Genmab (GMAB) made a very bold move earlier this month by announcing the acquisition of ProfoundBio for $1.8 billion in cash. The future is never certain, but I really like this acquisition and believe it adds an important piece to Genmab’s technology and drug development platform that was missing – the antibody drug conjugate (‘ADC’) platform. The ADC field is getting increasingly crowded, but I believe having an ADC platform will be necessary for companies like Genmab if they are to be competitive and create shareholder value in the medium and long-term.
ProfoundBio’s lead clinical candidate is rinatabart sesutecan, or Rina-S, and Genmab plans to quickly advance this candidate to registrational trials with a potential approval as soon as 2027, and it has the potential to expand the initially targeted FRα (folate receptor alpha) expressing ovarian cancer into other FRα expressing tumor types.
In my previous article in January, I upgraded Genmab as I saw the risk-reward as very attractive due to a combination of largely unchanged long-term growth outlook, a correction in the share price, and the denied appeal that was simply a confirmation of the previous arbitration loss to partner Johnson & Johnson (JNJ). I remain very bullish on Genmab’s long-term growth prospects, and more so after the ProfoundBio acquisition.
Deal terms and impact on expense growth
Genmab will pay $1.8 billion in cash for ProfoundBio and the transaction is expected to close this quarter, subject to customary closing conditions. Genmab will fund the acquisition with cash on hand.
Genmab’s expense growth has been the focus of investor attention in the last few quarters as the company increased investments to expand its pipeline and to increasingly participate in the upside of its pipeline assets by co-commercializing and co-developing products with big pharma partners with the goal of having wholly-owned assets down the road and retaining all the upside, and naturally, all the associated risks and costs.
The acquisition of ProfoundBio is another step in this direction and while I would not exclude potential partnerships based on the new ADC platform, I would expect Genmab to take many of these potential ADC products to market on its own. For example, Rina-S in ovarian cancer would be a perfect fit for the existing commercial organization as the company is already co-commercializing Tivdak for cervical cancer with Seagen initially and now with Pfizer (PFE) as it acquired Seagen last year.
Genmab now expects operating expenses to be at or moderately above the upper end of the DKK12.4-13.4 billion range. The increase reflects the incremental R&D investment to support the acquired clinical and preclinical programs, and management expects to update the guidance no later than the Q2 2024 earnings report as the acquisition is unlikely to close before the first quarter earnings report.
Rina-S has the potential to return multiples of the ProfoundBio acquisition value
AbbVie’s (ABBV) acquisition of Immunogen for $10.1 billion provided a view into the future and how much one approved ADC product and ADC platform could be worth in a few years. And ProfoundBio’s Rina-S shares the target with Immunogen’s Elahere – both are ADCs targeting FRα and Elahere is approved for the second line or later line treatment of FRα positive, platinum-resistant epithelial ovarian, fallopian tube, or primary peritoneal cancer. Elahere received accelerated approval based on the overall response rate of 38% and durability of response and AbbVie secured full approval last month based on the results from the MIRASOL trial where it showed a 33% reduction in the risk of death compared to the control arm and a 35% reduction in the risk of disease progression compared to the control arm.
Elahere has generated strong sales growth since its accelerated approval in late 2022 and the latest numbers shared by Immunogen just before the acquisition by AbbVie showed $105 million in net sales in Q3 2023. Immunogen’s net revenue forecast for 2024 was $571 million following the AbbVie acquisition announcement and nearly $1.3 billion for 2029.
Elahere effectively sets the bar for Rina-S and Genmab believes it can show both improved efficacy and safety compared to Elahere, and initial data in 21 patients look promising. With the caveat of cross-trial comparisons, Rina-S was able to match the 38% overall response rate (‘ORR’) of Elahere in 21 evaluable patients across ovarian and endometrial cancer across all doses, and antitumor activity was seen across the full spectrum of FRα expression with an impressive 67% ORR in evaluable patients with ovarian and endometrial cancer having greater than 1% of FRα expression.
Importantly, Rina-S was well tolerated, with no interstitial lung disease, infusion related reactions, or corneal toxicity and the most common treatment-related adverse events were cytopenias, gastrointestinal side effects and fatigue and these were mostly grade 1 or 2 and reversible and manageable. These data so far compare very favorably to significant ocular toxicity, fatigue, gastrointestinal side effects, and neuropathy seen with Elahere, although the grade 3 and 4 adverse events in Elahere’s trial were up to the high single digits.
Genmab believes that this differentiation is driven by the next-generation TOPO1 payload, which it believes is best-in-class and a high drug to antibody ratio (‘DAR’). If Rina-S shows improved efficacy and safety compared to Elahere, its peak sales potential and value to Genmab could significantly exceed Elahere’s as patients will be able to stay on Rina-S far longer and that should translate to both improved uptake of the drug and higher net sales per patient.
Genmab also believes the potency and safety of Rina-S should allow much broader development to include other FRα expressing tumors.
However, while it seems likely that Rina-S will show improvements in efficacy and safety over Elahere, the increased crowding in the ADC space is a potential issue and I am sure there will be many competitors utilizing the novel TOPO1 payload for their ADCs and that these will also show improved efficacy and safety compared to first-generation ADCs such as Elahere. The advantage Genmab could have is time as Rina-S will quickly progress to registrational trials and Genmab says its approval could come as soon as 2027.
ADC platform potential goes way beyond the three clinical candidates and is highly synergistic with Genmab’s pipeline
Rina-S is ProfoundBio’s most advanced clinical asset, but Genmab is also acquiring ProfoundBio for its ADC platform technology which is highly synergistic with its technology platforms and targeted disease areas.
In addition to TOPO1 payloads, ProfoundBio also has next-generate monomethyl auristatin E, or MMAE, hydrophilic linker platform. Some of the first-generation ADCs using MMAE payloads are Adcetris, Padcev, and Polivy.
As mentioned, Rina-S is using the TOPO1 payload, and ProfoundBio has two additional but earlier stage clinical assets:
- PRO1160. This candidate is also using a TOPO1 payload and is targeting CD70. CD70 is a cell-surface antigen and it is frequently overexpressed in several hematological and solid malignancies while being mostly absent from normal cells. PRO1160 is being developed for the treatment of non-Hodgkin lymphoma, nasopharyngeal carcinoma, and renal cell carcinoma. These indications are being investigated in the phase 1/2 trial.
- PRO1107. This is the first clinical candidate utilizing the MMAE payload and is targeting protein tyrosine kinase 7, or PTK7, which is often upregulated in various cancers. ProfoundBio’s phase 1/2 trial is investigating PRO1107 in ovarian, endometrial, triple negative breast cancer, non-small cell lung cancer, gastroesophageal and urothelial cancer.
Beyond TOPO1 and MMAE payloads, ProfoundBio is also working on bispecific ADCs and on novel cytotoxic and immune-stimulating (‘ISACs’) linker-drugs.
To date, Genmab has been the leader in the antibody drug class with its DuoBody, HexaBody, DuoHexaBody, and HexElect technology platforms, and an ADC platform was a missing piece. I believe the ProfoundBio acquisition represents the starting point for the expansion in this key oncology area in the next 5-10 years.
Conclusion
$1.8 billion could turn out to be a very small price to pay to get an entry into the increasingly attractive ADC market, and I believe Genmab has made the right move. There is near- and medium-term value creation potential through Rina-S, medium-term value creation potential through the other two early-stage clinical assets and significant pipeline expansion potential through ProfoundBio’s ADC platform, along with significant synergies with Genmab’s existing clinical and commercial infrastructure.
