Genmab basks in Nordic glory

Analysis

The Nordic markets are something of an oasis in Europe’s biotech desert, proving that at least some of the Nasdaq’s fever-pitch sentiment has managed to cross the Atlantic. For a major beneficiary, look no further than Genmab.

The Danish biotech has turned the corner after a share price collapse, and its stock has climbed 209% in the past 12 months on the back of a third big pharma deal and hopes for positive data readouts. Not that no other European biotechs can boast partner validation and upcoming news triggers; but in Genmab’s case investors actually price in much of the value.

Other beneficiaries of localised investor faith in the Nordic countries include Algeta and Active Biotech, the latter of which has taken the opportunity to raise cash and was yesterday boosted by positive long-term data of its multiple sclerosis project laquinimod (Active gets short term boost but MS pill is a long game, March 22, 2013). But for a chart akin to that of some of the leading US performers you have to turn to Genmab.

Keeping the faith

The region owes a large part of its success to Nordic investors’ undiminished faith in biotech and willingness to take failure on the chin and switch into other, more successful, local stocks.

After all it is not as though the Nordic market is somehow immune to risk. Last year Bioinvent saw its stock crash after a deal with Roche was scrapped and two projects failed in phase II within a few weeks, while just this week Neurosearch has moved to wind up activities and return cash to shareholders after a phase III debacle over its Huntington’s disease agent Huntexil.

But it would be unfair to ascribe Genmab’s success solely to positive sentiment. The company is underpinned by alliances with GlaxoSmithKline, Roche and Johnson & Johnson for its three most important assets: the marketed chronic lymphocytic leukaemia drug Arzerra, the phase II cardiovascular disease project RG1512, and the multiple myeloma prospect daratumumab, respectively.

These deals not only lend the business validation, they give investors hope that management will be able to turn current technology into cash through additional alliances. The fact that J&J also owns over 10% of Genmab, and Glaxo around 5%, underpins a takeover thesis, however tricky this might be to execute with multiple partners on board.

Arzerra royalties are expected to reach $234m in 2018, EvaluatePharma consensus estimates, valuing Genmab’s interest in the drug at a hefty $1.4bn. This year’s news triggers include data from a phase III study in first-line use, while a 410-patient head-to-head trial against Roche’s Rituxan – a key competitor – could read out in 2014.

Daratumumab, meanwhile, has emerged as an important R&D asset after being licensed to J&J last August in a deal worth $55m up front plus an $80m equity investment. Genmab’s latest share price surge was spurred by data from three patients given short exposure to high doses, showing one minimal and two partial responses.

While this was a tiny study it prompted J&J to expand the daratumumab multiple myeloma programme; results from phase II monotherapy and Velcade and Revlimid combination studies are expected this year. Jefferies expects peak sales of $750m.

Positive sentiment around Genmab has also allowed the company to emerge unscathed from last month’s sale of its Minnesota plant to Baxter for a mere $9.9m; the facility had been acquired in 2008 for $240m, although after years of failing to sell it Genmab and the markets had assumed that it was worthless.

Granted, the company’s share price surge has come from a very low base, and even after the 209% uplift the stock is 40% off its levels just four years ago. But slow and steady deal execution, the promise of data triggers, and cost controls – current cash of $260m should last through to profitability in 2016 – are paying off handsomely.

Even accepting the bullishness of its local market, Genmab must be the subject of envy of many of its peers.

To contact the writer of this story email Jacob Plieth in London atjacobp@epvantage.comor follow@JacobEPVantageon Twitter

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