Genmab - Q3 2023

Transcript

Operator (participant)

Hello, and welcome to Genmab's third 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 it's required by law. Please also note that Genmab may hold your personal data as indicated by you as a part of our investor relations outreach activities, in order to update you on Genmab.com. Please refer to our website for more information on Genmab and our privacy policy. I would now like to hand the conference over to our first speaker today, Jan van de Winkel.

Please go ahead.

Jan van de Winkel (President and CEO)

Hello, and welcome to Genmab's conference call to discuss our financial results for the period ending September 30, 2023. With me today to present these results is our CFO, Anthony Pagano. For the Q&A, we will be joined by our Chief Development Officer, Judith Klimovsky, our Chief Operating Officer, Anthony Mancini, and our Chief Medical Officer, Tahamtan Ahmadi. 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. This slide acknowledges those relationships. Genmab's strong foundation is built on our consistent track record of success. As we near the end of the year, it's a good time to reflect on how far we have come as a company, even in the last 12 months.

We continue to expand our pipeline with new INDs and new product candidates in the clinic. We also matured our pipeline with new clinical trials and positive data readouts. And very excitingly, there are now eight approved medicines that are followed by our innovations, half of which were created with our proprietary DuoBody technology. Epcoritamab, which we are co-developing with AbbVie, is also our first medicine to be approved for patients in territories outside the U.S. These advances are possible because we have a dedicated and unstoppable team at Genmab, an international team that has grown to enable us to continue to evolve into a leading integrated biotech innovation powerhouse. Let's now turn to recent key company events. September was an exciting month for epcoritamab, as we and AbbVie received approvals in both Japan as Epkinly and Europe as Tepkinly.

Like the approval in the U.S. earlier in the year, these approvals were important milestones, both for our patients and needs and for Genmab as a company. The approval in Japan is especially significant as we at Genmab are the commercial leads for Epkinly there. We began growing our presence in Japan in 2019, so we would be ready for just such an opportunity. We are very pleased to be launching our own product there, especially as Epkinly is the first and only bispecific antibody approved in Japan to treat adults with certain types of relapsed or refractory large B-cell lymphoma after 2 or more lines of systemic therapy. We are excited to note that in addition to the U.S., Japan, and Europe, epcoritamab has now been approved in Canada and the U.K.

I'm also happy to announce that once again, the broad potential of epcoritamab to become a core therapy for B-cell malignancies will be on display at this year's prestigious ASH Conference at the beginning of December. We have had 15 total abstracts accepted for presentation at ASH, two of which are oral presentations. Of the accepted abstracts, four will be initial disclosures of clinical data for epcoritamab, including an oral presentation of data from the EPCORE NHL-5 trial of epcoritamab in combination with lenalidomide as treatment for patients with relapsed or refractory diffuse large B-cell lymphoma. This data is further support for Epcor's combinability and highlights its potential to move into earlier lines of therapy.

HexaBody-CD38 will also be recognized at ASH with a poster presentation on preliminary results from the expansion cohort at the recommended phase II dose of the ongoing phase I/II trial. We are actively enrolling in the head-to-head portion of the trial. We are very encouraged by what we are seeing, and as we said previously, we anticipate the head-to-head data in 2024. If you look beyond our own pipeline and include all abstracts involving products that are powered by Genmab's innovations, there are nearly 200 total abstracts accepted for presentation at this year's ASH meeting, 36 of them oral presentations. Now, I want to turn to some additional exciting updates on the progress of our maturing proprietary antibody product pipeline. First, GEN1046. It has cleared the high bar that we set.

We are very pleased to share that we are now engaging with health authorities to determine next steps. Previously, we shared data from an expansion cohort of patients with non-small cell lung cancer who failed prior checkpoint inhibitors. We saw encouraging single agent activity, but responses were not durable. Based on clinical and strong preclinical data that showed that the combination of GEN1046 plus checkpoint inhibitors resulted in improved efficacy, we embarked on a scientific question: how to most optimally engage 4-1BB activation with checkpoint inhibition? The phase II study of GEN1046 in combination with pembrolizumab in patients with PD-L1 positive non-small cell lung cancer, who failed standard of care therapy with an immune checkpoint inhibitor, addressed this question. Emerging data from this study has provided a clear answer.

So far, the data from this study indicates that we can combine these two mechanisms and that this leads to improved efficacy. Based on this, we believe there is a clear path forward, and we are engaging with health authorities to determine next steps. We look forward to sharing the relevant clinical data at a medical conference in the first half of 2024. As a reminder, we are developing GEN1046 with BioNTech. Moving to Tivdak. We were very pleased that we, along with our partner Seagen, presented the late-breaking results from the innovaTV 301 trial of tisotumab vedotin in recurrent or metastatic cervical cancer during the Presidential Symposium of the ESMO Congress in Madrid in October. This follows the announcement by us and Seagen in September, that the trial met its primary endpoint of overall survival.

As a reminder, the results of this trial are intended to serve as both the pivotal confirmatory trial for Tivdak's accelerated approval in the U.S., as well as to support global regulatory applications. Likewise, Tivdak has also cleared the high bar that we set. We are optimistic about the data we have seen in head and neck cancer, post standard of care. Here we will actively engage with health authorities on next steps in this indication. Moving to GEN1042, we are also co-developing with BioNTech, and we remain very encouraged by the clinical efficacy data that we are seeing across several tumors, tumor types. We are currently taking the learnings from GEN1046 on how we can optimally dose and schedule GEN1042.

We need more time to do this, so we now anticipate that we will have the data we need to determine next steps for this program in the coming months. Looking at some of our earlier stage programs, I have a brief update on JNJ-1047 or DuoBody-CD3xB7H4. We have now completed dose escalation in the phase I/II trial and have transitioned to dose expansion. This is an important step in progressing our CD3 based bispecific platform in solid tumors. JNJ-3017, or DuoBody-CD3xCD30, a program that we announced last quarter, has now started recruitment for our first-in-human clinical trial. We are also very pleased to announce another IND submission for 2023, JNJ-1059, or DuoBody-EpCAMx4-1BB.

The first preclinical disclosure for this program, which will further leverage our knowledge of 4-1BB, also took place at ESMO in October in Madrid. This bispecific antibody, which we are co-developing with BioNTech, has potential in solid tumors. We anticipate that GEN1059 will enter the clinic in 2024. Finally, as we work to progress these new and existing programs, we have also made the decision to cease development of GEN3009 or DuoHexaBody-CD37. This decision was made following a strategic evaluation of the program within the context of our entire portfolio and was not based on any safety or regulatory concerns. Our goal of transforming the lives of patients is always at the center of our decisions, and we look forward to continuing to create and develop truly differentiated antibody products.

The power of our innovation is reflected in programs that apply our DuoBody technology. Two of these products are Janssen's Talvey and Rybrevant. In August, Talvey was approved in both the U.S. and Europe for relapsed or refractory multiple myeloma, making it the fourth approved DuoBody-based bispecific antibody. Also in August, Janssen submitted an sBLA for Rybrevant, followed by a type two extension to the EMA in October. Both of these submissions were based on the confirmatory phase III PAPILLON study. Overall, you can see plenty of progress across our business, with lots to be excited about as we look forwards. And that's a good note on which to hand over to Anthony Pagano, and he will take you through our financial. Anthony, the floor is yours.

Anthony Pagano (EVP and CFO)

Great. Thanks, Jan. We continued to strengthen our foundation over the first 9 months of the year. Of course, top of mind for everyone are the multiple regulatory approvals for Epkinly. And as we'll see, our financials continue to be strong. Recurring revenues grew by 22% on a reported basis, and impressively, 30% on an operational basis. This was principally driven by strong royalties from Darzalex, along with significant growth from our other 7 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 we need to succeed. So let's look at those revenues in a bit more detail.

We continued to see strong performance for Darzalex during the first nine months of the year. As you can see in the chart, overall, net sales grew by 22%. That's net sales of nearly $7.2 billion, which translates to over DKK 8 billion in royalty revenue. This growth was driven by continued share gains and strong performance in the frontline setting. So Darzalex remains a key driver of our revenue. We grew total revenue to almost DKK 11.8 billion in the first nine months of the year, and as I've already highlighted, that included a 22% increase in our recurring revenue. And to be clear, that's on a reported basis. Excluding some FX headwinds, recurring revenues grew by 30% on an operational basis.

Last year's results make for a somewhat tough comparator, as we saw pretty significant FX tailwinds, particularly for our royalty revenue. As a reminder, under our Darzalex agreement, for purposes of calculating our royalties, sales outside the United States are translated to US dollars at a specified annual hedged foreign exchange rate. Operational growth in the first nine months of this year continued to be strong, driven by higher Darzalex royalties, as well as royalties from our other products. This really illustrates the power of our recurring revenue. We also recognized the first full quarter of sales for Epkinly in Q3, and we're very pleased with how the launch is progressing so far, with around $22 million in net sales for the quarter and $28 million year to date. Overall, our strong recurring revenue growth enables continued, highly focused investment, as you can see on the next slide.

Back in February, we were very clear that we would continue to invest to capture the opportunities we see in front of us, and that's exactly what we've done, with total OpEx up 42% in the first nine months of the year. At that time, back in February, I outlined our top four investment priorities. First, securing a successful Epkinly launch by investing in our two key markets, the United States and Japan. Second, continuing to advance our pipeline. Here, the lion's share of our investment is being directed to our most advanced programs, including Epkinly, Tivdak, 1046, and 1042, which are all exciting opportunities for us. Third, investing in our world-class discovery engine, including focused investments to expand our therapeutic focus to include I&I. And fourth, foundational investments in enabling functions to achieve required scale.

As you can see, our investments continue to be fully aligned with these priorities, and as always, we continue to focus on long-term value creation. So with that, let's now take a look at our financials as a whole. Here you can see our summary P&L. Revenue came in at close to DKK 11.8 billion. That's up 26% on last year. As mentioned, that's negatively impacted by FX headwinds. Total expenses were around DKK 8 billion, with 71% being R&D and 29% SG&A. And even with the increased investment and significant FX headwinds, we're still delivering around DKK 3.7 billion of operating profit. Moving now to our net financial items. Here we have a gain of over DKK 1 billion so far in 2023.

This is driven by an increase in interest income due to higher effective interest rates, as well as the strengthening of the US dollar against the Danish kroner in the first nine months of the year. We have tax expense of about DKK 1 billion, which equates to an effective tax rate of 21.2%. That brings us to our net profit of over DKK 3.7 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. With the approval of Epkinly in May and Talvey in August, there are now 8 products on the market that are generating recurring revenues for us, and we expect significant cash inflows for the years to come.

Moving to the right, we remain focused on our investments as we evolve our organization for continued success. At the top of the list is accelerating and expanding EPCORE, but that's just one of the exciting opportunities that provide us with a compelling rationale for increasing our investment. As we've told you before, if we want to seize these meaningful opportunities, we've got to invest, and that's exactly what we're doing. So with that background, let's take a look at our guidance. As you can see, we are adjusting our 2023 financial guidance. In summary, we are lifting the bottom end of our revenue and OpEx ranges. This is due to current year-to-date performance and the strong U.S. dollar. This, of course, has the effect of tightening the ranges across the board.

We now expect our revenue to be in a range of DKK 15.9 billion-DKK 16.5 billion. One of the drivers of this increase is higher Darzalex royalties, so we've increased our guidance here to DKK 11.3 billion-DKK 11.5 billion. Turning to our investments. As always, we remain focused on executing against our strategy and key priorities, and at the same time, creating long-term value. So we're investing to capture the significant growth opportunities in front of us, and here we're increasing the bottom end of our OpEx guidance to a range of DKK 10.6 billion-DKK 10.9 billion. This is primarily related to increased and accelerated investment in epcoritamab clinical trials and the progression of other pipeline products, including GEN1046 and Tivdak.

Putting all this together, we're on track to deliver another year of substantial operating profit in a range of DKK 4.8 billion to nearly DKK 5.8 billion. As a reminder, note that these projections are based on an assumed US dollar Danish kroner exchange rate of 6.8. Finally, to give you a bit more color on FX, every 10 basis point move in the exchange rate relative to our guidance rate is worth around DKK 80 million in operating income for the balance of the year. Now, before I wrap up, I do want to take a moment to zoom out a bit and take a look at the very high quality of our revenue profile and the power of our discovery engine. We believe this powerful combination sets us up very well for the long term.

First, let's think about the eight approved medicines you can see in the box in the top right-hand side of the page, that are powered by our innovation and technology, and that are currently generating significant revenues for us. The top three are already blockbusters. The remaining five all have meaningful growth profiles and have the potential to become blockbusters. I can say this with confidence because we have the clinical development plans, and with our partners, we're investing to make this happen. The six royalty-generating products are marketed by pharma and biotech powerhouses, J&J, Novartis, and Amgen. Our two proprietary products are co-marketed with AbbVie and Seagen, and moving forward, we anticipate Pfizer. We're confident we will realize their potential. Now, let me turn to the power of our discovery engine.

Of around the 40 programs we've moved into the clinic, 8 are already approved and 19 are currently in active clinical development. That's a pretty strong hit rate, and it's no accident. We understood very early on the competitive advantage that our deep antibody science and focused discovery engine could provide. So we've invested more in discovery to increase the number and quality of our product candidates. This includes investment into our proprietary technology platforms. We believe that these diverse tech platforms are key to our success. They allow us to select the most appropriate modality from our toolbox to tackle a specific disease target. We have 4 proprietary tech platforms, including DuoBody and HexaBody, and we also have access to a suite of other technologies through our partners.

This unique position allows us to bring only the products with the best potential through to development. It's our deep insight into antibodies and our proprietary platforms that have helped us discover, build, or design the eight products that are currently approved. If all eight currently approved products were wholly owned by Genmab, we would have the potential to generate estimated revenue here in 2023 of over $14 billion. As we move forward to a model in the future where we have 100% ownership of our products, we believe we can continue this track record of success and further solidify our position as an innovative biotech powerhouse. Now, to really wrap up, let me provide a few closing remarks. In summary, we've had a solid first nine months of 2023.

We've created growing recurring revenue streams, including now two of our own products on the market, and that gives us a strong backbone of significant underlying profitability. 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. On that note, I'm going to hand you back over to Jan.

Jan van de Winkel (President and CEO)

Thanks, Anthony. We continue to work towards our goals for the year and are especially excited about the multiple approvals for epcoritamab, the positive data for tisotumab vedotin, and for the next steps in the development of our earlier-stage product pipeline. I'm also pleased to announce that we will hold our annual R&D update and ASH data review event on December the twelfth. To ensure the event is accessible to as many people as possible, this year's presentation will be fully virtual. Details are available on our website, and we look forward to a lively event. So that ends our presentation of general financial results for the first nine months of 2023. Operator, please open the call for questions.

Operator (participant)

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now take the first question. Coming from the line of Vikram Purohit from Morgan Stanley. Please go ahead.

Vikram Purohit (Executive Director)

Great. Thank you for taking our questions. We had two. First on GEN1047. So as you mentioned, there was some clinical data that was recently featured for this program through abstracts that were posted for ASH, and we were wondering what you think are some of the appropriate benchmarks to compare against here on both efficacy and safety to really frame these initial results. And secondly, just to clarify for the R&D update you'll be hosting alongside ASH, should we expect to see any updates for GEN1042 or GEN1046 at this event? Thank you.

Jan van de Winkel (President and CEO)

Thanks, Vikram, for the questions. I will hand over the first one to Tahi. He can give you further perspective on the benchmarks, which you need to think about for the antibody CD38 program, and then the question on 1042 and 1046 to give a bit more color and what I will hand it over to Judith. So but let's start with Tahi for the GEN3014. Tahi?

Tahamtan Ahmadi (EVP and CMO)

Yeah, thank you for the question. So, yeah, in principle, of course, you know, for, for Darzalex, a benchmark would be the 501 study or the SIRIUS study, and then also for the subcutaneous administration, the COLUMBA study. And it gives you a range of efficacy of somewhere between 30%-40%, with 19% data that can follow up a little bit more, but 90% of the patients having a VG, VGPR are better. But it's also important to understand that this data was generated in a setting with completely different treatment paradigms, and, presumably the data in today's world, where patients are more heavily pretreated with other mechanisms, may look differently, probably less favorable. That's why there is a head-to-head randomized data set that we are generating.

But broadly speaking, that's the efficacy benchmark, and I think it's important as you think about comparison from an efficacy point of view, not only the OR, but also the depth of response is going to be very important, certainly for us, as we look at the data that we have on our hand. The same with safety, and I think the safety data issue, of course, is like small data sets in a different environment. You know, there are some, some factors that are, that are different in today's world. For example, one of the patients that had a Grade 5 event was a patient with COVID. That was certainly not a virus existing at the time when the reference data sets were generated some 8 years ago. Again, I would say the comparison will come from the randomized data set, which is why we're doing a randomized study.

Jan van de Winkel (President and CEO)

Thanks, Tahi. Maybe over to Judith, maybe a bit more color on 1042 and 1046. Judith, at ASH?

Judith Klimovsky (EVP and Chief Development Officer)

Yes, thank you, Jan. So as you alluded, Jan, for 1046, we look forward to share the data of study 04 in a scientific congress that will... And we are looking for opportunities within the first quarter, second quarter next year. So this is where the data, the actual data will be presented. We expect at ASH to give a little bit more color directionally, where we are going, but, you know, as was discussed several times, you know, at SITC 2021, we presented interesting data of responders in non-small cell lung cancer after failing the current standard of care, which encompass chemo and immunotherapy. Responses were always not durable.

Interestingly enough, when we analyzed the clinical data, we saw that these responders were concentrated in the PD-L1 positive, and we also saw that these responders, who are mostly in the patient, had received a checkpoint inhibitor in the last 8 months. Based on those data points and the strong preclinical synergy between Pembro and 1046, we designed the 04 study, which those results allow us to discuss in future meeting with health authorities next steps. So we will see where we are, but we directionally plan to present a little more color. This is 1046. 1042, we are very encouraged and what we continue to see not just align with the 4 responders that we presented in head and neck, but in other tumor types.

We are also getting the learnings from 1046 in order to understand better how to dose and scale for 4-1BB engagement. So we may give more color, but we need to understand where we are to see to what degree, and it will be more directionally because we usually present data in scientific forum before we share with investors and analysts. But we will do our best to directionally give more color.

Jan van de Winkel (President and CEO)

Thanks. Thanks, Judith. Vikram, as you can hear, we are literally steaming about all these three programs, so we're very excited and, and I think we use the coming months to further position the molecules for next steps, and more to come from Genmab in the coming months for sure.

Vikram Purohit (Executive Director)

Okay, thank you.

Jan van de Winkel (President and CEO)

Thanks, Vikram.

Operator (participant)

Thank you. We will now take the next question from the line of Jonathan Chang from Leerink. Please go ahead.

Jonathan Chang (Senior Research Analyst)

Hi, guys. Thanks for taking my questions. First question, can you discuss the progress made with the early Epkinly launch? What gives you confidence that Epkinly can become the market leader in the CD20, by CD3 class? And then second question on GEN1046, what could a path forward in post-IO lung cancer look like, and can you discuss the opportunity for this program in endometrial cancer? Thank you.

Jan van de Winkel (President and CEO)

Thanks, Jonathan. Two excellent questions. The first one, I will hand over to Anthony Mancini, who will be delighted to speak about the Epkinly launch and next steps. And then 1046, maybe you can give a bit more color on the post-checkpoint inhibitor lung cancer landscape and the, and the way to develop the, potentially develop the molecule. Anthony Mancini?

Anthony Mancini (EVP and COO)

Thanks. Thanks, Jan, and thanks, Jonathan, for the question. As was covered earlier, we're seeing a really healthy uptake of Epkinly and really strong execution of our launch plans in the first quarter. And we're also highly encouraged by the launch momentum and overall positive feedback that we're getting from our customers that are using Epkinly in the third line plus DLBCL setting. Our go-to-market approach really looked to leverage our first mover advantage, and the strong early uptake really is driven by a couple of factors that I think give me confidence that we can continue that through the life cycle. First, the solid execution and focus on key accounts and on key customers from our field-based teams, across medical affairs, across the sales team, across our alliance with AbbVie, and of course, the market access team.

That really has yielded strong customer engagement and Epkinly early uptake, and it's also resulted in rapid access. So what we're seeing, Jonathan, is 99% of covered medical lives in the United States with functional access to Epkinly, which is very encouraging. It's also, you know, it's also very clear that there's a high unmet need in later-line DLBCL, and Epkinly is really filling the void, enabling an off-the-shelf access to T-cell engaging innovation across diverse sites of care. We feel very good about being the first FDA-approved T-cell engaging bispecific antibody for the treatment of patients with third-line DLBCL. But we really understand it's an important starting point to build from, to help Epkinly become the core therapy across B-cell malignancy.

Overall, we're highly encouraged by the early response in the market to Epkinly, and so far, uptake has gone better than expected.

Jan van de Winkel (President and CEO)

Thanks very much, Anthony. And Jonathan, we intend to actually give further color on the complete development plan, this year, potentially at the post-ASH event. So we will talk more about how to further build the market and the landscape for use of Epkinly in the coming years. Now, let's move to Judith, for giving a bit more color on the importance of the post checkpoint inhibitor lung cancer market, because we feel that that's a very strongly growing market with a need for new medicines. Judith?

Judith Klimovsky (EVP and Chief Development Officer)

Yeah. So as we all know, you know, with checkpoint inhibitors moving to the first line, as single agents, if patients have PD-L1 above 50% or in combination with chemo for patients with lower expression of PD-L1, there's a huge unmet medical need for patients that failing pembro checkpoint inhibitors and chemo. Where the standard of care, unfortunately, is Taxotere, that derives an ORR, let's say, benchmark vary, but from 12%-17%, 18%, 20% at the most, and with very dismal prognosis. And this segment is growing. As you know, more and more patients receive first line combinatory treatment on even sequential.

It is in this very setting where we conducted the randomized O4 study, assessing two different schedules and even 1046, a single agent, which gives us a strong foundation for a potential phase III in this very setting. So we are encouraged about the data, about the methodical follow of the science, and this is why we are engaging with health authorities in coming weeks to define better, and we will share more as we define better those plans.

Jan van de Winkel (President and CEO)

Thanks. Thanks, Judith. So more to come in the coming weeks and months, Jonathan, for sure.

Jonathan Chang (Senior Research Analyst)

Understood. Thank you.

Jan van de Winkel (President and CEO)

Thank you.

Operator (participant)

Thank you. We will now take the next question... From the line of Michael Schmidt from Guggenheim Partners. Please go ahead.

Paul Jeng (VP)

Hi, this is Paul. I'm from Michael. Thanks for taking our question. The first one is on the pivotal data for epcoritamab and follicular lymphoma at ASH. How are you thinking about the opportunity and differentiation from Lunsumio, based on the emerging clinical profile and your conversations with physicians? How much do you think that the evolving duration of response will possibly factor into how the two drugs are positioned? And then my second question is sort of building off the prior one on GEN1046. Can you sort of just talk a little bit about your decision to initiate that phase II study for endometrial cancer, whether that was driven by emerging data in phase I or perhaps the non-small cell lung cancer combo trial? Thank you.

Jan van de Winkel (President and CEO)

Thanks, Paul. The first question I think can be handled by Tahi, and then the second one, maybe you that you can talk a bit about endometrial and the start of that trial and why we are so excited there. Tahi?

Tahamtan Ahmadi (EVP and CMO)

Yeah. Thank you for the question. So as it relates to the data in follicular lymphoma, you know, there's obviously some public release of our data top lines, but you will see more data. And I think here, the most important part will be to pay attention to the optimized schedule that will be presented at ASH, and then the safety profile of Epcor in the optimized setting. Which will, I think, very clearly show that Epcor then has a profile, both from an efficacy but also from a safety profile that is extremely competitive, with a best-in-class safety and best-in-class efficacy, even in follicular lymphoma. Duration of response is a tricky one. To some degree, it's a question of follow-up.

Obviously, mosunetuzumab has significantly longer follow-up than epcoritamab because they started about three years before us. And so, that is also reflected in the duration of response. And then there's other parts that kind of like confound us to some degree. The Omicron wave certainly played a role in that, but even with that, I think there will be some data in the future and continuously showing that patients who are... And that's basically the truism about this mechanism. Patients who achieve a deep response, particularly CR, are staying very, very long in their CR.

You know, in some cases we will, we will see if that is actually a reflection of a big word in, in cancer, about a cure, because we have patients now who are, who are approximating five years in, in, in CR. So broadly speaking, on, on epcoritamab, I would say pay attention to, to the, the disclosure of the data will be shared at ASH and also the, the updated data and the optimization data set.

Jan van de Winkel (President and CEO)

Thanks, Tahi. Let's move to GEN1046, Judith, and maybe talk a bit about rationale for endometrial cancer. Why did we start up that study and so far?

Judith Klimovsky (EVP and Chief Development Officer)

Yeah. Thank you so much. So we started studying endometrial because it's a tumor type where 4-1BB is constitutively overexpressed and is a setting to test a hypothesis different from what we did or would have done in IO, which I already alluded to. So this is the reason to tackle endometrial cancer. Now, we understand that endometrial cancer is not a single disease. You have MSI high and MSI low. We are gathering data as we speak, and based on the data, we plan to tackle these different subtypes and go from there. And so it's very preliminary to say what is the path forward, because we are gathering data in this phase II program to understand the data and where there could be a path forward. As another point to flag is endometrial cancer.

In the phase I, we saw long, durable responses with GEN1046 as a single agent, which again prompted us to investigate more. So again, we expect to have this data in coming months to allow us to make decisions.

Jan van de Winkel (President and CEO)

Excellent, Judith. Thank you very much. Thanks, Paul, for the questions.

Operator (participant)

Thank you. We will now take the next question from the line of Etzer Darout, from BMO. Please go ahead.

Etzer Darout (Senior Biotech Analyst)

Great. Thanks for taking the question. The first one on sort of GEN1046 again. You have data next year, sort of at a medical meeting. Just how you're thinking about sort of the target relative to other IO targets, you know, agents that we've seen now being combined with PD-1, like what we're seeing sort of from the TIGIT class, just how you see the PD-L1 4-1BB mechanism relative to that. And then, maybe quickly on HexaBody-CD38, just if you could sort of remind us sort of the opt-in rights for J&J with respect to that program, just so we could think a little bit about more or less when that could be triggered potentially by J&J. Thank you.

Jan van de Winkel (President and CEO)

Thanks, Etzer, for the questions. The first one I will hand over to Judith to talk a bit about 4-1BB targeting versus TIGIT and other immune checkpoint targets. And I can take the HexaBody-CD38 question myself. Judith, why don't you go ahead?

Judith Klimovsky (EVP and Chief Development Officer)

Yeah. So I, I first start to say that there is no precedent of IO as a single agent, provided responses in patients that fail checkpoint inhibition, PD-1 inhibitors. So if you think about the array of TIGIT or other targets, the response rate in patients that fail checkpoint inhibitor is zero or in a handful. So with for PD-L1x4-1BB, we showed in the first cohort that, you know, there were responses, and there was 17%, and we enroll all comers. Then we presented in SITC 2021. When we segmented this population based on the PD-L1 presence, the response rate was higher, albeit not durable. However, we had this preclinical data that showed this synergy additivity with Pembro, and, you know, this is what prompted us to do the combo trial. So to reinforce the fact that IO-...

Single agent activity post IO, it's almost unheard of, but we saw it with 1046. To overcome the durability and strengthen the signal, the right next step to combine with pembro was the next step, and this is what we have done, which results are emerging, and we will share. So there is no precedent of IO-IO in a post IO. The TIGITs are all, you know, going to first-line in frontline. This is where the data show that there is a stronger activity. So even, you know, in the hypothetical case that TIGITs go to the first-line, it won't change the huge unmet medical need in a post IO for non-small cell lung cancer in particular.

Jan van de Winkel (President and CEO)

Thank you, Judith. I think that's very clear. Let me take the HexaBody-CD38 opt-in rights for J&J. They have the right to take a decision, yes or no, for opting in, also. After we give them the data from the dose escalation, the dose expansion data, which we already have, and the head-to-head data against the subcu data, which we are gathering now very rapidly. We believe that we have the head-to-head data next year, and then basically hand over that data package to J&J, and then they have only a very limited time to say yes or no. When they opt in, they are going to develop, commit to develop that molecule in any indication they want to.

But I think multiple myeloma is now the number one, I think, indication for HexaBody-CD38, definitely with the new data, now from the expansion cohort. And then we will get a $150 million upfront payments, and they pay for all, and we get a straight 20% royalty rather than 12%-20% royalty until some point in 2031, where we go from 13%-20% in a tiered fashion. So next year will be an important year as so, because then we will hand over the head-to-head data package on top of the dose expansion dose escalation and the dose expansion cohort data, which we already have in our hands.

But we keep following that, the data at ASH, which we will present on a poster, will be updated data from the abstract. So please watch out for that, and Tahi already gave you some color on what to look for versus years ago data to monotherapy data. But you can hear from the enthusiasm of the team here that we are really, we can't wait till we are in San Diego and can present that data, because we believe it's very, very encouraging. I think we should probably leave it at that, Etzer, for the time being.

Etzer Darout (Senior Biotech Analyst)

Thank you. Thank you for the additional color.

Jan van de Winkel (President and CEO)

All right. Thank you.

Operator (participant)

Thank you. We will now take the next question from the line of Sachin Jain from Bank of America. Please go ahead.

Sachin Jain (VP)

Hi there. Thanks for taking my questions. Just more follow-ons on the same topics, if I may. So firstly, get to Tahi on the CD38 grade five events. Thank you for clarifying that one of the two was COVID. Was that the respiratory event and any color on the patient characteristics for the CV event, just to get some color as to whether that was treatment related or not in your mind? And then just to follow on the grade fives, the abstract was obviously a May cut-off. Have you seen any grade five events since that May cut-off? So that's on the CD38. Second topic is the 1046. You said more color ASH. Just to clarify, will you have met with the regulators by then? So could you confirm your phase III program at the ASH event?

And then a follow on your clear efficacy comment, do I infer that as a response rate above the 20% for Taxotere you referenced, and any color on the duration of response you're seeing? Thank you.

Jan van de Winkel (President and CEO)

Thanks, Sachin. Let's see what my colleagues are willing to give you this information here. Tahi can definitely comment further on the grade 5 event for HexaBody-CD38, and I will ask Judith to think carefully about how to answer the question on 1046 and the ASH data as it correlates to clarity on the potential phase III trial, as well as the bar for responses. Tahi, maybe you can start.

Tahamtan Ahmadi (EVP and CMO)

Yeah. So, I mean, as I said, I think earlier, right, the one patient was a patient who passed away due to COVID. The other one was a cardiac event. Neither of the two events were, in our judgment, and the judgment of the investigators or in the judgment of the DMC, related to the HexaBody-CD38. You know, in these studies, and if you look at the Columbus study that I referenced earlier, you will see, there is roughly like a 7%-ish rate of grade five events on these trials, patients passing away, of all kinds of reasons, not always related to the drug.

So at this point, we don't really have any assessment of the DMC safety signal with small patients that in any way or shape or form seems to deviate from what is known for the class of CD38 antibodies. Hope that answers it.

Jan van de Winkel (President and CEO)

Thanks, Ty. And then Judith, on 1046 and ASH, potential updates there or further clarity on the program?

Judith Klimovsky (EVP and Chief Development Officer)

Yeah. So thank you for the question. I think that we will try directionally to give more color, you know, just to share the design. We expect to have more certainty on that, and this usually happens after discussions with health authorities. So we will give, you know, as much as we can, predicated on where we stand in the process. As related to the benchmark, you know, I alluded to the multiple datasets, in this-

Setting that unfortunately fail, and fail because they haven't done or they didn't do this rigorous scientific approach, question by question, to connect the dots and have the best potential hypothesis. So, and, you know, this allow us, you know, to wait a little bit, to have not only order, order, but duration, which is critical because, you know, time to event is the right endpoint, you know, in a phase III setting. So, I mean, I want to reinforce that we will share as much as we can, whenever we can. The commitment is there, but, you know, we are bound to when these meetings will happen.

Jan van de Winkel (President and CEO)

Thanks. Thanks, Judith, and thanks, Sachin, for the questions, huh?

Sachin Jain (VP)

Thank you.

Operator (participant)

Thank you. We will now take the next question from the line of Kaveri Pohlman from BTIG. Please go ahead.

Kaveri Pohlman (Director)

Yeah, good afternoon. Thanks for taking my questions. My first question is for GEN3014. Can you provide any insight into your expectations for its efficacy in CD38 pretreated patients, given that previous studies have shown that these patients develop resistance via overexpression of complement inhibitory proteins? And my second question is for Epkinly. Can you provide any color on your plans for follicular lymphoma and any timelines around that? Also, for Epkinly in the LBCL, especially from the safety standpoint, are you planning to have some real-world data collected that could further differentiate it from its competitors?

Jan van de Winkel (President and CEO)

Thanks, Kaveri, for the questions. I think I will hand them both over to Tahi. Before Tahi starts, I already said in an earlier comment that we will intend to actually describe the compound development plan for Epkinly in more detail, or epcoritamab, I should say, in more detail at the post-AGM update. Tahi, maybe you can give us a bit more color on the efficacy or the potential efficacy in CD38 pretreated patients.

Tahamtan Ahmadi (EVP and CMO)

Yes, thank you. You are absolutely right, right? There was a subgroup analysis worked on the combined dataset for SIRIUS and the 501 study that actually looked at the impact of, and in those cases, there are two or more treatments on CD38 expression, which actually gets kind of shed off the surface, so to speak, to a process called trogocytosis, and then the upregulation of complement inhibitory proteins. That's absolutely correct. So, this is why the study that we're conducting is actually in CD38-naive patients. We had a head-to-head comparison against Dara SQ. We have had some signals of efficacy in the daratumumab-exposed patients in the dose escalation. There were 2 patients who had a response.

You know, but, broadly speaking, that's not where we're focusing right now, because the focus is right now, as in the original agreement with Janssen, to generate data that allows us and Janssen, frankly, to elucidate whether the single point mutation that is underlying hexamerization really has the impact that we have pre-clinically seen and that we believe to be seeing in the clinical data so far. And then, sorry, the second part of the question was about positioning of Epcor in follicular lymphoma. So, yes, to some degree, there's already a phase III in combination with Len in the second line, and we have talked about that. We are actively working with AbbVie on plans on a frontline study, so there will be some news to come in the near future.

That is in follicular lymphoma. And then in diffuse large B-cell lymphoma, there are multiple real-world datasets attempted to generate data both to show also the impact of epcoritamab in comparison to CAR-T, right? And driving home the point that actually this modality that this bispecific antibody, the accessibility of it, the ease of its administration, and the safety of it, so compare quite favorably to CAR-T therapies in the real world data. Hope that answered the question.

Jan van de Winkel (President and CEO)

Thanks, Tahi. I think that was a good question. Kaveri, thank you very much for the questions.

Kaveri Pohlman (Director)

Thank you.

Operator (participant)

Thank you. We will now take the next question from the line of Michael Novod from Nordea. Please go ahead.

Michael Novod (Managing Director and Senior Equity Analyst)

Thank you very much. Just a few follow-up questions, especially to timing. If we take GEN1042 first, just need to understand. So, I think Judith said some directional guidance also on GEN1042. When do you expect to sort of have more clear data on GEN1042, and also for some of the potentially larger indications? I think we all had expected it would be around the ESMO IO, but is that also sort of then later in 2024? And to HexaBody-CD38, there was a question earlier on relating to the J&J potential opt-in.

Timing-wise, is it most realistic that you need to complete the head-to-head, which says October 2024 on ClinicalTrials.gov, or could that happen sort of midway in that trial also? Maybe just to clarify. Thank you very much.

Jan van de Winkel (President and CEO)

Thanks, Michael, for the questions. So I will hand over to Judith for GEN1042 to give you a bit further feeling for the timing. When do we have the data in hand? We believe that in some of the tumors, we actually have the data in the coming months, if not sooner, but Judith can give you a bit further color, Michael. Then for HexaBody-CD38, timing of the potential opt-in for J&J. I mean, they have the right to wait for all of the data from the head-to-head cohorts, Michael. I don't know whether they need to. To make a long story short, because we think the data is shaping up very nicely, as you can see from the expansion cohorts, but it's up to them.

So it's very difficult to actually give you an estimate of when, of when J&J would like to opt in, because it's, it's basically in their, in their corner. But the full head-to-head data will likely come in the second half of 2024, not before, but there will be a lot of data already by that time in the first half. But whether that's enough is up to J&J. But maybe I, I can hand over the 1042 timing question and some of the tumor cohorts to, to Judith. Judith?

Judith Klimovsky (EVP and Chief Development Officer)

Yeah, thank you. So, as you know, Michael, we are collecting data to assess the hypothesis that a checkpoint inhibition Pembro adds to 1042, and this is further potentiated by the addition of chemotherapy and the creation of immunogenic cell death. This is the basic hypothesis that guided us to collect to address in different tumor types. Among them, you know, head and neck, and non-small cell lung cancer, squamous and non-squamous, mainly. This hypothesis is the same, so the data sets are complementary from one each other. So the goal is to have a kind of good number of patients with some level of durability for more than one cohort, because this would make the data stronger.

So this is why there is no firm congress to when we are presenting, but I can tell you that enrollment is going very well. So it will be in 2024, depends on when the abstract is closed close to submission and the data we have in hand to decide the venue. So I cannot provide you a firm date at this point.

Michael Novod (Managing Director and Senior Equity Analyst)

Okay.

Jan van de Winkel (President and CEO)

Thanks. Thank you.

Michael Novod (Managing Director and Senior Equity Analyst)

Thanks a lot.

Jan van de Winkel (President and CEO)

Thanks, Michael.

Judith Klimovsky (EVP and Chief Development Officer)

Thank you. We will now take the last question from the line of Emily Field from Barclays. Please go ahead.

Emily Field (Director)

Great. Thank you so much for fitting me in. I will ask a quick financial question. I believe that, you know, for OpEx, going into 2024, I think consensus is modeling about half the growth rate of OpEx for 2023. Obviously, it's gonna be off of a larger base for next year, but maybe, Anthony, if you have any comments on just how we should think about modeling OpEx going into 2024 before you officially guide for it.

Jan van de Winkel (President and CEO)

Thanks, Emily, for the question, and Anthony will be delighted, Anthony Pagano, to answer a question on finances. So Anthony, the floor is yours.

Anthony Pagano (EVP and CFO)

Yeah, thanks. Thanks, Emily, and thanks, Jan. Yeah, you're right, Emily. Of course, we'll at the appropriate time in the year to take the time to really contextualize our overall guidance, including our investment levels. I can summarize for you now, though, really what our message has been through consistently throughout 2023, about how we should think about our overall OpEx levels moving forward. So I'll take the next minute or two to summarize that. You know, as always, you know, given our strong position, we're gonna continue to invest in significant growth opportunities in a focused and disciplined way. It's something that we do take very, very seriously.

As I think about that investment profile moving forward, you know, particularly as it relates to, let's say, call it the transition from 2023 to next year in the midterm, there are three drivers here now, particularly as it relates to R&D. First, Epco R&D is still in growth mode, so I fully expect Epco investment to go up as we add new phase III trials over the coming years. And here, it's really important to remember that this is grounded in our conviction of Epco's potential to help a large number of people living with cancer, and of course, will continue to be data-driven. And here, I mean, looking at the clinical data and the landscape, and also resourcing and sizing our investment accordingly, given this potential very meaningful opportunity.

Second, again, still thinking about R&D, and this is kind of the swing factor, you know, which additional programs will transition to later stage development? As a reminder, you heard about a lot about this today, we're doing some significant, let's call it, phase II work for both CD40x4-1BB and PD-L1x4-1BB during the course of 2023. And as just announced, the emerging data from 1046 leads us to believe there is a path forward here in terms of late-stage development. Also for Tivdak, based upon what you heard today, we also believe that there's a path forward here, particularly in terms of expanded development into head and neck, which also we think warrants further late-stage development. Now, with that, hopefully, will come larger revenue opportunities in the medium term.

Sticking with R&D in the third factor, we're gonna continue to invest to maximize the value of our current tech platforms. And here, we're gonna continue to invest to generate the next wave of IMP candidates, as well as progress some of our early-stage pipeline. And yet, Jan shared with you some of the exciting progress there. So that takes care of R&D. Now, let's talk about SG&A, and starting on the G&A side. Here, we are starting to increasingly approach scale based on our existing footprint. So growth here is already starting to moderate, and we expect it to further moderate here as we transition from Q4 2023 into 2024.

Now, if we think about the S part of SG&A as it relates to EPCO, there's a couple of things that you should all be thinking about as you start to model for 2024 and beyond. First, for the U.S., to be clear, the 2023 P&L reflects nearly a full year of costs for the initial indication. There will be some annualization impact next year, but that's gonna be more on the moderate side. And here, as we potentially build out the EPCO label over time, of course, there's gonna be some incremental investments. However, we will be able to leverage existing investments in many cases. Now, shifting to our other priority market, in terms of Japan, the same for what I just went through for the United States also applies.

However, everything is just pushed out a bit based on the potential approval date or the pre-approval date we've now seen with epcoritamab in Japan, is coming at a much later point in the year. So the incremental impact in 2024 will be higher. So maybe just to wrap up the comments on our investment levels. So everything I just covered, of course, is directional in nature. As always, we're gonna continue to be very focused and very disciplined in our approach, and we're gonna continue to take a detailed bottom-up approach and make sure that we're putting the appropriate amount of resource into our most important priorities. Certainly look forward in February, in conjunction with our full year results, really sharing what our investment priorities will look like for 2024.

What you heard today, hopefully, was conveyed a lot of excitement across our entire pipeline.

Jan van de Winkel (President and CEO)

Thanks, Anthony. Thanks, Emily, for the financial question.

Operator (participant)

Thank you. I would now like to turn the conference back to Jan van de Winkel for closing remarks.

Jan van de Winkel (President and CEO)

Thank you for calling in today to discuss Genmab financial results for the first 9 months of 2023. If you have 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, speaking with you all again soon.