Hello, and welcome to the Genmab's First Quarter 2023 Financial Results Conference Call. As a reminder, this conference call is being recorded. During this telephone conference, you may be presented with forward-looking statements that include words such as believes, anticipates, plans or expects. Actual results may differ materially, for example, as a result of delayed or unsuccessful development projects. Genmab is not under any obligation to update statements regarding the future nor to confirm such statements in relation to actual results unless this is required by law. Please also note that Genmab may hold your personal data as indicated by you as part of our Investor Relations outreach activities in order to update you on Genmab looking -- 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.

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…

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. And 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, was partially offset by lower TEPEZZA net sales, which according to Horizon were negatively impacted by seasonality. Now taken together, this growth really illustrates…

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 very much 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 together with BioNTech. And 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.

[Operator Instructions]. 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 out 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 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 time line 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've got three quick ones, if you don't mind. Firstly, just coming back to epcoritamab on the third-line follicular. I wonder if you could possibly set the theme for us as to what you think is a bit of bother to enable a regulatory filing this year. And presumably, again, we're talking response rates, complete response rates and the duration that complete response is maintained. I'm curious if you can give us an update as to what you think the minimum sort of volume of data is to be to go to the regulators, particularly FDA. Secondly, just on the Argenx deal, or actually more broadly immunology. Is this -- should we think of this as your big step into immunology, if you like? And then there are going to be -- I think you've sort of talked about bolt-on deals where we look at both targets and other sort of technology set that you bring into that. Or should we still think there's likely to be another perhaps even larger sort of in scale and concept deal to come as you move into this new therapeutic area? And then just finally, on the, I guess, a mandatory question, if you like, the 1042 and 1046, any updated thoughts on when we could potentially get data, whether it's likely to be by the end of this year or next year for 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. The -- 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…

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?

Thanks, Emily, for the questions. For epcoritamab, we hope that we actually get the approval from the U.S. authorities quite quickly and, hopefully, at the latest by May 21, which is in the weekend, but hopefully before that. So -- and what I understand from the team is that we are actually ready to launch very, very quickly after we get a potential approval. All is ready to go. But of course, it depends on how ready we are based on the feedback on the [indiscernible] how quickly we can launch. But it would be likely within a matter of weeks, if not shorter, what I understand. And the revenue reporting, I think we will get some color, I think, in Q2, hopefully, on revenue. And I don't know whether how detailed we will do the reporting. I will definitely give you color, Emily, on how the launch -- initial launch is going. There's a lot of positive feedback from the hospitals and from the doctors, and we are already in discussions with healthcare providers on the positioning of the drug and on the need for that medicine for some time. So I think we have a pretty good feeling for the level of enthusiasm, but I think we will probably in the second half of this year start to give some further detailed color on the launch under the assumption that the product will be approved in the United States. Then Argenx, this is basically all about combining the suites of proprietary antibody technologies, which are not overlapping. They are complementary between both companies and then together work on pathways, which could actually -- until both immunology targets as well as oncology targets. And we actually started already, Emily, on one oncology and one immunology target as we speak. So I think it will feed both pipelines for both the cancer and the immunology and inflammation franchise for both companies. And this is a true 50-50 that we would equally share the expenses and upside from these potential products. And we are already having -- working on concrete programs as we speak, and I think there's great complementarity. We have, of course, a lot more cancer models and cancer expertise based on Genmab's track record up to now. And Argenx has very, very good immunology expertise and models already operational. So this will actually accelerate, I think, and synergize the activities already ongoing and new activities for both companies. So we're very excited, Emily, about this strategic partnership. I think there's a very good alignment in the scientific focus, and I think this bodes quite well for the 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.

All right, Asthika. That's very nice question. Thank you very much. Now let me start with the Argenx partnership. We actually are very well defined who will take the lead of its programs and very likely for a cancer product, we will definitely share the upside, Asthika. But Genmab will likely be leading the commercialization. But the other party, so Argenx in this case, can co-promote for sure. And the same for immunology and inflammation, it's very likely that, initially, Argenx would lead the commercialization of programs in that area, in immunology area. But Genmab would be entitled to co-promote in a 50-50 basis. So it would be actually for both disease areas of both companies, but the lead will likely be lying with one of the parties, and that has been very clearly defined in the agreement here. So -- but both companies have the option to actually further scale up in commercialization in the disease area, where they're currently not very active in. Then as it relates to 1042 and 1046, we hope that at least 1 of those programs can be moved to late-stage clinical development, if not both. And what I said in my answer to, I believe it was for Peter Welford, is that both of the programs are doing very well. And of course, we need more data. And as I already explained before, data is not only response rate, it's also depth of response and duration in the various cohorts for both of the bispecific approaches. But there is a good chance that actually both would move forward to a late-stage clinical development based on data. But it's entirely data present, Asthika. So we'll let the data speak for itself and then take rational decisions, also potentially after we already have shared the data with the regulator and have some feedback on the 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 make it a little bit more difficult to come to these joint decisions on Tivdak development near term?

So thank you very much for the questions. For 2 questions, basically, Tivdak. The data is very, very encouraging. It's early data in head and neck in second-line plus head and neck. We -- by this time, we already have more data, and I think the pattern is consistent of what we presented recently, and we will actually collect a bit more data and then decide on next steps together with Seagen. We wanted -- the frequency of dosing is actually a bit higher here than in the labeled dosing for cervical cancer. And that is actually to get actually a higher amount of the medicine in the patients more effectively with still acceptable safety profile. So we are very encouraged by this data, and I think that we actually will collect in the coming months enough data to allow us to make a rationalization on next steps. And we have firm plans for that together with Seagen. What I can also tell you is that we heard from Seagen by this time that the potential acquirer Pfizer of Seagen is also very excited about the data. In the meantime, I think we have already spoken with some of the colleagues from Pfizer and assuming that the transaction goes through, I think that actually -- I think there is a very, very good level of enthusiasm for Tivdak to move to the next stages in the second solid cancer outside of cervical cancer. And then in the second half of this year, we also hope to see frontline data in cervical cancer and combinations and triplets and quadruplets regimens. But also there, I think the data shapes up very nicely. So I think that hopefully with Seagen or with Seagen and the new ownership, we will actually move not only to a second-line plus head and neck cancer in the course of this year, but potentially also to further in cervical cancer later on perhaps, even first-line head and neck cancer a bit further from that. So we're actually very encouraged by the profile of the medicine, it's very, very potent and it's very well manageable safety. So I believe that we have a good chance of creating a much more impactful medicine here with Tivdak in the coming time with Seagen and also with the potential new owners of the assets from the U.S. perspective.

Your next question comes from the line of James Gordon.

James Gordon, JPMorgan. Two questions, please. One was about CD38 in competition. So can you just remind us how much of DARZALEX sales are still coming from use in refractory patients? And I ask because some people have been a bit worried about [indiscernible] competition. And do you think [indiscernible] is going to have any impact on DARZALEX in the next couple of years as it moves into earlier treatment lines? And assuming we do get competition in the frontline potentially around 2027, how much of a headwind do you think that would be, given I know there were some manufacturing issues and administration issues? So how much of a threat there? Another part of that question also, just there are new therapies coming along in multiple myeloma, including CAR-T. Do you think that does mean change or any less likely to want to go for HexaBody CD38 if there's other things like CAR-T that may be a little more promising? And then the second question was on M&A. In terms of inorganic and dealmaking, do you have what you need in-house to do your own ADCs? Because I know you did a deal there. Or might you actually hunt for getting a link or a new payloads and actually ADCs might be where you want to expand into? And a final clarification, just on dealmaking. Are you done in terms of immunology in terms of looking for a larger partner? Or could you also -- as well as Argenx try and do an immunology deal with a large cap pharma company?

Thanks, James. I think there are more than 2 questions for sure, but let me try to go over that in an orderly manner. So first and then to all DARZALEX and CD38 competition, what I clearly see is that actually maybe I should go first over the [indiscernible] data because you asked about basically the second line. Overall, in the U.S. in March, that was 40% of the patients are treated with DARZALEX, and the 39% of the new patient starts in the front line. 36% of the patients are getting treated with DARZALEX, with 39% of the new patients start and the second line, 53% of the patients and the same 53% in the third-line setting. So there's still a lot usage in combination. And what I understand that actually, DARZALEX is the perfect combination drug, not only for the bispecifics like now TECVAYLI and potentially soon talquetamab but also for potential combination with CAR-T. And Janssen is already having a Phase III trial combining CAR-T with DARZALEX. So I don't think that actually that there will be a lot of competition for the position of the CD38. And then the question for you asked is would Johnson be interested in HexaBody CD38, I think so because of several reasons. One is if HexaBody CD38 would be much more potent in the clinic than DARZALEX, that could be a fantastic next-generation combination partner for all of these other medicines in multiple myeloma. And also in the context of IRA legislation and complexity from that perspective, it could be very smart for Janssen to actually switch at some point, DARZALEX for a next-generation CD38 targeted medicines. So I think the interest level should go up and not go down. We are now doing the head-to-head trial against subcu DARZALEX…

And the question comes from the line of Peter Verdult.

Peter Verdult, Citi. Two questions, please. First, for Tahi or for Jan. Just with the Polivy approval now in frontline DLBCL done and dusted. Could you remind us how quickly do you intend to initiate a frontline DLBCL study with Polivy and EPCORE? That's question #1. And then question #2 for Anthony. I think I know the answer, but just with the cash pile growing ever bigger, is there a point in time going forward, is there a tipping point where there will be a change in your cash allocation priorities? Or do we -- should we just assume that you continue piling up the cash to give you full flexibility to follow the science and push things into place should need be? I just wanted to know whether there's a tipping point where you would perhaps consider other 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 a bit epcoritamab, but a 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 to be 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.

This is Gina on for Yaron. 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 safer one versus the other?

Thank you for the question. So with HexaBody-CD38 or 3014, they had to have 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 of 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, collapse 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, 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.