MorphoSys AG (MOR) 2009 Q2 法說會逐字稿

Good morning and good afternoon. I am Evie, the operator for this conference. Welcome to the MorphoSys publication of six months report 2009. Please note that for the duration of the presentation, all participants will be in listen-only mode when the conference is being recorded. After the presentation there will an opportunity to ask questions. (Operator Instructions).

At this time I would like to turn the conference over to Ms. Claudia Gutjahr-Loser. Please go ahead, madam.

Good afternoon and welcome. This is Claudia Gutjahr-Loser, Head of Corporate Communications and Investor Relations of MorphoSys. With me is Simon Moroney, our CEO, and Dave Lemus, our CFO.

First, we would like to welcome you to our Q2 conference call and thank you for participating. During the call, we would like to talk about the Company's financial results for the first six months of 2009. Simon will begin by giving you an overview of the quarter. Then Dave will review the financial results of the first six months of 2009. Afterwards, we will open the call to your questions.

Before I start, I wanted to remind you that during the conference call, we will present and discuss certain forward-looking statements concerning the development of MorphoSys' core technologies, the progress of its current research programs and the initiation of additional programs. Should actual conditions differ from the Company's assumptions, actual results and actions may differ from those anticipated. You are therefore cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof.

I would now like to hand over to Simon Moroney.

Thank you, Claudia, and also from me a warm welcome to the call. The Company has made very good progress in the second quarter, and we are on track to reach our goals for the year.

As usual, we'll start our operational review with the therapeutic side of the business. During Q2, we achieved real progress in our drug pipeline. As a reminder, we see this as being a critically important metric of our value proposition as a Company. Perhaps the biggest highlight was the positive conclusion of the Phase 1 study of our lead compound MOR103. This healthy volunteer study was designed to assess the safety, tolerability and pharmacokinetics of the drug. The trial confirmed that MOR103 is generally safe and well-tolerated at all doses tested, and in our view supports a clinical trial application for a Phase 1b/2a study in rheumatoid arthritis patients, which was filed as planned during the quarter. We have yet to hear back from the European regulatory authorities regarding this application, but continue to expect that the trial will start later this year.

While rheumatoid arthritis is our primary focus, we are investigating the development of MOR103 in other inflammatory indications. As we conduct preclinical experiments in multiple sclerosis and respiratory diseases, we have expanded our research agreement with the University of Melbourne to investigate yet further therapeutic applications for MOR103.

We have also filed additional patent applications in these new indications, potentially increasing the value of the MOR103 program significantly. Regarding our next most advanced program, MOR202 for multiple myeloma, preclinical development continues as planned.

As a part of our commitment to building our proprietary pipeline, we have commenced three additional, fully-owned discovery programs to add to MOR103 and MOR202. During the second quarter, work on MOR205, our newest oncology program started as planned and lead identification for MOR203 continues.

In the inflammation area, a disease-related target molecule for a new program, MOR104, was selected. Beyond these three new proprietary programs, the first of our co-development programs with Novartis continues.

The effects of our increasing investment in proprietary R&D are clearly visible in our reduced profit compared to the same quarter of last year. This is exactly along the lines we expected and guided to. Most importantly, this investment should translate into an increasingly valuable pipeline of drugs, and this is the metric that we will keep reminding you to look at.

As you will hear shortly from Dave, the growing importance of proprietary development is reflected in our decision to establish a third reporting segment.

Turning to our partnered pipeline, we made excellent progress here in the second quarter. The partnerships which feed this pipeline continue to perform well. The main news during the quarter was Novartis' commitment to the full 10-year term of the strategic alliance originally signed in December 2007. The decision was based on our successful achievement of certain predefined improvements in our technology platform.

We also secured an extension of our collaboration with Schering-Plough, who triggered their option to extend the alliance between the two companies for at least another year.

Our partners achieved two significant clinical milestones during the second quarter. Centocor Ortho Biotech, Inc. and Novartis each commenced Phase 1 clinical trials using HuCAL-derived antibodies. We're not yet able to disclose the targets for these two programs, but hope to be able to do so as soon as they advance somewhat.

With these two clinical milestones already secured, I'd like to confirm that we see the potential for a further two HuCAL-antibodies entering Phase 1 with two different partners in the remainder of the year, which, if they occur, would bring the total number of Phase 1 starts during 2009 to four.

The commencement of clinical trials results sooner or later in an increase in transparency with regard to targets, indications and potential markets for the programs concerned. In this regard, our partner, Centocor, has started to publish more details on their most advanced HuCAL program. This relates to an antibody that Centocor took into the clinic in the middle of 2007. We can now confirm that this program carries the Centocor code CNTO-888, and is a HuCAL IgG1 antibody targeting the chemokine MCP-1.

The antibody is currently in two clinical trials. The first is an oncology study, which started in August 2007, looking at the safety, pharmacokinetics, pharmacodynamics, immune response and clinical effects of CNTO-888, when administered as multiple intravenous infusions in patients with solid tumors.

The second is a Phase 2 study in idiopathic pulmonary fibrosis or IPF for short. The trial is a randomized, double-blind, placebo-controlled, dose-ranging study evaluating the efficacy and safety of CNTO-888. The primary objective is to determine the efficacy, as measured by pulmonary function and safety of the drug in patients with IPF.

In addition, an assessment of the effect of CNTO-888 on measures of disease progression will be made, including patient-reported outcomes, functional capacity and health-related quality of life, as well as an assessment of the pharmacokinetics and pharmacodynamics of the drug in patients with IPF. This study started in November 2008.

As further evidence that value is being generated across our partnerships, Daiichi Sankyo added two new cancer programs during the second quarter.

Overall, the Company's partnered pipeline now comprises 62 therapeutic antibody programs in total, an increase of 7 since the beginning of the year. These 62 programs break down into 6 currently in clinical development, 31 in preclinical development and 25 in discovery.

I want to take this opportunity to remind you that we distinguish between programs and antibodies. For example, the Centocor program I just mentioned, CNTO-888, which is being developed in two distinct indications, we count as two programs. We expect the growth of the pipeline to continue during the rest of this year. We continue to regard the anticipated 20 program starts for 2009 that we communicated at the beginning of the year as a realistic outcome. However, please bear in mind that the vagaries of drug development mean that it is not a given that 20 new starts will result in a net increase of 20 programs for our pipeline by year-end.

Turning now to the AbD Serotec segment, the unit continued its upswing in the second quarter. While we have seen some competitors struggling, we have achieved an increase in total revenues of 8% over the same quarter of the prior year, and we estimate that this represents growth approximately double the market rate. The unit is well and truly on track to meet its profit target for the year.

AbD Serotec continues to make inroads into the diagnostic industry, a market that we have prioritized for the future. Just after the end of the quarter, Spinreact became a new customer in the diagnostics space. Spinreact will incorporate antibodies from AbD Serotec in a series of clinical diagnostic kits. Additionally, the first HuCAL-based antibody is now used by an undisclosed U.S. biopharmaceutical company for the purpose of clinical monitoring. We see many more opportunities in the diagnostics arena, and we look forward to keeping you updated on our progress here.

That concludes my operational review. I'd now like to hand over to Dave for his review of the quarter's financials.

Thank you, Simon. Before launching into the financial analysis, I would start by mentioning that we have made a few changes to our financial reporting in the second quarter.

The first change relates to our compliance with the new IFRS rule regarding "Operating Segments" which expanded our segment reporting from two segments to three. As previously, the AbD segment remains as a separate operating segment. New for Q2 is that we have split the Therapeutic Antibodies segment into two segments, namely Partnered Discovery and Proprietary Development.

Under the Partnered Discovery segment, you will find all activities where we are providing antibody generation to our collaboration partners, such as our partnerships with Novartis, Pfizer and others. Under the Proprietary Development segment, we have placed all activities which relate to both our own development as well as co-development activities. We believe this new classification of our operating segments underscores the growing importance we see in MorphoSys' proprietary drug development activities.

The second change relates to the new statement of comprehensive income, in compliance with IAS 1. This statement includes all changes in equity except for certain owner transactions.

Lastly, we have created some more transparency in our financial statements and notes relating to non-operating income, which I will come onto just a bit later.

Let's now move to the financial review with revenues. In the first six months of 2009, Group revenues were EUR37.9 million, a 14% increase over the same period of the previous year. This increase is due to higher levels of Partnered Discovery as well as stronger revenues in the AbD segment.

Revenues arising from the Therapeutic Antibodies segments in the first half of the year amounted to a total of EUR28.6 million, including success-based payments in the amount of EUR5.4 million, a significant increase over last year's EUR2.7 million.

Revenues in the Proprietary Development segment rose from funded research payments within our first pre-development program with Novartis and totaled to EUR500,000.

Revenues of the AbD segment increased by 8% to EUR9.7 million compared to the same period of the last year. The largest part of revenues, approximately 81% or EUR7.9 million, was generated with catalog and industrial customers, while custom manufactured antibodies contributed 19% or EUR1.8 million.

Assuming constant foreign exchange rates at the average rate for 2008, revenues in the Therapeutic Antibodies segment would have totaled EUR27.8 million; the AbD segment would have been almost the same at EUR9.8 million.

Compared to the first six months of 2008, total operating expenses increased in 2009 by approximately 24% to EUR31.3 million. The change of EUR6 million was mainly due to higher investment in research and development, which I will come back to in detail, in a moment.

COGS is composed of the AbD segment's cost of goods sold in the first six months of 2009 and decreased by 6% to EUR3.3 million compared to the same period of last year. This is primarily due to foreign exchange effects.

In the first six months of 2009, expenses for research and development increased by 56% to EUR18 million. As mentioned earlier, the higher costs for increased personnel costs and external lab funding, both related to our increased proprietary drug development activities, were the main reason for the increase.

In the Partnered Discovery segment, operating expenses for the half year amounted to EUR10.1 million, almost unchanged from 2008. Proprietary Development operating expense was EUR8.5 million for the half year, substantially higher than the previous year.

Within the Proprietary Development segment, costs in the amount of EUR7.8 million were incurred for the development of the Company's proprietary products by the end of Q2. Of that amount, approximately EUR5.7 million was spent for both MOR103 and MOR 202.

Compared to the same period of the previous year, SG&A expenses were essentially unchanged, at EUR10 million at the half year 2009.

Group operating profit amounted to EUR6.6 million in the first six months of 2009 compared to EUR8 million for the same period of 2008. The segment result for the Partnered Discovery segment amounted to EUR18 million, while the Proprietary Development segment showed a loss of EUR8 million.

What is perhaps a bit more visible in our new segment reporting, is the operating profitability of our partnered side of the business running at the half year at 64% of sales. The AbD segment also showed a strong result at EUR1.1 million, with a profit margin of about 11%.

In the first six months of 2009, net income amounted to EUR5 million. Diluted net profit per share for the first half of the year amounted to EUR0.22 compared to EUR0.28 in the same period of the previous year. Approximately 22.5 million shares were outstanding at both the half year and year-end 2008.

Another change we made in second quarter reporting was in our non-operating results. In an effort to provide more transparency, we have broken out our financing and other income and expenses, both on the face of the financial statements as well as in explanations to our financial notes. I would note in passing that our finance income was down a bit from EUR565,000 in the second quarter of the previous years, compared to approximately EUR231,000 in the second quarter of the current year, mainly the result of much lower short-term money market rates in 2009.

Moving to the balance sheet, there were no substantial changes to either assets or liabilities in the quarter. Further to that point, on June 30, 2009, MorphoSys's cash position was approximately EUR144 million compared to EUR138 million at year end 2008.

On the occasion of our quarterly results, we use the occasion to discuss our best estimates of any changes to our full year financial projections. Today we can again confirm our original guidance from February of this year.

We expect Group revenues to come in between EUR80 million to EUR85 million and an operating profit between EUR8 million and EUR11 million.

Regarding the AbD segment, we continue to expect revenue guidance of EUR20 million, and a profit margin of at least 2%. Given that we are presently at 11% margin at the first half of the year in that segment, we are confident to achieve at least last year's performance, and may outperform it.

With the goal of broadening our proprietary product pipeline in mind, we continue to expect that investment in proprietary product development will end up somewhere between EUR18 million and EUR20 million, with the majority of these expenses linked to our most advanced programs MOR103 and MOR202. With the Phase 2 trial for MOR103 starting in the second half of the year of 2009, proprietary R&D expense should continue at a slightly higher clip in the second half of the year.

With that, I would like to conclude the financial analysis and hand back now to Claudia for the Q&A session.

Thank you. We will now open the call for your questions.

We will now begin the question-and-answer session. (Operator Instructions). The first question is from Mr. Rodolphe Besserve of Societe Generale. Please go ahead.

Good afternoon. One question, if I may, on the guidance for top line. You've got a guidance of EUR80 million to EUR85 million. When I look at what you generated in H1 and when I make my calculation, I mean, I estimate that you need to generate in H2 approximately EUR32 million in Partnered Discovery to be at the low end of the range. So that means EUR4 million above what you generated in H1 on this part. How confident are you to be able to reach this and what is your visibility on one-off items or any upfront or [major sums] you may receive during this period? Thanks.

Yes, I mean this estimate represents our best estimate of what we expect today. In terms of the at-risk revenues till year end, I would guess that amount to be roughly about EUR5 million of new revenues, which are not secured today. So I think that answers your question -- or does it?

Yes. So you mean even when we take the low end of the range, so EUR80 million, on this EUR80 million, you've got strong visibility on EUR75 million. That is what I should understand?

No. We have visibility on the open amount of revenues on the Partnered Discovery segment, and within that Partnered Discovery segment, we have total visibility on all except EUR5 million of the Partnered Discovery segment. Within the AbD segment, of course, we've pegged the revenues at approximately EUR20 million, and of that -- again, I don't know if we can say that, we have visibility beyond what we have today. That's our best estimate of where it should be, but I think you were looking for the delta within the Partnered Discovery business. Right?

Okay.

The next question is from Mr. Hanns Frohnmeyer of LBBW. Please go ahead sir.

Yeah. Good afternoon. I have three questions. The first is on AbD, what Dave mentioned at the end of his presentation. So, I wonder that you're still very tempting on your margin, because I mean, 11% in the first half of the year looks very promising and if you say more than 3% for the full year this would mean a net negative result in the second half. From where originates your skepticism in this question?

And then the second question is maybe related to that. Your gross margin dropped significantly, I guess on what you mentioned on the currency side but also on the cost side. So, can we expect like 34% as a new run rate?

And third question is your tax rate in Q2 was pretty high with more than 40%. What is your exception for the remainder of the year on the tax rate? Thank you.

Maybe I'll start with the tax rate question first. We also did note that the tax rate under IFRS does a bit -- appear a bit high in isolation for the second quarter. That being said, there are couple of reasons for it. The main reason is the fact that the way that we do our calculation throughout the quarters are slightly different than from year end. A lot of the calculations take into account deferred taxes, which we look at at the quarters. Maybe to give you guidance for the full year, we expect that the guidance for the full year for our tax rate under IFRS -- and again, that is kind of a fictitious rate because we don't pay taxes on our IFRS result, but rather at the blended rate of the tax rates that we pay in both our subsidiaries in the U.S. and UK and as well on the tax books in Germany. But my guidance for the full year would be approximately 30%.

A number of these differences that you are seeing will back themselves out during the year, and we expect for the full year a guidance of roughly 30%, which is somewhat higher than last year's rate of 27%. That largely reflects increasing levels of profit in the U.K. and the U.S. vis-a-vis what's going on in Germany, that being influenced by higher levels of proprietary drug development here in Germany.

Okay, that was the question about tax rates. Regarding AbD guidance, I think maybe your first and second question may be answered by this answer, namely I guess what's still open for AbD till end of the year are two things. Number one, how the U.S. dollar and the pound develop till year end. They had a significant role in the relatively high gross margin that you saw in the first half of the year. Whether that continues or not, I can't definitively say. That depends very much on how the foreign exchange rates develop.

I think the other factor, which may lead us to be slightly more conservative in not just out -- raising the guidance outright at this point is the fact that we have pegged additional investment in that segment till end of the year, and should that come to fruition, our gross margins would be adversely affected by that.

Okay. Thanks.

The next question is from Mr. Thomas Schiessle of EQUI.TS. Please go ahead.

Hello everybody. This is Thomas Schiessle. Thanks for taking my question. Coming to AbD, what is your feeling concerning the customers' demand and the overall picture of demand in the quarters to come? Is there still like off-volume in the market and not that much price pressure on the product? And could you -- the results concerning your cooperation with Phadia and Sigma-Aldrich. And this is the one.

Then the second question is on AbD and the investments you intended to do. Are all the investments in the business done already for the current year or is there still something to do in infrastructure or in marketing? And the next question is on the antibody production and what is the current status of increasing the production capacity within MorphoSys or the cooperations with Crucell or with Bayer's cell line. Thank you.

Okay. Thomas, thanks for that. I'll take those questions. With regards to your first question about the state of the market for research and diagnostic antibodies, and I believe you are referring here to the downturn, to what extent that is being felt in this market. We certainly haven't felt that. As I said in the -- during the commentary, we felt that we have grown faster than the market. We've actually seen a couple of competitors with down quarters, which I think is quite significant, and set against that, achieving an 8% growth is actually a very good result.

So we're not experiencing a downturn at all. In fact, we are now hopeful, of course, because of the stimulus package in the U.S., that if anything, particularly there, in our biggest market, things should start to improve still further. So we are actually rather optimistic that the market as a whole should start to pick up, but as I said we actually haven't been experiencing any downturn there.

With regard to the investments that we are planning, as Dave kind of indicated, we are not entirely done there yet. We have been -- with the new management coming in to head that unit, we have been investing in certain internal systems and processes, strengthening our sales capabilities and training programs and other ongoing initiatives here internally. Those are not completed. And we continue to make decisions as we go on the level of that investment and that's why, depending on where that investment comes in finally, it will have an effect on the final margin that we see in the unit.

But we are very happy with the results that we've achieved so far. I think the fact that the first half year has been so good, now that the unit has now solidly turned around and really on an upward track has a lot to do with those investments that were made in the first six months of the year.

With regard to your question about Phadia and Sigma-Aldrich, there is really not much information I can provide to you there. At such time as we feel that there is really material information out of those two relationships in terms of the level of sales that are being achieved, we'll certainly pass that on, but at this stage we feel it is not significantly material enough really to merit detailed commentary.

And finally your question relating to production and you mentioned Crucell, so I assume here we are talking about the therapeutic side of the business, which is where our relationship with Crucell and DSM is.

Indeed.

As you know, we are producing both MOR103 and MOR202 with DSM using Crucell's PER.C6 cell line. The production of material for the clinical trials in both of those programs is ongoing and on track as planned. The capacity is available at DSM to achieve what we need, and therefore there is no -- certainly at our end -- no change in infrastructural capacity in order to meet the needs that we have. We can achieve that through working with DSM.

Okay. Thank you.

Thanks.

(Operator Instructions) The next question is from Mr. George Zavoico of Westport Capital Markets. Please go ahead sir.

Hi, good afternoon, there in Europe. I've got a question about the AbD. Your agreements with AbD and its partner seem to be mainly on the supply side, supplying antibodies. Have you considered at all going into actually creating and marketing diagnostic tests through AbD because the profit margins might be a little bit greater there?

George, hi, thanks for that question. Currently not -- this sort of venturing out into the diagnostics space is relatively new for us. The decision at the beginning of this year to hire new management for that unit in Dieter Feger, who joined us from Abbott Diagnostics in Chicago, kind of underscores the newness of that initiative if you like. And at this stage, we see really a lot of opportunities for the HuCAL technology in the diagnostics space, which we are currently exploiting through partnerships where we are the supplier of the antibody and the partner then obviously develops the kit and brings it to market. Of course, we wouldn't rule out perhaps for the future retaining more of the value chain by generating kits ourselves, and maybe even eventually marketing product ourselves, but certainly at this stage we have no current plans to do so.

Thank you. What about the transparency in that space? From your call, you mentioned that some of the diagnostic partners, you can't really reveal what the product is or how it's being used. It's a little bit harder to judge demand from an analyst point of view not knowing exactly how those products -- hello?

We're still here.

Yeah. Did you get that question or should I repeat it?

The question was relating to to what extent we can provide details of what the diagnostic antibodies actually are? Is that right?

Yeah, and what the sales are of those or the impact of those products are in the marketplace?

Yeah, I mean to the extent that we can talk about what those products specifically are, we will certainly do so, because obviously it's in our interest. Some of them are certainly very interesting programs, but obviously we have to respect the wishes of the partners in terms of maintaining confidentiality. So rest assured that as soon as we are in a position to be able to talk about individual antibodies and how they're reacting to movements in the market, we will do so, but in most cases currently that's simply not possible.

All right. Regarding MOR103, the Phase 1b/2a clinical [presentations] with RA, is it too early to provide some detail as to how you plan to go about performing that trial -- conducting that trial and when -- and how long it might take?

We will provide that information. We are actually just at the moment waiting for the feedback to our clinical trial application to the European authorities here, because of course there may be questions, we may need to provide answers and so on. And until that's taken place, we're just kind of holding back on providing that information, but we fully intend to be transparent about the trial design, the sites, the number of patients and so on and so forth, and we would hope to be able to provide that information within the next weeks to a couple of months perhaps.

Okay. Terrific. Congratulations on your continued progress with your partners and your proprietary drug development. Thank you.

Thanks a lot, George.

Perhaps I may ask back, Rodolphe, we have the feeling that perhaps your question wasn't properly answered at the beginning. Rodolphe, if you are still in the call, perhaps you could let us know if we have answered your question.

We have the follow-up question from Mr. Thomas Schiessle of EQUI.TS. Please go ahead, sir.

Thomas Schiessle, once again. Coming to the accounting and the higher -- transparency of the business provided by the segment report I appreciate very much. Could you -- Dave, could you please be so kind and give us some explanations concerning the segment Proprietary Development and what is the reason for having positive earnings out of this activities of approximately EUR0.5 million in the current period? And the segment report, some lines below, there is approximately EUR8.5 million cost of develop -- of developing the proprietary product and antibodies. How do these EUR8.5 million fit with the mentioned EUR7.1 million you indicated in the report on page number 7 concerning the [spoken in German], so the proprietary developments. Is there -- what is the missing link between the EUR7.1 million and the EUR8.5 million. Could you help me so much?

Sure. Okay. Maybe to answer your first question, in terms of revenue in the Proprietary Development segment, that arises from funded FTEs, which are provided to us by Novartis in what will eventually be a co-development program. And hence that's why you see revenues now, even though we don't have an out-licensing event.

In terms of the -- the question regarding how much we spend on proprietary drug development, you are correct that EUR8.5 million of that actually comes out of the proprietary development activities. And as I mentioned on the call EUR5.7 million of that relates to MOR103 and MOR202. I think perhaps where the difference that you are talking about relates to two things -- number one there are allocations in that EUR7.1 million, which are not present in the EUR5.8 million, and thus there is a delta between the two numbers.

I may give you a call and you can explain it to me in detail.

Yeah, I can -- we can help you and give you some guidance on that.

Okay. That would be wonderful. Okay. Thank you. That had been my question indeed.

Very good. Thank you.

The next question is from Mr. Elmar Kraus of DZ Bank. Please go ahead sir.

Hello, everybody, and good afternoon. And I've got two questions that they actually fit nicely together to the questions that we just had. One was, Simon, you said you haven't got an answer yet on your clinical trial application for MOR103. And I would at least expect that you got the confirmation that everything went in there in place and that everything was complete and that they start their review now. Perhaps you can clarify that for me.

And the other one is when we are looking at the current EUR8.5 million of proprietary drug development and this is without major, let's say, clinical trials that you are expecting for MOR103. How do you think this will actually go on over the next quarters to actually reach, and not to exceed your guidance of expenses for clinical trials or for proprietary drug development, because obviously with clinical trials and patients it gets substantially more expensive? Thanks.

Yeah. Elmar, thanks for that. Of course, I should have made clear that we have indeed got the acknowledgement from the regulatory authorities regarding the submission of the clinical trial application. What we are waiting for is the response in terms of confirmation that we can proceed or perhaps a question. So the acknowledgement has indeed been received as we expected on the schedule that we expected.

And to go back to the second part of your question regarding the cost for drug development, we guided at the beginning of the year to proprietary development costs of EUR18 million to EUR20 million. As you have seen, we haven't quite spent half of that through the first six months of the year, but we absolutely expect to fall into that 18 to 20 range through the end of the year. So we obviously have a detailed plan for all of our proprietary development activities and that plan we are keeping to and that calls for expenditure of somewhere in the range of 18 to 20, and we fully expect to lie in that range by year end.

Thank you for on that clarification.

We have a follow up question from Mr. Rodolphe Besserve of Societe Generale. Please go ahead, sir.

Yes. Just to come back to my previous question, so to [reach] EUR80 million, so the low end of the guidance. As you said, with Serotec you should be, let's say, around EUR20 million. So that means you need to make EUR60 million on Partnered Discovery. You made 28 on H1, so let's say you have to make approximately EUR32 million in H2, so how confident are you to reach this? And [also since] we had two milestones, important milestones in Q1 and Q2 from Novartis and Centocor, so which means you need to have in H2 a significant number or so of milestones. So how confident are you and what is your visibility on this? That was the original meaning of my question actually.

Thank you very much for that, Rodolphe, and apologies I didn't answer that. I think I left out one part of the answer. So I stand by the original answer I gave, which is in terms of new revenues, meaning from partnerships which have not yet been -- or revenue which has not been secured yet, other than success-based payments, we expect approximately EUR5 million. And we have given guidance for the full year that we had success-based payments in total of approximately EUR10 million and at the half year, we had approximately EUR5 million of that already taken.

So to answer your question in entirety now EUR5 million would be coming from new revenues so to speak, which are non-success based payment revenues, which are not yet secured, and approximately EUR5 million would be coming from success-based payments from existing secured agreements.

Okay. That's very clear. Thank you.

Sure, no problem.

There are no more questions at this time. I hand back now to Dr. Claudia Loser, for her closing remarks.

Actually it's to me, Simon. Thank you for that. To conclude the call, I'd like to remind you of the key points to take away. We are making great strides forward with our therapeutic antibody pipeline. This is visible on several fronts, the successful completion of the MOR103 Phase 1 trial, two partner INDs in Q2, and an increase to 62 partnered programs, to name just a few. The early extension of the Novartis deal to its full term was also a big highlight of the second quarter. Any finally, our AbD Serotec unit is performing well, and is making the sought-after inroads into the diagnostics market.

That concludes the call. Should any of you wish to follow up with us directly, Simon, Dave and I are in the office for the remainder of the day. Thank you all for participating and goodbye.

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.