Molecular Partners AG (MOLN) 2019 Q4 法說會逐字稿

Ladies and gentlemen, welcome to the full year results 2019 conference call and live webcast. I am Alessandro, the Chorus Call operator. (Operator Instructions) And the conference is being recorded. (Operator Instructions) The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Seth Lewis, Senior Vice President, Investor Relations, Communications and Strategy. Please go ahead, sir.

Thank you, and thank you for joining us today. Welcome to the Molecular Partners Year-end Results 2019 Conference Call and Live Webcast. My name is Seth Lewis, Head of Investor Relations, and I'm joined this morning by Patrick Amstutz, Chief Executive Officer; Andreas Emmenegger, Chief Financial Officer; and Michael Stumpp, Chief Operating Officer.

As a reminder, this call is being recorded. Today's date is February 6, 2020. If you're listening to this on replay, please note that management may have made subsequent updates to the statements made today. Please refer to our website, www.molecularpartners.com for our latest news and publications and any additional updates to these statements made today.

At this time, it's my pleasure to hand over the call to Patrick Amstutz, CEO of Molecular Partners. Please go ahead.

Thanks, Seth, for the nice introduction, and a warm welcome to the people who are here in Schlieren with me, very small group, and everyone on the webcast. It is my pleasure to present the full year results 2019 and give you an outlook into 2020. Last year was a very important and strong year for us, where we did a lot of progress with our DARPin candidates in our pipeline. And also, very importantly, strengthened our team to be ready for 2020.

We feel we're prepared for the next year, where we have with abicipar the first approval within reach of -- for DARPin. We have exciting progress on our oncology and I/O pipeline. And as I just mentioned, the team is in place to execute what we need to execute. If all goes well, this is a year where we can go from a more sequential to more parallel tracking in our pipeline.

Next slide is our disclaimer, and then I will go through the agenda with an overview of the presentation, where I will start with the review of 2019, then hand over to Andreas for the financial results 2019, end with a short outlook. And then, we will also introduce Michael to the Q&A and have, hopefully, enough time to answer your questions. We'll try to keep the presentation part slot -- short to have more time for the Q&A.

So let's give it a start with the highlights of 2019. And I will just start with the overview slide, where it's really about what we're doing, Molecular Partners, in brief.

2019, we have, with abicipar going towards approval, a deep validation of the platform. We have the clinical development portfolio with abicipar on track to market launch. We have 250 with a new mode of action and 274 with also new mode of action in HER2-positive cancers.

310, which is for us, opening a door, where we see now this translation of the research side into the development side and our new therapeutic designs being applied in what kind of is exciting us and where we are investing our money and focus going forward.

In the research, we have 3 areas: one is the tumor-localized agonist, one are the peptide-MHC binders and the next-generation T cell engagers, and we will speak to all of those and hopefully also take some questions in the Q&A.

We keep on being kind of close to our collaboration model, where we have our long-standing partnerships with Allergan and Amgen and are looking to also add more going forward. We are well financed, and Andreas will speak to that, to well beyond key value inflection points, including large milestones with abicipar launch.

I will go to the next slide, where the same messages are in a bit more graphic display. You have the validated source of candidates, that's really the deep validation via abicipar, which is on track to approval. Our focus is the novel therapeutic designs with the tumor-local agonist peptide-MHC and next-generation T cell engagers, and I will touch on much more now on the pipeline going forward.

Where I want to spend some time is the team. I think we really have the team in place to execute. We have made few transitions and new hires. We have Dani Steiner, heading Research. We have Nicolas Leupin as new Chief Medical Officer, Ana Cerdeira is heading portfolio management and Seth introduced himself as Investor Relations, Communication, and he is in Boston. So he's joining us from Boston and heading up our U.S. activities, which are important for the future progress for Molecular Partners.

On the business model, I have touched on that, that we continue a model of investing in our own pipeline as well as partnering to maximize every individual product we are moving forward.

A few words on the financial highlights. We are in a -- we remain in a strong financial position with CHF 95.1 million in cash and including short-term deposits as of December 31, 2019, versus CHF 99 million year-end 2018. We collected CHF 50 million in upfront from our collaboration with Amgen in January '19, which explains how -- the flatness of these numbers.

The net cash in operating activities was CHF 1.2 million in 2019. Operating loss is CHF 37.2 million. Net loss, CHF 36.8 million in 2019. The company grew 15% year-on-year, now to 135 coworkers or full-time equivalents. This reflects mostly the growth in the company and in our pipeline in research and development.

On the next few slides, I will pick out a few highlights. I will keep it on a very high level because I want to add more time for the Q&A. So don't expect too deep discussion here, and please feel free to go with questions as we then move on.

The pipeline chart gives you the overview. Again, abicipar is on track to approval. 250 is in Phase II. 274 in Phase I. 310, we're really excited about this program, is in early clinical development. And you see in green, the arrows, that's our novel therapeutic designs in immuno-oncology, where we will spend a few slides to explain in more detail.

But let's kick it off with abicipar in wet AMD. So what is the remaining medical need in wet AMD? And here, the slide is very busy, but I have 3 messages, if you want. The first is, if you compare clinical trial outcome in letter gain for patients to real-world data, you see clinical trials always provide more value than the real-world setting. The second is, if you compare fixed injections, 8 or 12, versus treat and extend injections, fixed injections are always better for patients compared to treat and extend.

So taken together, what we're seeing here is, if you treat the patients more continuously, give them more injections, the patients profit from more vision gain over time. So this is -- leads to the clear assumption and the clear question from doctors, what can we do about this? And there's 2 things to the right-hand side, long-acting or sustained delivery to reduce the treatment burden because patients don't want injections in the eye. And as we see on the left-hand side of the slide, fewer injections lead to worse outcome. And this is exactly where abicipar hits, we can give the full vision gain without the frequent injections. So we can translate clinical trial results, hopefully, into real-world data.

We had the 2-year data at AAO that's shown on the next slide. And I think it's really one of those moments when you see that your drug does exactly what you hoped for as you see up to week 52, that was known, the 1-year data. We knew this is the OCT data, which shows retinal thickness. You see the lines go down to about minus 140 microns and in the second year, these lines stayed down as textbook. So perfect disease control. You can call CRT kind of a biomarker of disease control, and you see perfect control in all of these patients. So we're not losing patients and this is the first time you can see this on a fixed dosing regimen every 3 months. So these are 4 injections of abicipar in one of the green lines versus 12 injections of Lucentis. So this is exactly what doctors will be asking for.

With this, I will turn to MP0250. I only have one slide to MPO250. This is an anti-VEGF/HGF inhibitor we're combining with Velcade in multiple myeloma. We have heavily pre-proofed that patients that have 4 or -- a median of 4 prior lines. We are looking at 20 patients here, and we see a response, partial response and larger in 45% of patients. We have 30 with stable disease, and only 25 don't profit at all. So these are very strong results. What is catching our eye not visible here, it is not showing in that graph, but this response is durable. That's very important for these patients. We have 1 patient now in the third year.

Other important point is that some of these patients had not responded to any other treatment at all. So it seems that in some cases, VEGF/HGF are core to treatment success. And the other point to make here is that we also had 6 patients coming from daratumumab, which will be standard of care, especially in the U.S. going forward and daratumumab does not change the response rate in these patients. So we feel the biology is not affected.

Indeed, we had 2 patients with p17 (sic) [17p] deletion. They progress rapidly. So this is a negative prognostic marker, if you want. And taken together, we believe this is a strong data set. We decided not to move forward with the IMiD trial but to now reach out to partners to see what other combinations make sense for MP0250. And that's important statement here. We believe 250 can be combined with most, if not all, other modes of action in multiple myeloma. And for us, it will be difficult to develop all combinations. That's why we are now looking to see what and which partners are interested to do combination trials with us.

Now I'm switching gears. We're going to the earlier pipeline. Here, we have our novel DARPin designs in immuno-oncology. And in short, in a top view, what we're trying to do is we're trying to move from systemic applications, so antibody, a small molecule that acts systemically to tumor-local activity. On the picture on Slide 13, what you see is the zoom in into the tumor. And you see -- in green and red you see a resting immune cell and an activated immune cell that then attacks the tumor.

On the left-hand side, that's our tumor-localized immune cell activation that shows local clustering. So the DARPin cluster is a target, an agonistic target on the immune cell leading to activation. So the green cell turns orange and starts to kill tumor cells.

Moving to the right-hand side, you see peptide MHC, so we need specific targeting of tumor cells. And we all know that there's not enough or not so many good targets, and peptide MHC are an exciting new class of targets that we can address. Now that blue DARPin targeting the peptide MHC, we need to arm. We use a CD3 DARPin. And we found also that CD3 alone is not perfect. So can we add to the CD3 world a next level, and we call that the next-generation T cell engagers.

Next few slides, I will highlight a few of the programs. I will start with MP0310, which is a tumor-local immune cell activator in clinical development. It has 3 binding moieties linked together. So the plus is a linker and the numbers of each are still undisclosed. This is in partnership with Amgen, so it also carries an Amgen number.

4-1BB is the immune modulator, FAP is the localizer or cluster and HSA for half-life extension. The boxes show our clinical setup, where we are, at Molecular Partners, responsible for the single agent dose escalation. When we have minimally active dose, Amgen will start to do combination trials that we then find combination activity likely, and we then opt-in for Phase II and III development. Possibly, we have monotherapy, but the aim of this drug is to activate immune cells that are then used either by PD-1 or by T cell engagers to then kill the tumor cell.

We are recruiting well. We're in the third dose cohort as we speak. So all going very smooth, and we're looking forward to hit the minimally active dose to them in 2020, hopefully, see the combination trials starting.

So I'm on Slide 15, where you see on the left-hand side, the molecule I was talking about, 4-1BB FAP 310. This molecule activates mostly T cell and NK cells. Now it's obvious that there is more immune cells. And with the next molecule, MP0317, which targets CD40 and FAP, we also on top want to trigger and activate the dendritic cells, macrophages and B cells.

This molecule, so 317, we have elevated to development status last year. Big achievement for the team, and we're looking forward to bring it into humans, not this, but next year in 2021.

Now to some of the exciting earlier work. And this slide here reminds us of the situation we are facing. I'm now on the top part of the slide, where you see a cell and you see surface antigens. This can be EGFR, HER2 or alike. And most antibodies or cell-based therapies are restricted to target these targets, which leads to many different approaches to a few targets.

Other targets are intracellular. These are the colorful ones inside, and they are displayed as peptides in a peptide MHC complex. And on the right-hand side, you see such a complex and you see the gray part, which is highly conserved. The differences between the ones, the different colors, is only the little orange peptide. So you need a device, a protein that can recognize these differences in this orange little peptide and the DARPin, and this goes back to a rigid body and the surface structure might be ideally suited to pick up these differences and to specifically or selectively recognize peptides that are only or mostly in tumors or virally infected cells or other altered cells.

If you now have such a binder, you need an effector function. And that's why we have been working on CD3 DARPins that we simply link to the first DARPin then that would kill these cells with a specific peptide-recognition pattern. This has been tried with many antibody approaches or soluble TCRs with a lot of work for a few binders. The big step here is that what I'm showing you are initial selections to 1 target, an undisclosed target. So the peptide shown here is a mock peptide. What you do is you take, and this is, again, in gray, you see to the left-hand side of the slide, the peptide MHC in blue and red. You see the peptide. So we took 1 peptide we selected. And these are 3 different binders. They were now hooked up with an anti-CD 3, and we changed the peptide -- the amino acids in the peptide, and we see very specific binding. So whenever you don't see a bar in these bar charts, this means selective binding. So you see that most peptide -- most amino acids in the peptide are necessary for binding. And you also then nicely see cell killing. So this can translate into a new drug selectively targeting cells that have a specific pep harbor or specific peptide sequence.

Now the CD3 part I touched on, so that's a cell engager, and T cell engagers per se are not ideal as we speak. And so what we have done, and it goes back to another feature of DARPin, the multi-DARPin approach, we're looking to generate the next-generation T cell engagers by taking a CD3 DARPin, but adding additional DARPins. And there's 4 activities we're trying to build in, maybe together, maybe not. One, to improve safety, boost activity, remove the break and ideally also generate a sustained activity and now boost of activity. And this, we depict on with the Swiss pocket Knife, where you would have many functions in 1 molecule. This is something we will talk about over the year. The prime focus for now is, first, the peptide MHC work. And this is the work that will enable peptide MHCs to get to full activity.

With this, I will pause here and hand over to Andreas for the financial results.

Thank you, Patrick. So let me run you through the last year's financials and the guidance for the current year. 2019 results are still preliminary and so-called nonaudited, but we do not expect any changes until they are published formally with the Annual Report around mid-March. The numbers that I'm giving you are in mainly in Swiss Francs. And there's quite a few more details in the press release as well as in the -- on our website, you can download the entire presentation. And there's also more information in the appendix.

So let me start with some key figures first, and then I go into a deeper dive into some selected figures. So there was absolutely no -- nothing surprising in the financials. We doubled accounting revenues, and costs and cash flows are in line with guidance and expectations. And both expenses and cash flows are well under control.

Most importantly, and that's the key figure to look at when you're working with biotech companies is that we are very well-funded with CHF 95 million in cash with no debt at the end of '19. And with that, we are funded into H2 of next year. And that is at least 1 year beyond the expected approval by the FDA of abicipar expected in summer of this very current year.

And we also expect an EMA decision, that European agency, in the second half of this year. With these 2 approvals, we will be entitled to more than CHF 100 million milestone payment. I cannot be more precise than that. It will be a game changer for our organization, both financially as well as, and most importantly, as a validation of our exciting DARPin platform.

After approval, we will be entitled to additional large milestone payments for other regions as well as for potentially other indications. On the top of that, we are also entitled to recurring inflows from royalties on sales, which start double digit and go up to the mid-teens. So considering that this drug has the potential maybe to become a blockbuster, you can imagine how impactful this could be for our financials going forward.

In 2019, we recognized revenues in the amount of CHF 20.4 million compared to CHF 10.4 million last year. So it's about twice as much. Expenses were CHF 57.6 million in '19, which is CHF 9.8 million more than the year before. This includes noncash effective share-based compensation and pension costs in the amount of just above CHF 5 million. The increased investments are a natural consequence of our progress and expansion of our pipeline, both in research as well as in clinical-stage assets.

This all resulted in virtually unchanged operating loss of $37.2 million, and we realized a small positive financial profit of 400,000, which was about the same last year. And that was bit of a challenge as many in our industry and our -- outside industry are facing with the negative interest, and we were able to overcompensate the negative interest with some interest income from our U.S. dollar money market investments.

Bottom line, our net loss was CHF 36.8 million, also about that, which is slightly better than last year, but not much. Operating cash flow wise, we were almost positive, with only CHF 1.2 million net cash out compared to CHF 42.5 million net outflow last year. And as Patrick was saying, this was mainly thanks to the CHF 50 million collected from Amgen about a year ago. The fact -- and just something I want to add, the fact that we are able to generate such large inflows from collaborations, demonstrates the power of our platform as a new protein modality. I think that's a quite unique thing if you look at across the entire biotech industry.

And let me repeat, we closed '19 with a strong and debt-free balance sheet with a cash position of CHF 95 million compared to CHF 99 million 1 year ago. And as Patrick said, our workforce was 130 FTEs, which is about 17 people more than 1 year earlier.

With that, I move to Slide 21. The balance sheet, I keep it short. As always, it continued to be simple and strongly dominated by the CHF 95 million cash and the solid equity position of CHF 54 million with 0 debt. On the liability side, the orange box is so called contract liability for Amgen. It can be a bit misleading. That's not something we owe Amgen, it's just the deferred revenues or in German, the (foreign language), which are recognized over the expected contractual period to earnout, call earnout this upfront payment. We expect the remaining CHF 28.3 million to be recognized in the course of the current year.

The other assets and other liabilities are mostly related to leasing, pension, IFRS accounting plus some general working capital positions.

Slide 22. Revenue over the last 5 years, split up into from which partnerships they are coming from. So our income, generally speaking, mainly results from fees and milestone payments from giving technology access and from product out-licensing to our partners. While cash wise, this has, of course, an immediate positive impact, as we have seen with Amgen, in our cash flows. Accounting wise, this can look totally different in line with IFRS standards, depending on the nature of the deal and contracts and payments are recognized over a certain time period. And sometimes, it's recognized point in time.

In 2019, our revenues doubled, reaching CHF 20.4 million. They are related to the CHF 50 million upfront payment, call it, for Amgen. And one, maybe I want to add that we made a slight change in methodology on how to spread the recognition of this upfront payment from straight line to percentage of completion, but again, this has 0 impact on our cash flows. It's pure accounting.

Slide 23. Expenses, they've developed in line with expectations and consensus, so nothing surprising. Our investments have gone up steadily, reaching CHF 58 million last year, and this includes around CHF 5 million noncash costs. It went up CHF 10 million versus last year, demonstrating our -- progress of our growing preclinical and clinical pipeline, and it includes both additional internal and external resources and capabilities. Around 80% went into R&D and 20% into selling, general and administration costs.

With that, I move to my last slide, number 24, the guidance for this year. So we are setting up our organization for growth and success. The positive progress of our pipeline gives us the confidence. And 2020, we plan to invest between CHF 60 million and CHF 70 million compared to the CHF 58 million we invested last year. Of which around CHF 6 million noncash on top of about CHF 3 million for capital expenditures, mainly for lab equipment. The majority of these investments this year going to 250, the running Phase II trial in combination with Velcade; the Phase I trial for MP0310, the lead I/O assets, which we are developing in collaboration with Amgen; the preclinical development of MPO317, the second compound in our I/O toolbox, as Patrick was elaborating on, which we plan to move into clinical development in the first half of '21; and in addition, we are making major investments into our exciting research and preclinical pipeline, including MHC approaches as well as next-generation CD3 platform assets.

I cannot give you more granularity on the net cash flows, as we are not allowed to disclose the terms with our partners. And as a disclaimer, of course, this can change over time and I'll keep you updated during the year.

With that, I hand back to Patrick to give you a bit more of an outlook and what's coming next.

Thanks, Andreas, for walking us through the numbers and your nice summary. Let me just quickly summarize again 2019 with this slide, the shield as we can call it. I think here, it's about the validation of the DARPin platform. I think this goes with mostly abicipar, but also MP0250.

Our focus on novel therapeutic designs, where we see highly innovative approaches that solve key problem in medicine, the value we're building is really on target in our pipeline. And there, we have abicipar, we have 250, we have 274, which I'll also touch in the outlook on. Then we have 310 and the research we are doing. Then the team, I'll just recap, I think we have a very strong and committed, dedicated team to make this happen going forward.

And the business model, as we said, is flexible. We look for partners where it makes sense. And we keep investing ourselves where we believe we can finance key value inflection points ourselves.

So what's to be expected this year? And I think there is no way past abicipar this year that has been filed in the U.S. and Europe, and we are steering towards approval and launch this summer, which will be the first DARPin approved ever. So the first from our platform.

There is also the initiation of the DME Phase III, which is with our partner, Allergan and soon to be AbbVie.

MP0250, we continue to run the Phase II Velcade combination to generate more data and more data, especially on those patients, we think, are interesting for us and potential partners, and we will also engage into discussions with one or more partners to see what additional combination trials are possible and makes sense as, for us, it is too difficult and too complex to jobs, which combinations are most appropriate. So that's going to be an activity to look for the ideal partner going forward.

MP0274, we did not touch on. That does not say that there is any negative data. At this point in time, we're at 8 milligrams per kilogram. So we're still in dose escalation, which is good news. It means that the drug is well tolerated. We are now going to higher doses. And we will then see if we can reach our go criteria or if the efficacy does not allow us to move forward.

If we see activity that is in line with our expectations, we will then also discuss and talk about the exact path forward. This is likely in the second half of this year.

MPO310, as I was elaborating on before, that's our ongoing Phase I. Executed very well. Recruiting fast, there we want to reach this minimally active dose that then Amgen can take over for combination trials, also possible in the second half of the year.

And in the research side, I think we have a lot of things cooking. We have the 317, where we're preparing for IND submission that we can then dose the first patients next year. We are working hard to nominate the first peptide MHC candidate for development, and we'll have multiple presentations, posters and conferences, especially around AACR. I think that's a good day to keep in mind to see what's ongoing in our research group.

To reemphasize what Andreas was saying, we're well funded to the second half of 2021. That's well beyond key milestones we are expecting from our collaboration with Allergan, from abicipar. So we are in a very strong financial position, and that really is the basis for us to say that we can change, if you want, gears and go from a sequential mode where kind of one DARPin is moved forward after another to be able to really parallel track and start to move more DARPin forward in parallel to feed the pipeline in the years to come with our novel therapeutic designs.

With that, I would like to thank first the people here in the room, who made their way to Schlieren, then those on the webcast. I want to thank my colleagues here with me, Andreas and Michael and Thomas and Seth, and then all the coworkers we have, our collaborators in the clinics in other companies for their continued support.

And I would open the floor for questions from our analysts and press.

I have a planning question regarding MP0250. And if you can speak on the early pre-proof in DARPin and MP0250, do you want to go with an exclusive partner or several partners as there are so many?

This is a very good question. So I'll just quickly repeat if somebody has not got the question. So will we go with one exclusive or do we go with several partners?

And I think this -- at this point in time, we are talking to a whole range of potential partners, and we have not decided what the best way forward is. And it will also depend on the data and there might also be stages that we explore more in parallel with more and then lock in one. So we are rather open on the deal model.

As we are well funded, we don't, today, have to optimize the value of today, but we can really take a long-term view for the program and make sure that we find a very committed partner who will then invest to bring this to the market. And I think the discussions are very good. So the parties see, the novel mode of action they understand that, that is different in multiple myeloma, which is very crowded. You just take a target like BCMA and you're the13th BCMA CAR T. It's very difficult to partner because you're competing with many others that might be ahead of you. MP0250 is not competing with any other VEGF/HGF in that space. So it's more, as you just asked, what is the best development strategy in which combinations. And that is complex, and we will find out what makes most sense.

Okay. And so early stage programs, the ones you have chosen the targets. You need to have animal models. How do you make sure that you have the right model to detect? And how long does it take to test such a target?

I can start and then maybe Michael will want to add a few words. So this is very dependent from program to program. If you take a target that is rather validated. There will be other models which have been established, and you know which ones are work. And I think you're asking which ones have translationable value that they actually show specific question also in the clinic. And I think that's why your team works very hard to come up with a set of models to address all the questions you have in a specific program.

And this is very different if you work on HER2, which is highly established and models are there, versus peptide MHC where you have to pioneer more of these models, and there might be less models. And that's why there is no simple answer, but that you have to define the set of models you think are critical to give you the answer and the confidence to move something into later-stage development. I'm sure Michael will add...

Thank you, Patrick. It's a wonderful question. So we could study (inaudible) real challenge in research. The complexities, as Patrick said, depends first on the target, right? There are some targets that don't even exist anymore, so you cannot work in any way, that's the most extreme case. However, our teams here have access to the animal facility so they can work on establishing models. Sometimes it takes, say, tumors from patients that are (inaudible) surgery, sometimes you'd rather go to animal.

For animals, we have to then build off from a very good molecules of the drug candidate, but you build another drug candidate that just works in mouse that allows you to understand how exactly does it work? What are the important limitations? And what should we maybe not do? And we did all of that for MPO310. There's also a lot of work, but I think it's fair to say that Amgen was impressed by the work we have established here. And then it often continues while you're doing Phase I because you will continue to learn and include or exclude certain types of patients. So it's a massive undertaking. And essentially, you're never finished until you know you have a patient responding. So it's quite a bit of work, and I'm proud that the teams here are progressing towards more and more and more sophisticated models.

So if there are no further questions, we will move to the questions of the webcast, starting with the telephone conference call participants. Operator, you can open the floor to those questions.

(Operator Instructions) The first question comes from Ken Cacciatore from Cowen and Company.

Just wanted to start by congratulating you on all the progress that you're making, very few companies are able to do what you've done without taking substantial dilution. So I hope your shareholders are very happy with you in how you've progressed the pipeline without having to do that.

My question is on abicipar first. I just wanted to understand in the DME study, just to confirm, it's going to have the next-generation formulation. And is there any way that, that formulation can be sped to market without waiting for the DME study to conclude?

My second question is now that AbbVie is close to taking control of the program, hopefully, just any interaction you've had with them as that transfer is about to take place?

And then lastly, just in general, with your programs outside of abicipar. Can you talk about the manufacturing infrastructure, the investments that you're going to need to make now or the complexities and scaling from the clinic to eventually commercial? It seems like you're spending CHF 3 million you said in capital expenditures this year. Just wondering what we should be thinking going forward in the complexities of manufacturing the products?

I'll hand over to first technical formulation questions to Michael, who is our abicipar expert. And I think he can take that. I will be happy -- and I think also you, Michael, interacted with AbbVie, we're happy to add there. And also on CMC, I'll let Michael go first.

Thanks, Ken, and thanks for the compliment. Very much appreciate it. So obviously, we are very excited that abicipar has delivered such strong data in 2019. And I'm mostly interacting with some people from the global development team, and they are, of course, massively proud that the compound really delivered such nice data. I think everyone recognizes that this is now the gold standard.

In terms of manufacturing and formulation changes. Of course, this has been the bummer that this takes much longer than originally expected. And luckily now, I think we are on track or mostly they are on track with this next-generation formulation that will be both used in the next clinical studies. Allergan always had such as DMEs, I'm just saying in the next clinical studies. No further information here.

And then for market launch. I think the procedure you use there post approval, it's a so-called license variation. And this is a standard procedure that you then basically modify your, for example, manufacturing and then go with this to market launch. So I don't expect any delays there.

AbbVie is a bit of a difficult territory because they haven't merged with Allergan. So we have no possibility to have official interaction. However, we were at JPMorgan in January in San Francisco, and there are these dinners and lunch and so on. So we had some informal contacts, and we were quite pleased how positively they are sort of thinking about us. And of course, this is all, say, colloquial, but I think this will be a very good basis to collaborate going forward. Obviously, AbbVie is one of the leaders in the field. I'm deeply impressed how well they managed Humira franchise. And essentially, how much they invested into making sure that this is really used in most indications that they are. So I think this will be a very attractive partner going forward. I'm looking forward to the close of the transaction. Any time it could happen, but most likely, it will be late in Q1 as far as I'm aware.

Now the last question on CMC investments, that's also a relatively tricky one. So obviously, we are always preparing for scale up, then you have to reserve facility. You have to reserve the team, you're working on all the technical steps. These are costs luckily for DARPins that are not so expensive because we can use relatively cost-effective bacterial manufacturing. Remember, we are all doing this in E. coli, and E. coli doubles every 40 minutes, so you can really grow massive amounts in a very short time. However, the cost usually goes with the people and the documentation. So right now, we are probably one of the companies that is very fortunate for Phase I. We spent only relatively little money to get the material we need.

And even if you scale up, I think it stays in the range of, say, single-digit million range. And the suppliers we work with are all the gold label suppliers in Europe. You're certainly familiar with Lonza and so on. But of course, once you want to secure market supply, you need multiple batches' validation then it becomes much more costly, so in the double-digit million range.

Is that a fair summary, Andreas and Patrick? Anything to add?

And maybe, Ken, just one addition. You were referring to the freewheeling capital expenditures. Certainly, we are not investing into manufacturing capability to manufacture a full-fledged Phase I or even Phase II material. We outsource that, so the CHF 3 million or more related to preclinical lab equipment and research lab equipment.

But let me echo on all 3 points Michael made. I think, just a few additions. I think, first, on the formulation, and we -- and Michael highlighted that we're not expecting any delays. And there was some let's say, confusion because you have to do a comparability assessment. But this is on a biophysical level and does not have to happen in a human clinical trial. So that's why we are not expecting any delays there, and we have spoken to several experts on that matter, which is very key for this program for the launch that we don't have to go into a clinical trial to show comparability there.

Then I would add on the AbbVie point that AbbVie today holds no eye care activity. So don't think of an integration where they have to choose between individuals kind of who runs which program, the Allergan teams stay quality intact for what they are doing. So there is no question on who is going to lead in there. What we feel the teams and Michael is working close with them, are intact and we are moving forward towards this launch without any changes.

And maybe that's the other point that there's not only one, but actually 3 approvals ahead in eye care, and from what we see is that AbbVie will move forward with these approvals that this makes most sense to maximize value for them. And then echoing Michael, AbbVie is a great partner to sell a drug in a competitive space.

Maybe on the CMC part, I'll just add because I was pointing out before that we want to go more in a parallel tracking mode. And when I'm talking to other companies, and I'm always surprised how much money they have to set aside for manufacturing. And for us, because we control manufacturing for all level of stages, so Phase I, Phase II and now also for commercial abicipar, but almost more importantly, for later-stage development, MPO250. So we have invested also in upscaling for MPO250. And that's one of the questions potential partners have first can you upscale to 1,000 liters scale, which we can, we believe. So I think the manufacturing is really part of the stronghold of the platform, which allows us this turn-key moment of just putting out more assets as we go. And not increasing the cost to a level that we cannot move programs forward in parallel, such as echoing what Michael said, I think it is key for what we're doing, that we are in control of, I call it, a low-cost manufacturing of highly complex and highly potent drugs.

High quality, though, right?

High quality, low cost. Thanks.

Next question comes from James Quigley from JPMorgan.

So just on the business model. You're very focused on partnerships at the moment, which is understandable. But where do you need to get to in the future where you can start thinking about co-promotions?

I think we just lost you, but I can take that question.

I wanted, generally, your high-level thoughts on what needs to happen in order to get to those -- to get to that -- at that stage?

And second question on MP0274, more of a high-level question. So when can we expect to see some initial data? And where are you with recruitment in the trial? What is your sense of the cancers that could benefit the most from the preclinical work that you've done? And -- or anything that you have seen so far in the clinic?

Very good. I will take the first on the, let's call it, co-promotion part. And then let's move to the 274. Maybe Michael can give an update.

So we take a very pragmatic view on kind of where can we add value to a program. And if that full promotion that could, in the future, want to be the case, co-promotion or straight out licensing. And when we looked at -- let's take abicipar in 2010, we said in eye care, at this point in time, a co-promotion does not make sense. When we actually now negotiated with Amgen about 310, and we see 310 as a combination partner of choice for T cell engagers or -- but also other molecules. We actually negotiated that we can also sell 310 in our combination. So we have a sort of a co-promotion right in there that we can use that combination.

And we are co-investing also in late-stage development. So this is a much more collaboration than just out-licensing for MPO310. And we will take this case-by-case, the core activities are our novel therapeutic designs in I/O. And depending on the patient population, the indications, we will go as far as we can alone. That's our ambition. And -- but not be afraid of also doing collaborations where they helped. But the end goal will be to sell our own DARPin products. And this is not in the next phase, but the one after and possibly one of the peptide MHCs or next-generation T-cell engager, maybe CD40, but CD40 and 4-1BB have such broad applications that partnerships can make sense at one point in time.

I'll hand over to Michael for 274, so we completely understands the mode of action well and also have a good feeling in which indications we could see that move forward. I'll just start by saying that the HER2 space is extremely active these days and new indications are kind of being followed, and we are following those activities, which, on the one hand, is good as there are more indications, on the other hand, the bar is going up with very good HER2 drugs, and that bar, we will have to beat.

Thanks, Patrick. Thanks, James. So 274, we have been in Phase I for quite some time already. The good thing is that we are still dose escalating. So as Patrick said, there is no dose-limiting toxicities. However, at molecular partners, we always want to present the data basically when they are complete. So while we are dose escalating, we cannot release any data.

I'm pretty sure we will show it this year, so depending on how many more patients we recruit and how long these patients then stay on study. As Patrick said, the bar is rising. So a AstraZeneca [Dytozunka] have had very good data. They now have an approval for -- in HER2. So of course, we would like to get a similar quality of data. But in Phase I, it's probably not possible.

So we set a high bar. We're trying to get there, and then we have to take the go/no-go decision, so I guess, within 2021, we will certainly talk about the program and show the data. Right now, we are still dose escalating. As Patrick said, safety is not an issue. And we also want to understand the biomarker side. So give us some more time, and then we'll have a comprehensive answer.

The next question comes from [Ruben Boyajian from FUV].

I was just want go back to MP0250. You say that a planned clinical trial will not be initiated. Could you just remind us what trial was that?

And could you also give us some hint about the time line for finding a partnership?

Yes. So the first is easier than the second question. So thanks for those. So the first is why -- or which trial are we not doing? So we did the combination trial with Velcade, which is a proteasome inhibitor. Thus, I would say, to date, 3 key backbone treatments. One are proteasome inhibitors, the other are IMiDs and the third are antibodies to CD38 and then soon BCMA. So what we were seeing and in each of these classes, you have several components. So you have several proteasome inhibitors, you have several IMiDs and several antibodies. So for us, to run the next trial with a specific combination that then would not be relevant for a partner is extremely high. So we would invest in clinical trials and ask a question that might for the next partner that we then choose not be relevant. So that will be a large investment for rather limited value and the partner would say, take another IMiD, take now this IMiD, this IMiD or take another IMiD, take an antibody.

And so we felt because we are now looking and engaging into these partnerships, we'd rather now ask partners for their favorite combinations and then find out with whom in which combinations to move forward. So we found the investment to be too risky and the value should be too small for us to invest in that program. That's why last year, we took the decision, it was a difficult decision, to not move forward with that combination trial.

Your second question is on the timing of these partnerships. And the discussions are ongoing. The trial is also ongoing. So we're also collecting more data. We definitely want to update this year, but I cannot speak to the exact time lines and it will also depend on deal models. Barbora asked, is it one large deal, if you want? Or do we actually put in maybe a few combination trials with different partners now before closing a large deal? And this is all under debate and will also depend on how these discussions are going. And we will keep you updated as we move forward.

(Operator Instructions) The next question comes from Henrietta Rumberger from AWP.

Could you just quickly repeat your calculations about the milestones you're expecting to receive and all the sales participation, et cetera, once abicipar is launched?

Okay. Thank you. I'm taking the question, it's Andreas here. So taking the big picture, so overall, Allergan owes us for abicipar, in totality, CHF 360 million milestone payments, of which CHF 210 million are due precommercially, the big bulk at the approval for 2 indications and 3 regions each. On top of that, we are entitled to CHF 150 million milestone payments when certain sales milestones are reached post the approval, obviously. In addition, we are entitled to royalties, (inaudible) starting double digits, so that's plus/minus 10%, up to the mid-teens, which is also plus/minus 10%. I cannot be more than 15 -- excuse me, I cannot be more precise than that. We are not allowed to disclose the exact numbers.

So that's the big picture. Now what's coming short term? What we expect to cash in short term, that is the approval for wet AMD in the U.S.A. and following by the approval in Europe. These are the 2 filings Allergan has done, and we expect the answer from FDA this summer, and in Europe, in the course of the second half of this year. And the 2 together -- again, I cannot be precise, but you can assume the 2 together, these 2 approval milestones would be over $100 million. And that could come in, in the next -- yes, next 12 months.

Absolutely.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Molecular for any further closing remarks.

Seth, do you want to say something? Or should I go first?

Go for it.

Good. No, so thanks for everyone for being part of this call. Thanks for all the good questions, your interest in what we're doing. I'll just repeat kind of the key messages. Molecular Partners, we had a very important 2019 level of hard work to progress pipeline, take the decision where we want to invest and also where not. That was done successfully. Now we're set up for success in 2020. First, DARPin on track to approval, validating the platform. Oncology pipeline set up to address key limitations of current treatments in multiple myeloma and immuno-oncology, and they're very hot and really disruptive early pipeline in research, where we're using the DARPin features to solve key problems in immuno-oncology.

I think with that, I will close the call. Thank you again, and looking forward to reporting progress in 2020.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.