Genmab - shaking the money tree

THE VOTING MACHINE AND THE WEIGHING SCALE

Analysts tend to weigh the value of firms on a twelve months future basis whereas the market behaves more like a short-term voting machine that judges firms as participants in a beauty pageant. The difference between the long-term concept of weighing and the short-term notion of voting creates ambiguity that can trigger disparity between the consensus valuation and the actual share price.

The voting machine runs on the same behavioral heuristics that fuels technical analysis and creates momentum effects in the process. The true value of technical analysis remains a contentious topic that many find hard to grasp. Its impact is although hard to ignore as Genmab’s recent crash perfectly follows well-documented and highly reliable momentum effects.

A case in point is that the shorters who recently moved above the 0,5% reporting threshold primarily rely upon momentum theories. The rationale behind their shorting activity is therefore typically based on quantitative measures rather than actual perceived weakness in the fundamental underlying equity story. This is also why the arrival of shorters should be no cause for alarm among long-term shareholders.

The shorters are "shaking the money tree" by inciting fear and thereby urging investors with loose hands to dump their shares. This pushes the stock below pivotal support levels and triggers cascading stop-loss selling that sends the stock further down. It fuels a vicious and self-reinforcing cycle that propels negative momentum as more and more uninformed retail investors panic and run away.

UNDERSTANDING THE TRUE RETURN CHARACTERISTICS

The market has clearly voted against Genmab while the weight of the value remains largely unchanged. However, we cannot ignore that something more fundamental must have sparked the downturn initially. Comprehending the fundamental drivers require a detailed understanding of the investment thesis. A logical point of departure for this endeavour is to build appreciation for the true return characteristics since most investors have a false or biased impression. Remember how the media heralded Genmab as the best performing stock worldwide back at the beginning of 2017:

The accumulated return for the above five-year period is an eye-popping 3000% which ensured much media attention. 

The glitter and the glamour of the successful five-year period between 2012 and 2016 only tells us a part of the whole story about Genmab. Selective sampling of timeframes like above can be a funny exercise but it often obscures our understanding. The fact of the matter is that long-term shareholders had a very bumpy ride:

The returns were negative in every year during the five-year period from 2007 to 2011 that preceded the winning streak from 2012-2016.

The difference between the two five-year sample periods is stunning but it isn't unusual for biotech companies to exhibit lumpy or even binary return characteristics. Genmab has delivered a total return of 460% in the roughly 17 years that has passed since the initial public offering (IPO). Additional public offerings have since increased the number of registered shares from 21 million to the current total of 61 million. This makes the actual non-diluted value creation much more significant than reflected by the nominal stock price appreciation.

The capital increases in Genmab were all exclusively directed at privileged institutional investors. The retail investors were therefore fully diluted along the way. This means that all of the private investors received the nominal return and nothing more. Someone that participated in the IPO and still holds shares has thus received nothing more than 9,2% in annualized returns over the last 17 years. The Nasdaq Biotech Index (NBI) has yielded much higher returns meanwhile also allowing investors to pocket handsome dividends.

The market is inattentive to this gloomy reality because it favors the allure of extreme returns while completely ignoring that it has been delivered in diluted and fragmental periods along the way. The long winning streak doesn’t offer much consolation for the long-term shareholders. They have frankly endured extreme volatility and fatiguing flash crashes without sufficient compensation for the unquestionable loyalty that weathering out the rollercoaster rides must have required. 

PUTTING THINGS INTO PERSPECTIVE

The unique events in Genmab's corporate history fits very well with the skewed return distribution as just discussed. The history of Genmab is namely the hair-raising story of an organization that stumbled but managed to execute a vigorous last-minute turnaround which literally pulled the company back from the brink of destruction.

It was under the reign of the former CEO -Lisa Drakeman- that things went awfully wrong and eventually caused her tenure to reach an abrupt end. Her departure came inin June 2010 when the former Chief Scientific Officer (CSO) and cofounder Jan van de Winkel stepped up to the plate and overtook the hot seat.

Mrs Drakeman became notoriously known for securing herself a place among the highest paid CEOs in Denmark. Her exorbitant remuneration strategy wasn’t only an unprecedented for move for a cash-burning biotech. It also perfectly exemplified how Mrs Drakeman managed to suck the life out of Genmab by excessive investing in projects, which mainly served to propel her own grandiose ambitions and were as unrealistic as the size of her huge paycheck. Mrs Dracula surely laughed all the way to the bank as she cashed her golden parachute while stripping the investors by leaving them with a company that mostly resembled the emperor without clothes. 

The new CEO Jan van de Winkel arrived just at the right moment to save Genmab by renegotiating an overly ambitious commercial agreement with GSK. He reshuffled the distribution of costs for the development of Arzerra (ofatumumab) and thereby drastically slashed the overall level of expenditure by accepting lower future income prospects:

Jan van de Winkel became the CEO at the last moment before Genmab would have been perpetually sucked into a liquidity death spiral. He only managed to rescue the company from the sins of the past by acting extremely decisively.

The lower burden associated with the clinical development of Arzerra unlocked the resources required for discovering and partnering Genmab's future blockbuster Darzalex (daratumumab). It was in 2012 that Darzalex quickly rose to become the absolute star of the show. The rest of Genmab's history prior to the advent Darzalex really isn't that interesting and we have also achieved our aim of putting the true return characteristics into perspective that makes it clear why we had a good and bad period. Readers that would like to dwell a bit more on the past can visit an article posted by the author back in January 2011. It captures the final stages of the crisis that later morphed into the +3000% bull run. Read the article (in Danish) by clicking here.

UNDERSTANDING THE PRESENT

It is by drawing on our past experiences that we can develop our understanding of the present. The above account of the past events is far from comprehensive but it still equips us with several interesting insights that we will draw upon later as we advance and build our understanding.

The share price appreciation has decelerated significantly over the last 18 months. The stock just finished 2017 in negative territory and at a low point for the year. It quite frankly feels a bit like Genmab is falling off a cliff as the stock has tumbled by 30-40% in recent months. The good news is that only a few analysts have followed suit and issued downgrades. Most analysts used the opportunity to issue supportive statements by describing the recent drop an excellent buying opportunity:

"..which we believe offers a very compelling buying opportunity.." - Michael Novod (Nordea), 12/12-2017

"..but we view weakness as a particularly good buying opportunity.." - Sachin Jahn (BoA MLI), 12/12-2017

"..remains a conviction Buy.." - Peter Welford (Jefferies), 11/12-2017

The examples of recent remarks included above confirms how the recent drop remains nothing more than the physical manifestation of the market behaving like a voting machine. It isn’t exactly a new phenomenon for Genmab to take an occasional deep dive. The stock has been subject to several fierce and sometimes unexplainable drops of the same magnitude or even worse than the current one. Genmab has always rebounded rather strongly and quickly rallied to new highs. Examples even include an astonishing three-months recovery of more than 100%. While that offers some room for cautious optimism amidst all of the doom and gloom, it certainly doesn't change that we are still stuck in the doldrums, alas!

The sentiment has dropped below freezing and the level of bearishness is rather extreme. Many have troubles envisioning how the stock could possibly rebound anytime soon. The prevailing bearishness indicates that there are fewer buyers than sellers. The average buyers are in other words significantly bigger than the average seller. This indicates that we have actually witnessed accumulation by "smart money" during the downturn. What supports this is that we have seen, for example, Blackrock accumulating and moving up above the 5% reporting threshold while the stock was actually declining.

The five year long bull ride clouded the minds of investors and they began ignoring the existence of downside risk. It gave rise to overconfidence and complacency which attracted uncommitted investors who started parking funds in Genmab simply because they didn't expect negative returns. This propelled the stock but it also distributed lots of shares among the loose hands that were the first to sell as soon as the money tree started shaking.

The sideways trading pattern prior to the onset of the crash greased the wheels of the downturn. The earlier meteoric rise motivated droves of aggressive fortune hunters to use the calm of the sideway move to establish significant and highly leveraged speculative positions. Saxo bank deserves to be separately mentioned because the bank noticed the ensuing leverage explosion and doubled their margin requirements while also capping the exposure that any CFD trader was allowed to undertake in Genmab. It was likely same kind of market foresight that pushed the cost of hedging higher and forced Nordea to close their Bull 3N certificate because they simply weren’t able to hedge themselves against extreme downside risk at reasonable prices.

UNJUSTIFIED WORRIES

The current downturn was to some extent inevitable and the discussion so far should have made this pretty obvious by now for most readers. There was money to be made and “smart money” never leaves anything on the table!

However, our innate need for making sense doesn't deal well with the abstract notions of the technicalities discussed this far and that is why we are compelled to look beyond the scope of simple market mechanisms and focus our attention on the investment object itself. That is exactly why the market always starts to look for cracks in the foundation of the equity story after negative momentum kicks in. Genmab offered no exception to this rule and the stock has consequently become the subject of an almost absurd myopic focus on risks and threats.

The media understands the cravings of the market as they make their living from serving our desire and hunger for stories. Risks are thereby slowly blown out of proportion as the media churn out stories with a negative focus. The market swallows the nonsense while ignoring the good news and interpreting non-events as bad news. The media agenda over the last months represents a textbook example on the influence and dominance of negative sentiment.

Genmab has delivered a string of positive news but to no avail as the stock has just continued its decline. The most competent equity analysts have astutely observed how the perceived fear seemed vastly exaggerated. The repeated calls for logic reasoning have although been overheard by the market as negatively biased misconceptions continued to steal the limelight:

·     The internal international accounting intricacies of J&J becomes more important than two earnings upgrades and a promise to hit the upper range of the top-line guidance. 

·     An attempt at delivering early shareholder friendly “soft guidance” is turned into a fierce debate on whether soft guidance should also include indications on the top-line expectations. At the same time, some of the least qualified analysts completely misunderstand the issued guidance and spread rampant unjustified fear into the market.

·     Sustained and rather serious M&A rumors from sources and media outlets that are more reputable than what has previously been seen, speculate on takeover which is largely ignored and the market also completely misses that the CEO changes his rhetoric on the topic.

·     Excellent first-line ALCYONE data and an associated filing for approval in the crucial segment of newly diagnosed patients is shrugged of as fear of competition remains in focus based on immature clinical data. The absurdity continues even as the ALCYONE data is presented at ASH in front of 10.000 hematologists who mostly describe and view Darzalex as a new promising paradigm in the treatment of multiple myeloma.

The threat from novel types of therapies is something that really scares investors because they fear that breakthrough innovations could erode the long-term peak sales potential of Darzalex. The market forgets that it isn't Genmab who must penetrate, position, expand and protect the Darzalex franchise in multiple myeloma. No, it is mighty Johnson & Johnson who already commands a market leading position and clearly possesses the experience required to build sustainable competitive advantages that will outlive anything short of an actual riskfree and cheap cure.

Johnson & Johnson is one of the most successful multinational pharmaceutical companies in recent years. Their organisation is widely recognized as champions of clever strategic positioning and they are vigorously executing an agenda that foremost seeks to optimise and protect the long-term potential of Darzalex. It simply takes time to circumvent all of the incumbents in both multiple myeloma and solid tumors and one cannot play with open cards in the process. The clandestine element makes the waiting feel like idle time and this feeds rising insecurity among Genmab investors. However, everything Johnson and Johnson has done underlines their massive commitment to ensuring that Darzalex becomes the best selling drug ever.

It is strategic positioning when Johnson & Johnson decides to pay $350 M on a deal that gives them access to the second most advanced CAR-T treatment developed by Nanjing Legend. Some have proposed that this is a hedge done as security if Darzalex becomes sidetracked or outcompeted. This is an ignorant argument since the investment merely represents pocket change when compared to the huge expense associated with the unfolding and unlocking of Darzalex. The company would have been far more active in the CAR-T space if they wanted to obtain anything more than simply securing a proprietary combination partner for Darzalex. Genmab investors may therefore rest assured that Johnson & Johnson still sees Darzalex as the core foundation of their future market leadership in the multiple myeloma (MM) space.

There are upwards of 10.000 people enrolled in clinical trials with Darzalex and it is one of the biggest drug development programs ever executed. The CEO of Johnson & Johnson has clearly emphasised the significance of Darzalex on several occasions. He expects the immense potential and scope of Darzalex to evolve into something that he has cleverly coined as the first ever "pipeline within a product". The CFO has simultaneously and repeatedly described Darzalex as the most important asset across all of the strategic business units in Johnson & Johnson! 

CAR-T remains no more than hype until proven differently as the results seen this far are in very small and conveniently handpicked patient populations which ensures maximum efficacy while inhibiting the massive side effects otherwise observed. The debate on the topic unfortunately continues to rage among scared Genmab investors who refuses to listen as KOLs and analysts are calmly rejecting that CAR-T represents an imminent threat:

Michael Novod from Nordea states on the 22/12-2017: CAR-T is as a late stage therapy that could move to the earlier lines of treatment but only for certain patients and only over a very long time horizon given the complexity, side effects and cost of the therapy.

Thomas Bowers from Danske Bank agrees as he states on the 21/12-2017: the complexity of CAR T significantly limits its potential use when compared to off-the-shelf therapies. He further argues that he expects no material impact to the future treatment regimes that will include Darzalex in a backbone role. He believes that the market is overlooking the immune modulatory effects that enable Darzalex to create immuno oncology like survival effects. He finally notes that BCMA doesn’t cure people on its own and its will likely be tailing off due to the possible escape or disappearance of expression on tumor cells. This is also why he thinks that the long tailed immunomodulatory survival benefits of Darzalex will makes it a perfect or even required partner for BCMA based treatments.

Peter Welford from Jefferies joins the chorus by articulating on the 11/12-2017: while CAR-T BCMA results are impressive they remain so early stage that they will require confirmation. He and the KOLs whom he dinned with during ASH fail to see the treatment move beyond salvage therapy as a last line of defence. Significant improvements for the infrastructure around the technology is although required before this can happen.

Sachin Jain from Bank of America concludes on the 12/12-2017: the data seen to date doesn’t suggest any competition to Darzalex’s future as a backbone therapy as CAR-T seems too toxic and complex.

The statements above just represent a small sample from a much larger selection of equally convincing comments by analysts. They are fully backed by doctors and specialists who sincerely seem to believe that CAR-T lacks the scalability to successfully enter the early lines of treatments in MM.

The whole CAR-T debate seems a bit ridiculous once you consider how a lack of infusion chairs can become a bottleneck in the market penetration of Darzalex. The healthcare system simply isn’t geared for the complex infrastructure requirements associated with CAR-T and the lack of resources to handle simple Darzalex infusions underlines this more convincingly than any other argument will ever do. It therefore seems obvious that the exaggerated fear of CAR-T can be put to rest. However, "even the gods themselves strive in vain against ignorance " and it is thus unlikely that the fear subsides anytime soon. We unfortunately just have to accept that the market increasingly views the rivalry in the industry as more diversified and less transparent than most had anticipated even half a year ago.

ESTABLISHING A MINIMUM FLOOR

Several analysts have lately referenced a natural floor in Genmab. This happens in the wake of increasing fear that Genmab could follow the path of other danish horror stories where shorters have gained control and pushed the stocks well below any reasonable minimum valuations. The difference is that the expected royalty income from foremost Darzalex sets Genmab apart from the other cases, simply because the revenue can be viewed as a clean cash flow stream without much operational risks or cost. External treats are also few as the sales of essential medicine doesn’t depend on fashion trends, fads or cyclical movements in the economy.

The best way to estimate a rational minimum stock price is to start by breaking a valuation into its sum-of-the-parts (SOTP). This allows you to see how much value each component contributes with relative to the rest of the company. The banks value all components and adjust for perceived insecurity by assigning probabilities that are used to calculate the de-risked net present value (NPV). Below is a table with an amended SOTP valuation model from Danske Bank.

The table above shows how Danske Bank arrives at it current valuation of 1620 DKK. It also shows that Danske Bank sees a significant upside to this target from future de-risking. However, we are not trying to value Genmab. We are instead trying to grasp what could form a natural point of extreme fundamental resistance against further decline in the share price.

It is in this context that it is relevant to notice how Darzalex in MM overshadows all other value drivers as it amounts to 64% of the NPV. It is at the same time the most de-risked and hence theoretically less speculative component in the SOTP. This is why a conservative valuation of MM could represent a natural floor for Genmab. Taking such an approach is of course extreme. It disregards all other value drivers and regards them as worthless and that is exactly why we should do it.

Danske Bank derives 1036 DKK in fully de-risked NPV from MM. Lets see if this is realistic by comparing this assessment to that of a few other leading analysts who have also also largely de-risked MM. 

The table above clearly shows us that Danske Bank appears more conservative than both Citibank and Jefferies. The MM derived NPV of Citibank is nearly 47% higher than that of Danske Bank. Such direct comparisons can be misleading due to potential discrepancies in valuation technics. Any such bias is although going to be far from enough to undermine the highly significant differences observed.

The valuations are, nevertheless, subject to considerable influence from a host of independent external factors and internal assumptions. That is why your author modelled a valuation continuum based on multitude of scenarios. This yielded a MM valuation range that starts from around 900 DKK and runs up to roughly 1750 DKK. It aligns surprisingly well with the average MM NPV of the three banks. However, the validity of their estimates can also be explored by looking critically at their underlying assumptions.

Citibank are the most bullish among the three compared banks and they are assuming that Darzalex will capture 28% of the first line market. This figure is exactly in line with what Johnson and Johnson has communicated earlier and this should thus represent a base case scenario in all models. Citibank only estimates 25 months average treatment duration. Recent data makes it fairly obvious that the average duration will go far north of 40 months. This indicates significant upside although it seems premature to make any adjustments because the longer duration will have implications for the populations across the various lines of treatment. However, very encouraging news recently emanated as the early signs from re-treatment with Darzalex where described as indicating continued strong efficacy. This further strengthens the case for a potentially huge upside. However, our focus here is on identifying a potential bottom for the stock and we should therefore only regard the upside in MM as further protection against any downside. It is clear that Danske Bank must rely on some rather downbeat assumptions to arrive at their much lower MM NPV when we consider that the estimates of Citibank seem to have an upside.

Events are continuously unfolding and Jefferies just raised their SOTP from 1700 to 1900 DKK earlier today. They doubled the forecasted duration of the second line treatment from approximately 12 months to 22 months. This brings their total MM derived NPV to 1570 DKK now surpassing even the bullishness of Citibank. Their move underlines the point point in the discussion above, namely that there is room for upside to existing targets also in MM which is otherwise almost fully de-risked by most analysts.

This clearly helps confirm that value derived from the treatment of MM makes it almost logically inconceivable that negative momentum can be sustained at levels below 1000 DKK. The absolute bottom is much harder to predict but it ought to materialize soon if it hasn't already. The trading pattern on the last day of 2017 and the first days of 2018 certainly makes it more likely that we have seen a bottom for now. Any declines below the 1000 DKK threshold should be of a temporary nature as the arbitrage opportunities for value investors otherwise become too attractive to neglect. 

WHY WE ARE AT THE FLOOR

It is of course very depressing that Genmab currently trades so close to the valuation floor. It literally means that the market is attributing zero value to everything but Darzalex in MM which it, by the way, also significantly undervalues.

An aspect that might play a role in this horrible valuation malaise -besides the apparent shaking of the money tree and the unjustified competitive worries already discussed- is an increasing confusion on how to accurately value Genmab. A rising number of investors have started considering Genmab from a perspective of multiples such as the P/E ratio. Their rationale is that Genmab will generate sufficient royalties to become sustainably profitable without the previous reliance on lumpy milestones.

Some investors are also considering multiples because they view Genmab as being on a path of transformation from a biotech firm into a full-blown pharmaceutical corporation. Genmab is indeed on a path of transformation but the clear-cut distinction between biotech and pharma is no longer as obvious as before The differentiating features are slowly converging as technology opens new possibilities and reduces the entry barriers to the pharmaceutical industry.

Jan van de Winkel has repeatedly used Apple as an example for how he sees the future disruptor of the pharma industry. Apple has a history of radical breakthrough innovation but this is not what makes the company immensely profitable. The profits arise as Apple sits firmly on the most value adding components of the industry. Downstream product development and upstream product sales. Everything else is becoming commoditized, automated and robotized or whatever you wan't to call it. Genmab wants to develop drugs and sell them while outsourcing everything in the middle and thus reaping the benefits of the highest value adding components in value chain of the pharmaceutical industry. Selling medicine today doesn't require the same resources as it did just 20 years ago. KOLs are considerably more well-informed and it is so much easier to communicate. You "only" need the best product and sales will then largely drive itself.

However, all of the above doesn't change that the strategy imposes a valuation vacuum where the proponents of multiples fail to appraise the continued pipeline expansions and punishes the accelerating R&D investments which are necessary prerequisites for execution of the strategy.

The current strategy came to life in 2015 where it was nicely framed around a 2025 vision that articulates how Genmab aims to transform cancer treatment by making it a chronic condition while significantly improving the life of patients by turning science into medicine via a pipeline of “knock-your-socks-of” antibodies. This is a bold vision which in its own right sounds fantastically daring. However, what makes it daunting is that Genmab wants to hold onto product ownership and aspires to take their own products to the market. Their motivation is to ensure long term value preservation for the shareholders. However, even when considering the new rules of the game in a changing industry, such a decision still does come at the expense of rapid short term value creation

The CEO has explained that he intends to bridge the gap by negotiating commercial deals similar to the previous out-licensing arrangements but with an additional option to take 50% ownership of the compound at a late stage during the clinical development. Darzalex was out-licensed against tiered royalty payments of up 20%. Genmab would have pocketed maybe 35% net profit if they had owned 50% of Darzalex via a late stage opt-in.

The idea of late-stage opt-ins is brilliant if only Genmab had been able to land some deals. The fact that 3 years have passed since the new ultimate requirement was made public is something that clearly doesn’t help during the current stock price slump. Critics fear that the deal-drought won’t come to an end and they argue that Genmab has already lost considerable time over the last couple of years where a host of deals was made by competing biotech companies.

Genmab states, on the other hand, that investors shouldn’t worry because so much of what seems to be happening in the industry is in fact a chase of fools gold. Gemab claims that the company is able to select clinical candidates that are thousands of times more effective than others. We are being told that the tech platforms (DuoBody and HexaBody) are light-years ahead of all the competition and it is supposedly this combination of extreme selection skills and world-class tech platforms that will enable Genmab to deliver leapfrog drug candidates transforming the treatment of cancer by turning it into a chronic condition.  

What talks to the advantage of Genmab is that the company has done incredibly well so far. The company has received 3 or 4 breakthrough designations (BTD) and still hopes to receive more. This is a unique achievement and it should help by adding some weight and credibility to the words of Jan van de Winkel. It is although not enough for many who are beginning to fear that Genmab is the emperor without clothes. 

Your author personally published a rather controversial article in August 2016 that described a “twist on the tale” by presenting more downbeat expectations than previously communicated (click here). Part of the reasons for the more cautious stance was rooted in the fear that the market would start doubting the tremendous ongoing valuation creation because several of Genmab’s competitors had entered traditional out-licensing agreements meanwhile Genmab still had to deliver its first deal with an opt-in.

Here we are, 16 months later! Genmab still hasn't secured a deal with opt-in and the stock price is literally flat. However, Genmab is for sure not the emperor without clothes that some fear. The company is continuously doing so much value creation that the market fails to appraise because it largely occurs behind the scene. The only mistake that Genmab committed was being too optimistic with regards to the timing of when commercial agreements with opt-ins could realistically be achieved.

The thing about opt-ins is that it is not so much a question of the actual price. It is more a question of the competitive aspect involved in giving up on half of the revenue from a segment of the market where your competitors might be paying 10% royalties on average. If all biotech firms simultaneously started demanding co-ownership then it would quickly become the norm and the pharmaceutical industry would have to accept this or start relying more heavily on internal R&D and M&A to fill up their pipelines.

Genmab logically needs to show much more evidence before any potential partner will accept the new terms. Jan van de Winkel expected that he could overcome this by allowing potential partners to do extended exploration or research sniffing as he popularly coined it. This didn’t solve the problem as it is very hard to determine commercial value at the preclinical stage. When Genmab presents better preclinical data you still cannot confidently reject that the alternative with less impressive preclinical results actually also holds less commercial potential. The disadvantage that ensues from accepting the co-ownership opt-in from Genmab is although guaranteed no matter what.

This implies that Genmab won't be able to strike any deals before they can show (real) clinical results. Intermediate phase I/II safety data along with very early confirmation on efficacy might be enough. It should therefore be like music to the ears of Genmab investor that we are not too far away from the first data on Humax-AXL-ADC meanwhile the first internal peek at data for DuoBody CD3/CD20 and HexaBody DR5/DR5 should also follow during 2018 with the actual timing being contingent on the study designs.

Genmab's stock price might be trading at floor value but we should fully understand both the technical reasons and the fundamental reasons for this by now. Genmab is not only at the floor value it is also at the dawn of an exciting new age in the history of the company.

THE DAWN OF A NEW AGE

The dawn of the new age in Genmab should start to unfold slowly during 2018 and things should then accelerate as we reach into 2019. The valuation models will have to be revised drastically to reflect the new reality as it emerges. It is not unlikely that Genmab investors still has to experience the biggest ever increases to analyst models over the next 12-18 months and the highest ever returns in the coming 4-5 years.

Jan van de Winkel gave a series of interviews in May 2015 where he reflected upon the success of Genmab while taking a long look ahead and making certain promises to the shareholders. The share price had just reached above 500 DKK when Jan van de Winkel was asked if he could possibly sustain the value creation seeing that he had already ten-doubled the stock price since he became the CEO. Jan van de Winkel specifically referred to the company’s strategy and told that he expected Genmab to undergo the same development as Regeneron had done over the last 5 years running from 2010 to 2015, He thereby strongly implied that Genmab would ten-double its value once more and preferably within the following 5 years to keep track with the pace of how things developed for Regeneron. We are now trading at around 1000 DKK but have been trading almost at 1500 DKK. However, mirroring Regeneron would require that Genmab goes all the way to 5000 DKK by 2020-2022. 

Regeneron belongs to the class of iconic biotech companies. As a funny little side remark it should be mentioned that the stock price of Regeneron didn't fair to well since Jan van de Winkel made his comments in 2015. The company is also far from the best example today but it was, nevertheless, the reference point of the CEO together with Alexion Pharmaceuticals who has also fallen considerably back from past highs in 2015.

There is no doubt that Genmab strives to become a member of the "iconic club". The entrance requirement is mainly based on developing a huge market cap while still retaining the entrepreneurial spirit and remaining focused on drug discovery. The iconic biotech firms are in other words those that live somewhere at the frontier between biotech and pharma. Recall how the differentiating features of biotech and pharma are slowly converging as technology opens new possibilities and reduces the entry barriers previously associated with pharmaceutical operations.

THE ROUTE TO BECOMING ICONIC

There are several drivers that will help Genmab on its path towards becoming an iconic biotech firm. Darzalex must be expanded beyond MM and Arzerra must be pushed forward in multiple sclerosis (MS) meanwhile Tisotumab vedotin and the rest of the early clinical pipeline must show progress.

The above is a kind of SOTP-roadmap that shows how a future bull case and blue-sky scenario might emerge based on 9 key value drivers. Targets are measured firstly over a 12-18 months horizon and secondly over a 19-36 months period. The blue-sky scenario requires massive succes across all of the value drivers. The bull case is slightly more realistic but it is still very optimistic and far from guaranteed to occur. Each of the nine value drivers will be discussed individually in the following.

Driver 1 – Darzalex remains undervalued in multiple myeloma

The first driver of future upside is that Darzalex still remains significantly undervalued in MM. The market hasn't fully understood the unique properties that Darzalex has with its six active mechanisms of action (MOA) that drives novel immune-stimulatory effect and ensures unparalleled synergy with IMiDs.

The final value of Darzalex in MM is going to be rather close to 2000 DKK once the market grasps the huge potential emanating from longer treatment durations, maintenance therapy and smoldering myeloma. It is the sustained efficacy and the benign side effects along with the ease of subcutaneous use that will help unlock the currently unrecognized upside over the next years.

Driver 2 – Darzalex holds great potential in solid tumors

The second driver is the potential that Darzalex holds in solid tumors. It is no longer outright speculation to assume that Darzalex will work in several tumor types. The preclinical evidence is overwhelming and the potential synergies from combination treatment with PD1-/PD-L1 therapies cannot be ignored much longer by the analysts.

Darzalex enters and kills cells which express CD38 protein on the surface. CD38 has been found in myeloid-derived suppressor cells (MDSC) and in regulatory T cells plus regulatory B cells. It is actually the MDSC cells that are producing tumors by suppressing the immune system and inhibiting regulatory T and B cells which would otherwise help the immune system fight the tumor.

Most MDSC cells are CD38 positive and that is why Darzalex is capable of inducing tumor shrinkage. It is although more intriguing that both the regulatory T and B cells appear to be CD38 sensitive. This indicates that Darzalex is capable of enhancing their ability to target the cancerous MDSC cells and further facilitate tumor shrinkage.

Checkpoint inhibitors (PD1/PD-L1) rely on activation of T cells and it is therefore logical to expect synergies to arise from combinations with Darzalex. Preclinical results have even shown that CD38 works as a kind of "escape route" for an up-regulated version of the MDSC cells. Darzalex could therefore offer remarkable benefits for patients who would otherwise see less efficacy of their checkpoint inhibitor treatment due to broadly up-regulated MDSC cell activity.

A broad range of combination trials targeting at least 10 different tumor types are ongoing. Some are in very large indications like non small cell lung cancer (NSCLC) where Darzalex is combined with Roche’s Tecentriq in the second line setting and with the first data expected to arrive already by mid-18.

Analysts are either not considering the potential in solid tumors or apply so heavy de-risking that the derived NPV becomes negligible. That is why there is an upside of 250-500 DKK which could materialize already within the next 12-18 months and possibly even earlier depending upon the timeline for arrival of further clinical evidence.

The peak sales estimates for solid tumors are typically in the range of $2-4B. These estimates will likely become subject to upwards revisions once the first combination treatments hits the market and sales starts taking off. It isn’t inconceivable that the potential value from solid tumors could double to 500-1000 DKK within 19-36 months from now. This is a significant amount and readers who wants more assurance with regards to the background behind the bullishness can click here to consult an article by the author that captures the moment when the first real hints of a great future for Darzalex in solid cancer emerged

Driver 3 – Darzalex in blood cancer and other indications

The third driver of future potential upside comes from Darzalex in blood cancer and other indications. Results from the CARINE trial in non-hodgkins-lymphoma (NHL) unfortunately wasn't convincing enough for Johnson & Johnson to prioritize the continued development in this indication and the valuation of Genmab took a small hit on this basis. The decision was although motivated by hard prioritization rather than by a lack of efficacy. It is therefore simply too early to reject that Darzalex might still have a future in blood cancer. In particular because a Bristol Myers Squib (BMS) sponsored phase I study in NHL holds great promise. It covers a very potent four-drug combination and the first results are still pending.

Darzalex is also being investigated in light-chain AL Amyloidosis and myelodysplastic syndrome. The phase III combination study in Amyloidosis is of particular interest because it relies on subcutaneous administration of Darzalex meanwhile it also offers a fast route to registration given that it has received orphan drug status designation from the FDA.

Some optimism is finally attributed to the phase II study of Darzalex in acute myelogenous leukemia (AML). This isn’t a large sub-indication of NHL but it is almost a free upside option as the study is sponsored sby M.D. Anderson Cancer Center. The market for AML is also expected to grow at astounding rates in the future.

There are generally speaking several avenues that could generate potential revenue for Darzalex in blood cancer and other indications. It is therefore only appropriate to anticipate a modest value contribution of 50-100 DKK on a 12-18 months basis and 100-200 DKK on a 18-36 months basis.

Driver 4 – Arzerra has upside potential from autoimmune diease

The fourth driver of future potential upside comes from Arzerra in the autoimmune disease multiple sclerosis (MS). Arzerra already showed great promise way back but the clinical development was not pushed forward due to a lack of priority from the former partner Glaxo Smith Klein (GSK). However, this changed as Novartis acquired the global rights for Arzerra and decided to launch large phase III trials in MS.

Arzerra is a CD20 antibody like ocrelizumab from Roche that has presented strong confirmatory data and became FDA approved in July 2017. Ocrelizumab has the same effect as the best available MS drug Lemtrada from Sanofi and it has shown efficacy as the only drug in PPMS (primary progressive multiple sclerosis) which covers 15-20% of all MS cases diagnosed in the huge $20B market.

There is concern about long-term depletion of B-cells tied to the use of CD20 antibodies in MS. However, Genmab/Novartis might have an edge as Ocrelizumab is infused while Arzerra is subcutaneously administered. Experts believe that injections may lead to less aggressive long-term B-cell depletion on top of the apparent advantage from ease of use and convenience.

With expected readout from the first phase III trial in 2019 so considerable value already needs to be reflected on a 12-18 months basis and certainly on a 19-36 months basis where Arzerra could have been successfully launched. Analysts expect Azerra to generate sales in the late stage RRMS indication of roughly $850M but it is also realistic to assume a bull case scenario where Arzerra takes up at least half of the 15-20% PPMS indication yielding an additional $1-2B in sales.

Driver 5 – Clinical advancement of Tisotumab vedotin

The fifth driver of future potential upside comes the continued clinical advancement of Tisotumab vedotin which is currently being tested in 7 different tumor types. It is difficult to establish the true potential of this drug as we have only seen limited clinical data from cervical cancer. These results alone were so encouraging that Seattle Genetics decided to exercise a co-ownership opt-in much earlier than required by the agreement with Genmab.

32% of very sick and highly refractory patients with cervical cancer responded to the single agent treatment with Tisotumab vedotin in results that were acknowledged as the best seen in over 20 years for patients with late stage carcinomas. A pivotal phase IIB study has been launched and it might even receive a breakthrough designation (BTD status) due to the strong data. This would shorten the time to market considerably and significantly boost the present value of Tisotumab vedotin.

It was in 2014 that Jan van de Winkel first called Tisotumab vedotin "the next big winner". He also described how the drug is one hundred times more potent than chemo and that his only worry was with regards to toxicity but certainly not efficacy. We know today that the side effects are rather manageable. Genmab could therefore be on the verge of hatching a golden egg at least if we adhere literally to what Jan van de Winkel stated in the three years old media coverage.

Genmab owns 50% of Tisotumab vedotin and it would barely require blockbuster status to justify a valuation of 200-250 DKK. There are therefore prospects for a much bigger upside than reflected even in the bluesky scenario but it is simply still to early to model more value on the shorter time scale of 12-18 months. The valuations on a 19-36 months horizon are of a binary nature as we should have surpassed the "make or break"moment by then.

Driver 6 – Clinical development and/or partnering of Humax AXL-ADC

The market still awaits the first clinical results from Humax AXL-ADC and that is why most analysts still attribute nothing or very little value to this pipeline component. Genmab are, nevertheless, upbeat with regards to the prospects of this wholly owned pipeline component.

AXL is a protein that becomes broadly expressed on solid tumor cells around the same time as when they develop resistance to the existing chemo and/or checkpoint inhibitor treatment. It is up to 80% of patients with certain tumor types that experiences this massive up-regulation of AXL right before their disease progresses into the final and terminal stage. Genmab has shown extremely promising preclinical results in tissue samples with for instance pancreas cancer. It is by attacking the AXL protein with the ADC warhead that Genmab expects to prolong the overall survival (OS) by extending the efficacy of existing treatments and this potentially across several cancer types.

Humax AXL-ADC could have a record-breaking short route to the market. The drug is honestly pulling people back from the edge of their grave and this bodes well for the urgency with which the FDA might handle an approval process. Recent rhetoric about the unnecessary bureaucratic burden on lifesaving essential drugs does seem to offer encouraging promise of a potentially record-breaking short timeframe for the prospects of commercialization. As 100% proprietary compound with minimal royalty obligations towards Seattle Genetics it quickly becomes an interesting asset in valuation terms.

Driver 7 – CD3/CD20

Genmab received the global and unrestricted rights to develop CD20 based DuoBody candidates back as a part of negotiations tied to the transfer of Arzerra from GSK to Novartis during November 2014. The CD3/CD20 DuoBody program was first unveiled at the JP Morgan conference in January 2016 and the IND followed at some point in the second half of 2017.

The CD20 target is obviously very familiar to Genmab due to Arzerra. The CD3 part of the DuoBody is extremely complex and this is something that Jan van de Winkel has emphasized on several occasions where he has also remarked that the complexity is the reason why he isn't too worried about competition. Roche is, for instance, pushing their own program vigorously ahead in a quest to maintain their market leadership.

Recall how Genmab is able to select antibodies a thousand times more selectively than any competitor. It has taken Genmab a couple of years to get the CD3/CD20 program moving but they now firmly believe that they have the most specific CD3 arm imaginable and that it will work at very low concentration with strong efficacy and minimal side effects.

The market for CD3/CD20 is gigantic and Genmab quite simply has to out-license this DuoBody because they can't cope with the scale of such a development program internally. One could speculate as to the reason why Johnson & Johnson decided to give up on Darzalex in NHL. Might this have anything to do with hopes of being able to launch a massive surprise attack on Roche's NHL leadership by going all in with the with the CD3/CD20 DuoBody from Genmab. If the claims from Jan van de Winkel has any merits then we should see several big pharma companies line up to ink a deal as soon as we have the first early safety data.

It is guaranteed that Genmab won't be able to take the CD3/CD20 program all the way to the market on their own. That is also why so much value can be attributed to this program already in 12-18 months. A partner must have materialized by then and the deal should make the scope and the magnitude of this DuoBody clear for everybody.

A case in point that illustrates the massive value of the CD3/CD20 DuoBody is that Xencor signed a deal with Novartis worth $150M in upfront payment and up to $2,4B in clinical, regulatory and sales milestones. The deal was for more than one pipeline component but the CD3/CD20 bi-specific antibody was for sure the most important asset. Xencor even retained the full rights for commercialization in the US meanwhile still getting the nice upfront payment and the large milestone package.

Genmab could very well emerge as the winner of the CD3/CD20 battle but it will take a very long time for us know things with certainty. However, we are guaranteed to get hints on whether Genmab might truly hold the upper hand already within the next 12-18 months depending upon what happens with regards to partnering.

Driver 8 – Rest of pipeline

The rest of Genmab's pipeline consist of a wide variety of early stage programs but more noticeably also the first HexaBody DR5/DR5 for which the company filed an IND towards the end of 2017.

DR5 (Death Receptor) is an attractive target in the fight against cancer because it is able to induce apoptosis or more simply put cause naturally controlled death of cancerous cells. However, it is illusive because as much as nine clinical programs including those from GSK, Amgen, Bayer, Celgene, Novartis and Pfizer have failed in the past due to a lack efficacy.

The HexaBody version combines two DR5 DuoBody programs an it is said to have an efficacy that is more than a thousandfold stronger than any previous attempts of inducing apoptosis via the DR5 target. Genmab therefore hopes to be the first company that really crack the key to apoptosis induction and develops another "first-in-class" drug like Darzalex.

Driver 9 – Technology platforms??? ?

Believe in the excellence of the tech platforms should automatically start to increase as the market sees the first clinical advances relying on the DuoBody technology. This even more so once the supercharged efficacy of the DR5/DR5 HexaBody also offers an early proof of concept for the practical applicability of the HexaBody platform.

Some would argue that the value of the tech platforms could be much higher than stipulated in the bull case and bluesky scenario above. This could indeed be the case in a takeover situation where the platforms could suddenly start to hold immense strategic value.

THE BIG BAD WOLF MIGHT STILL BE COMING

The analysis of Genmab's route towards becoming iconic revealed that lots of intrinsic value seems almost poised to manifest within the next 18 months. This will happen at the same time as Genmab takes the first crucial steps towards execution of their ambitious 2025 plan as previously discussed.

The strategy that Genmab has put forward is for sure something that has been noticed widely in the pharma industry where several of the largest incumbents are observing closely how things develop for Genmab.

The share price will likely move up to the range of 1800-2200 DKK within the next 12-18 months. This rise should occur rather effortlessly as investors start to close part of the huge valuation gap and begin appraising the tremendous accumulation of underlying intrinsic value. However, it is at the very same time that the strategic premium on Genmab will go through the roof and send the minimum price fetched in an acquisition towards 3000-3500 DKK or even higher.

There is currently a narrow window of opportunity where Genmab can be acquired for as little as 2000-2200 DKK. This while still respecting the 100% acquisition premium that Jan van de Winkel has stipulated as the minimum entrance fee for an invitation to serious takeover negotiations.

The window of opportunity literally allows an acquirer to take ownership of the entire pipeline for a price that barely reflects more than the true value of Darzalex. It is therefore exceedingly likely that there is a large field of big pharma suitors who are contemplating the possibility of making a rapid takeover at any moment before the window starts closing.

Envisioning a takeover as the window of opportunity closes narrows the field of potential suitors to a few companies. This is because the acquisition starts to enter a new realm as we hit $30-40B in deal value. Coughing up such a serious amount requires a much more stringent strategic fit and this naturally limits the number of potential acquires. Johnson & Johnson should obviously have sustained and long lasting interest in a takeover and the company should thus remain safely represented in the field of potential future acquires that would be willing to make a move later and at a considerably higher price than required today.

Roche could also show up to the negotiation table as a dark horse if Genmab's CD3/CD20 program outcompetes their internally developed bi-specific antibody. Again, if we are to believe what Winkel says then they might run into some toxicity issues due to a insufficient silencing of the CD3 arm. Their interest would of course be contingent upon Genmab having retained full ownership until the takeover offer arrives.

What is much more likely although is that Genmab won't survive the next 12-18 months as an independent entity. We have the recent words of the cofounder Florian Sch?nharting and continuous M&A rumours to back up this conviction.

Granted, your author has talked about a takeover for quite a while. Readers with a keen interest in these speculations are invited to read an article published 2,5 years ago (click here). Some of the speculations in the old article have lately proven to be wrong but the main arguments remain largely the same. However, it must be underlined that the idea of a looming takeover was publicly retracted roughly 16 months ago! This was when it became clear that Genmab could enter a lackluster period. The retraction happened within the context of the publication which expressed a more downbeat outlook for Genmab (See the previous link to: Genmab - A twist on the tale).

The anticipated slump became even more dull and far worse than first anticipated. The good news is although like discussed until now that it seems to be coming to an end finally. It is therefore by this that your author makes the bold move of putting the takeover likelihood back on the table.

The recent crash and the obvious "shaking of the tree" are just circumstances that increases the likelihood of someone making a move. Genmab is back in vogue and it is about to become hotter than ever before. The stock is most likely on the verge of another prolonged period with a value explosion and we could maybe experience a 300-500% bull run over the next 3-5 years.

Big pharma and in particular Johnson & Johnson has a pretty good feel for Genmab and they haven't felt any urgency until now. However, it is at this moment that their number crunchers must be going ballistic. The quants at Johnson & Johnson are literally looking at a dream scenario. The market cap of Johnson & Johnson appreciated by 20-30% while the stock price of Genmab fell by 20-25%.

The chasm between the market price, the true underlying intrinsic value and the incredible strategic value is so extreme that top executives and board members in several large pharma companies must have been burning the midnight oil while contemplating a way to outsmart Johnson & Johnson. Recall how Abbvie managed to steal Pharmacyclics from the hands of Johnson & Johnson at the very last moment before a takeover deal was to be signed. Remember also more recently how several suitors emerged during Johnson & Johnson's takeover process of Actelion and how it seemed for a while that they would lose the battle to Sanofi.

Critics and sceptics are often suggesting that an offer is unlikely simply because it didn't already materialize when there were so many chances in connection to past dips. This is, nevertheless, a ludicrous fallacy which builds on the same misconception as that of a chicken who lives an unworried and blissful life right up to the moment where the axe hits its neck and it suddenly becomes apparent why it was so well feed and cared for in the past.

The likelihood of a takeover bid increases for every day that goes by without a major commercial pipeline deal being announced. Genmab has conserved and expanded value by refraining from falling prey to the tempting improvidence of accepting out-licensing deals at bargain prices with low double digit royalties, modest milestone packages and mediocre upfront payments. This has caused a massive retained value to build up and it will either be unleashed by Genmab or harvested by a potential acquire who could exploit the window of opportunity and grab it for peanuts.

Doing the basic math of a takeover

Let's do a few very simple back-of-the-envelope calculations on behalf of Johnson & Johnson. Remember first that Johnson & Johnson would finance a takeover from their balance sheet while the increased profits stemming from the saved royalties would be booked on the P&L statement and thus help to enhance the financial performance immediately.

The total Darzalex sales will conservatively reach $10-15B and the present value of the future royalty obligations is therefore astronomical. The yearly royalty expense will skyrocket to $1,5 -2,5B depending upon the bullishness of your sales forecast. Johnson & Johnson currently books yearly net profits of roughly $16B so the royalty stream is going to inflict a massive drag on the earnings.

The company is totally committed to delivering growing dividends. The management would get a bit of leeway from buying Genmab as the rising dividends could be financed indirectly by the saved royalty and this without the market punishing the stunt.

The 2017 P/E ratio for Johnson and Johnson is very close to 20. This logically entails that any takeover for less than $30-50B (calculated simply as "P/E 20 * $1,5-2,5B") would create value for their shareholders.

The forward P/E ratio could drop to 10 and it would still make sense to pay roughly 2120 DKK* per share when considering a very modest peak sales assumption of as little as $11B. The takeover price of 2120 DKK is almost enough to offer 100% premium on the current stock price and it is based on such conservative estimates that no one can argue against them from the standpoint of Johnson & Johnson who are likely looking at much higher internal peak sales projections.

*($11B * 6,2 DKK = 68,2B DKK * 19% royalty = 12,95B DKK / 61M shares = 212 DKK * P/E10 = 2120 DKK)

The global total sales for Johnson & Johnson are close to $76B. The top-line growth has been very modest over the last years. So let's just add $10B from Darzalex plus another $4B in top-line growth that has arrived from other sources by the time that the $10B Darzalex sales mark is reached. This brings the future revenue of Johnson and Johnson to $90B with Darzalex representing 11% ($10/90). Johnson & Johnson's profit margin has hovered at 22-23% over the last three years. The impact of paying 20% royalty on the 11% of the revenue that originates from Darzalex would sink the overall profit margin to 19-20%. This is bound to be unacceptable when it is measured against the alternative of acquiring Genmab now and maintaining the current performance level.

Abbvie and BMS has exactly the same profit margin as Johnson & Johnson meanwhile the average for the entire pharma and biotech industry lies only a hairsbreadth away at 24%. This confirms that the profit margin is an extremely important key performance metric among pharma incumbents. The top management of Johnson & Johnson are therefore not going to accept a nominal debasement of 2% if they can prevent this performance drag by acquiring Genmab!

These are of course extremely simplified examples and they are to some extend different sides of the same coin. However, the end conclusion remains the same - namely that the numbers are so compelling that it is outright nuts if Johnson & Johnson doesn't make their move meanwhile Genmab trades at the current low valuation!

The mental logic of a takeover

Jan van de Winkel is the human embodiment of Genmab. He is in fact the only person who has signed all of Genmab's annual reports since the company went on the stock exchange. Those 17 signatures on annual reports allowed him to amass an astonishing net worth with more than enough to secure all the future generations of his family. That is if he could only cash-in right now!

Stepping down as CEO of Genmab is really not an option at this moment as it would send the stock tumbling and thus erode his fortune considerably. Taking chips of the table by selling stocks would also be very ill conceived and so he remains almost shackled in a tight grip while forced to work 70 hours per week without even being able to remove his hand from the boiling plate.

Accepting an acquisition would more or less give Jan van de Winkel the freedom to do whatever he pleases. Saying yes to a takeover and in particular while delivering a healthy premium at 100% would secure him an epic legacy meanwhile he could sit back and enjoy the sweet life along with his family if that is what he desires.

Say now that Jan van de Winkel really does have a deep felt desire to transform the treatment of cancer. His chances of achieving this gracious goal would honestly become far better within the framework and scope of a large multinational like Johnson & Johnson. The personal fit between Jan van de Winkel and some of the most important people at the very top of Johnson & Johnson is stunning. Paul Stoffels who is the global Chief Scientific Officer (CSO) at Johnson & Johnson is flemish and his mothers tongue is dutch like Jan van de Winkel. Paul Stoffels was actually one of the initiating factors behind Johnson & Johnson's takeover of Actelion. It was him that commenced the whole process by engaging in partnership talks which then later turned into a discussion of an outright acquisition.

Paul Stoffels seems to share much of the same worldview as Jan van de Winkel and it is very reasonable to assume that these two guys operate on almost familiar terms. It was also Paul Stoffels that was quoted saying: “It’s one of the most successful collaborations we have. We love the partnership". The partnership between Genmab and Johnson & Johnson is in other words a "love affair" and these things often have a tendency to turn into something more serious suddenly. This is probably also one of the reasons why Johnson & Johnson has accepted that several top oncology executives were poached by Genmab in what constitutes a highly unconventional unconventional flow of employees.

Takeover naysayers tend to argue that a transaction needs to be friendly. A takeover of Genmab will indeed be on friendly terms but it is not strictly necessary. Genmab has so few employees that it is easy to satisfy and motivate everybody whether by monetary rewards or through increased responsibility, more freedom or by offering personal development and self realization.

Taking the long historic view -like in the beginning of this article- proves that Genmab hasn't outcompeted the market in terms of value creation. Yet Genmab is still heralded and known as one of the biggest biotech successes. Accepting an offer with 100% premium right now would double the historical returns and propel Genmab into a new class of highly successful investments that managed to outcompete the market by a wide margin.

So will the wolf finally come? Well, your guess is as good as mine but a lot of things certainly does appear to speak in favor of a takeover. However, the long-term shareholders should logically hope for Genmab's continued independence because of the immense value explosion that lies just around the corner in the years ahead.

Thank you for reading "Genmab - shaking the money tree". Readers who would like a deeper dive into a discussion on the value of technical analysis are advised to consult the author's Master thesis as it includes a comprehensive literature review on the topic while documenting that the market isn't efficient (click here and read the thesis). 

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• Disclosure: The author of this article has significant long exposure in Genmab and would benefit greatly from a higher stock price. Nothing in this article constitutes a buy or sell recommendation and the author cannot be held reliable for any decisions taken on this basis.