Genmab stock slumped Wednesday after the Danish biotech announced it will buy privately held ProfoundBio for $1.8 billion.
Seattle-based ProfoundBio is working on antibody drug conjugates, or ADCs. These treatments send toxic chemicals to targets directly on cancer cells, limiting the damage to healthy tissue. The company is working on treatments for ovarian and other cancers.
Anthony Pagano, Genmab's chief financial officer, cited ProfoundBio's Rina-S as the strategic rationale for the deal. Rina-S blocks the folate receptor alpha, which the National Library of Medicines estimates is tied to more than 80% of ovarian tumors. Genmab is planning to broaden the development plans for Rina-S, both within and outside of ovarian cancer.
But investing in Rina-S will take lot of resources. Genmab now expects its full-year operating expenses to be at or moderately above the upper end of its previous outlook for roughly $1.79 billion to $1.94 billion, based on today's exchange rates.
"We believe in the overall strategic rationale for this deal," Pagano told Investor's Business Daily. "Of course we'll have to increase our investment to put a lot of resources behind Rina-S. But we have not shied away from making tough decisions around prioritizing or deprioritizing assets."
On today's stock market, Genmab stock fell 2.2% to close at 29.30.
Genmab Stock: A 'Highly Competitive' Space
The folate receptor alpha space is "highly competitive," Pagano said. AbbVie just spent $10.1 billion to buy ImmunoGen, which makes an antibody drug conjugate that targets the same receptor. That drug, called Elahere, is already approved to treat some ovarian cancer patients.
Pagano declined to say which types of cancer Genmab could pivot into with Rina-S.
Importantly, the ProfoundBio deal fulfills a key component of Genmab's capital allocation strategy: invest in external assets. Genmab has a long history of licensing and partnering in drug development. For example, Genmab is tied to Johnson & Johnson's Darzalex, Novartis' Kesimpta and Amgen's Tepezza.
But in 2013, the company decided it wanted to move to a 100% owned model, Pagano said. It's been a slow evolution, beginning with the approvals of Tivdak with Pfizer and Epkinly with AbbVie. The company has full ownership rights to the two drugs in the U.S. and Japan. Genmab is the lead commercialization party for Epkinly.
Moving to a model where Genmab owns 100% of its assets is "the next logical step," Pagano said. "It allows us to really control our own destiny."
Earnings Accretion Expected In 2028
However, Genmab stock took a hit because the deal will be dilutive to earnings in the near-term, RBC Capital Markets analyst Alistair Campbell said in a report.
Pagano says it will be a temporary effect. He expects Rina-S to be accretive to earnings within a year of its launch. Genmab aims to launch Rina-S in 2027.
"This will offer a meaningful value for Genmab and our shareholders as we exit this decade," he said, adding Genmab expects Rina-S to be a blockbuster drug.
Notably, Genmab kept its sales guidance for 2024 at about $2.7 billion to $2.97 billion.
RBC's Campbell kept his sector perform rating on Genmab stock.
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