Genmab: GEN3014's Demise And Implications For The HexaBody Platform

Shares of Genmab A/S (GMAB) fell this week after partner Johnson & Johnson (JNJ) unsurprisingly opted out of the deal to develop and commercialize GEN3014, Genmab’s next-generation CD38 HexaBody for the treatment of multiple myeloma. As I wrote on more than one occasion (including last month), this was the most likely outcome and one that I expected. However, I was somewhat surprised by the magnitude of the negative reaction as the writing was on the wall for quite some time.

The key driver of the downside reaction may not have been J&J's opt-out decision, but the results themselves and the potential implications for Genmab’s HexaBody platform. Some analysts on the investor call were concerned about the safety of GEN3014 and what these results may mean for Genmab’s other HexaBody projects.

I do not share these concerns and also do not believe that Genmab’s future depends on its HexaBody platform as there is only one HexaBody candidate in early-stage clinical development.

I continue to see Genmab as very well-positioned for long-term value creation and as one of the best risk-reward ratio stories in biotech today.

J&J made the right decision

GEN3014 did show a slightly better overall response rate (55% versus 52%), higher rates of complete responses (7% vs. 2%), and higher rates of very good partial responses (29% vs. 17%) compared to Darzalex, but the efficacy data really do not look differentiated, and the data confirmed my suspicions that GEN3014 is not much better than Darzalex despite much higher preclinical potency.

What made J&J’s decision to opt out a no-brainer was the significantly worse safety and tolerability of GEN3014 compared to Darzalex with grade 3 or higher adverse events occurring at much higher frequency (86.7% vs. 39.5%), although there are mitigating circumstances that I will discuss later.

Genmab made the right decision not to develop GEN3014 by itself

I really liked Genmab’s decisiveness in letting go of GEN3014 – the company got the rights to the candidate back from J&J, but it has no plans to develop the candidate internally or to out-license it to third parties.

One of the reasons is the company being contractually locked out of all indications Darzalex is approved for, but the other should really be undifferentiated efficacy and worse safety and tolerability.

Implications for Genmab’s HexaBody platform

Management’s bullish conclusions for the HexaBody platform based on GEN3014’s results were apparently not appreciated by the market or by analysts and I actually think this is the main reason the stock sold off, not J&J opting out, a decision that was largely expected.

Before I continue, a brief explanation of what is the HexaBody platform. This is Genmab’s proprietary technology to increase the potency of antibodies. It is derived from the Greek word hex which means six, and the company's HexaBody candidates induce antibody hexamer formation (clusters of six antibodies) after they bind to the target antigen on the cell surface.

In GEN3014’s case, this target was CD38 and the preclinical data showed enhanced complement-mediated killing, and Genmab further claims that this can either create much more potent antibodies or transform those with “limited or absent killing capacity” into “potent, cytotoxic antibodies.” Finally, Genmab says that the “clustering of membrane receptors by the HexaBody platform may lead to subsequent outside-in signaling.” In simpler terms, this means that a HexaBody candidate can trigger internal cellular responses from the outside which can further enhance its therapeutic effect.

However, in the head-to-head clinical trial against Darzalex, GEN3014 demonstrated what I can only describe as modestly improved efficacy, and these results were achieved with a safety and tolerability penalty.

So, why is Genmab still bullish on the HexaBody platform considering the data GEN3014 delivered?

Management says that not only is their confidence unchanged after GEN3014’s results, but that it is actually higher because they believe that:

1. GEN3014 clearly demonstrated enhanced complement-mediated cell killing compared to Darzalex.
2. They said that there were imbalances in baseline characteristics that favored Darzalex and that the detailed presentation of data at an upcoming medical conference would show that.
3. On safety, they say there are mitigating circumstances:

• GEN3014 was administered intravenously in this trial versus subcutaneous Darzalex, and subcutaneous Darzalex is safer and better tolerated than IV-administered Darzalex. This created unfair safety and tolerability comparisons as many adverse events in the GEN3014 treatment arm were infusion reactions.
• Clinical investigators are well versed and accustomed to administering subcutaneous Darzalex while GEN3014 is an entirely new clinical candidate.

The safety and tolerability data do look worse, but these explanations are reasonable, and I would add that there were no death imbalances (one death in the GEN3014 arm versus two in the Darzalex arm), and I do not really have concerns in terms of negative implications for the HexaBody platform.

At the same time, the HexaBody platform is not really relevant to my investment thesis. I have written off GEN3014 well before these results came out, and I currently do not see a single HexaBody candidate I like to be concerned or excited about its potential.

The only candidate in the clinic now is HexaBody-OX40 which is in early-stage trials and partnered with BioNTech SE (BNTX), on which I have no strong opinion, and I am waiting for the data to see if it has potential. And the other programs are undisclosed and preclinical. As such, the HexaBody platform really provides upside optionality rather than the investment thesis depending on it.

Conclusion

J&J’s decision to opt out of the GEN3014 development program is unfortunate but largely expected. Genmab has a healthy portfolio of long-lived assets that are either on the market (Epkinly and increasing royalties on products like Kesimpta and Rybrevant) or in late-stage development (Rina-S and acasunlimab), as well as a large cash balance and cash flows that it can use to further expand the mid- and late-stage pipeline and/or product portfolio through business development.

I also do not have concerns about the HexaBody platform, nor does Genmab rely on it. My investment thesis is intact since I anticipated GEN3014’s demise, and I continue to see Genmab as one of the best risk-reward ratio biotech stocks today.

The focus now turns to quarterly earnings reports and clinical data updates, starting with proof-of-concept results of Rina-S in patients with endometrial cancer, likely at ASCO in June, and updated phase 2 results of acasunlimab in second line-plus non-small cell lung cancer patients.

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