the Argenx deal and immunology in general, should we view this as a significant move into the immunology space for your company? Will there be additional smaller deals that focus on various targets and technologies you might acquire? Or should we anticipate possibly another larger deal in this therapeutic area? Finally, regarding the 1042 and 1046 studies, do you have any updated insights on when we might expect data, specifically whether it could be available by the end of this year or next year concerning the dose escalation expansion cohorts?

Thanks, Peter, for the questions. For the third-line follicular lymphoma data, I don't think we have discussed the bar that you want to hit basically with epcoritamab, but it will definitely be at the level of the overall response rate and the duration. So we are very excited about what we see in the various follicular lymphoma settings, both monotherapy, as in combination, as you know, from last year as we had spectacular data. I think the data actually gets better and better, but we haven't seen the readout on the third-line plus cohort yet. Once we see that readout, we will definitely present the data and also actually discuss them with the regulators in both U.S. and Europe, potentially as well in Japan. But we haven't given the bar we're aiming for publicly at this moment. Then as it relates to the Argenx deal, that is indeed a first step into the immunology and inflammation field. And we intend to indeed broaden that a bit further, activity of the company, both organically and inorganically. Organically by getting access to targets, we want to actually use our proprietary technology platforms for, to create better differentiated antibody-based medicines. But also potentially involving inorganic-type deals, as we said publicly, where we can bring in either technology in immunology and inflammation field, proprietary technologies, which we think will complement our suite of technology platforms or perhaps even product candidates into our pipeline to accelerate or move into the immunology and inflammation fields. Separate from that, we already have a number of preclinical programs active with our entirely Genmab programs, where we already are creating or have created the clinical candidates in our preclinical pipeline. We will actually update you further, Peter, once we are ready to move into a CTA filing or an IND filing. So we will progress at multiple fronts. The activity profiles get broader and broader in the immunology and information field. We are very serious about that therapeutic area. Hence, the Argenx deal was simply the first step into strategically working with a leading company with a similar science-based focus and purpose-driven approach as we have, which we know very well. And actually working already on 2 targets, one for immunology and inflammation, one for cancer in a 50-50 strategy, but there may be other partnerships following basically further bolstering our questions in immunology and inflammation field. So more updates are likely to come in the coming time. Then 1042, 1046. We are very rapidly progressing now with recruitment in different arms for 1042, 1046. And you will see data likely in the second half of this year for both programs, hopefully allowing us to move forward to late-stage clinical development, potentially even for both bispecific programs. So we continue to be very, very impressed by the profiles of both bispecific antibodies, but we need more data, also to have productive discussions with the regulators. Because ideally, Peter, we will first share the data that the regulators already have feedback on the potential move to potential late-stage development and then present the data at a medical conference. There's a number of medical conferences in the second half of '23. This, I think, would qualify for some of these datasets. There are multiple datasets being worked on for 1042. We are working on frontline melanoma, lung cancer, head and neck cancer, and pancreatic cancer, added together with pembro, pembro plus chemo depending on what the standard of care is. And you will probably not see all of the cohorts this year. Some of the cohorts will likely come next year because some move more quickly than others and generating more robust datasets. And for 1046, we have also multiple cohorts we are recruiting as we speak, and I can tell you with positive data in several of the cohorts. But not all of this data will likely become available this year, Peter. We'll probably do that once we have enough data to allow us to draw a conclusion on potential next steps in those lines of treatment, in those cancers. But we are getting more and more enthusiastic about these programs, and I think the second half of this year will be the beginning of a data-rich era for these programs.

Your next question comes from the line of Emily Field.

Maybe just some logistical questions around epcoritamab. Assuming approval on May 21, how quickly after that do you expect to be launching? And then when do you imagine that you would start disclosing revenue or kind of early launch metrics following, hopefully, an approval? And then another question on the Argenx partnership. It sounds like that, that sort of could produce either immunology-targeting assets or oncology-targeting assets. Is that the right way to think about it? And it's more just combining complementary technologies? Or should we think about this really as you are towards producing immunology assets?

Thank you, Emily, for your questions. Regarding epcoritamab, we are hopeful for a quick approval from U.S. authorities, ideally before May 21, although that is a weekend. Our team is prepared to launch immediately after receiving approval. However, the timeline for the launch will depend on the feedback and discussions we have. I anticipate it could happen within a few weeks. In terms of revenue reporting, we expect to provide some insights in Q2, though the details may vary. I will update you on the initial launch's progress. We are receiving positive responses from hospitals and doctors, and we are already in talks with healthcare providers about the drug's positioning and necessity. We feel encouraged by the enthusiasm surrounding it, and we plan to offer more detailed updates in the latter half of this year, assuming we receive approval in the U.S. As for Argenx, this partnership focuses on combining our non-overlapping proprietary antibody technologies. Together, we aim to explore pathways for both immunology and oncology. We're actively working on one target in each area. This collaboration will benefit the pipelines of both companies in cancer and immunology. The expenses and potential gains will be shared equally. We are already developing concrete programs together and believe there is great complementarity. Genmab has extensive experience in cancer models, while Argenx boasts excellent immunology expertise. This partnership will enhance both ongoing and new efforts for our companies. We are very excited about this strategic alliance, as it aligns well with our scientific goals, and we believe it will positively impact our future.

Your next question comes from the line of Asthika Goonewardene.

I want to just maybe touch on the question on Argenx. Just want to clarify something. You said you already have one oncology asset that you're sort of working on right now. If it goes into a full provision and maybe to market, is there a scenario that Argenx will actually act under and co-promote this product with you, given that they don't really have much of an oncology franchise? And then I wanted to back up on the question on 1042 and 1046 and make sure I heard this right. Did you say that by the end of the year that you're optimistic of the path forward for both those assets to go forward? Just want to make sure I had the right because I think there was some understanding that it might have been one or the other. So I just want to clarify that, too.

Thank you for the question, Asthika. Let me address the Argenx partnership first. We have clearly defined who will lead various programs. For cancer products, Genmab will likely take the lead on commercialization, while Argenx can co-promote. Similarly, in the areas of immunology and inflammation, Argenx is expected to lead commercialization initially, but Genmab will also have the opportunity to co-promote on a 50-50 basis. The agreement outlines that the lead will typically rest with one party, yet both companies can choose to enhance their commercialization efforts in areas where they are not currently very active. Regarding programs 1042 and 1046, we hope that at least one, if not both, can progress to late-stage clinical development. Both programs are performing well, although more data is needed. The data we are looking for encompasses not only response rates but also the depth and duration of responses across different cohorts for both bispecific approaches. There is a strong possibility that both could advance based on the data, but this is completely dependent on the data itself. We will allow the data to guide our decisions, including sharing it with regulators and receiving feedback on potential next steps.

Your next question comes from the line of Matthew Phipps.

One on Tivdak. Just curious how much more data you would want to see in head and neck to make a decision on moving that forward and the rationale for a different dose in head and neck versus cervical. Is that exposure or safety-related? And then kind of lastly, if the pending Seagen acquisition makes it a little bit more difficult to come to these joint decisions on Tivdak development near term?

Thank you for the questions. Regarding Tivdak, the data we have is very encouraging. It is early data related to head and neck cancer in the second-line setting. We have gathered more data since our last presentation, and the trends are consistent. We will continue to collect additional data before deciding on the next steps in collaboration with Seagen. It's important to note that the dosing frequency in this study is slightly higher than what is labeled for cervical cancer. This approach allows us to deliver a higher concentration of the medication to patients while still maintaining an acceptable safety profile. We are optimistic about these results and expect to gather enough data in the coming months to make informed decisions. We have solid plans in place with Seagen moving forward. Additionally, we've learned that Pfizer, a potential acquirer of Seagen, is excited about the data we've presented. We have already engaged with some Pfizer colleagues, and if the acquisition proceeds, there seems to be substantial enthusiasm around advancing Tivdak for second solid cancer indications beyond cervical cancer. In the second half of this year, we anticipate seeing frontline data concerning cervical cancer as well as various combination regimens. The emerging data here also looks promising. Overall, we are hopeful that, together with Seagen or possibly under new ownership, we can not only progress with second-line head and neck cancer this year but also explore further advancements in cervical cancer and potentially first-line head and neck cancer later. We are encouraged by the strong profile of Tivdak, which exhibits high potency and manageable safety, giving us confidence in its potential to become a more impactful treatment moving forward with Seagen and the prospective new owners.

Your next question comes from the line of James Gordon.

I have two questions. First, regarding CD38 and competition, could you remind us what percentage of DARZALEX sales comes from refractory patients? Some analysts are concerned about the competition. Do you anticipate any impact on DARZALEX over the next few years as it transitions to earlier treatment lines? Assuming competition arises in the frontline around 2027, how significant do you think the headwind will be, especially considering past manufacturing and administration challenges? Additionally, with new therapies like CAR-T emerging in multiple myeloma, could this influence the interest in HexaBody CD38, as there are potentially more promising options available? My second question pertains to M&A. Regarding your ability to develop ADCs in-house, do you have the necessary resources, or will you seek to acquire new links or payloads to expand in this area? Lastly, regarding immunology deal-making, are you finished searching for a larger partner, or is there still a possibility of pursuing an immunology deal with another large-cap pharmaceutical company alongside Argenx?

Thanks, James. I believe we have more than two questions, so let me address them in order. First, regarding DARZALEX and CD38 competition, I should start with the data related to the second line. In the U.S. in March, 40% of patients were treated with DARZALEX, along with 39% of new patient starts in the front line. In the second line, 53% of patients are using DARZALEX, and the same applies in the third-line setting. There is a significant usage in combination therapies. It's evident that DARZALEX serves as an excellent combination drug, not just for bispecifics like TECVAYLI and potentially soon talquetamab, but also for combinations with CAR-T therapies. Janssen is already conducting a Phase III trial that combines CAR-T with DARZALEX. Therefore, I don’t foresee substantial competition for the CD38 position. As for your question about Johnson being interested in HexaBody CD38, I believe they would be for several reasons. If HexaBody CD38 proves to be significantly more effective than DARZALEX in clinical settings, it could serve as a great next-generation combination partner for various myeloma treatments. Additionally, considering the complexities of IRA legislation, Janssen might consider transitioning from DARZALEX to next-generation CD38-targeted therapies. Thus, I anticipate interest in this area will increase rather than decrease. We're currently conducting a head-to-head trial against subcutaneous DARZALEX, as mentioned in our Q1 report, and I expect that with more data next year, interest will grow rather than wane. We don’t have significant concerns about DARZALEX competition; it has established itself as a core therapy and backbone treatment in multiple myeloma, not only with current agents but also with new bispecifics and potentially with CAR-T therapies. Moving to your second question about M&A and ADCs, we have numerous deals in place for ADCs, including collaborations with Synaffix and AbbVie. We also have access to immune activators through our relationship with Bolt Therapeutics. There are several ongoing early-stage deals related to building blocks and components for next-generation antibody therapeutics, and ADCs represent a significant portion of our preclinical pipeline. As we are enthusiastic about ADCs, like Tivdak, the tisotumab vedotin ADC in collaboration with Seagen, which is progressing well and shows promise beyond cervical cancer to solid tumors, we see potential for further development in this area. Regarding your third question about immunology and inflammation and potential large-cap partnerships, I believe there is interest in our technology platforms, prompting us to move into these areas. We are confident that our proprietary antibody technology can lead to improved therapeutics for immunology and inflammation beyond what current naked antibody approaches provide. There's significant interest from large pharmaceutical companies in collaborating with us. However, we will only pursue deals if we can retain 50% or more ownership of the products, which may pose challenges when dealing with larger companies that often seek greater ownership stakes. Thus, while we anticipate increased activity and more deals from Genmab, it may not necessarily involve large-cap pharma, as they might be hesitant to concede substantial upside to a biotech firm. Times are changing, and we are excited about our expanding efforts in the immunology and inflammation therapeutic space, with more developments expected in the future.

And the question comes from the line of Peter Verdult.

With the approval of Polivy for frontline DLBCL now completed, could you clarify how soon you plan to start a frontline DLBCL study involving Polivy and EPCORE? That's my first question. My second question is directed to Anthony. I believe I have an idea of the answer, but as the cash reserves continue to grow, is there a specific point in the future where you might shift your cash allocation priorities? Should we assume you will keep accumulating cash to maintain flexibility in pursuing scientific opportunities? I just want to understand if there is a point where you might consider alternative capital allocation priorities.

Thanks, Peter, for the two questions. I can tell you that we are planning a number of frontline studies as we speak. And we will absolutely detail them at the point that we get regulatory feedback so that we can initiate those studies. And that actually is also not only other antibodies or antibody-drug conjugates, but also small molecules, and even chemo in some instances. So you know that in the diffuse large B-cell lymphoma, we already have the R-CHOP combination with EPCORE ongoing and recruiting as we speak. But there will be more frontline studies, and we will give you further updates once we get feedback from the regulators on the combinations and the exact way we want to combine EPCORE, but the clinical program for EPCORE will become quite a bit broader in the coming time. Then handing over to Anthony for the second question.

Yes. Thanks, Peter. To be clear, our capital allocation priorities absolutely remain unchanged. As you highlighted, as we continue on this growth trajectory and looking at the really exciting growth opportunities that we have, we think having that full flexibility of our balance sheet, that strong balance sheet is absolutely essential to make sure we have the capital to invest in all of the exciting organic opportunities, and as Jan highlighted, if the right opportunity presents itself from a BD&L perspective or otherwise that we have that balance sheet and deploy that capital appropriately. So the headline message, Peter, to answer your question directly is that our capital allocation priorities remain unchanged. And again, that balance sheet strength is going to be important as we continue to build out our business on multiple fronts for the next couple of years and potentially beyond.

The next question comes from the line of Yaron Werber.

Going back to your GEN3014, the HexaBody-CD38. Can you give us any more details on the trial designs, just how many patients you have in your head-to-head and other arms to the trial? And then also, what you think are the efficacy and safety benchmarks to move that program forward? And also as a follow-up kind of second question going back to GEN1042 and 1046, given that you think that there's a possibility for advancing both of these into late-stage clinical, have you thought about how you want to position these 2 assets relative to each other? Or perhaps what indications or settings do you think would be more safe for one versus the other?

Thank you for the question. So with HexaBody-CD38 or 3014, they had two arms with CD38 naive collapsed refractory multiple myeloma. We haven't specified the size of the arms, but we hope that we actually can recruit them both this year. And actually, recruitment is going well at this moment, and you will hear next year the clinical data very likely also from that head-to-head arm, with HexaBody-CD38. Then second question as it relates to 1042, 1046, the 4-1BB targeted bispecifics. We believe that we can actually position them differently in different solid tumors and different lines of treatment. As you know, we are testing 1042 in frontline melanoma, frontline lung cancer, frontline head and neck, and frontline pancreatic. At this moment, you have only seen a few patients data in head and neck. But very likely 1042 will be positioned in the frontline area for one or more of these solid tumors. And 1046, I think the most likely is that we will actually go initially for lung cancer for non-small cell lung carcinoma, collapsed refractory after checkpoint inhibitor for that because we have the most impressive data there until now. But there's also other cancers which we have not yet specified, where we see very good responses for 1046. So we have no worries about the positioning of these two bispecifics. We think that they will be positioned in the end in different tumors and different lines of treatment. More to come this year.

And the question comes from the line of Rajan Sharma.

First one, just on OpEx. And could you just help us think about kind of phasing through 2023 and if there could be potentially a peak quarter through the year? And then secondly, just on DARZALEX. And could you provide any clarity on kind of what proportion of revenue were subcu in Q1 and how you see that progressing through the course of the year?

Thanks, Rajan. I will hand over both questions to Anthony. Anthony, please?

Yes. Sure thing. I mean maybe sort of stepping back and looking at our overall investment profile, particularly the drivers, as we sort of thought about transitioning from 2022 to 2023. I highlighted back in February, 4 key areas where we're really looking to deploy that capital and what was the drivers of the increase in OpEx year-over-year. As a reminder, those 4 areas, number one, was the portfolio advancement. That was making up around DKK 1.3 billion of the increase on a year-over-year basis at our guidance midpoint. We then had the further build-out and market build for U.S. and Japan of around DKK 400 million. Then we had really investing and scaling up our world-class discovery engine, including the investments to move into a new therapeutic area of around DKK 100 million. And then finally, in the enabling functions, some very important foundational investments in these functions to achieve the required scale. So these are the 4 areas that we highlighted as part of the reasons behind the growth drivers between 2022 and 2023. And as I look at the results in Q1 so far, that's exactly where that increase is as I look at the year-over-year figures. And as I sit here today, that absolutely remains true. Now particularly on your question on phasing. Look, this can be lumpy as a function of various spend, CMC or manufacturing investments. So no explicit quarterly phasing guidance, Rajan, other than to reiterate our full year guidance in the overall range of DKK 9.8 billion to DKK 10.6 billion. In terms of the subcu split in Q1, our commentary is going to be very limited, just limited to the U.S. market. And more recently, we've seen that in the high 80s or around 88% being subcu. Now outside of the U.S., our visibility is much more limited, and we're not in a position to really share that information. What I can say is that in terms of the 88%, that's in line with our overall thinking and projections for a year. Again, what I highlighted back in February when we gave our full year guidance is we're expecting to be on a full year basis globally in the 90% range.

There are no further questions at this time, so I would like to hand back for closing remarks.

Thank you all for calling in today to discuss Genmab's financial results for the first quarter of 2023. If you have any additional questions, please reach out to our Investor Relations team. We hope that you all stay safe, keep optimistic and remain healthy. And we very much look forward to speaking with you again soon.

This concludes today's conference call. Thank you for participating. You may now disconnect.