Yahoo Finance Genmab A/S (NASDAQ:GMAB) Q1 2024 Earnings Call Transcript
Genmab A/S (NASDAQ:GMAB) Q1 2024 Earnings Call Transcript May 2, 2024
Genmab A/S reports earnings inline with expectations. Reported EPS is $0.16 EPS, expectations were $0.16. Genmab A/S isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello, and welcome to the Genmab First Quarter 2024 Conference Call. As a reminder, this conference call is being recorded. During this telephone conference, you may be presented with forward-looking statements that'll 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. I would now like to hand the conference over to your first speaker today, Jan van de Winkel. Please go ahead.
Jan van de Winkel: Hello, and welcome to Genmab's conference call to discuss the company's financial results for the period ending March 31, 2024. With me today to present these results is our CFO, Anthony Pagano; and our Chief Operating Officer, Anthony Mancini. For the Q&A, we will be joined by our Chief Medical Officer, Tahi Ahmadi, and Chief Development Officer, Judith Klimovsky. As already said, we will be making forward-looking statements, so please keep that in mind as we go through this call. During today's presentation, we will reference products being developed under some of our strategic collaborations, and this slide acknowledges those relationships. 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 pipeline which is both expanding and maturing. And our growing revenue streams allow us to continue to invest in our people and in our pipeline. These are investments that will further accelerate our evolution into a fully integrated biotech innovation powerhouse. In addition to our existing technologies and mid to late-stage pipeline, a key investment that will enhance our long-term growth profile is the exciting proposed acquisition of ProfoundBio. So let us turn to that briefly now. The proposed acquisition of ProfoundBio firmly aligns with our core vision and strategy of transforming the lives of people with cancer and other serious diseases. It is highly complementary to our business.
And the addition of ProfoundBio's next-generation ADCs, including Rina-S, plus its novel ADC technology will further strengthen our already very strong and innovative mid to late-stage clinical pipeline. This will also strengthen and accelerate our capabilities in the ADC space. In addition to helping to propel us towards a 100% owned model with more value capture. So we are investing to unlock meaningful value by the end of the decade with significant upside into the 2030s. We expect to close the acquisition in the first half of 2024, subject to the receipt of regulatory clearances. So now let us turn to other important recent events. Epcoritamab continues to receive regulatory approvals and relapsed or refractory diffuse large B-cell lymphoma in various territories with additional filings underway.
We and our partner AbbVie have a robust development plan for epcoritamab. And in the first quarter of the year, we took significant steps to move into follicular lymphoma. In March, we, along with AbbVie, initiated the first of multiple Phase 3 trials anticipated to start this year. Epcoritamab in combination with rituximab and lenalidomide for the treatment of patients with previously untreated follicular lymphoma. Looking at relapsed or refractory follicular lymphoma, in addition to the JNDA submission in Japan, the FDA granted priority review to a supplemental biologic license application for EPKINLY as a treatment for relapsed or refractory follicular lymphoma following at least two prior lines of therapy with a PDUFA date of June 28. If approved, EPKINLY will be the first and only subcutaneous bispecific antibody approved to treat this indication.
And these were not the only regulatory events. Excitingly, the FDA has now approved the supplemental biologics license application for TIVDAK for the treatment of patients with recurrent or metastatic cervical cancer with disease progression on or after chemotherapy. And this converts the 2021 accelerated approval of TIVDAK to a full approval, making TIVDAK the first ADC with demonstrated overall survival data to be granted full approval in this patient population. This approval represents a significant achievement for women with recurrent or metastatic cervical cancer as it reinforces TIVDAK as a survival extending treatment option in patients whose disease has advanced after initial treatment. In addition to this approval, I'm very excited to share that at the end of April, we filed a JNDA requesting approval for TIVDAK for patients with advanced or recurrent cervical cancer in Japan.
And this is excellent news for patients in Japan in need of this potential therapy and a milestone for Genmab as we continue to build our presence in Japan. I would like to thank the patients and investigators who took part in the clinical trials that form the basis of the U.S. approval and Japanese submission or partners at Pfizer for the collaboration and the passionate and determined teams at Genmab whose hard work and commitments made these events possible. Before moving on, I would also like to note that we were very pleased to hear that in March, TIVDAK was added to the NCCN clinical practice guidelines in oncology for vaginal cancer under other recommended regimens. In the first quarter, there were several data presentations across our programs, including an oral presentation for TIVDAK at the SGO Annual Meeting on women's cancer.
And presentations for EPKINLY at conferences, including the Annual Meeting of the Japanese Society of Medical Oncology and the AACR animal meetings. We are also looking forward to multiple upcoming data presentations at ASCO. These include two rapid oral presentations for EPKINLY of new data in both relapsed or refractory and untreated follicular lymphoma. A rapid oral presentation on TIVDAK in head and neck cancer and a poster presentation for Acasunlimab or GEN1046 in second-line non-small cell lung cancer. And this is, of course, the data that we and our partner, BioNTech, anticipated presenting in the first half of this year. And we are currently engaging with health authorities on the design of a pivotal trial in this patient population with an aim to start this trial in late 2024.
Finally, turning to medicines powered by our innovation. In March, Janssen announced that the FDA approved RYBREVANT in combination with chemotherapy for the first-line treatment of patients with non-small cell lung cancer with EGFR exon 20 insertion mutations, converting the May 2021 accelerated approval to a full approval. In addition, in Q1, Janssen submitted applications for approval in both the U.S. and Europe for subcutaneous daratumumab based on data from the Phase 3 PERSEUS study. I'm pleased to now hand over the call to Anthony Mancini to take you through our first quarter 2024 net product sales, including for DARZALEX. Anthony, the floor is yours.
Anthony Mancini: Thank you, Jan. In Q1, product performance across our two key revenue streams, royalty medicines and Genmab commercialized medicines showed very strong growth. Our portfolio includes six royalty medicines: DARZALEX, KESIMPTA, TEPEZZA, TECVAYLI, RYBREVANT and TALVEY. DARZALEX demonstrated strong demand growth in Q1 with just under US$2.7 billion in net sales, a 19% year-over-year growth driven predominantly from share gains in frontline multiple myeloma. With the recent filing of PERSEUS, there are continued growth opportunities ahead with DARZALEX subcutaneous based therapies in the frontline transplant-eligible multiple myeloma space, including maintenance. DARZALEX is also being combined with both newer and older therapies in multiple myeloma, including with two of our recently approved DuoBody medicines TECVAYLI and TALVEY.
We expect continued growth and use of DARZALEX as a backbone in later-line settings as well. KESIMPTA achieved continued strong demand growth with $637 million in Q1, a 66% year-on-year growth. KESIMPTA demand growth is not only progressing well in the United States, but also outside the United States. It continues to be the new to brand share leader in seven of 10 major markets outside the U.S. The performance across our other recently launched royalty medicines, TECVAYLI, TALVEY and RYBREVANT all bispecifics based on our DuoBody technology, each delivered strong growth in the quarter. The TECVAYLI launch is continuing to go very well and delivered $133 million in the quarter with strong uptake and rapid adoption in the U.S. and other key markets, reflecting a best-in-class off-the-shelf BCMA bispecific therapy that's offering deep and durable responses in relapsed or refractory multiple myeloma.
We expect to see continued strong Genmab revenue growth from our diverse royalty medicines portfolio in 2024 and beyond. Turning to our Genmab commercialized medicines on Slide 8. EPKINLY delivered US$54 million in net sales for Q1. We with over 90% coming from strong launch performance in both the U.S. and Japan. We are very pleased with the EPKINLY launch performance across geographies. In the U.S., we continue to see robust uptake across key accounts. EPKINLY was launched in Japan late last year, and we're highly encouraged by the early launch update and overall positive response from our customers there. EPKINLY is the first and only approved bispecific antibody in the U.S., the EU and Japan for patients with third-line plus diffuse large B-cell lymphoma.
And we are preparing for potential approvals for EPKINLY in third-line plus follicular lymphoma with U.S. PDUFA date of June 28. We’re also pleased to announce that earlier this week, the NCCN has included EPKINLY monotherapy as a preferred regimen with a 2A designation in follicular lymphoma after two prior lines of therapy. Our first indication in third-line plus DLBCL, an area of significant unmet need is the first step to establishing EPKINLY as the core therapy across B-cell malignancies, including follicular lymphoma and in earlier lines of treatment. Tivdak delivered $27 million in net sales for Q1, representing the 10th consecutive quarter of demand growth. We’re pleased with Tivdak’s performance which was primarily driven by an increasing breadth of ordering accounts.
Gyn-Onc and Med-Onc customers continue to provide positive feedback on the impact Tivdak is making on the lives of women with cervical cancer. As Jan mentioned, the Japan New Drug Application for Tivdak was submitted in late April. And the FDA approval on April 29 based on the innovative 301 study, which demonstrated a 30% improvement in overall survival and a 33% improvement in progression-free survival will help establish Tivdak as the clear standard of care in second line plus recurrent or metastatic cervical cancer. We’re enthusiastic about the proposed acquisition of ProfoundBio, whose lead asset Rina-S is a potential best-in-class ADC in ovarian cancer that would add a second ADC in gynecologic oncology to our portfolio in addition to Tivdak.
As an end-to-end biotech company, we’re very pleased with the performance of our Genmab commercialized medicines and look forward to carrying this momentum through 2024 and beyond. Thanks to our partners and thanks to the entire cross-functional Genmab team for all they do every day to deliver for the patients we serve. With that, let me hand it off to Anthony Pagano to provide additional perspective on our Q1 financials. Anthony?
Anthony Pagano: Great. Thanks, Anthony. We continue to strengthen our foundation in Q1. Having reached our goal of successful regulatory approvals and launches for EPKINLY in the U.S., Europe and Japan in 2023, we are pleased with how the launches are progressing into Q1. Now we’re looking forward to the potential for additional approvals in these territories for late line follicular lymphoma and continuing to expand and accelerate epcor’s clinical development. And as we’ll see, our financials remain strong. Recurring revenues grew by 42% in Q1. This was principally driven by strong royalties from DARZALEX, Kesimpta and other approved medicines as well as net product sales for EPKINLY. Our solid balance sheet, growing recurring revenues and significant underlying profitability allow us to continue to invest in our business and our pipeline at 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 grew total revenue to over DKK4.1 billion in Q1. And as I’ve already highlighted, that included a 42% increase in our recurring revenue. This strong growth was driven by higher DARZALEX and Kesimpta royalties as well as royalties from other products, and we’re really pleased with how EPKINLY and Tivdak are performing. Taken together, these two products contributed 27% of the total growth in revenue that we realized in Q1. And this really illustrates the power of our recurring revenue. And overall, this strong recurring revenue growth enables our continued highly focused investment, as you can see on the next slide.
In line with our significant growth opportunities, total OpEx grew 31% in Q1. In R&D, we’ve accelerated our investment into our product portfolio, especially the advancement of our mid to late-stage pipeline. Here, we’re expanding the development for EPKINLY, Tivdak, GEN1046 and GEN1042, and we continue to invest to secure a successful EPKINLY launch in our two key markets, the U.S. and Japan. 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 over DKK4.1 billion, and that’s up 46% on last year. Total expenses were just under DKK3.2 billion with 73% being R&D and 27% SG&A. And even with the increased investment, we’re still delivering over DKK800 million of operating profit, and that’s up more than 90%.
Moving now to our net financial items. Here, we have a gain of DKK915 million. This gain was driven by the strengthening of the dollar against the kroner in Q1 as well as by an increase in interest income. Then we have tax expense of just over DKK390 million, which equates to an effective tax rate of 22.8%. And that brings us to our net profit of over DKK1.3 billion. So as you can see, continued strong underlying financial performance. With that, let’s take a minute to revisit our robust financial framework. First off, our revenue profile on the left. There are now eight products in the market that are generating recurring revenues for us. Three of these are already blockbusters and the remaining five all have significant potential for future revenue growth.
So for this year, we’re anticipating 25% recurring revenue growth at the midpoint and we expect significant cash inflows in the years to come. Moving to the right. We remain focused on our investments as we evolve our organization for continued success. And at the top of the list is accelerating and expanding epcor, but that’s just one of the exciting opportunities that provide us with a compelling rationale for investing back into our business. As we’ve told you before, if we want to seize these meaningful opportunities, we’ve got to invest. And that’s exactly what we’re doing with the Phase 3 trials we anticipate will start in 2024. And on top of this, we also have the proposed acquisition of ProfoundBio, including its most advanced program, Rina-S.
Rina-S is potentially best-in-class and registration trial ready. We anticipate the first potential approval for Rina-S in 2027. And importantly, we are anticipating blockbuster peak sales potential. So with that background, let’s now take a look at our guidance. Here, you can see our existing guidance, which we announced in February. We’re currently on track to meet these financial targets, excluding the impact of the proposed ProfoundBio acquisition and related deal costs. We continue to anticipate strong growth in revenue for 2024 of 19% at the midpoint, driven by both our royalty medicines and importantly, we anticipate that we will have over DKK1.2 billion of growth from EPKINLY and Tivdak. In fact, EPKINLY and Tivdak are driving nearly 40% of our total revenue growth in 2024.
Now as I told you back in April, we anticipate that the proposed acquisition of ProfoundBio will impact our guidance. Pending closing of the deal, OpEx before transaction expenses are now anticipated to be at or moderately above the upper end of the guidance range of DKK12.4 billion to DKK13.4 billion. The anticipated increase reflects the incremental R&D investment to support the advancement of ProfoundBio’s clinical programs, primarily Rina-S. This potential incremental investment is fully in line with our previously communicated priority of increasingly focusing our investment on mid to late-stage R&D programs with high potential. And finally, as a reminder, we plan to update our overall guidance no later than our second quarter 2024 earnings.
Now let me provide a few closing remarks. In summary, we’ve had a very solid start to the year. We have growing recurring revenue streams, increasingly from our proprietary products. 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.
Jan van de Winkel: Thanks, Anthony. Let’s move to our final slide. Over the past few months, we have made significant progress towards our 2024 goals especially for EPKINLY, we made strides towards both goals you see here with the initiation of a new Phase 3 trial as well as priority review from the FDA for relapsed/refractory follicular lymphoma. We look forward to the PDUFA date and potential approval of this new indication in June. And of course, we are extremely pleased with the recent approval for Tivdak. We’re also very much looking forward to presenting the Phase 2 acasunlimab data at ASCO next month. We continue to have a lot to look forward to in 2024, and we look forward to providing you with additional updates. That ends our presentation of Genmab’s financial results for the first quarter of 2024. Operator, please open the call for questions.
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