European biotech gets boost as Genmab market value hits $7 billion

By Ben Hirschler

LONDON (Reuters) - European biotechnology, long a poor relation to the far bigger U.S. industry, got a lift on Tuesday with approval of a new blood cancer drug that promises to bring sustainable profits to the continent's second-biggest biotech firm.

It's been a long haul for 16-year-old Genmab but Chief Executive Jan van de Winkel says the Danish company is now on a rapid growth path, with royalties from sales of multiple myeloma drug Darzalex set to fund many new products.

Shares in Genmab, already up 130 percent this year, leapt a further 12 percent on news that the drug, which was licensed to Johnson & Johnson in 2012, had won early U.S. approval, lifting Genmab's market value to around $7 billion (4.6 billion pounds).

That is still below the $16 billion tag on Switzerland's Actelion, Europe's biggest biotech, which was founded in 1997. And it is well short of older U.S. groups like Gilead, Amgen, Celgene and Biogen, with values of between $60 billion and $150 billion.

Still, with several analysts forecasting peak annual sales for Darzalex of $5 billion, van de Winkel believes Genmab will start to close the gap on its bigger rivals. He also hopes to find further success in other cancers and multiple sclerosis.

Importantly, a steady cash flow from tiered royalties of between 12 and 20 percent paid by J&J will allow Genmab to retain bigger stakes and hence more commercial upside from its upcoming experimental medicines.

"The income from Darzalex should allow me to hold on to 50 percent or more of our future products because that is what you need to do to build an iconic biotech powerhouse," van de Winkel said in an interview in London.

The relative weakness of Europe's biotechnology sector, despite its strong academic science base, has been blamed variously on factors such as lack of entrepreneurial spirit and inadequate funding. But Genmab's boss believes it is also simply a function of maturity.

"It takes on average 20 years between founding a biotech company and making it sustainably profitable. It took Genentech 22 years and they are arguably the most successful biotech of all time. So we are absolutely on track," he said.

Total revenues for Europe's biotech industry were $24 billion last year against $93 billion in the United States, while research spending was under $6 billion against $29 billion, according to consultancy EY.

In contrast to Actelion, which has retained full rights to its medicines for treating a rare condition called pulmonary hypertension, Genmab has struck deals to give away rights to partners in exchange for them funding development.

The approach made sense for a drug like Darzalex, which Genmab could never have afforded to develop on its own, while J&J has devoted hundreds of staff to getting the medicine to market.

Now, with analysts predicting that income from Darzalex will catapult earnings from 2016, van de Winkel plans to keep at least half the rights to new products like Humax-TF-ADC, which is in early clinical trials for various solid tumours.

(Editing by Adrian Croft)