Genmab - Q4 2022
February 22, 2023
Transcript
Operator (participant)
Hello, welcome to the Genmab full year 2022 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 believe, anticipate, 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 (President and CEO)
Hello, and welcome to Genmab's conference call to discuss the company's financial results for the period ending December 31st, 2022. 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 Tahi Ahmadi. Let's move to slide two. 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 three. Genmab has a science anchor and innovation-based culture, and collaborations and partnerships have always been part of our DNA. During today's presentation, we will reference products being developed under these strategic collaborations, and this slide acknowledges those relationships. Let's move to slide four. Genmab has had transformative growth in all areas of our organization.
As we transition into an integrated biotech that brings our own medicines to patients. Certain fundamental aspects of our business, however, will remain unchanged. These include innovative sciences at our core, and we strive to be forward-thinking in all areas of our business. We have an unstoppable team that aspires to use our innovations in antibody therapeutics to fundamentally transform the lives of patients. These foundational pillars led to great progress last year, setting us on the path that inspired our 2030 vision, which we unveiled in 2022. Let's turn now to recent accomplishments that will support our future success. Slide five. 2022 marks the 10th year of profitability for Genmab. As Anthony will describe in detail, this success is due to both our growing recurring revenue streams and our investing this revenue into a focused and disciplined manner.
Throughout the past year, we continue to invest in the strategic growth of our team and the maturation and expansion of our differentiated innovative product pipeline. In September of last year, we, together with our partner Seagen, celebrated the first full year of TIVDAK being available for cervical cancer patients in the U.S. At the beginning of this year, the NCCN updated their cervical cancer treatment guidelines, upgrading TIVDAK to a preferred regimen for second-line or subsequent therapy in recurrent or metastatic cervical cancer. This update is important for patients who are entering their second line of therapy and applies regardless of their biomarker status. For this patient population, TIVDAK is the only non-IO preferred treatment regimen across the second-line setting for all comers, regardless of PD-L1 status.
Based on this, on the high unmet needs and the strong efficacy results we have seen in clinical trials supported by the NCCN update, we believe that TIVDAK is on the way to becoming the clear second line choice for women with recurrent or metastatic cervical cancer. Turning to our next potential medicine, 2022 was a critical year in the development of epcoritamab. We have spoken both following our Q3 results last year and our 2022 ASH investor event about the BLA and MLA submissions by Genmab and our partner AbbVie, respectively. We are pleased to add to this our submission of a Japan NDA at the end of December for epcoritamab for the treatment of patients with relapsed or refractory LBCL after two or more lines of systemic therapy.
With these regulatory submissions, we are one step closer to potentially delivering epcoritamab as a new therapeutic option for people living with certain hematologic malignancies in the U.S., Europe, and Japan. Together with our partner, AbbVie, we believe that epcoritamab has the potential to become a core therapy for patients around the world with B-cell malignancies, and we are committed to progressing a comprehensive development program evaluating epcoritamab across a broad range of B-cell lymphomas. We look forward to receiving feedback from the U.S. FDA by the PDUFA date of May 21st. The past year was also notable for data presentations and publications. These highlighted investigational medicines across our portfolio, including a December article in the Journal of Clinical Oncology on the phase I-II epcoritamab dose expansion data. We expanded our pipeline in 2022 with new investigational medicines entering the clinic.
One of these, HexaBody-CD27, is part of an expansion of our thriving collaboration with BioNTech. I would also like to mention that as you can now see on ClinicalTrials.gov, there is a new arm in the phase I trial of HexaBody-CD38, comparing it to subcutaneous daratumumab. This will be a head-to-head evaluation to determine whether HexaBody-CD38 may be more potent in CD38 antibody-naive patients with relapsed or refractory multiple myeloma. We very much look forward to seeing how this trial progresses. now let's now move to the next slide and a brief reminder of the impact of our innovation beyond our own pipeline. Slide six. Partner-owned programs powered by our world-class innovation and especially our proprietary DuoBody platform, also saw great progress in 2022.
Novo Nordisk's Mim8 entered phase III-A development, and for both teclistamab and talquetamab, Janssen posted multiple new phase III trials on ClinicalTrials.gov, including in combination with daratumumab. In 2022, Janssen's TECVAYLI became the second DuoBody-based medicine to receive regulatory approval. With the submission of a BLA for talquetamab in December, as well as a submission in Europe in January of this year, there is the potential for a third approved medicine from our DuoBody agreement with Janssen. If both epcoritamab and talquetamab are approved in 2023, there will be eight approved medicines that incorporate Genmab's innovation available to for patients, half of which will be powered by our DuoBody technology platform. I also want to briefly mention some exciting recent news.
Last week, the British Pharmacological Society announced that the team behind the development of amivantamab has been awarded its prestigious Drug Discovery of the Year 2023. The creation of amivantamab was a team effort with the two antibody libraries used to produce amivantamab generated by Genmab, hence the antibody pair used to create amivantamab selected in collaboration with Janssen R&D, which subsequently led to a pre-clinical and clinical development by Janssen. This award is further validation of the potential of Genmab's innovative DuoBody technology platform to create truly differentiated bispecific antibody therapeutics. Turning to DARZALEX. It continues to redefine the treatment of multiple myeloma. As you have seen, J&J's net sales for daratumumab were up 32% over 2021. That is generating more than DKK 10 billion in royalties for us, contributing materially to our robust financials.
I would also like to note that the sales of Kesimpta passed the $1 billion mark in 2022. Kesimpta is now the third blockbuster medicine on the market created by Genmab. I will now turn the call over to Anthony Pagano to take you through our 2022 financial results. Anthony, the floor is yours.
Anthony Pagano (CFO)
Great. Thanks, Jan. Let's move to slide seven. We continued to strengthen our foundation during 2022. To start, as Jan just mentioned, together with our partner, AbbVie, we've achieved our goal of regulatory submissions for Epco in the U.S., Europe, and Japan. As we'll see, our financials for the year are exceptionally strong. We grew operating profit by 111%. We also increased recurring revenues by 70%. This was principally driven by strong royalties from DARZALEX and other approved medicines. Note that favorable FX also had a significant impact here, and I'm going to return to this in just a bit. Our strong 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.
An important part of this has been to continue to build the team and capabilities that we need to succeed. Let's take a look at those revenues in just a bit more detail on the next slide. We saw robust performance for DARZALEX in 2022. As you can see in the chart, overall net sales grew by 32%. That's net sales of nearly $8 billion, which translates to over DKK 10 billion in royalty revenue. This exceptional growth was driven by continued strong market shares, including further uptake of the subQ formulation. As a reminder for our royalties, we also had a significant FX tailwind. DARZALEX remains a key driver of our revenue, as you can see on slide nine. We grew total revenue to around DKK 14.6 billion in 2022.
As I've already highlighted, that included a 70% increase in our recurring revenue. We've already spoken about DARZALEX and the very strong performance there. Turning to Kesimpta and TEPEZZA, we saw an increase of DKK 747 million in royalties compared to last year. Impressively, Kesimpta achieved blockbuster status in 2022. Taken together, this growth really illustrates the power of our recurring revenue. Finally, we've seen some pretty significant FX tailwinds, particularly for our royalty revenue related to the strength of the U.S. dollar and the contractual hedge rate for DARZALEX. Let me break that out in a bit more detail on the next slide. In aggregate, of the 70% year-over-year growth in recurring revenue, 30 percentage points were related to FX tailwinds. I'll make a few points here. First, as we all know, FX can move in both directions.
One year's tailwind can of course become next year's headwind. Second, with our 2022 figures enhanced by FX, we set up a tough comp for 2023. That said, what's super encouraging for me is the 40% underlying operational growth. In 2022, we've materially strengthened our revenue profile. Now let's take a look at how we're using our strong recurring revenue to continue investing in a highly focused way. As you'd expect, given the investments we're making, total OpEx grew 51% for the year. In R&D, we've accelerated our investment into our product portfolio, especially the advancement of Epco and other pipeline projects. We've also further strengthened our team to enhance our commercial capabilities and support our expanding pipeline. That includes TIVDAK and the filings and potential launch for Epco.
Let's take a look at our financials as a whole on slide 12. Here you can see our summary P&L for 2022. Revenue came in at around DKK 14.6 billion. That's up 72% on last year, favorably impacted by a significant FX tailwind as mentioned previously. Total expenses were about DKK 8.2 billion, with 68% being R&D and 32% SG&A. That brings us to our very strong operating profit of over DKK 6 billion. That's an increase of 111% compared to 2021. Moving now to our net financial items. Here we have income of nearly DKK 700 million, which is primarily driven by the same two partially offsetting items that we've highlighted recently. First, we've got the strengthening of the U.S. dollar against the Danish kroner positively impacting the value of our cash and investments.
On the other side of the ledger, we have losses on our marketable securities due to rising interest rates and some losses on our public equity investments. Finally, there was an increase in interest income due to higher effective interest rates. We have tax expense of around DKK 1.5 billion, which equates to an effective tax rate of 21.5%. It's important to note that this rate is positively impacted by some one-time items in 2022. It isn't reflective of what we would expect moving forward. That brings us to our net profit of over DKK 5.5 billion. As you can see, extremely strong financial performance. Now, before we take a look at our 2023 guidance, I want to take a minute to revisit our financial framework on the next slide.
First off, our revenue profile on the left. At the beginning of 2020, DARZALEX was our only product on the market. Today, we have six, that will generate continued recurring revenue growth in 2023. We see a clear path to potentially expand the number of approved products with the recent submissions for epco and Janssen submissions for talquetamab. Taken together, we expect significant cash inflows in the years to come. Moving to the right, we remain focused in our investments as we evolve our organization for continued success. At the top of the list is accelerating and expanding epco. That's just one of the exciting opportunities that provide us with a compelling rationale for increasing investment. As we've told you before, if we want to seize these meaningful opportunities, we've got to invest. That's exactly what we're doing.
With that background, let's take a look at the components of our strong recurring revenue on slide 14. For 2023, we anticipate another year of strong underlying revenue growth. Before I get into the detail, note that these projections are based on an assumed U.S. dollar Danish kroner exchange rate of 6.8. At the risk of stating the obvious, I thought it important to highlight that as best we can tell, Genmab collected consensus has been derived using 7.2. As a reminder, the average dollar kroner rate in 2022 was 7.1. Looking at our total revenue, we're expecting to be in the range of DKK 14.6 billion-DKK 16.1 billion. More than 85% of this will come from recurring revenue, which is up meaningfully from last year.
We anticipate that DARZALEX sales will continue to ramp up and be in the range of $9.4 billion-$10 billion. We're projecting DARZALEX royalties to be between DKK 10.4 billion-DKK 11.1 billion. Recurring revenues also include a 32% increase in royalties from TEPEZZA and Kesimpta. We also expect significant FX headwinds. Overall, we anticipate recurring revenues will increase by around 12%. Turning now to non-recurring revenue, we expect this to be DKK 2.1 billion at the midpoint in 2023, compared to DKK 2.7 billion in 2022. As you'll recall, there were multiple regulatory filings in 2022, and we benefited by the one-time milestones associated with these.
Let's now take a look at our recurring revenue in just a bit more detail on the next page. As I said, we are anticipating recurring revenue growth of around 12%. It's important to note that's only a reported basis. What we're really focused on is delivering the 25% operational growth. This 25% growth is partially offset by the 13% negative FX impact. We're assuming lower dollar to kroner rate compared to 2022, and as I said earlier, it's a tough comp due to the DARZALEX contractual hedge rate from last year. I think it's important to step back and really look through this FX noise and focus on the fundamentals of our very, very strong revenue growth. With that, having looked at revenue, let's look at our planned 2023 investment on the next slide.
We expect total OpEx to be between DKK 9.8 billion and DKK 10.6 billion, this fully reflects the evolution of our pipeline and indeed our entire business. We have three near-term investment priorities. First, initiating new phase II and phase III epco trials to really maximize its potential. Second is generating the next wave of data for DuoBody PD-L1 4-1BB and DuoBody CD40 4-1BB. Of course, third, the potential launch of epco. These are our immediate priorities. As I noted, we're not just focused on today. In line with our vision, we're also very focused on long-term value creation. We're continuing to build out our infrastructure, teams, and systems.
We're investing to maximize the value of our current technologies, and we're also investing to generate the next wave of IND candidates and to progress our early-stage pipeline. With that, let's break out our 2023 investment profile with a few numbers on the next slide. Here, we've laid out the incremental investments we're expecting to make for our top priorities in 2023. Starting at the top, a successful launch for epco will require a significant amount of our focus and investment, especially on building out our two key markets, the U.S. and Japan. As a reminder, while the initial indication for epco is rather modest, over the medium term, we think this can be a meaningful opportunity. In particular, in the U.S. and Japan, where we are the commercial lead and booking net sales, the market is highly competitive.
For a successful launch, we need to focus investment in this area. Of course, it won't be our only focus. You can see the biggest overall increase in investment will be in advancing our portfolio. This is an investment for now and for the future as we look to expand development of our mid to late-stage programs, as well as the growth of our overall portfolio. As Jan mentioned, when talking about our 2030 vision, we'll also be making investments to move into a new therapeutic area, which is part of scaling up our already world-class discovery engine. Having looked at the framework and the constituent parts, let's look at how this all comes together on slide 18. Here, you can see our 2023 guidance. We expect our revenue to be in the range of DKK 14.6 billion-DKK 16.1 billion.
Most of this is made up of recurring revenue, where we're expecting 25% of operational growth. For OpEx, we expect to be in a range of DKK 9.8 billion-DKK 10.6 billion. As I previously highlighted, this step-up in investment is fully in line with our strategy and our focus on creating long-term value. Putting all this together, we're planning for substantial operating profit in a range of DKK 3.9 billion-DKK 6.2 billion. For my final slide, let me provide a few closing remarks. In summary, we had an exceptional 2022. We created growing recurring revenue streams, 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. Let's move to slide 20. As Anthony said, 2022 was an exceptional year for Genmab as we made significant progress across all areas of our business. In 2023, we will continue to work towards our 2030 vision with our KYSO antibody medicines, where our KYSO antibody medicines are fundamentally transforming the lives of people with cancer and other serious diseases. We will start with bringing our own medicines to patients. Subject to approval, we are enthusiastic about the potential launch of epcoritamab. We are also looking forward to working with AbbVie to expand developments with new studies. We will collaborate with our partner Seagen to establish TIVDAK as a clear choice for patients with metastatic cervical cancer. Together, we will continue to broaden the tisotumab vedotin clinical development program.
Turning to our world-class differentiated product pipeline, we very much look forward to data from the clinical expansion cohorts and progress to the next steps for both DuoBody molecules in development with BioNTech targeting 4-1BB. We anticipate expanding and advancing other early stage programs, including the potential for multiple additional INDs or CTAs during this year. Fundamental to the success of these programs is having the right team and culture in place. We intend to continue to scale our organization based on our planned portfolio development and business needs. We intend to leverage our solid financial base to support our growth, which could include external opportunities. With all of this in mind, we are very excited about the next 12 months. Let's now move to my final slide. That ends our presentation of Genmab's financial results for 2022.Operator, please open the call for questions.
Operator (participant)
Thank you. To ask a question, you will need to press star one and 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 go to our first question. One moment, please. Your first question comes from the line of Matthew Harrison from Morgan Stanley. Please go ahead. Your line is open.
Matthew Harrison (Managing Director)
Great. Thanks for taking the questions. I guess two from me. Jan, I'm curious, you talked about external opportunities that you may be looking at. Could you just give us a little bit of more detail around, you know, what you may be thinking, size, scope, and whether these are technology-focused or product-focused. Then second, just on the epcoritamab launch in the second half of the year, I'm not asking for guidance here, but just maybe how should we think about some of the parameters? We've obviously seen multiple late line DLBCL launches from a variety of drugs. How should we look at those as the right kind of comps to think about for epcoritamab, or are there other factors that you would highlight for us? Thanks very much.
Jan van de Winkel (President and CEO)
Thanks, Matthew, for the questions. I will definitely hand over the second question to Anthony Mancini. Let me start first with the external opportunities, Matthew. We are very much looking at the external landscape, both for components which we can use actually to build differentiated antibody therapeutics as we have done before. Of course, last year we did a number of deals with different companies like OBT, OREGA Scancell to get antibody components, Matthew, to really use in our next generation antibody therapeutic formats. We're also looking at other technologies, new types of ADCs, new type of immune stimulators.
As we already revealed last year, we are going to add at least one significant disease area to our focus area in cancer, and we potentially could do a strategic collaboration with another party already having a presence in another disease area, Matthew. I think it can be one of these or several of these potential options. I think it's the right thing to do, to use our financial resources to broaden our capabilities and suite of technologies actually in the coming time. I want to leave it at that, Matthew, and then hand over to Anthony Mancini to ask to give a bit more perspective on the epco launch and how to think about that. Anthony?
Anthony Mancini (COO)
Thanks, Jan, and thanks, Matthew, for the question. Just to situate you in terms of how we're thinking about the launch landscape, there continues to be, despite approved options in the space, really a high unmet need, in part due to the aggressive nature of LBCL based on what we're hearing from prescribers. CAR-Ts are clearly a compelling innovation, yet many patients are still unable to get the treatment due to, you know, various challenges impacting their availability. Some of the other novel agents that are approved in the space are accessible yet fall short on some other areas, particularly in efficacy.
You know, despite the fact that it's a modest opportunity, as Anthony described earlier, with about 3,800 new U.S. patient starts in the third-line setting, we still think the unmet need continues to be high. We continue to hear from prescribers in both the academic and community setting that if they could choose a single agent that offers an optimal profile that balances powerful efficacy, manageable safety, and a seamless patient experience with subcutaneous administration, that it is indeed differentiating. Of course this first indication is a starting point that we'll build from and hopefully help enable EPKINLY to become a core therapy across LBCL, FL, and beyond. Thanks for the question.
Jan van de Winkel (President and CEO)
Thanks, Anthony.
Matthew Harrison (Managing Director)
Thank you.
Jan van de Winkel (President and CEO)
Thanks, Matthew. Back to the operator.
Operator (participant)
Thank you. We will now go to our next question. Your next question comes from the line of Peter Verdult from Citi. Please go ahead. Your line is open.
Peter Verdult (Managing Director)
Yeah, thanks. I'm Peter Verdult, Citi. Just a couple of questions. Maybe, just to Tahi, the language on the BioNTech collaboration. I think you've gone from wanting to have at least one of those antibodies into phase III this year to just GEN1042. Just want to make sure I understand what's changed or anything there. Just the latest thoughts, Tahi, when, if you're just being as your sensible guess as to when we might see HexaBody data to actually come in. Is next year still likely, or should we be pushing out our expectations? Secondly, just Jan, I'm expecting the response to be quite short. Have you got any sort of insight or clarity as to when we might get resolution of the ongoing arbitration on DARZALEX FASPRO? Thank you.
Jan van de Winkel (President and CEO)
Thanks, Peter, for the questions. I will let Tahi think about the BioNTech for the V programs and the HexaBody-CD38 data timing, and can be brief, Peter, on my answer to the change arbitration case. I think it's in full swing. We hope that we get a resolution sooner rather than later, the timing is completely down to the panel, to the arbitrator, I cannot give you any color, Peter, on the timing of the potential outcome of the arbitration.
What I can say is that the pro-process is in full swing, and I think all the paperworks and all the documents are in place and we hope for a resolution and of course, for a positive outcome sooner rather than later. Having said that, I'm handing over to Tahi to see whether you can give a bit more color, Tahi, on the two forms that we targeted, the bispecific programs with BioNTech and potential timing of data, et cetera. Tahi.
Tahi Ahmadi (Chief Medical Officer)
Will try my best. Yes, I would say, no, nothing has changed actually. Both of these programs, GEN1046, GEN1042, the two form maybe bispecifics that we are co-developing with BioNTech, are on track on generating the data. As we have communicated before, we expect to have that data in our hands in the second half of the year, and then we'll make the appropriate decisions. Nothing has changed on that end, and there's nothing that at this point would indicate any changes to what we've communicated before. The CD38, I think we've also been very clear that really the time points to look at data that will both inform us and then potentially there on Janssen in a decision is 24.
Peter Verdult (Managing Director)
Very clear. Thank you.
Jan van de Winkel (President and CEO)
Thanks, Tahi. Thanks, Peter. Operator?
Operator (participant)
Thank you. We will now go to our next question. Your next question comes from the line of Sachin Jain from Bank of America. Please go ahead. Your line is open.
Sachin Jain (Assistant VP)
Hi there. Sachin Jain here, Bank of America. Couple of questions, please. Just firstly on DARZALEX. Just provide a bit of color as to what percentage of sales you see in second line and how you're thinking about risk from the J&J CARTITUDE data, which was recently headlined. I was just accepting some of Anthony's comments on CAR-T existing penetration. Just wonder if you could flesh out your thoughts there. Then two clarification questions to the prior question, please. On GEN1042, GEN1046, is it fair to therefore think if Tahi, you're talking about data in-house second half, but really for a conference presentation, we're looking at well into the year, towards the end of the year, is that fair?
For the CD38, if you could just provide a bit of color as to why you have just added the subQ arm. Was that your decision or J&J's? Does that delay the decision point for J&J? I know you said 2024, but I think the prior working assumption was sort of early 2024 for decision, but is that pushing that decision into middle or end of 2024? Thank you.
Jan van de Winkel (President and CEO)
Thanks, Sachin, for the questions. I'm going to hand over the first question on the second line sales, which looks very encouraging, I can assure you, from the latest brand impact data to Anthony Mancini, and then Tahi can handle the other two questions on the timing of data dissemination for 1042, 1046, as well as the timing for HexaBody-CD38 later. Maybe Anthony Mancini, you can start by giving a bit more color on second line use of DARZALEX as it stands and potential competition from CAR-T, how we see that.
Anthony Mancini (COO)
Thanks, Jan, and thanks, Sachin, for the question. As it relates to second line, I mean, what I really think there's a question for J&J to be best positioned to answer the composition of their total business with DARZALEX. What I can comment on from a share perspective is that the second line portion of the business continues to perform very well. It's a 50% share for DARZALEX and we continue to see continued growth there with new patients exceeding total patients in the second line setting. CAR-Ts still do will have a place. Clearly, despite the limitations that they have, there are still patients that move very quickly between lines in the multiple myeloma setting. We do think that CAR-Ts will play a role.
That said, the primary growth factor for DARZALEX really continues to be driven by frontline, and we continue to see very strong growth in that space and lots of growth potential to continue, driven by frontline and share gains both in the U.S. and ex-U.S. as reimbursement continues. I'll leave it there and pass it back to you, Jan.
Jan van de Winkel (President and CEO)
Thanks. Thanks, Anthony. Maybe over to Tahi to give a bit more color on potential data dissemination for the 4-1BB targeted bispecific programs, Tahi, and some color on HexaBody-CD38 timing of data, head-to-head data.
Tahi Ahmadi (Chief Medical Officer)
I'll take the CD38 first. You know, Jan mentioned at the beginning of the call that there's been some updates to clinical trials I've got. So we have been progressing the steps that we need in order to generate the data head to head to DARZALEX subQ. We are moving on to that. We'll generate the data, and we have been, I think, consistent that I think 2024 is the time point where we probably will have the data in our hands to make a reasonable decision. That will be true for us at Janssen and then also as you communicate to the outside.
As it relates to, yes, you're absolutely correct. The conferences inside tumor space in the second half are spread more towards the end of the year. That's true. The data release for these conferences is probably a little bit earlier. In the end, it is a function of generating the data and getting it out. I have no more to add to that.
Jan van de Winkel (President and CEO)
Thanks. Thanks, Tahi. Thank you, Sachin, for the questions.
Operator (participant)
Thank you. We will now go to the next question. Your next question comes from the line of Jonathan Chang from SVB Securities. Please go ahead. Your line is open.
Jonathan Chang (Senior Research Analyst)
Hi, guys. Thanks for taking my questions. First question, on the 2023 revenue guidance, can you discuss what you see as the key factors that determine where you might land in that range, given the lower end suggests little change versus 2022? Are there other key drivers beyond DARZA and FX that we should be considering? Second question, as you prepare for the potential epcoritamab launch, what do you see as the key determinants for whether or not epcoritamab can become the market leader in the CD20 by CD3 class in the initial relapse refractory DLBCL setting and beyond? Thank you.
Jan van de Winkel (President and CEO)
Thanks, Jonathan. Excellent questions. The first one I will delegate to Anthony Pagano, and then the epco launch question will go to Anthony Mancini. Maybe Anthony Pagano can start.
Anthony Pagano (CFO)
Sure. Thanks, Jonathan. Appreciate it, getting a question on the earnings call today, so that's great to, you know, let me join the fun. Overall, you know, as you kind of highlighted, the revenue range is DKK 14.6 billion-DKK 16.1 billion. The headline numbers, you kind of rightly point out, on a reported basis, this is just a 12% increase. As I highlighted, there's a significant FX headwind. On an operational basis, and this is, like, we're really focused on the execution here, is 25% growth, so significant growth. We already highlighted some of the big swing factors, most notably, you know, DARZALEX. There we are guiding a very significant growth range of $9.4 billion-$10 billion.
Maybe one thing that I didn't cover, you know, beyond that on, in my prepared remarks is really then on the milestones. Here there is a little bit of, you know, let's call it variance between the lower end and the upper end. Here I'll just drill into this a bit for you. In terms of the milestones for 2023, we have a total range of DKK 1 billion-DKK 1.4 billion, and approximately 70% of this is related to epcoritamab. For epcoritamab, on the lower end of this, on the lower end of the guide for epcoritamab, we have three milestones. One associated with the U.S. approval, a second one associated with the E.U. approval, and then third, we have a filing for a new indication in one territory.
That's for the lower end of the guidance for epcoritamab. Secondly, on the upper end of the guidance for epcoritamab, there's an additional milestone above and beyond what I just said, and that additional milestone would be filing for a new indication in a second territory. I think, Jonathan, we kind of stepped back the fundamentals of our overall growth story. You know, you know, six products compared to one a couple of years ago. Clear path to potentially adding number seven and number eight during the course of 2023. Overall very strong 25% operational growth we're looking forward to in the course of this upcoming year. Anthony, I think you want to take the second question?
Anthony Mancini (COO)
Yeah. Thanks, Anthony.
Anthony Pagano (CFO)
Yep.
Anthony Mancini (COO)
Thanks, Jonathan, for the question. It's a great question. It's gonna be an I think a competitively intense marketplace, but we like where we stand and certainly we're pleased with the readiness progress we've been having across functions with our partner, AbbVie. Our field teams are ready across medical, sales, and market access. They're in place and fully trained. Our patient services team is ready to go. We've already started active discussions with payers through pre-approval information exchange, and the reactions have been positive. What I'd say in terms of what's key is that we wanna ensure very quickly that healthcare providers, whether they are sitting in the community or the academic setting, have a very clear understanding of how to safely and effectively administer EPKINLY.
We think that doing that quickly across sites of care is a key factor so that we can really start to establish epcoritamab as the optimal treatment choice in the third line plus setting. We think if we can start our lead there, that we can build our lead. The key will be to seamlessly coordinate across channels and across the so that we ensure an optimal end-to-end customer experience. I'll leave it at that, Jonathan, and look forward to the continued progress.
Jonathan Chang (Senior Research Analyst)
Got it. Thank you.
Jan van de Winkel (President and CEO)
Thanks, Anthony. Thanks, Jonathan. back to the operator.
Operator (participant)
Thank you. We'll now go to our next question. Your next question comes from the line of Elizabeth Walton from Credit Suisse. Please go ahead. Your line is open.
Elizabeth Walton (VP)
Hi there. Thank you for taking my questions. Just a couple left from me. You note in your 2023 priorities the sBLA submission for epcoritamab this year. Perhaps you can update us on when we could expect to see the potential pivotal data in relapsed refractory follicular lymphoma, and if we should think of a possible submission in the second half of the year. Then just to touch back on the CD38 HexaBody, are you able to confirm whether the J&J opt-in option for this asset does not expire within 2023? Thank you.
Jan van de Winkel (President and CEO)
Thanks. Thanks, Elizabeth, for the questions. I can tell you that the option for CD38 HexaBody did not expire, I can tell you this year. We need to collect the data, and then there is only a few month option period after we submit the clinical data that J&J can opt in or out on HexaBody-CD38. It's still intact. The first question on the data in relapsed refractory diffuse large B-cell lymphoma and also follicular lymphoma, I will ask Judith to give you a bit more color on timing. Judith?
Judith Klimovsky (Chief Development Officer)
Yeah. Thank you for the question. The question was specifically for the pivotal follicular lymphoma and we expect to have this data by the second half of this year.
Jan van de Winkel (President and CEO)
Thanks, Judith. I think that's it, Elizabeth. Back to the operator.
Operator (participant)
Thank you. I will now go to the next question. One moment please. Your next question comes from the line of Michael Schmidt from Guggenheim. Please go ahead. Your line is open.
Paul Jeng (Senior Associate)
Hi, this is Paul on for Michael. Thanks for taking our question. I had one actually on the earlier pipeline, on the B7-H4 bispecific. Just wondering how are you currently approaching patient recruitment for that phase I study? Is there any weighting towards one of the four select tumor types? Do you envision that sort of biomarker selection strategy down the line? Then maybe a quick follow on, you know, how should we think about the differences between the CD3 bispecific approach versus some of the ADC for B7-H4? Thank you.
Jan van de Winkel (President and CEO)
Thanks, Paul. I will hand over the question to Tahi, and then perhaps Judith can also chip in. I think after Tahi has already given his initial thoughts on the B7-H4 bispecific program, which we're very excited about. Tahi, maybe you can give a bit of insight into tumor strategy, biomarker strategy, and then maybe you or Judith can give some further perspective on CD3, T-cell engagers, versus ADC approaches for B7-H4. Tahi?
Tahi Ahmadi (Chief Medical Officer)
Sure. Understand, easy. First part, the question of indication. B7-H4, there are some indications where B7-H4 is quite consistently and homologously expressed. These are the ones that we are currently concentrating in the study. This is on, say, for twice the cost. Our other indications was B7-H4 is expressed, but not necessarily always consistently at a high level. These are indications where potentially a biomarker strategy would be relevant. Right now, we're focusing on involving patients in the first human trial that based on internal and external data, have diseases that are known to have B7-H4 expression consistently, and I think the operative word is consistently here.
Then in a future development plan, we'll probably also look at indications where we might have to select based on B7-H4 expression, because it's not necessarily consistently expressed. That would be the B7-H4 general strategy, not to give too much away on that. Then on the question of ADC versus CD3, I think fundamentally these are completely different mechanism of actions that have different opportunities and challenges. That's at least my point of view and, you know, a bit hard to answer the question in the sense of specific detail that you would like to know. Short of sharing the B7-H4 has to be in a tumor, they are very, very different, both in the expression that they need and the mechanism and the potential for the safety profile.
Jan van de Winkel (President and CEO)
Thanks. Thanks, Tahi. I don't know whether Judith wants to add anything, otherwise we'll give it back to you, Paul. Judith, do you want to add anything here?
Judith Klimovsky (Chief Development Officer)
No, nothing to add. I think that as Tahi alluded, it depend on the expression of the target, the homogeneity of the target and expression on the target in the tumor versus normal cell, this is why-
Jan van de Winkel (President and CEO)
Mm-hmm.
Judith Klimovsky (Chief Development Officer)
We chose CD3 bispecific.
Jan van de Winkel (President and CEO)
Thank you, Judith. Paul, I think that's it for now, and then we give it floor back to the operator.
Operator (participant)
Thank you. We'll now take your next question. Your next question comes from the line of Yaron Werber from Cowen. Please go ahead. Your line is open.
Yaron Werber (Managing Director and Senior Biotechnology Analyst)
Great. Thanks for taking my question. I also have a question on GEN3014, specifically in AML. Can you give us a little of a sense of what's the plan there? Is there a chance to test it also in that setting, just given that DARZALEX obviously couldn't show activity there historically? Secondly, is the thought just as you think down the line to go to a DARZALEX refractory setting in myeloma, or is there a chance to really move up and how do you do that? Is that pivot on MRD negativity as an endpoint? Thank you.
Jan van de Winkel (President and CEO)
Thanks. Thanks for the questions. I think Tahi can handle this, Tahi, HexaBody-CD38.
Tahi Ahmadi (Chief Medical Officer)
Sure. I mean, let's actually start in the beginning with the CRAB. The hypothesis around the HexaBody-CD38 program is that hexamerization leads to a lower threshold needed for the CD38 expression or epitope density, and thus would increase the efficacy both in multiple myeloma, but also open up spaces where daratumumab was unable to elicit senior agent response because the density of CD38 is not that high. That would be, for example, diffuse large B-cell or, as you mentioned, AML. That's how you can think about how we're approaching this. Then to the second question around where to position what, you know, future position will be a discussion of who is in the future in charge of developing the drug.
Having said that, the proof of principle is generated in patients who are daratumumab naive in a direct comparison between daratumumab and the Hexa-CD38, because this is the best way of proving and documenting also that hexamerization does indeed lead to improved efficacy signal and a unchanged safety profile. Because daratumumab, of course, has a very favorable safety profile. That's probably the place where this dock in the mechanism makes the most sense.
Jan van de Winkel (President and CEO)
Thanks, Tahi. Thanks, Yaron for the questions. Back to the operator.
Operator (participant)
Thank you. We will now go to the next question. Your next question comes from the line of Emily Field from Barclays. Please go ahead. Your line is open.
Emily Field (Director)
Hi. Thanks for taking my questions. I'll just ask two. The first one is just on the part B expansion of the HexaBody-CD38 FASPRO head-to-head trial. Relapse refractory CD38 naive patients is what you're looking for. All of the trials that appear to be in the U.S. and Western Europe are finding those relapse refractory DARZALEX naive patients going to be a challenge in those regions or are you going to have to add more sites to that trial given how successful DARZALEX has been? Maybe just kind of a higher level question on, you know, you've indicated the desire to maybe move into a new therapeutic area. Is that something where we would get any insights into what that would be in 2023?
Is that something that would be wholly organically developed at Genmab or supplemented with business development? Just any early color you could give there would be helpful. Thank you.
Jan van de Winkel (President and CEO)
Thanks, Emily, for the, for the questions. I will take the second one for sure, and the first one I can hand over probably to Tahi. For the new therapeutic disease area, that will be a combination of work we do internally at Genmab. We already have programs in a new disease area active. We'll probably start speaking about that, Emily, at the time that the molecules are ready to be moving into the clinic like we do now also for the cancer programs. But it will likely be supplemented by strategic deal or strategic deals, and potential BD deals also to basically accelerate the move into the new disease area.
We are thinking of adding one very large disease area which can encompass different diseases. This year you will definitely hear more about that, but probably in the context of strategic interactions with another party, Emily, I want to leave it at that for now and then ask Tahi to basically talk a bit more about where can we find the patients for the head-to-head cohorts in the HexaBody-CD38 trial.
Tahi Ahmadi (Chief Medical Officer)
Sure. Yes, absolutely correct. You know, direct consequence of the dramatic improvement that daratumumab had on the lives of patients with multiple myeloma is indeed that those patients who have relapsed refractory multiple myeloma and not yet exposed to daratumumab are getting less and less. Having said that, we do have probably the best insight, partially because on this end, we collaborate with our partner Janssen on where there are still regions in the world where because of healthcare access issues or so in other issues, daratumumab penetration in the relapsed setting is maybe not as high. Obviously are going to focus our recruit in the trial in these regions. That's all there is to say.
Jan van de Winkel (President and CEO)
Thanks, Tahi. Emily, we are not worried about recruitment there. That's, I think, safe to say. I think there are some areas where we can indeed recruit such patients. We now know with the active doses of HexaBody-CD38, so we're very enthusiastic about progressing that head to head and hopefully have the data by first half of next year or earlier. Giving the floor back to the operator now.
Operator (participant)
Thank you. We'll now go to our next question. The next question comes from the line of Asthika Goonewardene from Truist. Please go ahead. Your line is open.
Asthika Goonewardene (Managing Director and Senior Biotech Analyst)
Hi, guys. Thanks for taking my questions. Just wanna get back to HexaBody-CD38. On ClinicalTrials.gov, you've increased the recruitment, the target recruitment there, I think, to 270 patients, so that's an increase of about 120. Beyond the two head-to-head, arms of the head-to-head component, there are, as you know, the expansion cohorts in other indications. Can you break out how many patients you aim to recruit specifically for the head-to-head arms as well as the expansion cohorts? Just on, epcoritamab, just wanna get your thoughts on which combinations of epcoritamab and other agents, in earlier lines of DLBCL do you see panning out next? Thanks.
Jan van de Winkel (President and CEO)
Thanks, Asthika, for the questions. I think I will hand over both to Tahi. I don't know, Tahi, whether you want to give full co- transparency on on how big the cohorts are. I'll leave that up to you. Definitely you can speculate on the potential combinations in LBCL, of course, in the early stage, disease. Tahi?
Tahi Ahmadi (Chief Medical Officer)
Yeah. We have not and probably should not completely disclose, but there is a contractual size to the head-to-head comparison that we are meeting. That's partially a part of the update, not only. There's the different cohorts, the head-to-head comparison a little bit refractory cohort and AMR cohort, the registration set cohort, and the sum of it is the update in the clinical trials. I wouldn't go into the details of the size of them. On the early combinations, there's a lot of work obviously done also in collaboration with our partner AbbVie, both in the relapse and then in the frontline.I think the one frontline study that is going to come up very early is the one in elderly patients who are not necessarily candidates for full dose Arzerra, which we are using as an opportunity to explore novel combinations that are chemo-free.
Jan van de Winkel (President and CEO)
Thanks. Thanks, Tahi. I think, that's where we leave it at this moment. Astika, thanks for the questions.
Operator (participant)
Thank you. We will now go to our next question. One moment, please. Your next question comes from the line of Etzer Darout from BMO. Please go ahead. Your line is open.
Etzer Darout (Managing Director and Senior Biotechnology Analyst)
Great. Thanks for taking the question. Just one more on HexaBody-CD38, if you're not completely exhausted yet on that. Just on the head-to-head study with daratumumab, just wondering if, you know, you can help us think about sort of, you know, kind of efficacy, safety benchmarks. I guess, you know, ultimately, what level of activity would you wanna see to move that program forward? Thank you.
Jan van de Winkel (President and CEO)
Thanks, Etzer, for the question. Indeed, HexaBody-CD38 is apparently the winner today for all the questions. That makes Tahi also the winner because he's doing a lot of that for that program. Tahi, you're on again.
Tahi Ahmadi (Chief Medical Officer)
Okay, talking about benchmarks. The only benchmark that you can refer to at this point is the data set of the most data on term to serious study or 5.1. They're slightly different, so it ends up having a response rate of roughly 30%, a little bit less. If you take that, there's this one benchmark. The other one to look at is, of course, depth of response. There is another part of the equation that is the uncertainty, and that is, you know, data that was generated in a timeframe, 2012, 2013, may not necessarily reflect the efficacy of daratumumab in a population that may be treated completely different because standard of cares have changed, the combination of IMiDs and proteasome inhibitors in combination. Frontline has moved forward.
Other mechanisms have been introduced in the relapse setting, so maybe patients are sensitive and naive to daratumumab, but half have already been exposed to some of the drugs that have been developed in the BCMA class, for example.That's why I think the head-to-head comparison is the best way, to really get to the heart of whether hexamerization leads to enhanced C1q mining, to enhanced CDC, and through that, to enhanced efficacy, either by increasing the overall response rate and/or by increasing the depth of response. I think these are both parameters to look at.
Etzer Darout (Managing Director and Senior Biotechnology Analyst)
Great. Thank you.
Jan van de Winkel (President and CEO)
Thanks, Tahi. Thanks, Etzer. Back to you, operator.
Operator (participant)
Thank you. We will now take our last question for today. One moment, please. The last question for today comes from the line of Matthew Phipps from William Blair. Please go ahead. Your line is open.
Matthew Phipps (Group Head of Biotechnology)
Hi. Thanks for including me. I was wondering on GEN1042, you mentioned moving into late stage development. Is it safe for us to assume that's head and neck and combo with chemo and pembro, like you showed ESMO IO, or is it too early to jump to that conclusion? For the hematologic T-cell engagers, we've now seen two quite different labels from the FDA regarding hospitalization suggestions or requirements during dose escalation between LUNSUMIO and TECVAYLI. Just wondering if you guys have any thoughts on where epco might land for the hospitalization and BCL. Thank you.
Jan van de Winkel (President and CEO)
Thanks, Matthew, for the questions. I think the first one we can be quick on the 1042. I think it's too early to conclude how to position it because actually doing a frontline combination therapy in four different cancers, Matthew, you've seen some very encouraging early head and neck cancer data, which we are also very excited about, but I think it's too early to make a call there. We will come to that conclusion on next steps this year. Very exciting year for 1042. I'll leave it at that. Then I basically want to ask Judith to give a bit more color on hospitalization for T-cell engagers because there are indeed different labels, as you already alluded to, Matthew. We are aware of that for sure. Maybe, Judith, you can give a bit of color there.
Judith Klimovsky (Chief Development Officer)
Yeah. Thank you for the question. There are different examples. You know, we are very aware, you know, that the safety profile of epcoritamab is well managed with the current guidances. In the protocols, we requested a single day hospitalization after full dose. As you know, only 60% of patients presented CRS and most of it Grade 1. This is the data that we are sharing with health authorities, and based on that, we might have different recommendations. It's very early to speculate which one, but we feel very comfortable with the way it is managed and the safety profile of epcoritamab.
Jan van de Winkel (President and CEO)
Thanks very much, Judith. I think that's it, Matt, for now. I will give some closing remarks. Thank you all for calling in today to discuss Genmab's financial results for 2022. If you have additional questions, please reach out to our industrial relations team. We hope that you all stay safe, keep optimistic, and remain healthy. We very much look forward to speaking with you again soon.
Operator (participant)
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.