Genmab A/S — FY 2019 Form 20-F
Reporting period: Year ended December 31, 2019; this is an annual filing, not a standalone fourth-quarter report. Financial statements are audited and prepared under IFRS as issued by the IASB, in Danish kroner (DKK). Amounts below are DKK millions unless otherwise stated.
Business context
Genmab is a Denmark-based biotechnology company developing antibody therapies. It earns revenue through partner royalties, milestones, license fees and research reimbursements; it had no direct product sales. Its three partnered approved products were DARZALEX (daratumumab), Arzerra (ofatumumab) and TEPEZZA (teprotumumab). The company reported seven proprietary clinical-stage candidates and approximately 20 proprietary and partnered preclinical programs.
Key financial results
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Revenue | 5,366 | 3,025 | +77% |
| Operating expenses | 2,728 | 1,645 | +66% |
| Operating result | 2,638 | 1,380 | +91% |
| Net financial items | +221 | +232 | Lower by 11 |
| Net result before tax | 2,859 | 1,612 | +77% |
| Corporate tax expense | 693 | 140 | +553 |
| Net result | 2,166 | 1,472 | +47% |
| Basic earnings per share (DKK) | 34.40 | 24.03 | — |
Margins: Operating margin was approximately 49.2% versus 45.6% in 2018; net margin was approximately 40.4% versus 48.7%. These percentages are calculated from reported revenue and results. The lower net margin mainly reflects the higher tax expense; the 2018 tax charge benefited from a larger release of deferred-tax valuation allowances.
Revenue comprised royalties of 3,155 (+81%), milestone payments of 1,869 (+172%), reimbursement income of 342 (+37%) and no license-fee revenue (2018: 348). Janssen-related revenue was 4,983, or 93% of total revenue. DARZALEX royalties were 3,132, up 83%, reflecting increased product sales, a higher royalty tier and favorable currency translation. Janssen reported DARZALEX net sales of US$2.998 billion, up 48%. Arzerra royalties fell to 23 from 33 as Novartis moved the product to limited availability in most markets.
Research and development expense rose 67% to 2,386, driven by advancing tisotumab vedotin and enapotamab vedotin, more clinical programs and higher staffing. General and administrative expense increased 60% to 342, including early commercial investment and expanded support functions.
Cash, liquidity and capital
- Cash, cash equivalents and marketable securities totaled 10,971 at year-end, up 80% from 6,106. This included cash and cash equivalents of 3,552 and marketable securities of 7,419.
- Operating cash flow was 1,326 (2018: 1,015); investing cash outflow was 1,983 (1,778); financing cash inflow was 3,660, primarily reflecting the 2019 ADS offering.
- Receivables rose to 3,001 from 1,337, largely reflecting royalties and milestones earned late in the year. Management cited this as a main contributor to the 1,218 negative working-capital movement.
- Total assets were 15,144 and shareholders’ equity 14,048; total liabilities were 1,096. The filing reports no significant interest-bearing debt; lease liabilities were 181, including 26 current and 155 non-current.
- The July 2019 offering issued 3,277,500 ordinary shares, raising gross proceeds of DKK 3,873 million; net financing cash proceeds from the share issuance were 3,635 million. No treasury shares were purchased in 2019.
Material changes and notable items
- Revenue growth was driven chiefly by DARZALEX. Genmab recorded DKK 1,778 million of DARZALEX milestone revenue in 2019, including US$150 million and US$100 million sales milestones. The filing says no further sales-volume milestones remain under that agreement; royalties remain subject to contractual tiers and duration limits.
- R&D expense increased by 955, with reported clinical-stage third-party costs more than doubling. R&D headcount rose from 323 to 468; total year-end employees increased from 377 to 548.
- IFRS 16 was adopted in 2019 using the modified retrospective method; prior-year figures were not restated. The adoption added DKK 205 million of lease liabilities and right-of-use assets at transition and reduced 2019 net result by DKK 4 million.
- Genmab invested €20 million in CureVac for a 2.2% ownership interest, recorded at DKK 149 million at year-end. The investment was unpaid at December 31 and included in other payables.
- Teprotumumab was approved in the United States as TEPEZZA in January 2020. The European Commission authorized DARZALEX with VTd in January 2020; these are post-year-end developments.
Outlook, management commentary and risks
Management’s stated strategic objective was to launch a proprietary product by 2025 and build late-stage development and commercial capabilities, initially to support a potential tisotumab vedotin launch, subject to regulatory and reimbursement approvals. The filing provides no quantitative 2020 revenue or earnings guidance. It anticipates higher R&D and general and administrative expenses as the pipeline advances and commercial capabilities expand, and states that existing revenue streams are believed sufficient for current projects and planned commercialization activities, while noting that needs and outcomes remain uncertain.
Key 2020 development priorities included results and regulatory engagement for the potentially registrational Phase II tisotumab vedotin cervical-cancer study; advancing enapotamab vedotin and epcoritamab; and progressing other clinical and preclinical programs. These milestones are plans, not assured outcomes.
- Revenue concentration: 92% of 2019 revenue consisted of daratumumab royalties and milestones, making near-term performance highly dependent on Janssen’s sales, development and commercialization decisions. Competitive pressure, including other myeloma therapies and biosimilars over time, could weaken returns.
- Development and partner dependence: Product candidates require further clinical testing and regulatory review. Genmab relies on partners for key products and programs; collaborations may be terminated, delayed or affected by disagreements. Tisotumab vedotin costs and profits are shared 50:50 with Seattle Genetics, and detailed commercialization arrangements were still under discussion.
- COVID-19: The filing warns that the pandemic could disrupt enrollment, trials, regulatory timelines, manufacturing and supply chains, and demand for partner-marketed products, particularly DARZALEX. The extent of impact was uncertain at filing.
- Other risks: Competition, safety events, pricing and reimbursement constraints, reliance on third-party manufacturing, intellectual-property challenges, foreign-exchange movements and execution of commercial expansion are significant risks. The Phase I/II HexaBody-DR5/DR5 study’s partial clinical hold over liver-toxicity discussions was lifted in October 2019 after protocol changes.
- Commitments: Contractual obligations totaled 780, including leases and R&D agreements. Additional contingent development, regulatory and commercial milestone commitments were approximately 9,520; 8,440 related to regulatory and sales milestones not expected to be triggered within five years.
The MorphoSys patent case concerning DARZALEX was resolved in January 2019 after the court found the patents invalid for lack of enablement and the parties dismissed their claims. The auditor issued an unqualified opinion. Management concluded disclosure controls were effective at year-end; the filing did not include management’s internal-control assessment or an auditor attestation because of the applicable transition relief.
Important facts for investors to verify
- Whether DARZALEX sales, label expansions and royalty receipts continue to support revenue, given the high partner and product concentration.
- Whether tisotumab vedotin and other proprietary programs meet clinical, regulatory, manufacturing and commercialization milestones, and how collaboration responsibilities and costs are ultimately allocated.
- How COVID-19 and market competition affect trials, product demand, partner activity and reported revenue.
- Cash conversion and collection of the year-end collaboration receivables, as well as the use of cash raised in the ADS offering.
- The timing and potential financial impact of contingent collaboration milestones, future development spending and deferred-tax asset recoverability.