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Genmab Shares Rise 5% In Pre-Market On Oncology Partnership With AbbVie

Shares in Genmab A/S (GMAB) rose in pre-market trading after announcing a collaboration agreement with AbbVie (ABBV) to jointly develop and commercialize three of its early-stage investigational bispecific antibody product candidates.

The stock advanced 5% to $30.32 in Wednesday’s pre-market trading. The two companies said that they will also collaborate on research to develop future differentiated antibody therapeutics for cancer.

As part of the partnership they will develop Genmab’s next-generation bispecific antibody programs, epcoritamab (DuoBody-CD3xCD20), DuoHexaBody-CD37 and DuoBody-CD3x5T4.

“Epcoritamab is a strong fit for our robust hematological oncology franchise”, said Michael Severino, Vice Chairman and President at AbbVie. “By combining the strengths of our two organizations, we can advance the treatment landscape for patients battling cancer.”

Under the financial terms of the collaboration, AbbVie will pay Genmab $750 million in an upfront payment with the potential for Genmab to receive up to $3.15 billion in additional development, regulatory and sales milestone payments for all programs. The financial terms also include tiered royalties of between 22% and 26% on epcoritamab net sales outside the U.S. and Japan.

Except for these royalty-bearing sales, the parties will share pre-tax profits from the sale of products on a 50:50 basis. Included in these potential milestones are up to $1.15 billion in payments related to clinical development and commercial success across the three existing bispecific antibody programs.

In addition, if all four next-generation antibody product candidates are successfully developed as a result of the research collaboration, then Genmab will get up to $2 billion in option exercise and success-based milestone payments.

As a result of the agreement, Genmab is raising its 2020 financial guidance for revenues to be in the range of DKK 9,100 – DKK 9,500 million, an increase of DKK 4,350 million compared to its previous guidance.

Genmab shares have been on a steady winning streak since mid-March and are up 29% so far this year. AbbVie was little changed in pre-market trading after advancing 1.7% to $96.17 on Tuesday.

SunTrust analyst Asthika Goonewardene this month increased the Genmab’s price target to $36 (25% upside potential) from $30 and maintained a Buy rating, citing the company’s pipeline and platform.

Goonewardene sees strong potential for epcoritamab as a leading CD20 T-cell engager and noted that the antibody platform “is indeed quite remarkable”, with potential to generate a large number of drug candidates and efficiently screen to “find several lead assets per target/mechanism”.

The rest of the Wall Street analyst community agrees with Goonewardene as the stock scores 5 Buy ratings backing up a Strong Buy consensus. The $31.75 average price target implies shares may advance another 10% over the coming year. (See Genmab stock analysis on TipRanks).

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