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Executives

Jan G. J. van de Winkel – President and Chief Executive Officer

David A. Eatwell – Executive Vice President & Chief Financial Officer

Analysts

Richard Parkes – Deutsche Bank

Thomas Bowers – Danske Markets Equities

Carsten Madsen – Carnegie Asset Management

Michael Novod – Nordea Markets

Sarah Potter – Bank of America Merrill Lynch

Peter Welford – Jefferies International Ltd

Sachin Soni – Kempen & Co.

Genmab A/S (OTC:GNMSF) Q2 2014 Earnings Conference Call August 13, 2014 12:00 PM ET

Operator

Thanks for standing by. 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 compound such statements in relation to actual results, unless this is required by law.

I will now turn the conference over to your speaker today, Jan van de Winkel. Please go ahead, sir.

Jan G. J. van de Winkel

Hello, and welcome to the Genmab Conference Call to discuss the company’s financial results for the quarter ended June 30, 2014. Joining me on today’s call is David Eatwell, our CFO.

Let’s move to Slide 2, as already stated we will be making forward-looking statements. So, please keep that in my mind as we go through this call.

Let’s move to Slide 3, the 2014 highlights. During the second quarter we continued making excellent progress towards meeting our goals for the year. The daratumumab program continues to be one of our most exciting progress areas. We have announced four new large Phase III studies of daratumumab. We announced four new large Phase III studies of daratumumab have started or will start in the near future. Two of the studies are for daratumumab in combination with oral therapies for relapsed or refractory multiple myeloma and two are for frontline multiple myeloma.

Study MMY3007 will compare daratumumab in combination with Velcade or bortezomib, melphalan and prednisone to Velcades melphalan and prednisone alone as frontline treatment for multiple myeloma. This study is expected to start in the fourth quarter of 2014. Study MMY3008 will compare daratumumab in combination with Revlimid or lenalidomides and dexamethasone to Revlimid and dexamethasone alone for frontline multiple myeloma, this study is expected to start in the first half of 2015.

Thanks to the rapid progress in ofatumumab program, we have received a total of DKK47 million in milestone payments under our collaboration with Janssen so far this year. We have also announced a considerable amount of news for Arzerra; we received approval from both the U.S. FDA and the EMA for Arzerra as a first-line treatment for CLL and patients for whom treatment at fludarabine is considered inappropriate.

In the U.S., the indication is for Arzerra in combination with chlorambucil, while in Europe the indication is for Arzerra in combination with chlorambucil or bendamustine. Arzerra will now become available to a much wider group of CLL patients.

Our partner, GSK, relaunched Arzerra in the US in June and started the frontline launch in Europe as well early July including launching in the important German markets. Beyond the new label expansions we were excited to announce that the pivotal study of ofatumumab as maintenance therapy in relapsed CLL met its primary endpoint of improving progression free survival at pre-plan IDMC in trim analysis.

The statistical hurdle sets for the interim analysis was stringent at a P-value smaller than.001, and we are very pleased with the result. The safety and efficacy data in the study are being further analyzed and we intend to discuss the findings of the interim analysis with regulators to determine the potential regulatory pathway for ofatumumab and the CLL maintenance setting.

There is clearly no approved therapy for maintenance CLL and this study firmly demonstrates the potential of ofatumumab in treating patients with relapsed CLL. We also reported results from two other Phase III studies of Arzerra, diffuse large B cell lymphoma and in bulky fludarabine-refractory CLL. The study results were disappointing as both trials miss the primary endpoint. However, it is worthnoting that in the bulky fludarabine-refractory CLL trial ofatumumab performed as well as it has in previous trails with control arm, while the control arm performed better than expected.

As a result, we do not anticipate making regulatory applications for Arzerra in either of those indications. We also expected to report data from a Phase III study of Arzerra in combination with fludarabine and cyclophosphamide a much more aggressive type of chemotherapy versus fludarabine and cyclophosphamide in relapsed CLL this year. The timing of the result for this study was based on a predefined number of patients experiencing worsening of their disease. Since patients in this study are living longer without their disease getting worse data from this study is now expect to read out in 2015.

Additionally, we believe that Arzerra may have the best potential to be used in combination with tyrosine kinase inhibitors to such as ibrutinib and idelalisib. At ASCO in June, promising data from an investigator sponsored studies combining Arzerra and ibrutinib was presented, showing response rate of up to 100%. And we have preclinical data from Genmab experiment that strongly underline this promise for a potential combination therapy.

We also had good news with the development of the subcutaneous formulation of ofatumumab for autoimmune diseases. We were very pleased to be able to announce in May that GSK intends to start multiple Phase III studies of ofatumumab in relapsing, remitting multiple sclerosis in 2015. GSK also plans to file an IND for a potential pivotal study of neuromyelitis optica, a rare autoimmune disorder, sometime later this year.

As a reminder, although GSK plans to divest Arzerra and ofatumumab cancer development to Novartis in the announced GSK/Novartis asset swap last April, GSK intends to keep rights to develop ofatumumab in various autoimmune indications. Our technology platforms, DuoBody and HexaBody, are also a continued focus for the company. In June, we announced a new research collaboration with a very large undisclosed biotechnology company, which would evaluate both of these technologies.

This represents our first collaboration for the HexaBody platform. We also achieved another significant milestone from the productive Janssen DuoBody collaboration. Though David will present the financial results for the first half in a moment, I would like to briefly mention that our financials are well on track. We are again improving our financial guidance today and saw DKK54 million improvement in operating results in the first half, compared to the first half of 2013 and remain very well capitalized.

Let’s move to Slide 4. I would like to take a step back now and remind you of some of the basics about Genmab. Our value lies in our ability to create differentiated antibody therapeutics for cancer and advance them to the market. Innovation and being at the forefront of antibody know-how are therefore key for our success. Our lead products, daratumumab and Arzerra, were both awarded breakthrough therapy designation from the U.S. FDA. Daratumumab is in development for multiple myeloma and we believe it has blockbuster potential.

Arzerra was recently granted an expanded label in first-line CLL. Last year, we started a Phase I study with a third candidate, HuMax-Tissue Factor-ADC, our first antibody drug conjugate, which is being developed to treat solid tumors. We are focused on creating innovative products through development and use of new technologies, such as our proprietary DuoBody and HexaBody platforms. ADC programs and our world-class antibody know-how.

Partnerships, such as those with GSK, Janssen, and Novartis, are a key part of our strategy to effectively transform Genmab into a sustainably profitable company. Our long-term strategy is to build even more value by holding onto products longer and to execute multiple opt-in deals where we retain a greater share of product rights.

Let’s now move to Slide 5. One of the exciting new areas Genmab is moving into is the field of immuno-oncology. Immuno-oncology is a fundamentally new approach to cancer treatment. This engages and activates the body’s own immune system to fight tumor cells by targeting the avoidance mechanisms used by the tumors. Combined targeting of so-called immune checkpoint molecules may lead to improved cancer therapies.

Genmab's DuoBody technology has optimal characteristics for the efficient creation of bispecific antibodies this effectively target key immune checkpoints targets via one antibody therapeutic. To this end, we have recently entered research collaborations with the American company Agenus and the Dutch biotech company BioNovion two companies with impressive expertise and track records in the immuno-oncology therapeutic area.

Lets move to Slide 6. This slide details sales of Arzerra since Q1 2013. Sales in the first half of 2014 are down compared to the first half of 2013. Note, however, that there were significant sales related to the purchase of clinical trial supplies by other companies last year, which is not the case this year. Also, as anticipated, Imbruvica has impacted the refractory CLL market in the US.

As you know we recently received approval for treatment of first-line CLL for Arzerra in both the U.S. and Europe. However, it’s too early to gauge the impact of sales in this new indication, but we do expect to see an increasing level of online sales as we progress through the second half of this year. In this context we were very pleased with the wider European label that included bendamustine.

I will now hand over the call to David to discuss in detail our financial results for the quarter. David.

David A. Eatwell

Thank you very much, Jan. Let’s move to Slide 7. Let’s start by looking at the income statement for the first half of the year. The same headlines as in Q1, with the revenue growth driving an increase in the operating income. I will show you more details on the revenue on the next slide, but here you can see that the H1 revenue came in at DKK363 million an increase of DKK65 million over 2013. As planned, the expenses were only a little higher than last year and that means that most of the revenue growth dropped through to improve the operating result, with an increase of DKK11 million in 2013 to DKK65 in 2014, a year-on-year improvement of DKK54 million.

The net financial items and tax were a small positive in 2014, compared to a small negative in the past year. And of course, there is no discontinued operations in 2014, in 2013, there was, of course, the income related to the sale of the Minnesota manufacturing facility. So that takes us to the net result, which was DKK72 million in 2014 compared to DKK47 million in 2013.

Finally on this slide, the cash position. Our cash position increased by over DKK1 billion in the first half of the year. Mainly due to the private placement that took place in January, our cash position at the end of June was over DKK2.5 billion. Moving to slide 8, this slide shows more detail for the revenue for the first half of 2014. The graph on the left shows the categories of revenue. In 2014, the largest portion came from deferred revenue at a DKK141 million, closely followed by the milestone income at DKK122 million, mostly driven by the daratumumab collaboration with Janssen.

At DKK52 million, the Arzerra royalty was lower in 2014, but as previously indicated, H12013 sales included a large portion of clinical trial supplies. There were no significant supplies in 2014. The other category shown here was slightly lower in 2014, as Janssen has taken on more responsibility for the daratumumab studies. The graph on the right shows the revenue growth drivers, and it is no surprise that the DKK119 million daratumumab milestone leads the way, driving the overall revenue growth of DKK65 million or 22%.

The DKK119 million relates to a DKK22 million daratumumab milestone that was achieved in March. You would have seen that we also achieved another milestone for $25 million in July, which, of course, will be recorded in our third-quarter results. Next, the operating expenses and the operating income on slide 9. The graph on the left shows you the growth in expenses. We invested DKK14 million more on early-stage research projects, trying to build our pipeline. This was offset by lower development expenses mainly driven by lower cost for the HuMax-Tissue Factor-ADC and also for ofatumumab.

Also, as a result of the increasing share price, the non-cash warrant expenses increased year-on-year. There is no change to our expense guidance for the full fiscal year, as the increased H1 expense was budgeted and expected. Looking at the chart on the right, you can see that the H1 revenue growth far outpaced the increase in expenses, which means we get a nice DKK54 million increase in the operating result.

Now let's take a look at the guidance for 2014 on slide 10. We have again improved our 2014 financial guidance due to the acceleration of the daratumumab development program. Here, we show the overview of our revised guidance for 2014 compared to the actual result for 2013 and 2012, we’ve raised the revenue range to DKK800 million to DKK875 million and that means that the midpoint of the guidance increases to DKK838 million. And if we achieve that, we will increase the growth over 2013 to 26%. Daratumumab milestones are, of course, the key growth driver for the full year, and we now anticipate milestones for daratumumab to be over DKK350 million compared to DKK44 million that we achieved in 2013.

Although we do expect the Arzerra front-line label expansion to lead to higher sales in the second half of 2014, we have slightly lowered the expectations on Arzerra royalty income to approximately DKK125 million, compared to our previous guidance of DKK145 million. Moving to the middle graph, we will continue the disciplined expense management and therefore no change to the expense range of DKK600 million to DKK650 million with the midpoint of DKK625 million showing a modest 5% increase over 2013.

Moving to the graph on the right, this means that the increased revenue drops through to increase the operating result, with a new range of DKK175 million to DKK250 million. That would mean a midpoint of DKK213 million, a large increase of DKK144 million from 2013. Finally, we will move to my final slide for me, anyway, slide 11. As discussed, we've improved the revenue and the operating income, although we have not increased the cash position, since the additional daratumumab milestone is expected to be achieved in Q4 and the payment is currently anticipated to Q1 of 2015. Therefore we are projecting that the year-end cash position will remain at around DKK2.5 billion.

Also note that as usual, the revised 2014, guidance does not include any new potential deals. In summary solid half year results, guidance improved again and well positioned for the reminder of the year. Now I would like to hand back to Jan to discuss the progress on our 2014 goals. Jan?

Jan G. J. van de Winkel

Thanks David, let’s move to slide 12, through the rest of the year we will remain focused on ofatumumab, daratumumab, and HuMax-Tissue Factor-ADC, as well as advancing our state-of-the-art antibody technologies and disciplined financial management. We reported results from three of the four pivotal studies of ofatumumab expected this year, provided an update on plans for development of subcutaneous ofatumumab in autoimmune disease, and, most significantly, received approval for ofatumumab in front-line CLL in the US, as well as in Europe. We have made excellent progress in our daratumumab collaboration with Janssen. We announced four new Phase III studies of daratumumab in multiple myeloma and presented updated data from earlier studies in multiple myeloma at both ASCO and EHA in the early summer.

In addition, excellent proof-of-concept data in animal models with non-multiple myeloma indications ALL diffuse large B-cell lymphoma, and Burkitt's lymphoma were presented at EHA in June in Italy. So we are moving towards our goal of firmly expanding the daratumumab development program into other hematological cancer indications. Our Phase I study of HuMax-Tissue Factor-ADC continues to be on track and we expect to report progress on our innovative preclinical programs. We have entered new DuoBody research collaborations with Lilly, Cormorant, a major undisclosed biotech company, Agenus, and BioNovion this year and the first HexaBody collaboration with an undisclosed big biotechnology company.

We are also pleased with the progress made in our existing DuoBody collaborations. For example, we received a $3 million milestone payment from Janssen for preclinical progress on a DuoBody product candidates targeting two key autoimmune disease targets, and Janssen recently activated the eighth and the ninth DuoBody programs under our highly productive collaboration. Finally, we will remain focused on our financials. We have received significant milestone payments in the daratumumab collaboration, as described here by David, with Janssen this year, increasing revenues and decreasing the cash burn.

We will continue our disciplined approach, selectively investing only in the most exciting opportunities without significantly increasing our cost base. Move to slide 13, this will end our presentation of Genmab's second-quarter 2014 results. And we are pleased to answer your question. Operator, please open the call for questions now

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions) First question comes from Richard Parkes of Deutsche Bank. Please go ahead.

Richard Parkes – Deutsche Bank

Hi, it is Richard Parkes from Deutsche Bank. I've just got the traditional three questions. So first one on Arzerra, you managed to get the data with bendamustine in the label in Europe. I'm just wondering if you could talk about what might – what maybe you could do to satisfy the FDA to allow that data in the FDA-approved labels? That's the first question.

Second one is your competitors have talked about potential to catch up in the CD38 space by targeting some specific patient populations in multiple myeloma. Obviously, we're expecting your monotherapy data hopefully later this year. But I am wondering if there any other trials that you could do or that you are thinking about that maybe could report before the main randomized relapsed/refractory in front-line trials in 2017, 2018.

And then, last question is just on the immune checkpoints collaboration. Just wondered if you could talk a little bit more about the targets you might be looking at, or at least what ideas you have got about which targets might be particularly attractive to a bispecific. And I'm also wondering how far you have already progressed. I am just wondering if you have done any internal screening against targets already before you entered these collaborations, or are you starting from scratch? Thanks.

Jan G. J. van de Winkel

Thanks, Richard. Let me start with the wider label in Europe versus – that contains bendamustine on top of Arzerra in addition to chlorambucil where the Phase III trial was being run with, versus the US label. This is based basically on the Phase III trial with chlorambucil plus Arzerra. We cannot speak too actively about the discussions we have had with the regulators, but I can tell you that we have had open discussions and very constructive discussions with the US FDA about a wider label.

And we also believe that we can get towards a wider label because we also have another trial, of course, ongoing, which will now read out in 2015, as I referred to. It combines two more aggressive chemotherapeutics with Arzerra, and if that trial reads out well, we have a very good potential to get a much wider label even, potentially, on the back of strong data. At the short term, I think the only way to get bendamustine in the label would be to do new studies, which doesn't make any sense because of the timing.

Richard Parkes – Deutsche Bank

Okay.

Jan G. J. van de Winkel

I don't think that I can add further to that.

Richard Parkes – Deutsche Bank

That’s great.

Jan G. J. van de Winkel

With regard to CD38, we are very excited about the progress with – in the collaboration with Janssen. As you know we have now detailed studies which embody north of 2,500 patients already and we have many more new studies on the drawing board, also studies specifically addressing, moving even more forward – more rapidly forward into some third population that we have not spoken about publicly yet. But I can assure you that this is the number one priority in the whole Johnson & Johnson – the development part actually at this moment. So daratumumab gets most of support. We have great early clinical data. We are the only CD38 antibody that daratumumab has got, at least that we know of, that got a breakthrough therapy designation and have had best support from the whole Janssen organization.

So the whole announce more studies not only in multiple myeloma, but also in other indications where we have seen some very strong proof-of-concept have reported this year at EHA and ASCO, but also last year at ASH, we had great data in AML and in some other indications. I can tell you that we have submitted north of 15 abstracts in total for Genmab to ASH, the majority being based on daratumumab work, so we will aggressively move forward that plan. I cannot detail the specific planning with you more than I did now, but there will be more news during this year on daratumumab planning and studies. Then, finally, we are very excited about immune checkpoint targets. We have chosen these two collaborators, Agenus and BioNovion, because of their track records. Recently, Agenus also was announced that it was working with Merck on some new checkpoint targets. They have very robust capabilities in that area. We know them very well. Antibody panels are already made and are ready to be moving into bispecifics, which is already done at this moment. So we don't have to start from scratch at all. We're working with experts and we think that we can move forward very aggressively and competitively here.

And so, the same strategy appeals to BioNovion. Let me give you some further background. BioNovion, this is the team that actually made the breakthrough therapy drug targeting PD-1 for Merck while this group was still called Organon, and then Schering-Plough, and then Merck. These are the inventors of the antibody called pembrolizumab now in Merck, which is creating a lot of excitement. They are named inventors on a number of other checkpoint targets. They have already generated antibodies against a number of these new and validated targets, and Genmab has already created antibodies against a number of targets which we think are ideal to combine in a single bispecific molecule.

There is abundant evidence now that combined blockade of checkpoint targets can lead to far more robust and more impressive anticancer effects, both in the clinic, as well as in the preclinical models, and Genmab is very actively pursuing that now with two partners, each for different types of targets so that they don't compete with each other, because we believe that our bispecific technology is uniquely positioned to screen in so-called grid screening where we can combine two arms of different -- targeting different therapeutic targets in new formats and effectively screen them in final therapeutic format. There is only very few other technologies that can do that and certainly no other technologies which can do that so robustly. So, I can assure you we are not starting from scratch. We already well underway and we are very, very focused on creating novel therapeutic candidates together with these experts that have a track record already in this area.

Richard Parkes – Deutsche Bank

Okay. Can I just clarify whether either of those deals, are they just royalty deals or are they – you've got an option to share in development costs?

Jan G. J. van de Winkel

We have not shared those details yet. Right now, we closed research collaborations, but as I explained all of you earlier this year, we did an extra funding round in January in order to give us ammunition to actually buy into programs very actively, and I can tell you that we very much foresee that we would step into these collaborations very proactively, and several of them would probably move to a 50-50 type agreement.

Richard Parkes – Deutsche Bank

Perfect, thanks very much.

Jan G. J. van de Winkel

Thank you.

Operator

Your next question comes from Thomas Bowers from Danske Markets. Please go ahead.

Thomas Bowers – Danske Markets Equities

Yes, thank you. Just a couple of questions. First, I just noticed that you have partly check marked the HexaBody deal; now it is going forward for 2014. I kind of expected more on this, given the potential for later-stage programs, lifecycle management, and recovery of some failed programs. So, I am just wondering if partner discussions are still active and if we potentially could see more material agreements here in 2014.

And then, a second question just on Arzerra and expectation for 2014. I’m just wondering. You don’t divulge guidance, but is that before the impact from front-line setting. So I’m just wondering if this is based on a more-than-expected impact from ibrutinib in refractory patients or have you seen the slow ramp up from the casaba launch in front-line?

And then, last question, I just want to follow up a bit on daratumumab. I’m just wondering if you actually have revised your commercial strategy, given that we’ve seen some of the competitors clearly need to do some more work on dosing and maybe leading to some delays. So, do you have any comments on that? And also, just again on dara, maybe also comment on that Celgene seems to focus on or prioritize a combination of more to with pomalidomide. Thank you.

Jan G. J. van de Winkel

Thanks, Thomas. Why don't I take questions one and three, and then part number two on Arzerra for David? Why don't we start with HexaBody? We're in very active discussions with multiple parties on giving them access to our HexaBody technology platform. We also have a number of internal programs which uses HexaBody with excellent proof-of -concept. We already presented some of that proof-of- concept data at ASH last year in an oral presentation. But I can assure you that you will see more partnerships being executed by Genmab. Also some that you have qualified as more substantial, albeit that the first HexaBody agreement that we have entered into is with a very large blue-chip biotech company for multiple programs, I can assure you. We also believe that one is very substantial, but we are waiting on their experience with the platform. But we are, in fact, having a lot of activity in that area and there will be- there is anticipated more progress also within this year.

And let me move to daratumumab. Together with Janssen, we are continuously working on optimizing the program. As already said in my response to Richard Parkes, we are get creating a bigger and bigger program with daratumumab. We have seen excellent early clinical data. From the fact that we are now launching one pivotal study after the other, you can actually conclude that some of our multi-combination experimenting in the Phase Ib and what we call multi-combo study with three different lines of treatment, with Velcade in combination with dara, and one with pomalidomide plus dara, is that we have seen good safety data from that study. We are already treating several patients with pomalidomide/daratumumab.

So, we believe that is a potentially very good combination. You asked me to comment on what Celgene and MorphoSys have reported. I cannot do that because I cannot look into their strategy. But we basically plot our own path and we actually keep daratumumab very much in the fast lane. I said already in my answer to Richard, yes, it has the number one development priority right now at Janssen Biotech of all the drugs in development there, so we are continuously doing more studies pre-clinically in relevant models and also engaging into new interactions with other groups to look at potential combinations.

We see daratumumab as potentially the new gold standard not only in multiple myeloma as the backbone regime, but basically any other type of drug with a different mechanism of action, but also outside of multiple myeloma very lightly move into clinical studies next year in the other non-MM indications it almost because of prioritizing multiple myeloma as a very large incredibly important indication it’s number one blood-borne cancer in Europe, the second at this moment.

But the market is very strongly growing and we believe that daratumumab can make a true impact there for the lives of a lot of patients, and we hope to give you more clinical data at the end of this year and then there is probably not much I can add here. But we have certainly not – we're monitoring the competition, but we are not letting them impact our planning because we have very firm capabilities in house already. Janssen is among the most experienced company with expertise in multiple myeloma. They have their blue-chip team headed by Peter Lebowitz, which is also the team overseeing the ibrutinib development, together with Pharmacyclics.

It has created a lot of attention and also very positive feedback on that part. And this blue-chip team is now overseeing daratumumab development together with Genmab. It has, I think, very firm antibody expertise. So we are not – let our development of daratumumab impacted by the competitors, because we believe we have the stronger drug. We have the only drug which has breakthrough therapy designation and it is at least one year, if not two years, ahead of the development of the competitor. So we actually critical so what they are. David may be you can take the question on Arzerra and the revised guidance on the income created by Arzerra this year, and then…

David A. Eatwell

Yes, Thomas if I sort of refer back to Slide 6 of the presentation, overall you can see that the impact of Imbruvica starting a hit on the U.S. sales in Q2. If you look at the rest of world sales, you can see that there is relatively small impact there, if any, coming through on that side.

So the U.S. launch of Imbruvica, as we anticipated, as we spoke about when we were at the post-ASH last December, and when we went through the guidance for 2014, we did expect Imbruvica to really take a fairly good hold in that relapse market, and I think they have had a pretty successful launch. But as we said before is that really we see the main battleground for us in being that front-line setting, and one of the challenges is it's really too early to tell in the launch, both in U.S. and in rest of world, to really get it good indication of where that will go.

But I think the good news for us overall, we have got the U.S. launch started in June. We got the label the wider label with bendamustine in Europe, which I know the GSK European colleagues were very pleased with. They launched very quickly, including in July into the larger and more important German market for us overall. I think the other important thing to remember for the build-up in the H2 sales is you don't get a full sales, of course, in month one.

It's a six-month treatment regime, so it means we will ramp slowly. As you get the first patients on, you're effectively getting one-sixth of the sale for that patient. When you are seeing a refractory patient, then it's a very high dose, as you'll recall, in the refractory, so you have got to gain a higher number of front-line patients to replace any lost refractory patients overall. In terms of the assumption for our sales and royalty for the second half of the year, as we have said is that we reduced the total year royalty from DKK145 million to DKK125 million.

If you work that back through, that would mean that we would expect about GBP68 million of sales for the full year and as we’ve got on Slide 6 you can see just over GBP28 million for H1. So you can see that quite a ramp that we are still expecting between H1 and H2 approximately GBP28 million in H1 ramping up to GBP40 million in the second half for the year.

If we are successful on that, you would see that to continue to grow as you start getting up to the full six months' worth of treatment and new patients actually coming through overall. I think with the rest of world, we do expect to see less of an impact on those sales one because both Imbruvica and Zydelig are not approved yet, although they do both have CHMP recommendation.

So at this stage, we are keeping close contact with our commercial friends at GSK and they are very focused on that launches they really we got very few weeks data points to be – to go on at this stage, but strongly expect a better H2 in comparison to H1 for Arzerra.

Thomas Bowers – Danske Markets Equities

Great, thank you.

Operator

Your next question comes from Carsten Madsen of Carnegie Bank. Please go ahead.

Carsten Madsen – Carnegie Asset Management

Thank you this is Carsten Madsen from Carnegie. Thank you for taking my questions here. Actually, I only have one left and that is in relation to HuMax-Tissue Factor-ADC, where on your trigger list, right, you hope to provide an update or report progress for this program. Jan, could you tell us what we should expect from this isolated trigger? Will it be a data-driven update or will you give us some more soft update on the outlook for Tissue Factor ADC?

Jan G. J. van de Winkel

We are making a lot of progress for Tissue Factor ADC, but it is a very careful dose escalation program, because it is an antibody drug conjugate. It is the most potent therapeutic candidates we have ever worked with, so you need two dose escalations very carefully. That means that after initial dose, there is a pause in a patient, and then you can include some pure auto patients, and then there is another waiting period just to protect the patient from potential toxicity triggered by such potent candidate therapeutics.

But what I can tell you is that we are going very actively through the dose escalation. From that, you can conclude that we have already done a number of cohorts, and that's good news because you would probably have to inform the market when we would see something which would let us to stop there because this is an important program.

So, what I have said is it is likely that we will come with a more robust data set next year because of the schema of the dose escalation, but we may be able to give you an update by early next year already in topline form on the clinical study. But we are very excited by the progress. We're incredibly excited about the prospects of this therapeutic candidate.

What is also a good signal is that for this program, potentially Seattle Genetics has an option to opt in to that program after the Phase I clinical data become available, that we hear the CEO of Seattle also talk about this program quite a lot as an interesting opt-in candidate. From that, you can conclude that excitement is at least shared between Seattle Genetics, our partner, and Genmab. But we are pleased with the progress there, nothing further to report at this moment.

Carsten Madsen – Carnegie Asset Management

And actually, I had another question as well. I think it was right about this time last year where you, on the Q2 call, mentioned that you at ASH would report fantastic data with – in the front-line setting. Do you also have something you will share with us at ASH this year that will be fantastic?

Jan G. J. van de Winkel

I think we will, but I cannot tell you what the data will be. But I am willing to put on record here that we will present exciting and fantastic data.

Carsten Madsen – Carnegie Asset Management

Is it primarily the maintenance data in CLL or…

Jan G. J. van de Winkel

I cannot comment – we have two fascinating drugs in the clinic; one is Arzerra, where we hit a very steep at data points with IDMC analysis of the interim, as you know, and the maintenance, which is the most important CLL I think indication market-wise for Arzerra potentially. There is no other drug approved for maintenance yet. Despite a changing landscape, I think that is an important result.

We are very pleased with that Arzerra introduction. We have a stellar drug candidate, daratumumab, which has performed fantastically both in monotherapy and in early combination data, as we have reported at ASCO, so we hope to present more data on daratumumab. We have one of the strongest, most robust antibody therapeutic pipelines, I believe, in the industry for an antibody company, so we have submitted a lot of abstracts, also, on some other candidates which I think will give you…

Carsten Madsen – Carnegie Asset Management

Thank you.

Jan G. J. van de Winkel

Thank you.

Operator

Your next question comes from Michael Novod of Nordea. Please go ahead.

Michael Novod – Nordea Markets

Yes, it is Michael from Nordea. Just two short questions. One, even though it is not your study, do you still expect the potential of data coming from the idelalisib plus opus trial this year? And then, secondly, if we look at the Janssen collaboration on DuoBody, can you give any flavor whether you expect the first-in-human trials to be initiated this year? I think Janssen said back in April they were largely ready to start the first ones in lung cancer. So maybe you could give an update on where do you expect these to start this year.

Jan G. J. van de Winkel

Thanks Michael for the questions. The study you are referring to is the 270-patient study by Gilead combining idelalisib/ofatumumab and run it against ofatumumab. That trial is expected to read out in the coming months as we understand from Gilead and the communication to our partner GSK, but we don’t control over that Michael. With expected to read out definitely this year hopefully relatively soon and we have very excited about the potential on that study based on two effects one is very strong pre-clinical data that you have generated in-house its actually points at Arzerra potentially the best possible combination partner for tyrosine kinase inhibitors like idelalisib.

And secondly, there is a very similar mirror trial with Rituxan plus idelalisib versus Rituxan with great data in the combination setting. And that bodes actually quite well for the data from this trial, this pivotal study from Gilead but we would say in the coming months Michael or definitely this year as we have been message via our partner GSK then with regard to Janssen, we are making stellar progress there with nine active programs now.

The furthest ahead in development is indeed the cMet HFR program called EM1 antibody which Janssen had said at ASCR earlier this year that they are moving clinic. I would think that it will be tough to do expect a clinical introduction this year with perhaps it could take place next year. With that’s up to Janssen they are in the driver's seat there. This is a program that Genmab created both arms of the antibody, as well as the technology.

We have a very single digit royalty. It will move potentially into double digits also there, so it was good economics there Michael and this one works and it has a very good scientific to work better than easy of our antibodies, our cMET antibodies, and Janssen has presented stellar data at ASCR last year in the Boston and this year, earlier this year, and also in the United States at ASCR. So we are very enthusiastic about that program, as in fact Janssen has multiple exciting programs using our DuoBody technology. But this one, the EM1 program, is likely the first to move into the clinic. I would guess next year.

Michael Novod – Nordea Markets

Thanks, super. Thanks.

Jan G. J. van de Winkel

All right.

Operator

Your next question comes from Sarah Potter of Bank of America. Please go ahead.

Sarah Potter – Bank of America Merrill Lynch

Yes, it is Sarah Potter from Bank of America. I just have one question left, please. I wondered if you could provide some – any anecdotal feedback that you have had on the launch of Arzerra in the first-line setting, so based in Europe and the U.S., and how it's being perceived, first, as versus Roche's Gazyva. Thanks.

Jan G. J. van de Winkel

Thanks. Welcome first of all, welcome Sarah good to have you on the call.

Sarah Potter – Bank of America Merrill Lynch

Thanks.

Jan G. J. van de Winkel

Let me start with that and I will David to step in. We cannot say too much, we have launched already – was launched Sarah in Europe in several countries with includes Germany as one of the key drivers of sales in Europe. Now another country has also been added and they working on more as we speak. What I understand is that we have talked to the commercial folks at GSK that the feedback has been very positive in the United States. I am not aware of feedback from Europe, but maybe David can step into that. But it's relatively early stage, as David has explained in his answer before to – I think it was to Thomas. It is actually too early right now to really look at the real sales ramp-up in the frontline setting because of the fact that you don't buy the complete supply at the same time, but it takes several months before you can build up sales because the doses are much lower in the front-line setting than in the refractory setting.

But David, maybe you can add some further color to Sarah on the feedback from clinicians on the launch in the United States.

David A. Eatwell

Yes, it's probably, Sarah, a little early to get meaningful feedback so far, but I think first off in the U.S., I think in terms of the comparison between Gazyva and Arzerra, of course both front-line, both approved with chlorambucil, I think the GSK sales folks are quite happy with the comparison between the two drugs. I think overall you can look at all the different data and look at the PFS, et cetera, but I think overall the conclusion is, from an efficacy standpoint, probably Gazyva and Arzerra, it is fair to say that there's similar efficacy between the two. I think we are happy with our side effect profile and particularly on the infusion-related reactions between Gazyva and Arzerra.

And I think lastly on the pricing in the U.S. For six months' treatment, Gazyva is priced about 19% more expensive than Arzerra, which could also be an advantage as well, particularly in the U.S. when you look at the co-pays from patients. In the EU, Gazyva hasn't been out for so long. It hasn't had its approval very long, nor has Arzerra. I think our advantage within Europe compared to Gazyva, they have the chlorambucil label and we have got the advantage of either with chlorambucil or bendamustine. So I think, again, we like our label, prefer our label, and the overall profile of the drug in comparing Arzerra compared with Gazyva. But again, I think a little early days to be able to conclude too much.

Jan G. J. van de Winkel

Maybe I can add to that – thanks, David – to that, Sarah. From Germany, I am in close contact with some clinicians, hematologists in Germany, and I know that they have been very positive about the combination of Arzerra with bendamustine and they were very excited to hear that we got a broader label in Europe. So I believe that may actually help us to differentiate ourselves from Gazyva in other CD20 antibodies, because Arzerra actually has the broadest label in front-line now of the very potent CD20 antibodies.

So I think that especially in countries like Germany when you ask for anecdotal feedback, they were very pleased with the wider label and know that they are very experienced already with combining Arzerra with bendamustine. They also like what they see there.

Sarah Potter – Bank of America Merrill Lynch

Thank you.

Jan G. J. van de Winkel

Thank you.

Operator

Your next question comes from Peter Welford with Jefferies. Please go ahead.

Peter Welford – Jefferies International Ltd

Just two last, please. Firstly, on dara, I wondered if you could comment at all on the event rate you are seeing in the now fully enrolled relapsed/refractory monotherapy study, the Phase II, and what, I guess, given the endpoints that we know, what sort of event rate was anticipated in that study? And then, secondly, just moving on to the immuno-oncology area, I just wondered if your team or equally BioNovion or the Agenus team had done any work on the IP situation there and the potential pitfalls, but also potential benefits, if there are any, of a DuoBody approach. Thank you.

Jan G. J. van de Winkel

Thanks, Peter. These are two excellent questions. With the event rate, I cannot comment on what we see in the now fully recruited study as of May, the Phase II study, with monotherapy. You know that we have obtained a breakthrough therapy designation in that population from the U.S. FDA and we need to pass a certain bar, and that is a response rate bar. I have said probably before that you can think of the type of bar this was set by drugs like apolis and pomalidomide in similar settings.

And up to now, all the data we have seen in monotherapy and the latest data has been presented at ASCO, we are very, very safely above that bar. But I cannot comment on what we see, actually, in the Phase II study because the data is actually developing as we speak. We hope that by the end of this year, we will have a good feeling for that, but we continue to be very motivated and enthusiastic. I have already, in my answers to your colleagues, Peter, said that this program has a very high priority.

It keeps having a very high priority, so the enthusiasm level is pretty high; also based partly by what we see in the ongoing clinical studies. Then with regard to the immuno-oncology area, the IP situation is complex, as you rightly guess, for some of the well-known targets like PD-01 or PD-L1. We believe that by moving in with a bispecific approach, one can actually open up some of these intellectual property areas, and together with our partners at this moment, Agenus and BioNovion, we have already identified several areas where we believe that via a bispecific approach, you can actually open up the intellectual property side quite actively, but it is a complex field.

It is comparable to the car fields. You and I know there is already a lot of discussion between different parties, several of its some of the targets in immuno-oncology, but there's also novel targets where actually the IP situation is a lot clearer, and that’s one of the advantages of working with these focused experts on this work because they not only have already a position, but they also have a very good feeling of the landscape, the IP landscape. But by working with a novel molecule in the form of a totally unique bispecific, one can potentially open up the intellectual property window for some of the therapeutic approaches.

Peter Welford – Jefferies International Ltd

That's great. Thank you.

Jan G. J. van de Winkel

Thank you.

Operator

Your next question comes from Sachin Soni of Kempen & Co. Please go ahead.

Sachin Soni – Kempen & Co.

Good afternoon, everyone. My question is on dara again. If you compare the three candidates, of course you can always say you are ahead and you have better CDC and better phagocytosis, but at the end of the day, it looks like it is going to be a competition on the basis of patient compliance. Do you see infusion reaction or basically long infusion time or painful infusion time a potential disadvantage going forward?

Jan G. J. van de Winkel

Thank you, Sachin, for the questions and welcome. We believe that patient compliance is very important, and the daratumumab, as you know, we originally had very long infusion times, and I explained before perfectly that this was positive because this molecule is unbelievably potent and we were actually advised by the regulatory authorities to go for long infusion. So if something would happen during an infusion session, one could stop the infusion and protect the patient, we have never seen that.

We now know it is a very safe drug. In fact, the infusion reactions are the only thing which we see in a significant percentage of the patients, but they tend to be grade one or maximally grade two, so not very burdensome if one compares that to some other infusion reactions, such as induced by Gazyva, for example, the CD20 antibody. But we are now shortening and shortening the infusion times. They're now around three-hour timeframe and we can probably further shorten it in amendment of the new studies or ongoing studies, as I learned from the development team. So we think that infusion times is not going to be a differentiator if one realizes that the average infusion time for a drug like Rituxan that is Roche's biggest drug right now, is also three to four hours for a cancer patient that should not be, I think, overly burdensome when the drug actually works.

So we believe that daratumumab still has the best pay per session. It is the most potent pre-clinically, maybe like I said before, we are one to two years ahead at least, relative to some competitors, and it has great clinical data not only in monotherapy, but also in combination with other well-known and frequently used drugs for the Celgene/MorphoSys antibody, zero clinical data has been presented. This is beginning to puzzle even us at this moment. And Sanofi has, I think, some pretty strong data and you put them side by side, our data looks at least as strong. So, I think the level of patient compliance and infusion times, we are roughly in the same area as some of the other CD38 antibodies and definitely in the area of some of the biggest sellers and biggest drugs by some of the largest pharma companies right now in hematology/oncology.

Sachin Soni – Kempen & Co.

That's fair, and then one more question, but hypothetical. But are there, we had a similar story that, infusion reaction wise, we are better than Gazyva, but in DLBCL setting, it came out that you were actually not as good as Rituxan and you were even worse when the study failed. What is the risk that if you pick another indication for dara and you go for similar thing that infusion reaction comes out in that particular setting in this way? Would it affect your positioning at all?

Jan G. J. van de Winkel

I mean, Sachin the speculation. Let's not start on Arzerra; otherwise, you will get a very lengthy answer, I'm afraid. But for Arzerra, yes, for different indication, of course the side effect profile can, of course, change because the biology of the disease is different. There is no clinical data there whatsoever. We don't have clinical experience in other indications. I think Sanofi has some clinical expertise in the dose escalation study in some other settings, and with that drug, there was no differences seen, actually, at the infusion/reaction level between the different hematological cancer indications.

It would be speculation from my side. What we now know for daratumumab, and it may be a class effect, is that you need a certain level of CD38, and once it is above a certain bar, the antibody is very active in killing the target cell. And yes, that can potentially lead to infusion reactions when you kill them too quickly in the beginning, but then we know that multiple myeloma is a tumor where you see universally very high expression levels of CD38, much higher than in other hematological cancers. So I would say that when the infusion reaction is already mild in multiple myeloma, I would, on the basis of everything we know about CD38 and targeting CD38, expect that it would be less of an issue in other indications because the expression level is lower of CD38 but it is right now, it is speculation. There is no clinical experience and we have to bite the bullet and do it, and we are prepared to do it together with our partner Janssen.

Sachin Soni – Kempen & Co.

No, that's a fair answer. We will wait until ASH and see what comes out. Thank you.

Jan G. J. van de Winkel

Absolutely. Thanks, Sachin.

Operator

Thank you. There are no further questions at this time, please continue.

Jan G. J. van de Winkel

All right. So, thank you for calling in today to discuss Genmab’s 2014 second quarter financial results and we look forward to speaking with you again soon.

Operator

That does conclude the conference for today. Thank you for participating. You may now disconnect.

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Source: Genmab's (GNMSF) CEO Jan Winkel on Q2 2014 Results - Earnings Call Transcript

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