Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Genmab. We currently have 9 research reports from 1 professional analysts.
Genmab released its Q3 17 results which were well below the street’s expectations. The reported revenue came in at DKK323.5m as the growth momentum decelerated (on a sequential basis) for the multiple myeloma/MM drug ‘Darzalex’. Genmab’s collaboration partner Janssen/J&J reported net sales of $317m for the drug (vs AV’s estimate: $355m; +6% qoq vs Q2 17: +17.3%) resulting in royalty income of DKK253m for the Danish biotech firm (accounted for c.78% of Q3 17 revenue). Note that, as sales of Darzalex have exceeded $750m in a calendar year (9M 17 sales: $871m), the royalty rate has moved up to the next tier (13% vs 12% earlier). Also, with dismal performance continuing for Arzerra (net sales of $9m vs Q3 16: $10m), royalties from Novartis were down 21.4% yoy (DKK11m; accounted for c.3% of Q3 17 revenue). The remainder of the revenue was derived from milestone income, deferred revenue and reimbursement income under R&D collaboration agreements with various pharmaceutical firms. The operating profit came in at DKK58.3m as Genmab continued with its budgeted R&D investments despite lower revenue (R&D accounted for c.86% of the opex base). In addition, higher than expected financial charges (forex movements negatively impacted the dollar-denominated portfolio) resulted in a net loss of DKK5.7m for Q3 17. On the regulatory front, Darzalex was approved as a second line treatment for MM in Japan in September 2017 (triggering a milestone payment of $25m/c.DKK160m upon the first sale in November 2017). As anticipated, Genmab received milestone income of $50m in November 2017 as sales of Darzalex crossed $1bn in a calendar year. Also, based on encouraging data from the phase I/II clinical trial of tisotumab vedotin in recurrent/ metastatic cervical cancer, Genmab/Seattle Genetics initiated a new phase II study in October 2017 (patient enrolment to start in H1 18; trial could form the basis for approval in the US). With earlier than anticipated launch of Darzalex in Japan, management has upgraded its FY17 revenue (DKK2.11-2.31bn; +DKK160m vs previous guidance) and operating profit guidance (DKK1.06-1.26bn).
Genmab released its Q2 17 results, wherein revenue and profitability came in slightly ahead of our estimates as well as market consensus. Reported revenue increased to DKK773.3m (vs AV’s estimate: DKK763m; Q1 17: DKK250.8m) primarily driven by higher than expected milestone income from the multiple myeloma/MM drug ‘Darzalex’ (DKK489m vs AV’s estimate: DKK475m; mainly related to second-line approval in Europe and third-line approval in the US). Net sales for the drug reached $299m (vs AV’s estimate: $305m; +177% yoy) resulting in royalty income of DKK243m from the collaboration partner Janssen (including milestones and royalties, Darzalex accounted for c.96% of group’s revenue in Q2 17). However, due to stiff competition in the chronic lymphocytic leukaemia space, sales for Arzerra were down 38.5% yoy (Q2 17: $8m), translating into a 35.3% decline in royalties from Novartis (DKK11m; accounted for c.2% of group’s revenue in Q2 17). Operating profit came in at DKK536m (vs AV’s estimate: DKK513m), led by the operating leverage. However, higher than expected financial charges (currency movements negatively impacted the dollar-denominated portfolio) and tax expenses (deferred tax assets not utilised yet) lowered the EPS to DKK5.05 per share (vs AV’s estimate: DKK8.2 per share). For FY17, management has reiterated its revenue (DKK1.95-2.15bn) and operating profit guidance (DKK0.9-1.1bn). On the regulatory front, Darzalex reported strong interim data in the front-line MM setting (phase III ALCYONE study combining Darzalex with Velcade met its primary endpoint; improved progression free survival by 50%). In addition, Genmab reported encouraging preliminary data from an ongoing phase I/II study of tisotumab vedotin in relapsed cervical cancer. Foreseeing additional potential in six other solid tumours, Seattle Genetics has opted-in for the drug’s co-development programme (costs and profits to be shared equally going forward).
Genmab released its Q1 17 results which werer slightly below our estimates (both top-line and profitability). Reported revenue came in at DKK251m (vs AV’s estimate: DKK280m; +47% yoy) as the increase in royalty income (DKK225m vs Q1 16: DKK100m) was partially offset by lower than expected milestone income (nil vs Q1 16: DKK45m; milestones deferred by a few months). Net sales for the multiple myeloma ‘MM’ drug ‘Darzalex’ reached $255m (vs Q1 16: $101m), resulting in a royalty income of DKK211m (c.84% of Q1 17 sales) from its collaboration partner ‘Janssen’ (royalty rate: c.12%; Q1 16: DKK83m). However, net sales for Arzerra (c.6% of Q1 17 sales) were down 17%, translating into an 18% decrease in royalties from Novartis (DKK14m vs Q1 16: DKK17m; impacted by continued competitive pressure in the refractory chronic lymphocytic leukaemia market). Operating income came in at DKK46m (vs AV’s estimate: DKK50m) as the additional investments in pipeline products led to a 33% increase in operating expenses (reached DKK205m in Q1 17). For FY17, management has reiterated its revenue (DKK1.95-2.15bn) and operating income (DKK0.9-1.1bn) guidance. On the regulatory front, Darzalex received a label expansion approval in Europe in April 2017, wherein the drug was approved as a second-line of treatment for MM (first sale to trigger milestone payment of $48m from Janssen). The drug will be used in combination with either Revlimid or Velcade, the same arrangement which was approved in the US in November 2016. In addition, the US FDA approved the drug in the third-line setting in June 2017 (in combination with Pomalyst; triggered milestone payments of $25m).
Genmab released Q4 FY16 results broadly in line with our estimates as well as market consensus. The reported revenue came in at DKK927m (+61.2% yoy), primarily on the back of higher royalties and milestone payments under the Darzalex collaboration agreement with Janssen. For FY16, the reported revenue reached DKK1,816m (+60.3% yoy; -10bp vs AV’s estimate) with Darzalex being the primary contributor (accounts for c.86% of FY16 revenue). Sales for the drug reached $572m (vs FY15: $20m), resulting in higher royalty income for Genmab (DKK458m vs FY15: DKK16m). Moreover, a number of regulatory submissions/approvals in the US and Europe triggered milestone payments of DKK1,096m during the year (vs FY15: DKK587m; FY16 number also includes sales volume milestone payment of $25m). However, net sales for Arzerra were down 19% yoy (accounts for c.4% of FY16 revenue), resulting in a 17% decrease in royalty income from collaboration partner ‘Novartis’ (DKK63m vs FY15: DKK76m). The operating margin came in at 58% (+50bp vs AV’s estimate) on the back of higher revenue, but was slightly offset by increased investments in the R&D (DKK661m vs FY15: DKK488m). Moreover, higher financial income (due to favourable currency movements) and tax credits underpinned the EPS to DKK19.83 (vs AV’s estimate: DKK17.4). For FY17, management expects revenue and operating income to come in at around DKK1,950-2,150m and DKK900-1,100m, respectively.
Recommendation and upside We are initiating coverage of Genmab (market cap. of DKK68.6bn/€9.2bn and a float of 100%) with an ‘Add’ recommendation and a target price of DKK1,238 (c.9% upside). Our upside is driven by the company’s multi-blockbuster potential drug ‘Darzalex’, strict cost management and a cash surplus business model. Darzalex’s approval as a fourth line of therapy for multiple myeloma ‘MM’ in November 2015 triggered a spectacular rally in the stock, with the share price surging c.70% in the subsequent seven months. However, the stock has remained range-bound since then and is currently trading c.15% below its all-time high. Moreover, Darzalex’s recent approval as a second line of treatment for MM (in November 2016) has triggered the next growth phase for the stock. Given the clinical profile, we also expect Darzalex to get approval in the frontline setting as well (by 2019/20) and thus further propel growth in the long run. While we acknowledge Genmab’s upside potential, we restrict our recommendation to an ‘Add’, as we await the ‘on the ground’ performance of the drug in the second line setting and interim data from the frontline studies. Business and Trends Genmab is a Denmark-based biotech company with two approved antibodies for cancer treatment – Darzalex (c.79% of 9M 16 revenue) and Arzerra (c.5% of 9M 16 revenue). The remainder of the revenue is attributed to deferred/reimbursement income from the pipeline drugs. Darzalex was approved by the FDA in November 2015 (Europe in May 2016), as a monotherapy for the fourth line of treatment for MM. Based on superior clinical efficacy data vs rival drugs, Darzalex was also approved in the second line setting (Europe approval expected by H1 17). The second line approval has significantly expanded the target population of the antibody, more than doubling the number of patients eligible to use Darzalex. Moreover, patients tend to stay on therapy for a long time (patients are less sick when the treatment starts in second line vs third line), resulting in higher revenue per patient and, in turn, higher royalties for Genmab. The company is also conducting trials for the third line and frontline setting, and, once approved, Darzalex has the potential to change the current landscape of the MM industry further. The global market for MM is valued at $8.9bn and is dominated by Revlimid/Celgene (c.43% share) and Velcade/Takeda/Janssen (c.33% share), with Darzalex holding an insignificant market share (<5%; it was used in the third line-plus setting until late 2016). The MM market size is expected to more than double to $22.4bn by 2023 and, given the better clinical profile of Darzalex, it is expected to grab a significant slice of the market in the mid/long term. Genmab’s other antibody ‘Arzerra’ was approved in 2009 in the US (Europe in 2010); however, it has not been a commercial success due to its narrow label approval and the lack of differentiation vs the market leader ‘Rituxan/Roche’. Genmab is now working to revive its Arzerra franchise by making inroads in the multiple sclerosis ‘MS’ market. Although the $14.9bn MS market offers larger market opportunities, it would not be easy for Genmab to compete with Roche in this domain. Need to know Genmab has relied on strategic partnerships with pharmaceutical companies to fund its R&D activities and bring the products to the market (Darzalex is out-licensed to Janssen/J&J and Arzerra is out-licensed to Novartis). Genmab is entitled to milestone payments (c.52% of 9M 16 revenue) and royalties (c.39% of 9M 16 revenue) under these collaboration agreements, which are also the primary FCF drivers as the operating expenses have been kept under control over the last five years. However, the royalty income is expected to contribute the lion’s share in the top-line post Darzalex’s approval in the second line setting. Genmab is also building a pre-clinical pipeline of c.25 programmes to identify the ‘next big winner’ and ensure sustainable long-term value creation. The company plans to bring the next product to the market by 2025 with complete/significant ownership (plans to hold on to at least 50% of the rights) and is focusing on next-gen antibody technologies (duobody, hexabody and antibody drug conjugate). The diversity of antibodies in the clinical pipeline reaffirms our belief in Genmab’s long-term growth potential. Upcoming triggers We expect the next triggers for the company to be the second line approval of Darzalex in Europe (expected by H1 17) and third line approval (in combination with pomalyst and dexamethasone) in the US (expected to come before the PDUFA date of June 2017). Moreover, the interim data from one of the studies in the frontline setting (expected in H2 17) is also highly awaited.
Q1 sales were DKK 170m (vs DKK107m); operating expenses were DKK154m (vs DKK110m); operating income was DKK16m (vs 173m); the cash position was DKK3,491m similar to the end-FY15 position.
Daratumumab accounted for 62% of FY15 revenues (DKK1,133m) and is expected to account for 82% in FY16. FY15 operating income was DKK730m and is expected to be between DKK25-75m in FY16. The cash position at end of year was DKK3.5bn and is expected to be DKK3.3-3.4bn at end of FY16.
1/ The FDA has granted accelerated approval to Daratumumab for multiple myeloma patients who have received at least three prior treatments. Approval comes ahead of the 9 March Pdufa date. 2/ Q3 revenues increased by 2.3%, operating profit by 2.9% and net profit decreased by 12.5%. The cash position at the end of September is DKK3,206m. For the first nine months, revenues decreased by 12%, adjusted operating profit by 12.2% and net profit increased by 61%.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Genmab. We currently have 9 research reports from 1 professional analysts.
Since April, our growth style screen has performed very strongly, outperforming the main small-cap index by 20pp and 24pp on an unweighted and weighted basis respectively, also comfortably outpacing microcap. In this note we provide more detail on the constituent and basket performance in the period and present the new screen constituents. As usual we focus on 10 of the current constituents, providing brief summaries and financials for clients to consider. We will refresh again in 5-6 months time and report back on performance.
Companies: SUN DOTD ERGO TEF AVG SOG COR FEN LOOP YU/
ECO Animal Health’s interim results highlight continued growth, with Aivlosin® generating strong demand. Sales of the antimicrobial increased 18% and is on track to meet our full year estimate of £53m. EBITDA and EPS increased by 36% and 13% respectively. The balance sheet remains robust (£20.3m net cash at period end) and the interim dividend of 3.2p is 28% higher than last year. H2 has reportedly started well with a strong and growing order book. Our EBITDA forecast is unchanged and we upgrade our dividend assumptions. We remain positive on ECO Animal Health and look forward to additional marketing authorisations of Aivlosin®.
Companies: Eco Animal Health Group
Immupharma (IMM) is a drug discovery company whose lead product Lupuzor, is in Phase III trials for the treatment of Systemic Lupus Erythematous (SLE). Previous IIb trial demonstrated both efficacy and safety through novel immune system modulation that offers benefits to the only approved treatment, a monoclonal antibody (mAb) called Benlysta with £400m annual sales. Phase III pivotal study readout (n=200) expected Q1-18 (finnCap est. approval of 63%) follows on from Lupuzor being given Special Protocol Assessment (SPA) status by the FDA with existing global patent protection until 2032. Blockbuster status (sales >$1bn) could be achieved within 8 years and historical licence deal (Cephalon, 2009) suggestive of licence/partner agreement potential. Unusual upside potential from binary readout leads us to initiate coverage with a Buy recommendation and 237p price target (increasing 87% on +ve Phase III, which excludes the value of potential upfront (c.50p) and milestone payments that could amount to c£500m or 386p per share).
We upgrade to Buy this morning following a site visit and increasing confidence in the group’s outlook. Over the next twelve months Oxford BioMedica is focused on establishing additional deals with its LentiVector® platform (with the potential to establish another deal with big pharma), progressing technical developments with its LentiVector® platform, reducing its debt profile and spinning out/out-licensing its internal pipeline programmes. There is also upside potential to our forecasts from additional approvals with Kymriah®/CTL019 where Oxford BioMedica is eligible to a royalty on net sales.
Companies: Oxford Biomedica
Ergomed has entered into a co-development agreement with Allergy Therapeutics for three of its OralVac products. The first Phase I trial (in house dust mites) will commence in 2018. Ergomed will contribute in-kind to the development of the products and will receive service fees as well as royalties on net sales. Ergomed has extensive experience in the allergy field and we view it as a good fit for the group’s co-development pipeline. We continue to favour Ergomed’s integrated business model and reiterate our highly positive stance.
Since its inception in 2010, the Panmure Gordon Conviction List has outperformed the market, returning 278% against a Small Companies index that would have returned 232% over the same period. Our Q4 portfolio reflects our view that the UK equity market stands to benefit from a coordinated upturn in global growth. Low nominal fixed income spreads continue to provide a valuation underpin for global equities. There are increasing signs that the world’s central bankers are making a concerted effort to wean markets off near zero interest rates. However with global debt exceeding 200% of GDP and unfavorable demographic trends, we think their chances of rapid progress are slim.
Companies: CPI CTH CINE JE MJW NOG RPC VM/ XAR
Alliance Pharma has announced the proposed acquisition of Vamousse®, used for the prevention and treatment of human head lice, from TyraTech this morning for up to a total of $17.5m. Vamousse® is expected to be immediately earnings enhancing and will become the third growth brand for the group (Kelo-cote™ and MacuShield™ the other two). This morning’s acquisition represents one of Alliance Pharma’s larger deals and follows the acquisition of Ametop™ announced on the 1st December. We continue to think Alliance Pharma represents an interesting opportunity, although it is not under formal coverage.
Companies: Alliance Pharma
In the October edition of the Hardman Monthly newsletter, Chief Executive, Keith Hiscock analyses the much misunderstood – but highly important – issue of stock liquidity. In particular, he focuses on the lower echelons of the Main Market and of AIM.
Companies: OPM ABZA AVO AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG GTLY MCL MUR NSF OBT ODX OXB NIPT PHP PURP RE/ RGD SCLP SPH SCE TRX VAL
The Phase II trial start for PR022 in Atopic Dermatitis (AD) is an expected but nevertheless very positive development for Realm Therapeutics. In our view, AD represents a significant commercial opportunity, as highlighted by the recent approvals and current sales projections for Pfizer’s EUCRISA® and Sanofi/Regeneron’s Dupixent® ($0.7bn and $3.5bn respectively by 2021). We look forward to top-line results in Q3 2018 with anticipation, and reiterate our highly positive stance on Realm Therapeutics.
Companies: Realm Therapeutics
The AIM Healthcare index has shown positive returns in all but three out of the past 11 years (2007, 2008 and 2011), growing at a CAGR of 7.6% over the period. This compares with a CAGR of -0.3% for the broader FT AIM All Share, +0.6% for the AIM 100 and +3.5% for its more senior FT All Share Health index. Sector growth and relative performance to the AIM All Share index has accelerated over the past five years; the sector having risen 19.19% CAGR since 1 Jan 2012. This compares with 6.8% growth in the AIM All Share and 6.1% in the FT All Share. This outperformance can be attributed to the increasing success amongst the Healthcare constituents which have progressed their business plans to a point where substantial value has been/is being created and where many companies have successfully scaled their businesses to sustain future growth. We highlight four companies that have different business models but exemplify the opportunities that are increasingly becoming evident within the sector.
Companies: ABZA AKR AGY APH AGL AVCT BVXP COG CTH IHC LID MTFB ODX OPTI NIPT PRM SDI STX SNG TSTL
Following Roche’s recent success in haemophilia, we are cutting our estimates further. Although Roche’s success (both in terms of approval as well as commercial success) is not guaranteed, our conservative stance aims at gauging the valuation side in case of high pressure, even in the non-inhibitor space. We have also revised down our estimates for the hereditary angioedema drug Cinryze, which dominates the market currently but witnessed severe supply shortages during the quarter.
Abzena’s interim results highlight continued investment across its increasingly integrated Services offering. Performance for the full year is expected to be H2 weighted, with a stronger H2 propelled in particular by recent chemistry research services contract wins and a revitalised biology research services offering. The installation of bioreactors in San Diego is on track, with the first (500l), bioreactor due for installation this month and a second (2,000l) to follow in Q1. Meanwhile, the lease for a new 50,000 sqf facility in San Diego has been negotiated, to co-locate the Group’s manufacturing services. Although costs for the current year are expected to be slightly higher than previously anticipated, we continue to expect the investment in Bristol (a new conjugation suite is expected to become operational in Q1) and San Diego to drive accelerated growth from FY2019.
Immunovia continues to leverage the IMMray technology to additional opportunities with prospective trials in the group of early pancreatic cancer symptoms (PANSYM-1) due to start in the next few weeks. In diabetes patients (PANDIA-1) trials should start after the readout of a retrospective study in this population expected in Q118. Immunovia is preparing for the launch of a PanCan-d test for the early detection of pancreatic cancer in high-risk patients in 2018. Our valuation is SEK156/share.
BMK has updated on overall FY17 sales being c. £138m – in line with market expectations and equivalent to 26% growth over FY16.
Two product acquisitions fit with the company’s buy-and-build strategy and are forecast to be 2-6% EPS-enhancing in 2018-2020. Alliance paid £18.7m ($25m) for the two products, representing c.2.7x EV/Sales, up to $4.5m of which is deferred until 2019/2020. The larger acquisition of Vamousse is the company’s first acquisition with significant US sales, signalling perhaps the direction of its future M&A strategy. Net debt is expected to rise to c.£75m at year-end 2017 (2.6x leverage), We increase our target price to 70p, implying 2018 P/E and EV/EBITDA of 14.7x and 11.9x, respectively.
Companies: Alliance Pharma