Genmab A/S

NASDAQ:GMAB

Earnings Call Transcript 2018-Q1

[Operator]

Good day, and welcome to the Genmab Q1 Reports 2018 Conference Call. Today's conference is being recorded. During this telephone conference, you may be presented with forward-looking statements that includes 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 an obligation to update statements regarding the future or to confirm such statements in relation to actual results unless this is required by law. At this time, I would like to turn the conference over to Jan van de Winkel. Please go ahead, sir.

[Jan G. J. van de Winkel, Co]

Hello, and welcome to the Genmab conference call to discuss the company's financial results for the quarter ended March 31, 2018. Joining me on today's call is David Eatwell, our CFO. 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. Let's move to Slide 3. We expect 2018 to be an exciting and eventful year at Genmab as we continue to work towards our 2018 goals with a steadfast determination Genmab A/S is known for. During the first quarter of 2018, we continued to see very good progress with DARZALEX. Today, we can celebrate the fifth indication in the U.S. for DARZALEX after the news overnight that the FDA approved the use of daratumumab in combination with Velcade, melphalan and prednisone, or VMP, as frontline treatments for patients with multiple myeloma who are not considered candidates for stem cell transplantation. The approval came 2 weeks earlier than the assigned PDUFA dates of May 21 and was given under the priority review process. The approval is based on the excellent results from the ALCYONE study that we reported last year. DARZALEX has been launched in the U.S., Japan and 29 European countries. And sales and marketed multiple myeloma indications continues to be very strong, with net sales reaching USD 432 million in the first quarter of 2018, resulting in DKK 310 million in royalties to Genmab. In January, we announced Novartis' intention to transition Arzerra from commercial availability to limited availability via compassionate use programs for CLL in markets outside the U.S. As a consequence, Novartis paid Genmab a lump sum of $50 million as payment for potential loss milestones and royalties. However, we believe the significant potential and future value will be in MS. And post quarter end, we learned that the 2 large Phase III studies evaluating the subcutaneous formulation of ofatumumab in relapsing multiple sclerosis completed patient recruitments. Data from these pivotal studies are expected in 2019. We also saw progress with other partner programs, including the start of a new Phase III extension study of teprotumumab in Graves’ orbitopathy by Horizon Pharma and the first clinical study of JNJ-64407564, a DuoBody product for the treatment of multiple myeloma. Finally, our financials remain well on track, and we improved our revenues by DKK 430 million or 171% in the first quarter of 2018 compared to the same period in 2017. I will now turn the call over to David to describe our financial results for the first quarter of 2018. David?

[David A. Eatwell, Executive VP & CFO]

Thank you, Jan. Let's move to Slide 4 and the results for the first quarter. Revenue for the period came in at DKK 681 million, an increase of DKK 430 million or 171% compared to the first quarter of 2017. The increase was driven by the payment from Novartis of $50 million or just over DKK 300 million and higher DARZALEX royalties. The total expenses in the first quarter of 2018 were DKK 357 million, an increase of DKK 152 million or 74%. And this was driven by the advancement of tisotumab vedotin and additional investment in our product pipeline and the increase in employees to support the expansion. However, it should be noted that the expense increase was partially offset by reimbursements from our collaboration partners. These are required to be recorded as revenues. If we were able to net these reimbursements against our expenses, then the net growth in expenses for Q1 would be DKK 95 million or 47%. Of course, this accounting treatment has no impact on the operating result, and we had an operating income of DKK 324 million for Q1 2018 compared to DKK 46 million in 2017. The increase of DKK 278 million was driven by the higher revenue, which was partially offset by the increased operating expenses. Net financial items were a loss of DKK 68 million in 2018 compared to a loss of DKK 26 million in 2017. Again, the main driver of the variance between the 2 periods is foreign exchange rate movements, which negatively impacted our U.S.-dollar-denominated portfolio and cash holdings. The exchange rate dropped from the end of December at DKK 6.20 to the end of March at around DKK 6.00. And today, it's actually bounced back and is at DKK 6.28 when I checked earlier today. So if we were closing the books today, we'd actually have a positive amount in these net financial items. Corporation tax expense for the first quarter of 2018 was DKK 57 million compared to DKK 4 million in the first quarter of 2017. The estimated annual effective corporation tax rate for the first quarter of '18 was 22% compared to 21% in the first quarter of 2017. There were no reversals of the valuation allowances on deferred tax assets in the first quarter of 2018 or the first quarter of 2017. Now let's move to Slide 5 and the revenue. Our revenue breakdown by category is shown on the left-hand side of this slide. In the first quarter of 2018, royalty income was the largest portion of the revenue at DKK 318 million compared to DKK 225 million in 2017. The increase of DKK 93 million was driven by higher DARZALEX royalties, which were partially offset by lower Arzerra royalties. License fees were the second-largest portion of the revenue at DKK 304 million in the first quarter of 2018 compared to DKK 24 million in Q1 2017. The increase was driven by the DKK 50 million upfront payment from Novartis with the amendment of the ofatumumab license and collaboration agreement. In the first quarter of 2017, the license fee income of DKK 24 million was the deferred revenue. Reimbursement income that I referred to earlier amounts to DKK 59 million in the first quarter of 2018 compared to just DKK 2 million in the first quarter of 2017. The increase of DKK 57 million was driven by our collaboration agreements with Seattle Genetics and BioNTech. The graph on the right bridges the revenue between the 2 periods. The largest increase in revenue was the Arzerra payment from Novartis of $50 million or DKK 304 million. DARZALEX royalties grew from DKK 211 million in 2017 to DKK 310 million in 2018, an increase of DKK 99 million. And that was based on Janssen's DARZALEX sales, which were $432 million in the first quarter of 2018 compared to $255 million in the same period in 2017. The increase in sales of $177 million or 69% was driven by a strong uptake following the regulatory approvals in the U.S. and Europe and the launch in new countries. The cost reimbursement, all other increase, was mainly driven by the increase in our reimbursement income from the collaboration agreements, partially offset by a decrease in deferred revenue. Now effective January 1, 2018, we adopted the new revenue recognition standard, IFRS 15, using the so-called modified retrospective transition method. And the deferred revenue of DKK 151 million on our balance sheet at the end of December 2017 was reclassified to the balance sheet accumulated deficit in the first quarter of 2018. As a result, there is no amortization of deferred revenue in 2018 or going forward. This is also sometimes referred to as the lost revenue. Next, the expenses on the operating income on Slide 6. The graph on the left compares the change in expenses between the first quarter of 2017 and 2018. As you can see, there was an increase in the operating expenses of DKK 152 million, which was driven by our decision to accelerate the investment in products in our portfolio. In fact, 70% of the expense increase was due to the additional investment in our product pipeline, including the advancement of tisotumab vedotin, HuMax-AXL-ADC and our 2 new products that are entering the clinic as well as selected investments in our preclinical programs. FTE costs have also increased year-over-year as well as we are ongoing carefully controlled growth and have hired key personnel to support our product pipeline growth, to build commercial competencies and also strengthen our management team. Looking at the chart on the right, you can see an increase in the operating income from DKK 46 million to DKK 324 million. As previously discussed, the sevenfold increase was mainly due to the higher revenue partially offset by those increased expenses. Now to my last slide, Slide 7, the guidance for 2018. We are maintaining our 2018 financial guidance, which was released on February 21, 2018. We expect our 2018 revenue to be in the range of DKK 2.7 billion to DKK 3.1 billion. Our projected revenue for 2018 consists of DARZALEX royalties of around DKK 1.75 billion based on Genmab's estimate of DARZALEX net sales of somewhere between $2 billion and $2.3 billion. We also project DARZALEX milestones of DKK 550 million in 2018. In addition, the 2018 guidance includes the upfront payment from Novartis, which we recently achieved in Q1 of approximately DKK 300 million, and that was related to the transition of Arzerra from commercial availability to compassionate use programs in the non-U.S. markets. The remainder of the revenue consists of cost reimbursement income, Arzerra royalties and DuoBody milestones. We anticipate that our 2018 operating expenses will be in the range of DKK 1.4 billion to DKK 1.6 billion, which mainly consists of the advancement of tisotumab vedotin, AXL ADC and also HexaBody-DR5/DR5 and DuoBody-CD3xCD20, as well as the increase in the employees to support the expansion of our product pipeline. In 2018, we'll spend about DKK 765 million on our 10 key projects or just over half of our total expense base. Therefore, we expect the operating income for 2018 to be approximately DKK 1.3 billion to DKK 1.5 billion. But note that, as usual, the 2018 guidance does not include any new large potential deals or potential proceeds from future warrant exercises. In summary, the increase in royalties from DARZALEX in 2018 are enabling Genmab to increase the investment to selectively advance our pipeline and create even more value. Now back to Jan to discuss our 2018 goals. Jan?

[Jan G. J. van de Winkel, Co]

Thank you, David. Let's move to Slide 8. We are making good progress on our key goals for 2018. Having gained the U.S. regulatory approval for DARZALEX based on the data from the Phase III ALCYONE study in frontline multiple myeloma, we also look forward to a decision from the European authorities. We anticipate the start of a number of new daratumumab trials and expect to report key data in both the frontline multiple myeloma setting and in solitary tumors. After the quarter closed, the 2 large Phase III studies evaluating the subcutaneous formulation of ofatumumab in relapsing MS completed patient recruitments. If the data from these studies is positive, Novartis could submit regulatory applications in 2019. For tisotumab vedotin, we foresee the start of Phase II studies in cervical cancer and studies in additional solid tumor indications within this year. We also continue to advance our other pipeline projects. The expansion phase in the Phase I/II HuMax-AXL-ADC trial has been started in the second quarter, and we now have now treated the first patient worldwide with the product created using Genmab's proprietary HexaBody technology. A cancer patient was yesterday treated with HexaBody-DR5/DR5 in the United States. We are also looking hard to progress our DuoBody-CD3xCD20 Phase I/II study as well as accelerate our proprietary immuno-oncology DuoBody programs towards the clinic. We continue to be committed to disciplined financial management with controlled company growth and smart investments, including investment in our highly innovative differentiated antibody pipeline. Let's move to Slide 9. That ends our presentation of Genmab's Q1 2018 Financial Results. Operator, please open the call for questions.

[Operator]

[Operator Instructions] The first question is from Michael Novod of Nordea.

[Michael Novod]

Yes, it's Michael Novod from Nordea in Copenhagen. Just a few questions. Maybe you could talk a bit about the insights that you have on, say, the uptake of DARZALEX in markets outside of the U.S., Japan in particular, how you see the potential in Japan going forward. I know it's you're part of Janssen that is responsible, but it would still be interesting to hear more on your views. And then on the same note also regards to the DVMP. Now you have the approval in the U.S. Do you still expect this to be very, very limited in terms of uptake? And how do you see that going in Europe when the first approval or when the approval should come later in the year? And then maybe just a sort of a bookkeeping question, maybe David could just go through the deferred stuff again, just to get it completely clear to our modeling.

[Jan G. J. van de Winkel, Co]

Thanks, Michael. I think I will hand over all 3 questions to David. But what I can tell is that we recently had a survey which we had been taken in Japan in physicians, which was just very, very interesting. And why don't I ask David to first give his views, Michael, and then I may step in later.

[David A. Eatwell, Executive VP & CFO]

Very good. Thank you, Jan. Thank you, Michael. In terms of the Japan potential, we are actually starting to collect IMS data. What we want to do is really check and compare that data with the Janssen sales when we get their sales report -- royalty report through. So what I want to do first is to sort of see how accurate we believe the IMS data is for Japan. But one of the things that we're doing is sort of tracking those IMS sales and comparing them for matter of interest against the launch in Germany. Obviously, in Japan, we've got a larger population. I think the population is over 120 million people in Japan compared to just over 80 million in Germany. And also, we have the advantage in Japan that we're launching in the second-line setting in combination with REVLIMID and Velcade; compared to in Germany when that was first launched, of course, that was just starting off with the monotherapy. We've also been doing some market research, and it seems that DARZALEX is fairly well known in Japan already, and they seem to be looking forward to receiving it. I think, as we discussed before, the Japanese market is probably a little bit more like Europe where Velcade is used more in REVLIMID, particularly in the first-line setting. But they also use dara-VMP in Japan as well, which would bode well for the future, assuming we are able to file and get approval for DVMP frontline in Japan in the coming months. So I think it's sort of off to an encouraging start. It seems to be known in the Japanese market. And so I think we should see a nice increase in sales in 2018 for Japan versus 2017. In terms of other markets around the world, I think, as we spoke before, we are now seeing launches and second-line availability starting to come through in places like Spain and Italy and Brazil, all of those contributing. We still got -- some countries are still waiting to come up onstream in the monotherapy setting, but a number of countries are also expected to come up onstream in the second line. We also got contributions in '18 from places like Canada and in the U.K. through the Cancer Drug Fund, although that's only in the fourth-line setting in the U.K., not the second-line setting. In terms of the dara-VMP U.S., that is not a regime (sic) [ regimen ] that's used widely within the U.S. markets. So we're not anticipating that we'll get a large amount of sales in the dara-VMP combination. But I think it's still good for the U.S. market overall to get the fifth label in the U.S. to encourage, really, the -- just the knowledge of daratumumab. Of course, a big one for the U.S. will be assuming if the DRd data is good in frontline multiple myeloma. Then we'll be looking for that to be a nice inflection point for our 2019 for the frontline MM market in the United States. I think the last thing was on the deferred revenue. So if you look at the deferred revenue, we did have DKK 24 million of deferred revenue in Q1 2017. We have now got 0 deferred revenue being recorded as revenue in 2018. So as I mentioned, at the end of December 2017 there's DKK 151 million of deferred revenue that if the rules hadn't changed would've been rolling out over a number of years and giving us some revenue. That -- with the change of accounting rules, that DKK 151 million is just being moved around on the balance sheet from deferred revenue into the -- just deferred deficit. So that does mean that there's a little bit of a handicap for the 2018 revenue number compared to '17, but it's not particularly huge. For 2017, the total deferred revenue for the year was DKK 90 million. So year-on-year, that's the impact, which is not too material considering our midpoint of our guidance for 2018 is DKK 2.9 billion. Hopefully, that...

[Michael Novod]

And the 2018 guide that you provided was -- when you provided that guidance, that was still including the deferred? Just to get a feeling of whether this is...

[David A. Eatwell, Executive VP & CFO]

No. No impact on our guidance because we already knew that, that was the new accounting rules. And so there was 0 deferred revenue included in our 2018 guidance.

[Michael Novod]

Okay.

[Jan G. J. van de Winkel, Co]

Thanks, David. So maybe, Michael, I can give a little more color on the Japanese -- how we see the Japanese market from the survey we recently had been done amongst Japanese hematologists and oncologists. Apparently, the uptake of DARZALEX has recently outpaced all our recently launched competitors, with initial estimates and a relapse effect to the patient [ share ] of about 20%. And that is now seen to be rapidly increasing in the coming 6 months or so to a pretty substantial and near-term levels by the Japanese physicians. And we will have to see, Michael, whether that pans out, but it sounds all very encouraging for Japan and DARZALEX in 2018.

[Operator]

Your next question is from James Quigley of JPMorgan.

[James Patrick Quigley, Analyst]

A quick follow-up on Japan. You mentioned about frontline or potential frontline approval for DVMP. Has Janssen already filed based on ALCYONE? Do they need to do a bridging study? Seeing that there is a DVMP study for Asia Pacific, do you need to see the results for that? Or do you expect approval in the frontline in Japan before we've seen that? Then on the cost and the cost phasing, Q1 seemed a little higher than certainly I was expecting. Are we -- should we expect that to be a sort of the base for the runway to see if you multiply that by 4 in terms of the total costs and get to the bottom end of the guidance? Should we be looking more towards the top end of the guidance, assuming more investment in the pipeline? And then practically, how does it work in terms of the Seattle Genetics, the reimbursement income there? Did Genmab pay for the entire cost and reimbursed Seattle's share? Or is -- do Seattle pay some cost, Genmab pay some costs and then there is a true-up at the end? And I think I'll leave it there.

[Jan G. J. van de Winkel, Co]

Thanks, James. I think I will take the first question, and I'll leave the other 2 to David. So Japan, we are going to file -- or Janssen is going to file imminently based on the ALCYONE data, James. We think we can get the frontline approval there based on the ALCYONE study and, hopefully, also before the end of this year. We have also, in addition, Janssen has performed some smaller Japanese trials for safety data, and some of that data will be included in the filing, but there's no other Phase III study necessary in order to get to a frontline approval based on the Velcade combination regiments with dara in Japan. You should see that filing imminently. David, maybe on the second and third question from James?

[David A. Eatwell, Executive VP & CFO]

Certainly. On the expenses for the year, we had a guidance range of DKK 1.4 billion to DKK 1.6 billion. Each quarter, we go through detailed forecasts with all of our groups to see if -- making sure we're still in track with that. At the stage, we still expect to be in that range DKK 1.4 billion to DKK 1.6 billion or a midpoint of DKK 1.5 billion. Quarterly to quarterly, our expenses will bounce around a little bit, particularly when we get high CMC costs, the material costs for our trial. They can be quite lumpy quarter-to-quarter. So it is a reasonable sum that we're spending in Q1. But I take that as positive because that means we're advancing all of those clinical programs and investing in the preclinical as well. So I'd take that as a good news that we are investing that amount because it means those projects are on track, on schedule and [ good ] investment for us. But no change to our guidance at this point, DKK 1.4 billion, DKK 1.6 billion for a midpoint of DKK 1.5 billion. In terms of the way it works with Seattle Genetics at the moment is that we're running the clinical trials for the program. So how it works in Q1, for example, we're spending the money on the clinical trials. We're recording all of that expense in Genmab's expense line, 100% of it. And then we cut an invoice to Seattle Genetics, and that gets recorded in the revenue as this reimbursement income. Now in the future, that can change as the future trials will be run -- some of the trials will be run by Seattle Genetics. They'll be recording 100% of that cost and then invoicing us for our 50% share of those trials. And so we'll continue to keep you updated in future quarters and give you the information so you can figure out what the net cost is at the end of the day. Even if the accounting rules won't allow us to net it off, we will keep that commentary going for you.

[Operator]

Your next question is from Wimal Kapadia of Bernstein.

[Wimal Kapadia, Research Analyst]

Wimal Kapadia from Bernstein. So I guess, 2 questions, please. The first one is on -- I'm trying to get a sense of the economics for the doctors in the community setting. So are you able to give any context around how much these doctors are actually making from infusing dara? I guess, what I'm trying to understand is how much appetite there is for a subcu product considering we've seen some subcu products in oncology, [indiscernible] have not penetrated as fast as some people had anticipated. And the economics is one of the drivers around them. And then the second question is around duration of the treatment. This is something I have asked before, but I guess, any more color in terms of -- if we think about dara being used as we see it in the clinical studies, that would suggest the product could be used for 5 years in the first-line setting. And we know in reality that's probably unlikely. How does Genmab internally think about duration of treatment? Any context around how you model the first-line setting would be would be great.

[Jan G. J. van de Winkel, Co]

Thanks, Wimal. I think I will probably leave both questions to David and then may step in the second and third question with maybe some more perspective after letting David give a go at it, Wimal. But David, why don't you kick off with the economics for the doctors?

[David A. Eatwell, Executive VP & CFO]

Yes. I think, first off, in terms of the market research that we've done, the expectation and the anticipation for the subcu is very much being looked forward to. I think if you talk to the doctors there's really only 2 things that they're not keen on with daratumumab. I mean, it's gotten an incredibly benign safety profile compared to some other drugs. But one of the sort of the complaints, if you like, is the long infusion, particularly when you look at the first infusion of perhaps 7 hours plus. And that does mean you're actually tying up an infusion chair for a very long period. The second thing is the infusion-related reactions, which mostly is seen just on the first infusion only. Now we've seen with the PABO data and the subcu data is that you should be able to get the actual subcu format down to an infusion of 3 to 5 minutes, which is going to be incredibly good. But the capacity particularly in the community setting perhaps there could be a limitation of IV chairs. But also, we're seeing that the infusion-related reactions are lower with the subcu format. So throughout everything we've done in terms of market research and anecdotal is there seems to be very much excitement building up for the subcu. And we've had no comments back of, "Well, I don't really want to do that" due to any economics. It does seem to be is that when you look at infusions there is money paid for infusions. But as I understand it, in the U.S. it's on a sliding scale. So most of the money you make is in the first part of an infusion. The longer the infusion goes on the actual rate of reimbursement actually declines. But as I'd say, from everything we are seeing is that there is a great deal of excitement building up, anticipating the format in the subcutaneous version. In terms of duration, you're absolutely right in that we're seeing even with the data in the second-line setting very long durations. And in the first-line setting, we're waiting for the data with dara-REVLIMID combination. But we would anticipate in the front-line setting that we will be measuring the duration in years rather than in months, which is great news for the patients. At this point, it is a continuation of treatment. There isn't a holiday break there. We'll have to see in the future of what actually happens in practice of whether patients could get into a very deep response into MRD negativity. Jury is out at this stage of whether to sort of just keep that patient very much under control in MRD negativity or if there would be some potential in the future to take a treatment holiday or just go on to a lengthy daratumumab maintenance regime (sic) [ regimen]. So unknown at this stage of what will happen when you start getting into the 5-year-plus duration.

[Jan G. J. van de Winkel, Co]

Thanks, David. Maybe I can add a little bit to that, Wimal. The -- for the first time we got -- today we got in the U.S. label the MOB data showing that in the dara-VMP arm there's definitely more than 3.5, 4 more patients which have become very deep MRD negative. We expect that to be even more robust in the Maia study, combining daratumumab with REVLIMID and dexamethasone; because that's a more potent combination, we believe. We will see those data in -- around the summer this year, so early in the second half. And I think that will very much then, I think, dictates how doctors are going to treat patients going forward over several years. Maybe patients which are deeply MRD negative, Wimal, don't need to be getting dara that frequently. Maybe the frequency drops from once every 4 weeks to once every 6 weeks. And I think it's too early to actually model that in. But we are super excited about getting the MRD data for the first time in any label, I think, for multiple myeloma in the label. That happened last night. I think that will be even more impressive in the Maia study, which we hope to see in the summer time frame. So super exciting times, especially for patients with multiple myeloma. And then the end also for analysts at banks, I think, because this is super exciting.

[Wimal Kapadia, Research Analyst]

Great. Can I -- do you mind, just a quick follow-up. In terms of are you able to give any specifics on how much the community doctors actually make to give the infusion today?

[Jan G. J. van de Winkel, Co]

I don't know that, but maybe David knows.

[David A. Eatwell, Executive VP & CFO]

No, sorry. I don't know that.

[Operator]

We'll take our next question from Peter Welford of Jefferies.

[Peter James Welford, Senior Equity Analyst]

I'm afraid I'm going off DARZALEX. Firstly, on AD -- HuMax AXL ADC, just curious if you can disclose that. You said you got into the expansion phase. What are the indications? I think you were going to choose 4 indications for the expansion phase. I wonder what those are. And also in the dosing, if you can comment on what dose you've got to or perhaps which dose cohort you got to before you then started to expand? And then on the HexaBody-DR5/DR5, again, you said the first patient was treated yesterday. Can you give us any sort of insight into the trial design and what sort of patient population you're looking for in that study? I don't think we've -- we can see any details at the moment. And then just for David on the financials. Is -- you mentioned that -- obviously that there is manufacturing for the CMC costs, et cetera. Is therefore the first quarter reimbursement revenue from Seattle and BioNTech unrepresentative, should we say, of how we should think about it in future? Or is that a reasonable figure if we were to think about it for the full year?

[Jan G. J. van de Winkel, Co]

So thanks, Peter, for the questions. Let me see whether I can add further details on the AXL ADC study. We have recently, in April, started 3 expansion cohorts, and that will in the end probably grow to 6 or 7 expansion cohorts. We're very excited about the drug. We are starting these 3 types of cancer with the dose which we have determined and dosing every 3 weeks. And we are still also with a more frequent dosing schedule dose escalating a separate cohort. Probably more data will become available, I hope, in the second half of this year on the dose escalation, Peter. What I can tell is that right now the expansion cohorts consist of specific types of patients with lung cancer, melanoma and sarcoma. And then we will add more cancers to that later. But the early data looks very, very encouraging from the dose escalation. And hopefully, in the second half of this year, Peter, we can give you further color on the data. Then for the HexaBody-DR5/DR5, we are going to treat 6 types of solid tumors; and we are doing a pretty standard dose escalation, 3-by-3 dose escalation. And we have just yesterday dosed the first patient. And hopefully, some further data of that, early data on the safety of the HexaBody-DR5/DR5 molecule or concept before the end of this year, Peter. That's all I can add at this time. It's early days but super exciting times at Genmab. David, maybe for the second and third question.

[David A. Eatwell, Executive VP & CFO]

Yes, in terms of the reimbursement income for the full year, the first quarter is not too far out of line of what we would expect for the full year. So I'd be expecting over DKK 200 million reimbursement income for the full year.

[Operator]

Our next question is from Peter Sehested of Handelsbanken.

[Peter Sehested, Research Analyst]

It's Peter from Handelsbanken. Just one. Could you just talk us through the potential communication scenarios around the solid tumor data, particularly from the [ centric ] combination study? That study has 2 arms allowing for potentially comparative readouts. And so just your thoughts on that and how we should prepare for that, the news release later in the year.

[Jan G. J. van de Winkel, Co]

Thanks, Peter. That's a question which is very hot on the radar screen, I think, for a lot of investors, so thanks for asking that. We -- right now, we have little visibility on the data. Janssen is running that study. And you're right about the 2 arms. We also have possibilities of expanding that study by adding in more patients. And I think that's up to Janssen to see whether they do that. And we have just recently started interacting with Janssen about what level of detail we can potentially use in the first communication in the second half of this year. And that will likely include in different subsets of patients because we're doing a lot of biomarker analysis in that study, looking at overall response rates and, of course, secondary readouts also looking at BFS and other depth of responses et cetera, duration of responses. But I don't know at this moment how much detail you're going to get in the second half of this year. This still needs to be decided and concluded by the 2 companies. But it is a complex study, as you have seen from the setup on ct.gov. (sic) [ ClinicalTrials.gov]. And it's likely going to be even more complex because we're going to actively looking at different subsets. So it's very little I can add at this time, but we will see data in the second half of this year. And we continue to be very encouraged by the preclinical data underlying the potential to combine daratumumab checkpoint blockers like Tecentriq.

[Peter Sehested, Research Analyst]

And respect for the last one, I have just have one follow-up question. We're seeing some increasing number of studies investigating the potential of -- or the impact of amyloidosis [ suppressor ] cells having a negative impact on PD-1, PD-L1 response. In order to get more clarity regarding the underlying mechanism of action of DARZALEX here, should we expect to see more preclinical/mechanistic data ahead of the main study readout, i.e., the study we just talked about?

[Jan G. J. van de Winkel, Co]

There's a lot of activities, Peter, now by -- not only by Janssen but also by BMS, several academics groups. You have seen that already at AACR and I think also at ASCO. You will see more preclinical data. Don Gibbons' group at M.D. Anderson is doing a lot of work on different populations of suppressor cells which can be CD38 positive in animal models as well as studied in biopsies from human cancer patients. It's not only myeloids-derived suppressor cells, which we think are very important. The key suppressor ones are CD38 positive, but there's also so-called tumor-associated macrophages, different regulatory T cells, which are important regulatory cells, also CD38 positives. And those are the ones which we target with daratumumab. Those seem to be the most important in preclinical models, Peter. And I expect you to see a number of additional preclinical models from various groups supporting the concept of knocking out these immunoregulatory cells, these suppressor cells, with an anti-CD38 targeted approach. But clinical data, it should come in the second half from the lung cancer study, which we already discussed, off of 1 of the 4 studies from BMS, where they combined daratumumab with nivolumab with OPDIVO in different settings because some of them are definitely going to create clinical data in the second half or very early in 2019. So again, I think an exciting second half of this year.

[Operator]

Our next question is from Anastasia Karpova of Kempen.

[Anastasia Karpova, Research Analyst]

Three questions, if I may. First, on about tisotumab vedotin, on the clinical trials, you and Seattle Genetics recently published a new study in solid tumors, which also include patients with lung cancer and head and neck cancer. And judging -- during that -- those cohorts when also expanded in the Phase I/II trials, I was wondering, what's the thinking about exploring again in this population? And what are you doing differently about the setup of this particular trial? Second, the primary end point in CASSIOPEIA is stringent complete response, which is a -- rather a new end point or a combination such as [indiscernible]. Can you share some benchmark in terms of, I think, what you would expect to see in the control arm? And finally, it's a little bit far off in the future, but regarding your patent litigation on CD38, can you share some color on how the economics of potential damages could be shared between you and J&J?

[Jan G. J. van de Winkel, Co]

Thanks, Anastasia. These are interesting questions, for sure. The study which was just announced for tisotumab vedotin, which is going to be initiated in the summer time frame by Seattle Genetics for solid tumors, they'll use the optimal doses as determined in the dose-escalation Phase I/II up to now. We're going to see clinical data from the dose escalation in the second half of this year, Anastasia. But these different tumors were then treated with different levels of tisotumab vedotin. And the difference from the new study is that they've all got the optimal dose in the new study. These are 4 solid cancers. And as I said at the previous full year conference call, I said, well, there is at least a handful of solid cancers which we're going to move into clinical trials with tisotumab vedotin. So from that, you can conclude there will be other studies starting this year and involving other solid cancers. And that is probably very much based on what we have seen already in the Phase I/II dose escalation part as promising indications for tisotumab vedotin. So this will potentially further build the potential area of use for tisotumab vedotin. But for now, I think we have to wait on the clinical data from the Phase I/II dose-escalation part. And those will come in the second half. Then as it relates to your second question on CASSIOPEIA, the stringent complete responses is indeed the first time we believe that, that has been accepted as a formal end point by the authorities for a Phase III study in multiple myeloma. And I don't have here at hand the control arm estimated stringent complete responses for VTD by itself. So we need to look that up, and I can get back to you on that because I don't know which study we have used internally as a reference for the control. But we certainly hope that the dara arm is going to be a lot more substantive also based on what we are seeing as stringent complete responses in other studies already with dara containing combination regimens. So I cannot give you the answer for the control arm there, but we can follow up for sure on that. And then the last question as it relates to the court case with MorphoSys. There's little for me to comment on an active court case. And I can tell you that the economics of a potential outcome of such a case are not in the public domain. But I can tell you that the majority of the costs will be taken by Janssen, by our partner, so not by Genmab. And that is contractually laid down but not in a public domain.

[Operator]

[Operator Instructions] We shall take our next question from Peter Verdult of Citi.

[Peter Verdult, Director]

It's Pete Verdult here from Citi. Just 2 questions. Firstly, for David or Jan, you've made it quite clear that you want to be in a position to commercialize your pipeline on your own going forward. Does this relate to the U.S. only? Or do you have global commercial aspirations? Just trying to get a sense of the timing of any move you might make and the magnitude of this buildout as it relates to P&L impact. And then secondly, Jan, just coming back to your -- one of your answer to an earlier question on the solid data biomarker analysis. I'm sure PD-L1 is one of them, but are you willing to go or discuss what other biomarkers you're investigating, be it TMB or anything else that you're willing to disclose at this stage?

[Jan G. J. van de Winkel, Co]

Thanks, Peter, for 2 very interesting questions. So first of all, the commercial aspirations. We are looking at it globally, so also outside of the U.S. and Asia. And in the second half of this year, that -- we will actually communicate about that more broadly and more proactively, Peter. And that's initially related to tisotumab vedotin. We're working on commercialization plans and strategy with our partner, Seattle Genetics, who is going to operationalize more and more of our clinical studies from here. Also Genmab is expanding the number of studies for tisotumab vedotin. It's a bit on the early side, but we will communicate on that in the second half of this year. Then as it relates to the solid tumor trial in lung cancer, PD-L1 is, of course, a good guess, Peter. We will definitely look at PD-L1 positive and negative cancers as subsets, but there is also a number of other subsets. And I'm not allowed to speak about those subsets at this time. But you can guess a few of them, of course, by from other studies which Janssen's team is working on right now, but they are not in the public domain. So we'll have to wait a bit till the second half to see those.

[Operator]

Your final question is from Frank Anderson of Jyske Bank.

[Frank Hørning Andersen, Senior Analyst of Equities]

It's Frank from Jyske. I'm just trying to get a sense of whether there's anything changed in your perception of the competition in the multiple myeloma space since your last quarterly presentation. So I was just trying to get a sense of any moving parts in there. So could you give me some kind of update if something has changed in your perception during the -- [ through ] last month?

[Jan G. J. van de Winkel, Co]

Thanks, Frank. And we will follow up, of course, with more tomorrow in Copenhagen. But let me give you my perspective. I think not a lot has changed as it relates to multiple myeloma new molecules which could potentially compete for market share with dara. As it relates to BCMA ADC, the antibody drug conjugate from Glaxo, I think it's a very potent molecule, very similar in potency, I think, in the [ very ] refractory population to what dara has been showing. And what I already predicted, Frank, is that there will be combination studies, and that's already been confirmed now by GSK R&D leaders with dara because they are likely going to be used together. And the same will hold for [ CD Nexor ] and other molecules which has shown some potencies, some good potency. And that is also a drug which is already being combined with dara. So I think the strength of dara is that daratumumab is literally an ideal combination drug for a lot of these other drugs with other mechanisms of action. So that will likely grow the total market for daratumumab. What I think has changed a bit is the CAR-T competition. I think the markets and also the doctors has become a little bit become a little more critical on durations of response and the ease at which CAR-T type treatments can be done. I think some of the hysteria, the -- unrational -- irrational hysteria attached has now been dampened a bit over the last few months. And I think from that perspective, the CAR-T potential competition has gotten a little bit less, I think, less impactful for how we see the dara market develop over the coming times. So net-net, I think a pretty positive development for daratumumab.

[Operator]

That concludes today's question-and-answer session. Mr. Jan van de Winkel, at this time, I will turn the conference back to you for any additional or closing remarks.

[Jan G. J. van de Winkel, Co]

All right. Thank you for calling in today to discuss Genmab's financial results for the first quarter of 2018. And we very much look forward to speaking with you again soon.

[Operator]

Ladies and gentlemen, this concludes today's conference call. You may -- thank you for your participation. You may now disconnect.