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Edited Transcript of GEN.CO earnings conference call or presentation 6-Nov-19 5:00pm GMT

Q3 2019 Genmab A/S Earnings Call

Copenhagen Nov 23, 2019 (Thomson StreetEvents) -- Edited Transcript of Genmab A/S earnings conference call or presentation Wednesday, November 6, 2019 at 5:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* David A. Eatwell

Genmab A/S - Executive VP & CFO

* Jan G. J. van de Winkel

Genmab A/S - Co-Founder, President & CEO

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Conference Call Participants

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* Emily Field

Barclays Bank PLC, Research Division - Research Analyst

* Graig Suvannavejh

Goldman Sachs Group Inc., Research Division - Executive Director & Senior Equity Research Analyst

* James Patrick Quigley

JP Morgan Chase & Co, Research Division - Analyst

* Kennen B. MacKay

RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research

* Matthew Kelsey Harrison

Morgan Stanley, Research Division - Executive Director

* Michael Novod

Nordea Markets, Research Division - Director of Healthcare, Healthcare Analyst & Sector Coordinator

* Michael Werner Schmidt

Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD

* Peter Verdult

Citigroup Inc, Research Division - Director

* Peter James Welford

Jefferies LLC, Research Division - Senior Equity Analyst & European Pharmaceuticals Analyst

* Thomas Schultz Bowers

Danske Bank Markets Equity Research - Analyst

* Wimal Kapadia

Sanford C. Bernstein & Co., LLC., Research Division - Research Analyst

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Presentation

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Operator [1]

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Thank you for standing by, ladies and gentlemen, and welcome to the Q3 report 2019 conference call. (Operator Instructions)

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 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 must advise you the conference is being recorded today, and I would now like to hand the call over to your first speaker, Jan van de Winkel. Please go ahead.

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [2]

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So hello and welcome to the Genmab conference call to discuss the company's financial results for the quarter ended September 30, 2019. Our CFO, David Eatwell, is joining me on today's call.

Before we really begin with today's call, I would like to take a moment and acknowledge the recent news that David has decided to retire from Genmab. As you're all well aware, David has been a key figure in our company over the last 11 years, working closely with me and our other excellent colleagues to guide Genmab to the success we are experiencing today. I would like to thank David for his passionate commitment to Genmab and wish him and his family the very best as he begins a new chapter in his life. I would also like to assure you that our leadership team will remain extremely strong as we welcome Anthony Pagano into the role of CFO next year. Anthony has been with Genmab since 2007, currently in the role of Senior Vice President, Finance and Corporate Development, and he has demonstrated both strong leadership skills and expert financial know-how. He was also instrumental in the success of our U.S. IPO, which I will discuss in just a moment, and I look forward to you all getting to know him in 2020. We are also actively searching for a candidate to take on the role of Chief Operating Officer to round out and further strengthen our executive management team.

With that said, it's now time to move on to a discussion of Genmab's exciting third quarter.

Let's move to Slide 2. As already said, we will be making forward-looking statements, so please keep that in mind as we go through this call. As you can see from the slides, the third quarter of 2019 was an eventful one for Genmab. Of key importance, and as I mentioned during our last results call in July, Genmab officially became a dual-listed company, trading on both the NASDAQ Copenhagen Stock Exchange and the NASDAQ Global Select Market in the U.S. This event is significant not only because it was the second largest U.S. IPO ever by a biotechnology company with total gross proceeds of USD 582 million but because of how it positions Genmab for future success. This dual listing provides Genmab with a far greater visibility in the United States, allowing us to share Genmab's compelling story to a wider group of thought leaders, including academia and the financial community. From a financial perspective, it helps to support strategic investments, including investments in talent that will allow us to advance our world-class product pipeline and robust next-generation antibody technologies.

Some notable recent advances for our pipeline can be seen here. The highly anticipated Phase III data for subcutaneous ofatumumab in relapsing multiple sclerosis was presented at ECTRIMS in September. Both ASCLEPIOS trials met the primary end points with ofatumumab showing a highly significant and clinically meaningful reduction in a number of confirmed relapses evaluated as the annualized relapse rates, demonstrating superiority versus teriflunomide. Based on this data, our partner for ofatumumab, Novartis, has stated that they will initiate submissions to health authorities by the end of this year, signifying a possible turning point for ofatumumab. If approved, ofatumumab could have a new life as the first subcutaneous B-cell therapy for relapsing MS that can be self-administered by patients at home.

Another partner products moving towards potential approval is teprotumumab. The U.S. FDA granted priority review to the BLA submitted by Horizon Therapeutics for teprotumumab in the treatment of active thyroid eye disease, assigning a PDUFA date of March 8, 2020. If the BLA is approved, that would make teprotumumab the third Genmab-created product to reach the market.

We also saw progress with Genmab's proprietary products during the past quarter. In September, the first patient was dosed in the first-in-human Phase I/II trial of DuoBody-CD40x4-1BB in solid tumors. This is the second product candidate we are codeveloping with BioNTech, and we are looking forward to watching it progress through the clinic.

Also in September, the preliminary data from the non-small cell lung cancer expansion cohort of the Phase I/II study of enapotamab vedotin in solid tumors was featured in an oral presentation at the International Association for the Study of Lung Cancer 2019 World Conference on lung cancer in Barcelona. The presentation of this data both met one of our company goals for 2019, and it supports our belief that the potential of this first-in-class compound for patients with advanced non-small cell lung cancer progressing on chemotherapy and a checkpoint inhibitor.

Three preclinical abstracts for Genmab product candidates were selected for presentation at the Society for Immunotherapy of Cancer or SITC 34th Annual Meeting, which begins tomorrow. This include preclinical data for enapotamab vedotin DuoBody-PD-L1x4-1BB and for DuoBody-CD3x5T4. The latter, DuoBody-CD3x5T4, is our latest compound introduced as a novel drug candidate with potential in solid tumors. The potential to further expand our preclinical pipeline into new and exciting areas also increased as we entered into strategic collaborations with Tempus and with BliNK Biomedical.

DARZALEX momentum continued at pace with new approval in multiple myeloma. This includes an approval in the U.S. based on the CASSIOPEIA study, which is also the first approval for DARZALEX with patients eligible for autologous stem cell transplantation; and approval in Japan based on the ALCYONE study, which is the first front-line approval for DARZALEX in that territory and the first ever DARZALEX approval in China as monotherapy for patients with relapsed or refractory multiple myeloma. We anticipate key additional approvals in 2020 following Janssen's submission of applications to both U.S. and European regulatory authorities for the subcutaneous formulation of daratumumab. In September, Janssen received a standard review from the U.S. FDA for this new formulation, which is what we had anticipated, as it is in line with previous review time lines for products like Rituxan and Herceptin that moved from an intravenous to a subcutaneous formulation.

More recently, in mid-October, the Committee for Medicinal Products for Human Use of the European Medicines Agency, or EMA, issued a positive opinion recommending broadening the existing marketing authorization for DARZALEX in the European Union to include the combination of lenalidomide and dexamethasone, or Rev/Dex, for patients newly diagnosed with multiple myeloma who are ineligible for autologous stem cell transplants. As with the approval of this indication in the U.S. earlier this year, this opinion was based on the MAIA data. Upon approval, this will become the second combination that includes DARZALEX for newly diagnosed multiple myeloma patients in Europe.

Over the past few months, Genmab also reported 2 separate sets of positive top line results for daratumumab. As I discussed during the call for second quarter in July, we reported that Phase II GRIFFIN study of patients newly diagnosed with multiple myeloma who are eligible for high-dose chemotherapy and autologous stem cell transportation treated with daratumumab plus lenalidomide, bortezomib and dexamethasone, or VRd, met this primary end points, demonstrating a higher percentage of stringent complete responses for the patients who received daratumumab as part of their treatment.

Subsequently, in September, we reported that the Phase III CANDOR study sponsored by Amgen of daratumumab in combination with carfilzomib and dexamethasone in relapsed or refractory multiple myeloma met its primary end points of improvement in progression-free survival. Amgen has stated that they will discuss this data with health authorities in preparation for regulatory submissions. The Phase III Andromeda and APOLLO trials are event driven, and we expect that data from these studies will be available in 2020.

Finally, sales of DARZALEX continue to meet expectations with net sales reaching to $2,168 million in the first 9 months of 2019, resulting in DKK 2,033 million in royalties to Genmab.

I am pleased to now turn the call over to David to present our financial results for the first 9 months of 2019. David?

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David A. Eatwell, Genmab A/S - Executive VP & CFO [3]

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Thank you very much, Jan, and thank you very much for the kind words that you gave to me at the beginning of the call. Over the next few slides, I'd like to highlight the results for the first 9 months of 2019 as well as an improved financial guidance for the whole year.

Starting with the income statement on Slide 4. The revenue for the 9 months' period came in at DKK 2,405 million, an increase of DKK 616 million or 34% compared to the first 9 months of 2018. The increase was primarily driven by the higher DARZALEX royalties, driven by year-on-year increase in DARZALEX sales of 50% and also an improvement in the reimbursement income from our collaborations with Seattle Genetics and BioNTech. And that was partly offset by the Arzerra onetime payment of $50 million or DKK 304 million in Q1 2018.

The total expenses in the first 9 months of 2019 were DKK 1,943 million, an increase of DKK 813 million or 72%. And that was driven by the advancement of our clinical products, including tisotumab vedotin and enapotamab vedotin as well as other products in our pipeline. As planned, we also increased the number of employees to support our pipeline expansion.

For our operating result, as anticipated, we had an operating income of DKK 462 million for the first 9 months of '19 compared to DKK 659 million in the same period in 2018. The decrease of DKK 197 million or 30% was driven by the higher operating expenses as well as that one-off Novartis payment in Q1 2018. Also note here that the DARZALEX royalties of DKK 2,033 million exceeded the gross expenses of DKK 1,943 million.

Moving to the net financial items. There was a net income of DKK 442 million in the first 9 months of 2019 compared to DKK 162 million in 2018. The main driver for the variance between the 2 periods is foreign exchange rate movements, which positively impacted our U.S.-denominated portfolio and cash holdings for both periods but to a greater extent in 2019.

The corporate tax expense for the first 9 months of 2019 was DKK 210 million compared to DKK 183 million for the same period in 2018. The estimated annual effective corporation tax rate for the first 9 months of 2019 was 23% compared to 22% in the first 9 months of 2018. And that brings us to the net result, which was a net income of DKK 694 million for 2019 compared to DKK 638 million in the same period of 2018, an increase of DKK 56 million or 9%.

Moving to Slide 5 and the revenue. On the left-hand side of the slide, we have a revenue breakdown by category. In the first 9 months of 2019, royalties were the largest portion of the revenue at DKK 2,051 million compared to DKK 1,134 million in 2018. The royalties actually made up 85% of our total revenue in 2019. The increase of DKK 917 million or 81% was driven by the higher DARZALEX royalties, which were partly offset by lower Arzerra royalties. There were no license fees in the first 9 months of 2019 compared to DKK 338 million in 2018. The decrease, again, was driven by that $50 million or DKK 304 million one-off item from Novartis.

Reimbursement income accounted for NOK 254 million, an increase of NOK 79 million or 45%, driven by the increased activities under our collaboration agreements with Seattle Genetics and BioNTech. The graph on the right bridges the revenue between the 2 periods. And as we've discussed, the largest increase was the DARZALEX royalties, which grew from DKK 1,111 million in 2018 first 9 months to DKK 2,033 million in the same period in 2019, an increase of DKK 922 million.

The royalties were based on Janssen's DARZALEX sales of $2.168 billion in the first 9 months of 2019 compared to $1.441 billion in the same period of 2018. That increase of $727 million or 50% was driven by the continued strong uptake in the U.S. as well as in the EU and continued success in Japan. The cost reimbursement, as I said earlier, was driven Seattle Genetics and BioNTech. And again, you've got the decrease shown there of the Novartis DKK 304 million.

Now we move to Slide 6 and the expenses and the operating income. The change in expenses between the first 9 months of 2018 and 2019 is aligned with our focus to achieve our 2025 vision, and you can see the growth drivers on the left-hand side of this page. There was an increase in the operating expenses of DKK 813 million, which was driven by the accelerated investment in our clinical and preclinical product portfolio. In fact, 59% of the total expense increase was due to additional investment in our product pipeline, including the advancement of tisotumab vedotin, enapotamab vedotin and many of our other new programs.

FTE costs have also increased year-over-year to support our robust product pipeline and our continued efforts to build commercial and medical affairs capabilities. We had 533 FTEs at the end of September 2019, and that's an increase of over 50% from the end of September 2018.

Looking at the chart on the right, you can see a decrease in the operating result going from DKK 695 million to DKK 462 million. As discussed, it's a combination of the increased investment and also the Novartis one-off payment.

Now let's move on to the improved guidance for 2019 on Slide 7. We're, again, improving the 2019 financial guidance, which was last published on August 14. And again, it's mainly due to positive foreign exchange movements between the U.S. dollar and the Danish kroner.

Starting on the top of Slide 7. We have a table that shows a comparison of the revised guidance to the previous guidance issued in August. We now expect our 2019 revenue to be DKK 5.1 billion. This is a DKK 300 million increase compared to the previous guidance, and as I said, mainly due to foreign exchange movements between the dollar and the kroner, and that's improving both milestone and royalty income on the sales of DARZALEX. We anticipate our operating expenses will remain at DKK 2.75 billion, so consistent with the August guidance. Taken together, this result in an operating income of DKK 2.35 billion. So that revenue increase rolls right down to the operating income with a DKK 300 million increase.

Now if we move to the bottom of that page, we can take a closer look at the key elements of the revenue. Our improved projected revenue consisted of DARZALEX royalties, which we've now got in at DKK 3 billion. And that's based on Genmab's estimate of DARZALEX net sales of achieving the $3 billion in a calendar year. And that's an increase of DKK 115 million from the previous guidance, again, due to the foreign exchange movements. We expect the DARZALEX sales to continue to advance through the end of 2019, particularly in U.S. market share, both in the second line but also in the front line, with growth with daratumumab combined with Revlimid and dex.

In Europe and rest of world, we also expect to see additional countries coming on stream, including in the frontline setting with daratumumab combined with VMP. As a reminder, the average royalty for $3 billion of sales is just under 15%, and all the sales that will be above $3 billion will attract a royalty rate of 20%. You'll also note that in 2019, the anticipated DARZALEX royalties continue to exceed the total expense base.

We also project an improvement in the daratumumab milestones growing to DKK 1.675 billion in 2019. And those mostly relate to the sales-based milestones. You'll recall there's $150 million milestone for sales exceeding $3 billion in the calendar year as well as a milestone for exceeding $2.5 billion in a calendar year. We expect these milestones to be achieved by the end of 2019. And again, this is DKK 175 million increase compared to the previous guidance because we've now improved the U.S. dollar/Danish kroner exchange rate in our guidance.

The remainder of revenue in 2019 mainly consists of cost reimbursement income related to our collaborations with Seattle and BioNTech as well as DuoBody milestones and a small amount of Arzerra royalties.

Now if we move to the guidance expenses on Slide 8. On the top of this slide, you can see that we've repeated for 3 main investment areas: the project investment, the personnel costs and business support. And as I said, the total expenses have remained unchanged since the guidance published in August.

As a reminder, the largest cost at about 60% of the total is our project investment, and this directly relates to the success and the advancement of our pipeline. The next largest cost is the personnel cost. And at the end of the 2018, we had 377 FTEs, and we expect that to grow somewhere between 560 and 580 by the end of the year. Again, that investment in people is directly related to the success of our pipeline. The business support relates to all the support functions, and the growth is across many different support areas, including enhanced technologies and systems, early investment in commercial, medical affairs and other functions.

Moving to the bottom of the slide. We have broken out the most significant area of investment, the project costs, into more detail. This is the same as we presented in August, and you can see that our 2 most advanced projects, tisotumab vedotin and enapotamab vedotin, account for about 50% of our total investment in that project area.

On the right-hand side, we have the breakout of the FTEs, and about 73% of those are in the R&D area. Of course, we're also projecting to be cash flow positive again in 2019, and our priority for capital allocation continues to be the increasing the investment in our preclinical and clinical pipeline as we advance towards achievement of our 2025 vision. Note, as usual, the 2019 guidance does not include any new potential deals.

Now I'd like to turn back over to Jan for an update against those 2019 goals. Jan?

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [4]

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Thank you, David. Let's move to Slide 9. As we near the end of the year, I'm pleased to say that we have already achieved the majority of goals that we set for the company for 2019. With the U.S. FDA approval based on the CASSIOPEIA data, we met all of our daratumumab-related key milestones for the year. We are now looking forward to the ASH conference next month. We have 34 industry-sponsored and ISS daratumumab abstracts that are accepted for presentation, including 7 oral presentations.

As I already stated at the beginning of today's call, in this quarter, we accomplished 2 more of our pipeline goals with the reporting of the exciting ASCLEPIOS data for ofatumumab and the first presentation of the expansion cohort data for a proprietary product in enapotamab vedotin. While it looks like we will now need to make -- wait until next year to see the publication of the initial clinical data for HexaBody-DR5/DR5, I'm very happy to be able to share with you that the preliminary dose-escalation data from the Phase I/II study of DuoBody-CD3xCD20 in non-Hodgkin B-cell lymphoma has been accepted as an oral presentation at this year's ASH conference, along with preclinical data for our exciting Hexabody-CD38 program which was accepted for poster presentation. A total of 37 abstracts related to Genmab-owned and partner programs were accepted for presentation at ASH. We also continue to expect to file at least one more IND or CTA by the end of the year.

Finally, I would like to mention that just last month, one of the DuoBody products being developed by Janssen, JNJ61186372, moved into a Phase II study in non-small cell lung cancer. This is the first DuoBody product to enter Phase II clinical development, an exciting development for the program as well as for innovative DuoBody platform. As (inaudible) as this quarter has been, 2019 is not yet over, and we look forward to ending the year with a fourth quarter that maintains the strength and momentum seen during the first 9 months of the year.

Let's move to Slide 10. That ends our presentation of Genmab's third quarter 2019 financial results. Operator, please open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) First question comes from the line of Kennen MacKay of RBC Capital Markets.

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Kennen B. MacKay, RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research [2]

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And congrats on the revenue guidance raise. Maybe just thinking ahead to ASH, the GEN3013 abstract we got this morning noted efficacy of 120-microgram dose. I was wondering -- this is the CD20/CD3. Does this refer to sort of the sponsors? Or how should we think about the term efficacy? And maybe going into the meeting, what should we watch for in the data to potentially differentiate your CD20/CD3 from the rest of the class here? It seems like there's a lot of focus on the cost, especially with [growth] agent receiving a pretty prestigious plenary presentation. Really looking forward to the ASH conference.

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [3]

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Thanks, Kennen, for the question. You should look at the abstract more or less as a placeholder. We will update the data up until about 2 weeks before the ASH meeting. We expect to present data of roughly around 30 patients, actually most of them being diffuse large B-cell lymphoma and also a number of follicular lymphoma patients. We are still dose-escalating as we speak. We started the dose escalation at much lower doses than Roche or Regeneron have been using their CD3/CD20 antibodies, Kennen. And we also use a subcu rather than IV. So what you should look for is, of course, the efficacy at the higher dose levels which are the active doses and also the side effect profile which we expect to be actually cleaner based on the preclinical data. So we are super excited about the overall presentation. It's not yet a plenary because it's early-stage data, Kennen, but we look forward to fire work at ASH.

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Operator [4]

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The next question comes from the line of Wimal Kapadia.

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Wimal Kapadia, Sanford C. Bernstein & Co., LLC., Research Division - Research Analyst [5]

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Wimal Kapadia from Sanford Bernstein. Jan, can I just dig a little bit deeper on the abstract? So I mean am I right in reading it as, in the dose escalation, you just chose doses that were too low, given there's no dose-limiting toxicity? Or is there another reason? And then specifically on CRS, it seems to be non-severe in nature, which is a little bit different to your peers, but it reads as dose dependent. So does that suggest that as we -- we see higher CRS rates and severity in the dose-escalation phase of the study?

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [6]

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Thanks for the question, Wimal. The doses are actually, in the abstract, are very much the low doses where we've seen clearly signs of activity, Wimal. What we expect to see is when we, of course, go to more reasonable doses in the active dose spectrum that the frequency will go up quite a bit. What you need to do is think back on the early-stage abstracts from Regeneron and also Roche some years ago where we actually saw a very, very low levels of responses during the dose escalation. And what we expect is that by the subcutaneous application that you will see much less cytokine release syndrome phenomena with this antibody, but I think we have to we wait until ASH, Wimal, to see all the data. We are collecting the data as we speak, but we are quite encouraged by what we're seeing with the drug at this moment.

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Wimal Kapadia, Sanford C. Bernstein & Co., LLC., Research Division - Research Analyst [7]

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To kind of follow up, just to confirm that the CRS was -- the symptom of CRS were dose dependent from what you've seen so far.

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [8]

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No, not necessarily. And I think we have to wait ASH, I think, before you see the complete picture because this is actually very heavily pretreated patients. And what we have seen overall is very mild cytokine release syndrome. We're not commenting on the dose dependency here.

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Operator [9]

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Your next question comes from the line of Michael Schmidt.

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Michael Werner Schmidt, Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD [10]

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Jan, with the innovaTV 204 trial results coming up next year, I guess how should we think about the clinical efficacy bar for TV in recurrent metastatic cervical cancer? And have you already had any interactions with regulators regarding this?

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [11]

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Thanks, Michael, for the question. Yes, we have certainly had interaction with the regulators. And they look at different parameters not only the overall response rate in the single-arm study but also, of course, the duration of response. What we now have decided to do is to actually extend the cut-off by a few months that will still fall within the first half of next year, Michael, so that we can make a much better estimate of the median duration of response because it's actually the duration as well as the percentage of patients responding and, of course, the depth of the response which are meaningful for the regulators. And of course, those extra few months, which would take to more precisely estimate immediate duration of response, we can also, of course, use that to do extra -- to spend extra time on data cleaning, data checks, et cetera, to really come at a very high-quality data set to the regulators potentially. So it will be 2 parameters, which we'll be watching very actively. And so that's about what I can say at this moment.

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Michael Werner Schmidt, Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD [12]

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Yes, there are sometimes some people refer to the Keytruda response rate as the minimum bar. Is that a valid assumption in your opinion?

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [13]

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Yes. I mean that is definitely a assumption some people take. But I think I cannot really reveal here what we have discussed with the regulators, Michael, because it's a more complex discussion than just the response rate. It's also the duration of the responses.

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Operator [14]

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Thomas Bowers, your line is open.

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Thomas Schultz Bowers, Danske Bank Markets Equity Research - Analyst [15]

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Thomas from Danske. Just on the DR5 project, so the changes to protocol after the observed liver tox, I'm just wondering if it reflects a lower dose used onwards or any changes to the dosing frequency. And any color here on where you are in terms of clinical activity at these current dose levels?

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [16]

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Thanks, Thomas, for your questions. I can take this question. So we are likely going to play with both the dose level as well as at dose frequency. Thomas, we have seen some liver toxicity. This was communicated to the FDA. We got a brief partial clinical hold to allow for discussions with the FDA. And we right now, again, are dosing patients in that study. We have already flagged up that we have seen signs of clinical efficacy but clearly also some tox issues that we wanted to actually protect the patient's safety, and the regulators are in agreement with that. And right now, we are enrolling patients as we speak. And the net effect is, Thomas, that we actually present the data from this study in a number of [solid councils] next year rather than this year, but we will provide you with the status update of where we are at the -- around the ASH conference this year, so in a month from now.

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Thomas Schultz Bowers, Danske Bank Markets Equity Research - Analyst [17]

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Okay, great. And maybe can we just follow up on the amyloidoses time line, just we are expecting sort of the interim readout? So is this still pending near term or we'll just continue to a final analysis?

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [18]

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What we have heard from the IDMC is that we will go to the final analysis, but it's not too far from here anyhow, Thomas. So you can expect that in 2020.

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Operator [19]

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Next question comes from the line of Peter Verdult.

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Peter Verdult, Citigroup Inc, Research Division - Director [20]

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Peter Verdult, Citi. Jan, just in light of last week's news from Sanofi on the -- of some of the PDX CD38 programs inside tumors being terminated for lack of efficacy. I know that there were some programs ongoing, but I do also know that you and Janssen were eagerly awaiting to look the data to determine whether you would proceed with your sort of tumor -- reinitiate your sort of tumor thrust. Any change in your level of [view] in there, in light of the recent data that -- or announcement that we've seen from Sanofi.

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [21]

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Thanks, Peter, for the question. No, there's no change. What we want to do is actually get a better understanding of the underlying reasons why the prostate and lung cancer cohorts were terminated by Sanofi because we don't know anything further probably than you do at this point on that level. And we still have 8 data from isatuximab in combination with atezolizumab to really see whether there is any responses in other solid cancers because we understand that there's a number of solid tumors still being evaluated by Sanofi. So right now, we and Janssen take a wait-and-see approach, Peter, try to learn more for what is happening with isatuximab there. And then if the data in some of these tumors would be positive, Janssen has already said publicly that they would then jump in with the subcutaneous formulation of daratumumab in solid cancers. For the time being, Peter, we are awaiting further data and clarity of what exactly has happened in the post data lung cohorts with isatuximab.

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Operator [22]

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Next question comes from the line of Matthew Harrison.

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Matthew Kelsey Harrison, Morgan Stanley, Research Division - Executive Director [23]

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I guess 2 questions for me. So one, can you just -- or I guess, one, but can you just remind us on AL amyloidosis with dara. There was supposed to be an interim at some point. Has that interim passed? Can you give us any updates on what's occurred with that interim?

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [24]

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I just spoke of -- Matt, I just spoke to the previous analysts about the interim analysis, and that has passed. And the IDMC have -- has actually recommended to go to the full data sets, which is not too far from here anyhow. And we continue to be very, very encouraged by the efficacy profile of daratumumab in amyloidosis. This was reflected, of course, in the Phase II already in the public domain, Matt. And so early next year, we will expect data from the pivotal study.

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Operator [25]

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The next question comes from the line of James Quigley.

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James Patrick Quigley, JP Morgan Chase & Co, Research Division - Analyst [26]

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First of all, congrats, David, on your retirement. I hope you have a relaxing time. Second more on the question, GRIFFIN time lines. We've had the presentation at a conference, but when do you think you could get this into the guidelines for potential off-label use and potential reimbursement? And then on a similar note with transplant patients, have there been any sort of traction with the CASSIOPEIA data in the U.S.? I know VTd is not really used in the U.S., but have the dara plus VTd combination gained any traction?

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [27]

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Thanks, James. So time lines for GRIFFIN, there will be an update on the GRIFFIN data at ASH, as you've seen from the presentations. And the update looks actually very good. The date -- the responses got deeper and deeper. We see a very nice difference at multiple parameters between the dara-containing arm and the VRd-alone arm. Janssen is going to publish that data pretty soon in a peer-reviewed journal, and [that's all done] and then trigger potentially listing in compendia, et cetera. And I don't have the exact time line in front of me, James, but that is seen as pretty quickly what I understand from the Janssen colleagues. Then as it relates to CASSIOPEIA, that is not a very much U.S.-based regimens. So we haven't seen, I believe, data with brand impact of -- from our own analysis with [LEK] on the -- how it is used in the transplant-eligible patient population. But why don't I ask David to give you a further flavor of how the usage of dara is building up actually in the different lines of therapy in the U.S. as it relates, David, to the September brand impact data because that is quite interesting?

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David A. Eatwell, Genmab A/S - Executive VP & CFO [28]

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Yes, sure. Happy to do that, and thank you for your comments, James. So of course, miss all of the analysts greatly. So if we look at the brand impact data for the period 3 months' rolling averages ending September 2019. If we look at the overall market share, first off, revenue high for our report, September was our highest market share at 20% market share in total. If you go back to December, that was about 15% market share. So we're making nice progress on the year overall. Of course, the one we're really interested is in the frontline setting. We are now at a new high, 6% market share. So still a long ways to go and a lot of opportunity there in the front line, but that gives you an idea. If we go back to June, we were at 3% market share. So we are actually seeing now that, that traction, you're quite right, it's not VTd. That is not really a U.S. regime. It is the MAIA data. It is the DRd that is beginning to move those numbers. So in the front line, we've got a share of 6%. Of that, 4% of it is DRD. The remaining, it -- most of it would be a little bit of use of the VMP but not too much. And we're seeing in that front line that the new patient starts are at a number higher than that in September. It was 8%. So we're going to be seeing that front line. You'll see the patient stacking come through. And we expect that, that will be one of the items providing growth for us in Q4.

In the second-line setting, that was also another new report high at 35%. Again, if we go back to December, we're at 27%. And that's growing consistently quarter-on-quarter throughout 2019. So a new high, 35% market share. And the good news is the new patient starts are still running at a number that's higher than that. So that, again, indicates to me that there is still some ways to go before we fully get full penetration in the second-line setting.

In terms of the third and fourth line, they're both remaining around that sort of 40% mark. And as we've discussed before, over time, we expect to see that the highest proportion of sales coming from the front-line and second-line setting, and probably you'll get more competition from some of these newer and smaller new drugs coming through, probably taking some of the market share. Once you cycle through daratumumab in front line, second line, third line, you're probably going to be trying something else in fourth line eventually. So we're quite pleased with that development. We're looking at the IMS data as well, as we've spoken before. We actually purchased the weekly data. We are beginning to see that to move. To give you an idea, the weekly average for the U.S. IMS gross number was just over $36 million for Q3. And for the first 4 weeks of October, we're seeing that rolling 4-week average come out at 38.8%. So that little step-up ties in with that sort of gain in the front-line market share and continued gains in the second line. So we're quite pleased with that development. So it gives us confidence around the $3 billion for 2019.

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Operator [29]

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Your next question comes from the line of Emily Field.

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Emily Field, Barclays Bank PLC, Research Division - Research Analyst [30]

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I'm not sure if I missed it in the answer to the last question. But do you still expect as part of the total sales for DARZALEX in 2019 in the front-line setting greater than $200 million based on the shares that you've been seeing? And then also kind of a more technical question, just based on how you're incorporating FX into guidance. I just -- I was just wondering if you could talk about your philosophy there, given that when you initially issued guidance, it was well above kind of -- the corner was well above the spot rate at the time. And then just given that the hedging gains seem to be quite volatile if you would consider guiding for the impact of hedging going forward, just as it does seem to be a little bit chunky.

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [31]

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Thanks, Emily. I think both questions are for David.

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David A. Eatwell, Genmab A/S - Executive VP & CFO [32]

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Yes, let's take the FX one first. I mean what we -- a lot of our income is actually in U.S. dollars. So in some ways, we're sort of -- certainly, for the revenue, a U.S. dollar company reporting in Danish kroner. So what we do when we issue our guidance and we go through the updates, we'll give you the U.S. dollars. So if you take the DARZALEX sales, for example, we'll guide you and give you and say, "Look, we are basing this on $3 billion." We've now declared all of the different royalty rates, all the different tranches that are there. And as we said before, for $3 billion of sales, the average royalty rate is 14.9%. If you look at the new guidance now and you take $3 billion, 14.9%, an average rate for the year of about 6.7%, that's going to give you a DKK 2,995 million. And what we've got in the new guidance is $3 billion. Currency has been moving around quite a bit. I mean we sort of have got an average for the year of about 6.7%. But a couple of weeks ago, we were down in 6, 6s. Then by the end of September, we were at 2 85. Then it was back to 6.7%, and back to 6 75. So it can move around quite a bit overall. But what we do is to give you the dollar -- underlying dollar amounts and you -- and if you want, you can also take your bet on what you think the dollar-kroner rate is going to be. But I think overall now, we've got the 6.7. Last week, that was close to where we were. I think today, I looked at it earlier, it was 6.75. So it'll continue to move around. And of course, we've got these 2 large milestones, $100 million to the $2.5 billion of sales in a calendar year and $150 million to the $3 billion. And so I don't know what the rate will be towards the end of the year when we expect to achieve those milestones.

On the other question, in terms of the front-line contribution at the beginning of the year, we did say that we would hope to get $200 million in the frontline setting. We were anticipating a little bit of an earlier approval, where we got approval of [MAIA] right at the end of June. For launch, that was not great timing because you then go into the summer doldrums of July and August where we see seasonality. We do see lower sales in that period. So it was not in the best time of year to launch. So I wouldn't be expecting $200 million now.

We're [most] at the beginning of the year. I did the same in 2018. It looks like I'm overestimated my U.S., underestimated the rest of the world. And 2019 is beginning to turn out the same as 2018 where the rest of the world has actually come through stronger. And it's been a little slower in the U.S., mainly on the -- we haven't got that front-line market share as high as we originally anticipated at the beginning of 2019.

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Operator [33]

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The next question comes from the line of Peter Welford.

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Peter James Welford, Jefferies LLC, Research Division - Senior Equity Analyst & European Pharmaceuticals Analyst [34]

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I just wanted to get an update on other DARZALEX studies that are ongoing in other indications. I wondered if Jan would be tempted to give us some sort of ideas when we could get AQUILA data. I know that's now fully enrolled and smoldering and also the [LANs] in the NKTCL which I think is also fully enrolled as well. I guess just for a point of clarity from David, was it 38, you said, million dollars for the rolling 4 week in October IMS?

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [35]

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Thanks, Peter. Let me ask David, first. I think you said $38.8 million, but maybe, Dave, if you can clarify that for Peter.

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David A. Eatwell, Genmab A/S - Executive VP & CFO [36]

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Yes, the rolling 4-week average, the last -- and this is week ending October 25 because a little bit of a delay before we get the data through. $38.8 million, so nearly $39 million over the last 4 weeks rolling average.

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [37]

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And then going -- Thanks, David, and then going back to you, Peter, on the DARZALEX timing for some of the trials. The NK/T-cell lymphoma trial, I am not sure that I have the actual timing for whether to read out. There will certainly be an update at ASH with a very nice response rate, but I don't have the actual timing of that trial. And the same holds for AQUILA. I think it will be in 2020, but I cannot 100% confirm that, Peter. I think we need to follow up with Janssen and then get back to you.

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Operator [38]

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The next question comes from the line of Graig Suvannavejh.

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Graig Suvannavejh, Goldman Sachs Group Inc., Research Division - Executive Director & Senior Equity Research Analyst [39]

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Also my congratulations to David on your retirement. Congrats on the quarter. I had a question about your early-stage pipeline. Clearly, a lot of progress there, and clearly from the questions, a lot of interest in the CD20/CD3 program. Maybe I could ask a high-level question just around how you think about your partnership strategy around your early-stage compounds and if you can say specifically what your intentions are in terms of how far you want to develop these assets.

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [40]

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Thanks, Graig, for the question. And I can speak very long or very brief about this question. I can tell you overall, the company believes that we need a partner for a number of these programs because some of these may actually be very, very large, and you need to robust development program to maximize the potential of the potential products. And what we intend to do, Graig, is to hold on to at least 50% ownership and also then get a strong partner on board to maximize the potential of a program where we are convinced that we have an active molecule for a unmet medical need. And the nice thing is at the end of this year, we have 7 proprietary clinical programs. Next year, we'll add a few more to the clinical pipeline. So we have never had a company a stronger clinical pipeline. And we are already in discussions with potential candidates for a number of these clinical programs -- early clinical programs. So there's most of interest actually for a number of those programs. And for some, we, of course, have already a partner like Seattle Genetics for TV, which is a program which is expanding and we hope to, in the first half of next year, to read out the first potentially pivotal study. And we, of course, have 2 BioNTech DuoBody programs. So it's both in the clinic and both recruiting patients. And we hope in 2020 or very latest early '21 to come with data from those programs. And these are already 50-50 partnered with a very strong company, BioNTech from Mainz, Germany. But we are definitely going to see partnership from the company.

What we want is 2 things. One is to hold on to 50% to the finish line, which we can do it, Graig, because we have a growing income stream and a very strong cash position already. So building up further with that income stream but potentially 3 Genmab-created products generating revenues to us next year when teprotumumab also gets to the market. And we are then holding on to potential co-commercialization or commercialization rights depending on how big the market is in the U.S.. Because that is, I think, our preferred scenario where we actually can hold on to commercialization rights. And we believe that we can do that with a bit of a negotiation position. So I think exciting times coming, Graig. I think 2020 will be even more exciting for our pipeline than 2019, but we -- the next thing we look forward to is ASH.

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Operator [41]

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The next question comes from the line of Michael Novod.

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Michael Novod, Nordea Markets, Research Division - Director of Healthcare, Healthcare Analyst & Sector Coordinator [42]

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Just a follow-up question to rest of world sales for DARZALEX. When do you expect to see some significant impact from China? That could be quite interesting, and we've just seen that rest of world is performing better than expected all the time. So maybe you could just elaborate on also your discussions with Janssen around when to see some significant impact and how much.

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [43]

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Thank, Michael. I will turn that question to David.

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David A. Eatwell, Genmab A/S - Executive VP & CFO [44]

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Yes. With China, it's a little difficult. Whilst we got the approval, you sort of get through the sort of pricing reimbursement. So I have assumed no sales for China in 2019. Hopefully, it will start to contribute in 2020. And of course, there's also some other Phase III trials, some of the combinations like with daratumumab/VELCADE in the relapse setting. So those will probably be more significant than the monotherapy setting in China. But it's great to have our first approval in China but no large sales expected anytime soon.

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Operator [45]

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We have no further questions at this time. Please continue.

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Jan G. J. van de Winkel, Genmab A/S - Co-Founder, President & CEO [46]

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So thank you all for calling in today to discuss Genmab's financial results for the third quarter of 2019, and we look forward to speaking with you all again soon.

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Operator [47]

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That concludes the conference for today. Thank you for participating. You may all disconnect.