Earnings Call Transcript - GMAB Q4 2021

Jan van de Winkel, CEO

Hello, and welcome to the Genmab conference call to discuss the company's financial results for the period ended December 31st, 2021. With me today to present these results is our CFO, Anthony Pagano. For the Q&A we will be joined by our Chief Operating Officer, Anthony Mancini, and our Chief Medical Officer, Die Giamatti. Let's move to Slide 2. As already stated, we will be making forward-looking statements. So please keep that in mind as we proceed 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 our strategic collaborations. This slide acknowledges those relationships. Let's move to Slide 4. Due to our extraordinarily solid foundation, Genmab is extremely well-positioned to achieve our ambitious vision of making a difference for patients by transforming the treatment of cancer. I would like to start today with a reminder of some of the many successes that will fuel our future growth. Beginning with Slide 5. The 39 INDs created by Genmab through our technologies have led to a robust and expanding clinical pipeline with five approved medicines, including TIVDAK. The first Genmab-owned product on the market, which we are co-developing and co-promoting in the U.S. with Seagen. Royalties from partner-owned medicines plus key partnerships with companies have significantly expanded our revenue. Our strong recurring revenue allows us to continue investing in next-generation technologies and truly differentiated new antibody therapies in our company, where we added commercialization capabilities and are further strengthening our world-class team with key talents. Our growing internal competencies are enabling us to evolve into an integrated end-to-end international biotech led by an experienced and diverse leadership team. We built on these solid track records with the events of 2021. So now let's move to Slide 6, and take a look at some of our recent achievements. 2021 is our 9th year of profitability with an impressive 48% increase in revenue versus 2020, excluding the one-time upfront payments. Our strong balance sheet allows us to strategically invest in our differentiated product pipeline, including our first product launch. While we are evolving into a fully integrated end-to-end biotech, we know that we can accelerate innovation by strategically investing in collaborations with partners across the pharma and biotech ecosystem, which can provide us with building blocks that support our future pipeline expansion, novel targets, novel payloads, and technology that complements our own. In 2021, we entered into more than 10 collaborations that will add to the breadth of our suite of technologies and support the rapid growth of our innovative next-generation pipeline of antibody therapeutics. For example, we partnered with Bolt on stimulatory antibody drug conjugates or ADCs and with Synaffix on its topoisomerase I inhibitor ADCs. We're witnessing the results of our investments in collaboration and capabilities in our expanding and progressively maturing pipeline. Examples of recent investigational medicines entering the clinic are HexaBody-CD38 and DuoBody-CD3xB7H4, both the products of our highly productive R&D. In addition to growth, our product pipeline also matured over the past 12 months. The highlight of the year was undoubtedly the FDA’s accelerated approval of TIVDAK, our first regulatory approval and a much-needed new potential treatment for patients with metastatic cervical cancer. With our partner Seagen, we have a robust development plan for TIVDAK, including the first Phase 3 study initiated in 2021, which is intended to confirm TIVDAK’s benefit in recurrent or metastatic cervical cancer and to support global regulatory applications. Epcoritamab also entered Phase 3 development in 2021, the first of multiple Phase 3 studies that we, along with our partner AbbVie, are planning for Epcoritamab. Both of our investigational medicines under development with BioNTech also advanced last year with the first Phase 2 study for DuoBody-PD-L1×4-1BB, and multiple expansion cohorts initiated in the Phase 1/2 study of DuoBody-CD44-1BB. New and updated data from all of these programs and others were presented at various prestigious conferences throughout the year, and we are anticipating additional data presentations this year, including data from the tisotumab vedotin innovaTV 207 study, which is scheduled to be presented in a plenary session at an upcoming head and neck cancer symposium in Arizona on February 25th. In addition to our pipeline, Genmab’s innovations are applied in the pipelines of multiple global pharmaceutical and biotechnology companies. In particular, our DuoBody technology platform has powered a variety of bispecific antibody therapies in development. The most advanced of these, Amivantamab and Teclistamab, are the result of our DuoBody collaboration with Janssen. In 2021, Janssen’s Amivantamab was approved as Rybrevant in the U.S., Europe, and other markets for the treatment of certain patients with non-small cell lung cancer with eGFR exon 20 insertion mutations. These are the first regulatory approvals for a therapy created using the DuoBody bispecific technology platform. Subsequently, at the end of 2021, Johnson submitted a BLA to the FDA for Teclistamab for the treatment of relapsed or refractory multiple myeloma. Last month, Johnson also submitted a Marketing Authorization Application (MAA) for Teclistamab to the European Medicines Agency. These events provided further validation for our DuoBody technology platform, which also powers the majority of our own product pipeline. Johnson’s Darzalex, which has redefined the treatment of multiple myeloma, continued to evolve in 2021 with new approvals, including the approval of the subcutaneous formulation of Daratumumab as the first and only approved therapy for AL amyloidosis. Sales of Darzalex for the year were very strong with J&J reporting $6,033 million in net sales, an increase of 44% over 2020, resulting in $6,235 million in royalties to Genmab. I will now turn the call over to Anthony. Anthony, please go ahead.

Anthony Pagano, CFO

Great. Thanks, Jan. Let's move to Slide 7. We've never been in a better position to achieve our vision of transforming the lives of cancer patients. My objective today is twofold. First, to explain why 2021 was yet another remarkable year for Genmab, and second, to provide our guidance for 2022, which is set to be another very strong year. Overall, we continue to strengthen our foundation and drive towards our 2025 vision. We executed our first commercial launch, bringing TIVDAK to cervical cancer patients. We grew recurring revenue by 48% in 2021. This was driven by strong royalties from Darzalex and other approved medicines. And as Jan said, this ensured our ninth consecutive year of profitability. Our strong balance sheet and growing recurring revenues allowed us to continue to invest in our business and our pipeline in a focused and disciplined way. An important part of this has been to continue to build the team and capabilities to enable us to succeed. So let's look at those revenues in a bit more detail on the next slide. We saw continued strong performance for Darzalex in 2021. You can see that in the chart on the left. Overall, Darzalex sales grew by 44%. That's net sales of over $6 billion, which translates to approximately kr6.1 billion in royalty revenue. This exceptional growth was driven by continued strong market shares across all lines and the ongoing 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 48% in 2021. We've already spoken about Darzalex and the very strong performance there. We're also encouraged by the growth of Kesimpta and Tepezza, which generated approximately kr828 million in royalties for 2021. That's an increase of more than $500 million compared to last year. This growth truly illustrates the power of our recurring revenues. Our revenue profile continues to get stronger with increases in both recurring and non-recurring revenue after excluding, of course, the AbbVie one-off. 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 by 44% in 2021, and here you can see where we invested. We accelerated our investment into our product portfolio, especially the advancement of both EPCOR and DuoBody-CD40. We've also allocated more resources to expanding our team to support our growth in commercialization, enhance technology and systems, and other areas related to our expanding pipeline. That includes supporting the launch of TIVDAK and preparing for the filing and potential launch of EPCOR. 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. In 2021, revenue came in at approximately kr8.5 billion. That's up 48% on last year, excluding the AbbVie one-off. Total expenses were about kr5.5 billion, with 77% being R&D and 23% SG&A. We reported a very strong operating profit of around kr3 billion. Our net financial items amounted to income of $965 million, primarily driven by the strengthening of the U.S. dollar against the Danish krone, and our U.S. dollar-denominated cash and investments. Then we have a tax expense of $975 million, which equates to an effective tax rate of 24.5%. This brings us to our net profit of around $3 billion, demonstrating our extremely strong financial performance for 2021. Let's move now to remind you of our robust financial framework on the next slide. First off, let's think about our revenue profile, which you can see on the left. At the beginning of 2020, Darzalex was the only product on the market. Today, we have five, providing us with expected recurring revenue growth of 39% in 2022. There's a clear path to potentially expand the number of approved products with Janssen's recent BLA for Teclistamab and our planned submission for EPCOR in 2022. Taken together, we expect significant cash inflows for us in the years to come. Moving to the right, we continue to focus our investments as we evolve our organization for continued success. At the top of the list is accelerating and expanding the development of EPCOR. I'll come back to this and some other exciting opportunities that provide a compelling rationale for increasing investment shortly. With that background, let's take a closer look at Darzalex sales on Slide 13. Here, we're on a clear path to market leadership in multiple myeloma. For 2022, we anticipate that Darzalex sales will continue to ramp up, and we expect sales to be in the range of $7.3 to $8 billion. There are three drivers underpinning this growth: 1. There is a significant opportunity for further market share gains in frontline treatment; 2. We expect to continue the conversion to the SubQ version; and 3. With 10 approved indications in the U.S., we anticipate continued strong market shares across all lines of therapy. So Darzalex is truly continuing to deliver. Looking at our total revenue, we expect it to be in the range of kr10.8 billion to kr12 billion, the majority of which will come from recurring revenues anticipated to increase by 39%. We're projecting Darzalex royalties to be between kr7.7 billion and kr8.5 billion, an increase of 32%. As a reminder, consistent with how we handled this last year, our guidance reflects around a kr700 million reduction in royalties due to ongoing arbitration. Recurring revenues also include a 71% increase in royalties from TEPEZZA and Kesimpta. Turning to non-recurring revenue, the growth here will be driven by reimbursement revenue from our collaborations and other milestones. In particular, our 2022 guidance does include a significant milestone associated with the filing and acceptance of the regulatory submission for EPCOR. Now, I said I'll come back to our ever-stronger rationale for investment, and this next slide shows you why. We can see here on the left a powerful combination of both our technologies and our pipeline. These are what underpin our imperative to invest. On the right, you can see the real progress we're making. 2021 was a great year with more than 20 active clinical trials, as well as bringing our first product to market with TIVDAK. Building on that foundation, 2022 is going to see another significant increase in our opportunity set. With more than 30 active clinical trials anticipated and preparation for a potential EPCOR regulatory submission and commercialization in the U.S. And to be clear, based on the work we've done so far and the data we've seen, we're convinced that EPCOR is a drug that has the potential to make a real difference for patients. As we've told you before, if we want to realize this meaningful opportunity, we've got to invest, and that's exactly what we plan to do. This also includes investing in our team, technology, and infrastructure to deliver. So let's take a closer look at our total expenses on Slide 16. Our total expenses are expected to be between kr7.2 billion and kr7.8 billion. This fully reflects the evolution of our pipeline and indeed our entire business that I've just described. There are four near-term investment priorities for us: 1. Initiating new Phase 3 EPCOR trials to maximize its potential; 2. Filing and preparing our commercial organization for EPCOR; 3. Generating the next wave of data for DuoBody-PD-L1×4-1BB and DuoBody-CD-40-1BB; and 4. Continuing to build our infrastructure, teams, and systems. This is essential to our continued success and realizing our full potential. 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. Here we're investing to progress our early-stage pipeline and generate the next wave of IND candidates. We're also investing to maximize the value of our current technologies and ensure we stay right at the forefront of antibody science. Now, having looked at the framework and the constituent parts, let's see how this all comes together on slide 17. Here, you can see our 2022 guidance. We expect our revenue to be in the range of kr10.8 billion to kr12 billion, most of which is made up of recurring revenue. For operating expenses, we expect to be in the range of kr7.2 billion to kr7.8 billion. As I previously highlighted, this increase in investment is fully in line with our strategy and focus on creating long-term value. Putting all this together, we're planning for substantial operating profit in a range of kr3 billion to kr4.8 billion. To my final slide, let me provide a few closing remarks. In summary, we have a clear path to reach our 2025 vision. We've created growing recurring revenue streams, which form a strong backbone of significant underlying profitability. We're investing those revenues in a highly focused way to realize our vision and capitalize on the very significant growth opportunities in front of us. On that note, I'll hand you back to Jan to discuss our key priorities for 2022.

Jan van de Winkel, CEO

Thanks, Anthony. Let's move to Slide 19, beyond strong revenue; 2021 was an excellent year for Genmab. As we continue to focus on our core purpose, we're preparing for an equally momentous 2022. Let's start with our most advanced products. For Epcoritamab, as I mentioned, we're very much looking forward to expanding its development. We're excited about the data and we anticipate filing in the U.S. and/or Europe this year. Further, the Genmab and AbbVie teams are hard at work, gearing up to initiate new Phase 3 studies to maximize EPCOR's potential. As part of these preparations, we're going to collect more data on EPCO dosing due to recent FDA guidelines recommending that sponsors perform more formal dose elevation studies. This means that for some of the Phase 3s, the first patients could be pushed beyond 2022. As Anthony noted, the investment will start this year. We will work with Seagen to continue to broaden the clinical development program for TIVDAK and establish it as a clear choice for patients with metastatic cervical cancer with disease progression on or after chemotherapy. We are very much looking forward to data from the clinical expansion cohorts and progress to next steps for both of our first-in-class bispecific next-generation immunotherapy candidates in development at BioNTech. Beyond these maturing programs, we anticipate expanding and advancing our other early-stage programs, including the potential for additional INDs or CTAs. Finally, we intend to continue to scale our organization based on our planned portfolio development, and as Anthony just discussed, we will use our solid financial base to support our growth. We have a lot to look forward to in the next 12 months and we look forward to sharing our progress with you. Let's move to our final slides. That concludes our presentation of Genmab’s 2021 financial results. Operator, please open the call for questions.

Operator, Operator

Thank you. And if you wish to ask a question, please press star 1 on your telephone. If you wish to withdraw your question, please press star 2. Please limit yourselves to one question per person and then rejoin the queue.

Kennen MacKay, Analyst

Hi. Thanks for the update and for taking the question. Maybe just a housekeeping question for John or Anthony. Wondering if you could help us with updated expectations towards when we might expect resolution of the ongoing arbitration and litigation with J&J around Subcu Darzalex? Thank you.

Jan van de Winkel, CEO

Thanks, Kennen, for the question. Unfortunately, I cannot provide further information there because the outcome and the duration of these proceedings are inherently uncertain. We hope, however, that we will see a resolution soon. Thanks, Kennen. I think we can move to the next analyst.

Peter Virgil, Analyst

Thank you. I'm Peter Virgil. I have one clarification and one question. I want to confirm that, based on your comments about the change in the FDA guidelines, the EPCOR filing in DLBCL is still expected in 2022. Are there other potential filings this year? Also, Jan, I apologize for testing your patience, but I want to follow up on Kennen's point. It's evident from attending ASH and observing QB trends that Darzalex is likely to become a significantly larger drug than anticipated, and the pipeline is advancing. However, when discussing Genmab with new investors, the ongoing arbitration issue tends to be a concern. I understand you can't delve into specifics, but could you at least share whether you are optimistic about this situation? How long could this arbitration potentially last? Is there a chance we might see a resolution sooner rather than later? I appreciate your patience with my questions. Thank you.

Jan van de Winkel, CEO

Thanks, Peter. Let me start with the easier question regarding EPCOR. Yes, a filing in the U.S. and/or Europe is absolutely on track for B-cell lymphoma. And perhaps even in other indications but depends on when data become available. Peter, we continue to be very excited about filing this year, so that's fully on schedule. The more complex question pertains to the arbitration. We understand that this is an overhang, and we certainly recognize it. What I’ve said publicly before is that all the materials and positions have been exchanged and now it's up to the three judges to reach a resolution. I’m actually fairly confident that it will definitely be concluded this year and hopefully sooner, Peter. I cannot provide further indications on timing because it's not within our control.

Peter Virgil, Analyst

Thank you.

Jan van de Winkel, CEO

Thanks, Peter.

Wimal Kapadia, Analyst

Oh, great. Thank you very much for taking my question. Can I just push a little bit on timelines for data please? Particularly the earlier pipeline, so CD38 to CD37 and element 24-1BB molecules, when exactly in 2022 could we get updates? And are there any conferences you could start to point to where the data is most likely? And then specifically on the CD38, will we get an update this year to really begin to have a view that this product could be superior to Daratumumab or will we need to wait longer? Thank you.

Jan van de Winkel, CEO

Thank you, Wimal. I believe the timelines will become clearer as we approach the conferences. We have submitted the data, but let's ask Tahi Ahmadi, our Chief Medical Officer, if he can provide more insights on HexaBody-CD38 and DuoHexaBody-CD37. Tahi, could you share some additional details?

Tahi Ahmadi, CMO

Thank you, Jan. So I will try to take the questions. Let's take CD38 first. There were, I think, three parts in your question. The first part is when will we see any data? I think Jan pointed that out; that will be a function of appropriate conferences. I think we have publicly stated that this is likely a second half '22 event where we will be able to share the dose escalation data. It’s worth noting that we only started dosing patients last year. We already stated publicly that we will achieve Phase 2 doses timely. We will engage in the second stage of the data generation in comparison to the Subcu, and whether that data will be available this year, I think is too premature to comment on because this is really dependent on generating the data and having it available. On CD37, I think there's a very similar timeline to CD38; we are close to determining the recommended Phase 2 dose. I would say, with some changes in the environment, this could impact the timing on data needed to define the recommended Phase 2 dose and the earlier trials. But we're quite confident we're going to get this within the first half of this year and then share the data on CD38.

Jan van de Winkel, CEO

Thanks, Tahi. I think that's all we can say at this time. Maybe more when the timing of the data submissions to conferences are clear, we will certainly update you right away.

Wimal Kapadia, Analyst

Great. Thank you.

Jan van de Winkel, CEO

Thanks, Wimal.

James Gordon, Analyst

Hello. James Gordon, JP Morgan. Nice taking the question. One on the 4-1BB bispecifics. I saw the line about generating data to determine the potential late stage. The question is, how long can we expect to see either one or both of the bispecifics move to late stage? Which of the two, PD-L1 or CD40, do you think is more likely to be taken forward? And is it fair to say that you are a bit more cautious on these assets than 18 months ago?

Jan van de Winkel, CEO

Thanks, James, for the questions. I will hand over the question to Tahi first, and then I will see whether I can add to his characterization. Tahi, can you shed some light on PD-L1 and CD40 programs and the likelihood of moving them to late-stage clinical development this year?

Tahi Ahmadi, CMO

Let's address these sequentially. For PD-L1, we began when we had data shared in 2020 and also in 2021 at SITC, helping us to narrow our understanding of biology and the single-agent activity, which is limited in durability in the post-IO space. We had already announced that the next step would be integration of the combination with full blockade of the PD-L1 axis, which will occur for PD-L1 in two distinct studies. One is a separate study actively enrolling, interrogating various schedules of either sequential or concomitant activation. For CD40, we had shared data for the first time at SITC that shows dose escalation, which was also encouraging. We had flagged very early that by the mechanism of action of engaging antigen-presenting cells will be significant. But we are confident that combining it with checkpoint inhibition will be powerful, and these experiments are ongoing across multiple indications. And the decision to take either asset to late-stage depends on the data that we generate, which we will monitor closely.

Jan van de Winkel, CEO

Thanks, Tahi. Let’s move on to the next question.

Sachin Wadhwa, Analyst

Hi. Thanks for taking my questions. I have a few clarifications, if I may. So if I could just follow up on the last question concerning 1042, 1046. I believe Judith mentioned on the third-quarter call or the ASH call that combination cohort data might be due in the coming months. That was a couple of months ago. So is 1042 data possible in terms of the combination cohort in the first half of this year, or are we now thinking that the data for all assets you've referenced, 385710461042, is a little more likely in the second half? My second clarification is on EPCOR. You mentioned potential filing for additional indications. I wonder if you could just elaborate on that comment regarding other indications. Finally, I would like to clarify regarding CD38. Is there enough data in 2022 to drive a potential partner decision from J&J or will some of that data need to wait longer into 2023?

Jan van de Winkel, CEO

Thanks, Sachin, for the questions. I'm going to hand over the 1042-related questions to Tahi, but you can provide the answer to that one first. Let me start with EPCOR. Our T-cell lymphoma cohort is the most advanced and is actively progressing. We also moved rapidly with follicular lymphoma and multiple cell lymphoma indications, potentially filing for follicular depending on how soon we can access the data. For CD38, it remains to be seen what data J&J requires to make a decision. We must be clear about our expectation that they want to see some data regarding head-to-head efficacy, especially against Subcu data, which is the benchmark. It’s likely that ample data will not be available in 2022. However, if we hope to see some data that could support their option exercise and further development, that could potentially become available this year, but the majority will probably be in 2023. Let me ask Tahi now to provide further color on 1042 and the various cohorts, including projections for data availability.

Tahi Ahmadi, CMO

Regarding the question on 1042 and the various cohorts, I believe the timelines on when we will share data will depend heavily on the generation of the data and the decisions we make on when to present that in public forums. As previously mentioned, the quarter just began, and we anticipate getting data in hand before the end of the first half of this year. Whether this data is sufficient to drive decision-making depends on its quality, so that's something we will need to assess carefully.

Jan van de Winkel, CEO

Thanks, Tahi. That’s clear. Thanks, Sachin, for the questions.

Operator, Operator

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

Paul, Analyst

Hey, guys. This is Paul on for Michael. Thanks for taking our question. I just want to focus on TIVDAK and the upcoming innovative data study that has been running for a couple of years now. So hoping you could set expectations for the scope of the readout. Maybe whether the data will be restricted to head and neck and if so if we could potentially see data from other solid tumors at some point down the line. And lastly, how you're thinking about how this data will inform next steps for the program beyond cervical.

Jan van de Winkel, CEO

Thanks, Paul, for the questions. I will turn this over to Tahi to address.

Tahi Ahmadi, CMO

Thank you. I think we will look forward to some data sharing on the head and neck indications, and we will do that in one of the upcoming conferences. We're quite excited about the data we've seen which potentially allows us to expand development into that space.

Jan van de Winkel, CEO

Thanks, Tahi. Further updates will come as we move forward with our partners. We are very confident about taking TIVDAK to earlier lines of treatment for cervical as well as several solid tumors. Let's stay tuned for any updates that come out on February 25th.

Elizabeth Walton, Analyst

Hi. Thank you. Elizabeth Walton from Credit Suisse. Just a few questions left at this point. Firstly, can you update us on the penetration of subcutaneous Darzalex that you're seeing? I think the data point we have was a comment that was made at Q2 that you were seeing about a 64% penetration in the U.S. Can you update us as to where that got to at the end of the year? And do you have any data on what penetration looks like for the subcutaneous version outside of the U.S.? Lastly, what do you think the ceiling could be for that penetration? And then just one quick one on TIVDAK. We saw $6 million of sales reported this year by Seagen. Consensus expectations are around $30 million for this year. Just wondering how comfortable you are with these consensus expectations and anything you can share on how the launch is tracking versus your internal expectations? Thank you.

Jan van de Winkel, CEO

Thanks, Elizabeth, for the questions. These are perfect questions for Anthony Mancini, who is on the line. So Anthony, maybe you can address both questions regarding subcutaneous Darzalex and TIVDAK launch tracking.

Anthony Mancini, COO

Sounds good, Jan. Thanks for the question, Elizabeth. Regarding Darzalex, as you mentioned, the Q3 number was 72%. We ended the year at 77% in the U.S. in terms of the exit subcutaneous penetration. That’s based on IQVIA data derived from weekly gross sales. We are continuing to witness strong share gains and are confident that growth will persist due to favorable reimbursement for subcutaneous formulations. Concerning international markets, we have confirmed that all five of the top European countries are now reimbursing subcutaneous formulations, with Italy achieving that milestone in December. While I won't provide a specific prediction for what we anticipate the subcutaneous penetration will reach, we believe trends are favorable and that only a few areas are seeing slower adoption due to healthcare system dynamics that make subcutaneous conversion challenging. As for TIVDAK, we are pleased with how the launch is progressing and it aligns with our plans. While the initial patient population for this indication is modest, we are hearing from providers that TIVDAK is an important treatment option for this patient population. It also stands as the only non-IO therapy achieving the Category 2A NCCN guideline recommendation within this population. Feedback from gynecological and medical oncologists in the community has been very positive. Together with Seagen, we are navigating the ICare requirements. We've implemented a patient support program to connect patients to ICare providers within their healthcare plans. We are also enhancing our educational initiatives and support in this arena. The launch is performing well.

Elizabeth Walton, Analyst

Thanks very much.

Jan van de Winkel, CEO

Thanks, Anthony. Thanks, Elizabeth, for the questions. Let's move on.

Asthika Goonewardene, Analyst

Hey, guys. Thanks for taking my questions. I've got a couple of quick ones, if I may. Anthony, what proportion of your non-recurring revenue related to EPCOR filing milestone can you provide a little detail? And Tahi, just want to clarify on the two studies you described: post-IO and non-small cell lung cancer treatments. Are you waiting for dose completion before initiating studies in other tumor types? And then lastly, Jan, regarding the arbitration, KOL checks indicated that this allows for an appeal. Do you think they'll go into an appeal, and do your expectations for this to be resolved in 2022 take this into account? Thanks, guys.

Jan van de Winkel, CEO

Thanks, Asthika, for the questions. I’ll have my colleagues respond. Anthony Pagano and Tahi will address that, but I’ll state that regarding the appeal, the verdict from the three judges is binding; however, the parties can appeal one more time with a single judge, and that has a finite timeline. We believe that even if that happens, we cannot predict if it will, but it should still conclude this year. That's probably where I need to leave that for now, and then I'll ask Anthony to answer the question on the EPCOR milestone.

Anthony Pagano, CFO

Great. Yes. Thanks, John, and thanks, everyone. Regarding the EPCOR milestones, our guidance for 2022 includes a total of around 1.7 billion in expected non-recurring revenue. That consists of reimbursement revenue and milestones. I highlighted earlier that our guidance reflects a significant milestone associated with the filing and acceptance of a regulatory submission for EPCOR. In total for EPCOR in 2022, we anticipate around 500 million kroner of EPCOR-related milestones, majority of that being from the filing and acceptance. Hopefully, this gives you clarity regarding the magnitude of the milestone.

Jan van de Winkel, CEO

Thanks, Anthony. Sorry, Tahi.

Tahi Ahmadi, CMO

Just taking a step back, regarding the trials and the 1042 programs, we've designed these datasets to become biological experiments aiming to answer specific biological questions. We will make decisions based on the strength of the data we generate. Therefore, we may not necessarily have to wait for all trials to mature before making decisions regarding future studies; rather, it depends on the quality of the generated data.

Jan van de Winkel, CEO

Thanks a lot, everyone, for your questions.

Peter Welford, Analyst

Hi. Yes. Thanks for taking my questions. Just going back to Epcoritamab, can you clarify the recent FDA guideline changes regarding the findings we've discussed? Do those relate to Phase 3 initiations in combination studies? What is the extent of the findings needed before initiation of those combination trials? Additionally, could you provide any color in terms of what the Phase 3 development plan looks like? Should we be considering other potential indications for studies or are we clearly focusing only on what has been started thus far? Thank you.

Jan van de Winkel, CEO

Thanks, Peter, for those questions. I think they are well-suited for Tahi. Tahi, can you provide further insight into the Phase 3 trial design involving Epcoritamab?

Tahi Ahmadi, CMO

In terms of trial design, I'll say that we continue to be enthusiastic about the data we're generating, both as a single agent and in combination for diffuse large B-cell lymphoma (DLBCL). The comments on regulatory shifts related to a requirement for more data before moving forward with Phase 3 in combination studies, especially regarding dosing. Our colleagues at AbbVie are actively engaged in planning and operationalizing these strategies.

Jan van de Winkel, CEO

Thanks, Tahi. I believe that should cover all the key points. Let's move to the next question.

Laura, Analyst

Hello. Thanks. I'd like to go back to HexaBody-CD38. Given that you're quite optimistic about the program, there are a few questions. Theoretical combinations: would you consider combinations of HexaBody-CD38 with teclistamab or talquetamab later? I understand you can't comment specifically, but would that be a future consideration?

Jan van de Winkel, CEO

Thanks for the question; that's a perfect inquiry. We are not developing those combinations yet since the HexaBody-CD38 program remains a Genmab program while in the dose escalation stage before the Janssen opt-in happens. There are currently no plans for these combinations, but there’s nothing to indicate potential issues regarding safety at this point.

Ian, Analyst

Hi, this is Ian from Berenberg. Thank you for taking my question. I have a question on the Epcoritamab Phase 3 trial design in frontline DLBCL. Could you provide any insights on the potential trial design and whether you could share what combination partners or control arm you’re looking at? Logistically, can you actually run a frontline trial involving drugs that are not FDA approved yet?

Jan van de Winkel, CEO

Thanks, Ian, for the questions. I will shift to Tahi, who can address the details regarding the plans for the frontline DLBCL trial with Epcoritamab.

Tahi Ahmadi, CMO

I can provide some commentary on the current strategies. We believe that this will primarily be in combination settings, and any decisions on what our control arms will be are dependent on additional ongoing studies. As mentioned before, our chief focus is on patient selection and determining the most relevant combinations for success.

Jan van de Winkel, CEO

Thanks, Tahi, and thank you, Ian. Let's move on to the next question.

Charlie Yang, Analyst

Thanks. This is Charlie on for Matthew. I need a little more clarification on the 4-1BB and CD40 flexibility in terms of potential combinations without studies. What are your expectations in terms of the population targeted? Is there a likelihood for a specific market subset, or is the goal to help target a wider population?

Jan van de Winkel, CEO

Thanks for the question. I'll hand it over to Tahi for a deeper understanding of the potential 4-1BB and CD40 study plans.

Tahi Ahmadi, CMO

The data we obtain from multiple datasets is systematically focused on various patient populations that will offer distinct insights and strategy implications. This data generation is critical as we examine whether significant synergies exist when targeting various markers; consequently, decisions on future developments will depend on the data we generate. I hope that explains our strategy moving forward.

Jan van de Winkel, CEO

Thanks, Tahi. Let's move to the next question.

Emily Field, Analyst

Hi, thanks for taking my questions. Quickly on Darzalex, I know you don’t break these down in consented depth, but versus our own estimates, Europe has been doing better than expected so far. Is that also the case relative to your internal expectations? Could you provide some comparisons to your internal expectations across first-line and second-line multiple myeloma as it relates to the brand impact share in the U.S.? Lastly, a quick one on the SG&A increase for 2022. The growth is almost equivalent to R&D. Is that primarily due to the build-out of the commercial sales force for Epcoritamab? Will the bulk of that growth happen in 2022 or do you think there are still projections for growth in 2023? Thanks.

Jan van de Winkel, CEO

Thanks, Emily. Great questions for Anthony Mancini and Anthony Pagano to address. Anthony Mancini, can you start with Darzalex expectations relative to internal ones across Europe and the U.S.?

Anthony Mancini, COO

Thanks, John. Thanks, Emily, for the question. We see our expectations aligning well with yours. However, remember that fluctuations in share closely tie to reimbursement decisions. Some key changes, especially regarding coverage for newer formulations, are driving those sales more robustly. We're observing positive sales trends across Europe for Darzalex compared to the U.S., but as you know, variability may vary geographically according to healthcare policies. I'll turn to Anthony Pagano now.

Anthony Pagano, CFO

Thanks, Anthony. In 2022, we want to highlight three aspects that should frame your thinking. First, we'll experience a full year of TIVDAK commercial expenses. Second, the anticipated filing and approval of Epcoritamab will demand resources. Finally, we want to ensure we maintain the proper structures to navigate our evolution as a business. While I won't delve deeply into projections for 2023, I want to say that we're satisfied with our progress, as evidenced by a growing pipeline and clinical activity.

Jan van de Winkel, CEO

Thanks, Emily. Thank you, Anthony and Anthony. Let's see if there are any further questions, Operator.

Operator, Operator

There are no further questions at this point.

Jan van de Winkel, CEO

Thank you for calling in today to discuss Genmab's financial results for 2021. If you have additional questions, please reach out to our Investor Relations team. We hope you all stay safe and remain healthy and optimistic and look forward to speaking with you again soon.

Operator, Operator

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