MorphoSys AG (MOR) 2014 Q4 法說會逐字稿

Ladies and gentlemen, welcome to MorphoSys quarterly call and the year-end 2014 results. Please note that for the duration of the presentation, all participants will be in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. (Operator Instructions) Now, I would like to turn the conference over to Dr. Gutjahr-Loser. Please go ahead.

Good afternoon and also good morning and welcome to our 2014 year-end results conference call and webcast. I am Claudia Gutjahr-Loser, Head of Corporate Communications and Investor Relations of Morphosys. With me on the call today is our complete management board; Simon Moroney, our CEO; Jens Holstein, our CFO; Arndt Schottelius, our CDO and Marlies Sproll, our CSO.

Simon and Jens present you a review of the year 2014 and provide an outlook for 2015. After the presentation, he will all be available for your questions. We would like to thank you for participating. For the participants of the conference call, you will find the slide deck of this presentation on our corporate website.

Before we start as shown on slide 3, I want to remind you that during this conference call, we will present and discuss certain forward-looking statements concerning the development of MorphoSys Core Technologies, the progress of its current research and development 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 here.

Let's start by taking a look how the presentation will run. We have 2 parts; first, we will review 2014 focusing on pipeline and financials; and second, we will provide an outlook for this year. The presentation will last about 45 minutes. I would now like to hand over to Simon Moroney.

Thank you, Claudia, and also from me a warm welcome to our 2014 year-end results conference and webcast. The year just completed with one of very solid progress for MorphoSys. We finished the year with a product pipeline that is larger and more material than it has ever been. A few numbers make this point. The total number of programs was 94 at year-end, an increase of 11 at the year end 2013. Number of clinical-stage programs was 22, an increase of 3 antibodies are in Phase III development and 10 in Phase II, more than ever before.

Altogether, 16 new clinical trials were initiated during the year. And we may now be within two years of the first market entry of a drug made using our technology. Overall, execution of our strategy of using proprietary technologies to build a valuable drug pipeline is paying off.

Looking on slide 6, I will commence with a review of the main operational highlights of the year starting with our proprietary product portfolio. Summarize the current status, we now have two compounds in Phase 2 development, two in or about to enter Phase 1, phase 2; one in pre-clinical development and five in discovery. The four clinical candidates that have been the subject of proprietary R&D investment ranked by stage of development, MOR208, MOR103, MOR202 and MOR209.

In 2014 we made substantial progress with MOR208. Complete Phase 1/2a data in CLL and ensure data from the ongoing NHL study have now been published. In relapse the refractory CLL, we observe an objective response rate of 38% at the recommended dose, despite a relatively short treatment schedule. To put these data into perspective, this is the best seen for CD19 or CD20 antibody and comparable studies in this indication. Median progression-free survival at the recommended dose was 37 weeks and 60 weeks in the expansion cohort. This compares favorably to recent results shown with other recommended single agent antibody therapies in this indication.

Rituximab and ofatumumab, which in comparable monotherapy setting showed median progression-free survival of around 24 weeks to 34 weeks. In term NHL data was presented at the American Society of Hematology Conference in December. There is a clear and very encouraging efficacy signals into relapsed or refractory NHL subtypes we looked at, mainly diffuse large B-cell lymphoma, DLBCL for sure and follicular lymphoma. Within the evaluable patients in these two cohorts, we saw an ORR of 36% in DLBCL and 28% in Follicular Lymphoma. This promising clinical data from MOR208 was mirrored by very good progress on the regulatory front. During the year, we received orphan drug status from MOR208 in both Europe and the US for CLL and DLBCL. We also received FDA Fast Track designation for MOR208 and DLBCL.

I'll turn now to the other MOR more component compound, starting with the HuCAL antibody MOR103. In September, we presented final data from the Phase 1b trial of MOR103 in multiple sclerosis. This concern the safety profile we have seen in our earlier clinical studies and healthy volunteers and in rheumatoid arthritis patients and also provided some hints of efficacy. With this work, MOR103 has been completed and all responsibility is being transferred to our licensee GSK.

In 2014, we expanded the clinical development of MOR202 through the addition of a weekly dosing regimen comprising cohorts with and without dexamethasone together with our partner Celgene, we also finalized plans for clinical studies combining more towards to with lenalidomide and with pomalidomide. The clinical data, which we published in connection with the ASH conference support the choice of these two combination partners.

The newest addition to our portfolio was MOR209, which is the subject of the co-development agreement with Emergent BioSolutions. We in-licensed this program on the basis of a compelling preclinical data package that Emergent has assembled. MOR209 is about to enter a phase 1 clinical study in metastatic castration-resistant prostate cancer patients. The agreement we signed with the Emergent is another step on our path to establishing a future commercial portfolio, as we secured sole rights to the program outside of North America.

These four clinical stage programs; MOR208, MOR103, MOR202 and MOR209 are supplemented by growing earlier stage portfolio. MOR106 is the next most advanced program, the first from our collaboration with Galapagos. MOR106 is also the most advanced antibody derived from Ylanthia platform and entered formal preclinical development during 2014. In discovery stage, we expanded our portfolio from three programs at the beginning of 2014 to total of 5 now. This includes an exciting co-development program that we entered into in June with Merck Serono, which is focused on the use of our Ylanthia platform to generate antibodies against selected immune checkpoint targets.

I'd now like to turn to our partnered pipeline, which continues to expand and mature. At the end of 2014, this partnered pipeline comprised three programs in Phase 3 clinical development, 8 in Phase 2, 8 in Phase 1, 25 in pre-clinic and 40 in discovery. Over the year as a whole, this is a net increase of 9 programs; there were 11 new program starts and 2 programs stopped. In the interest of time, we'll highlight just some of the progress of these programs. The most advanced program is Novartis' HuCAL antibody Bimagrumab.

In 2014, Novartis published data from the Phase 2 trial of Bimagrumab in sporadic conclusion of polymyositis on the basis of which Breakthrough Therapy Designation was awarded for the program by the FDA. The data showed an increase in muscle volume and lean body mass and an improvement in the six-minute walking distance endpoint, Bimagrumab has also been shown to accelerate the recovery of muscle mass in young man, these muscles of atrophied as a result of wearing a cast.

In 2014, a new Phase 2 trial was started looking at the use of Bimagrumab in recovery from hip fracture surgery and Novartis also added a new larger Phase 2 trial in older patients with sarcopenia progress more visible in 2014 with Janssen's HuCAL antibody guselkumab, positive Phase 2b data and mild-to-moderate plaque psoriasis was reported in March in which guselkumab showed significantly high efficacy than compared to Humira.

By the end of the year, Janssen had initiated or registered five phase 3 trials and the further phase 2 trial of guselkumab an indication of the scale of their commitment to the program. The third pharma antibody in Phase 3 development is Roche's Gantenerumab being developed for Alzheimer's disease. We were sorry to learn that the Phase 3 prodromal trial was stopped by Roche based on the pre-plan futility analysis. We are, however, encouraged that Roche remains committed to the program, and is now focusing on the 1,000 patient trial in mild Alzheimer's disease, one of two late stage studies that are being proceeded with the antibody.

Elsewhere in the product pipeline, Novartis' LJM716 a HuCAL antibody against the cancer target three is emerging as a very interesting phase 2 candidate. In 2014, Novartis published first clinical data from the compound and this highlighting the program in the pipeline presentations. In the year-end results conference last month, Novartis presented LJM716 as a candidate for future filing.

(inaudible) program PF-05082566 a HuCAL antibody directed against the T-cell checkpoint 41BB is another interesting part of program, which is being explored in combination studies. During the course of last year, Pfizer announced a combination trial with Merck's PD-1 inhibitor pembrolizumab in advanced solid tumors and also signed a deal with (inaudible) to conduct clinical studies in combination with the anti-CCR4 antibody mogamulizumab. Pfizer antibody is the most advanced of several immunooncology programs in our pipeline.

To complete the review of the year, I'd like to highlight the progress we've made in new drug discovery, which comprises both technology developments and target sourcing. During 2014, we completed our acquisition of the lanthipeptide library technology platform from the Lanthio Pharma. The decision to secure access to this technology was made following a feasibility study, which assessed the generation and use of extremely diverse high quality lanthipeptide libraries. The technology is now being applied in selected discovery projects within MorphoSys. This is a nice example of the use of our Innovation Capital initiative as a means of expanding our access to novel drug discovery platforms.

Our investment in developing the state of the art Ylanthia antibody platform is paying off in two respects. All-in-house discovery programs are now being run with Ylanthia. Our experience with the technology is concerned view that this is the best technology for our future antibody generation requirements in terms of its power and the quality of the antibodies that gives us. We see this in particular and our ability to make antibodies against target classes such as (inaudible). Several target validation projects are ongoing, two of which have already advanced to tangible discovery programs.

Secondly, we've recently established a novel bi-specific antibody technology, which in conjunction with Ylanthia opens up new opportunities for us in oncology and beyond. Sourcing promising therapeutic targets is critical to our ability to generate new drug candidates in-house with antibodies, bi-specifics or lanthipeptides. For this reason the part of our strategy is to establish relationships with institutions involved in new target identification or validation. One such we signed in April with the Molefi Asante of Temple University in the USA. In exchange the access to our Ylanthia platform, which we installed at the we installed at Molefi Asante, we have options on therapeutic antibody candidates that emerge from they were.

With that, I'll conclude the operational review of 2014 and now handover to Jens for the financial report and guidance.

Thanks very much Simon. Ladies and gentlemen, also from my side a warm welcome to our conference call for the financial results of 2014. As stated before, 2014 was operationally another very solid year for MorphoSys. We've made significant progress preparing the Company for the future, especially with respect to the numbers of compounds in development in the majority of our pipeline. In terms of our financial results, we ended the year in the range of our updated guidance from October of last year, significantly better than originally estimated in February resulting from; A, higher revenues; and B, lower expenses.

Our solid financial foundation with EUR352.8 million in cash and our short and long-term financial assets at the end of 2014 allows us to push the Company strategy of enlarging its proprietary compound based further in the years ahead. We raise this approach of increasing the number of proprietary components as a value creating as well as the risk reducing one.

Let me now turn to the financial highlights of the year 2014. Revenues came in above the guidance range of EUR58 million to EUR63 million at EUR64 million. The main reason for the over-performance was success based payments from three IND's and one Phase 3 milestones during the year. EBITDA amounted to minus EUR5.9 million after a positive EBITDA of EUR9.9 million in 2013. Comparing the year end EBIT with our guidance of minus EUR5 million to minus EUR8 million, we closed at the upper end of the loss range. Our financial position remains very strong for a Company of our size. We ended the year with a very healthy cash position of as mentioned EUR352.8 million.

Let me provide you with some more granularity on our figures. On slide 15, you can find the profit and loss statement for 2014 in comparison to 2013. Revenues decreased by 18% to EUR64 million. This decline resulted primarily from non-recurring effects in relation to the out-licensing of MOR103 to GlaxoSmithKline and from a license fee from the sale of the ABD Serotec business unit to Bio-Rad in 2013.

As planned, total R&D expenses increased by 14% to EUR56 million. R&D expenses on behalf of partners remain in the same ballpark is previous years at around EUR20 million, proprietary R&D expenses increased by 15% to EUR36.4 million. This number comprises EUR33.5 million invested in proprietary development and EUR2.9 million expenses for further technology development. General and administrative expenses decreased by 25% to EUR14.1 million, mainly as a result of lower personnel expenses and lower expenses for third-party services.

Other operating income mainly consisted of currency gains and losses and the recovery of receivables paid in previous years as a result of incoming payment. With earnings before interest and taxes amounted to minus EUR5.9 million, we are fully in line with our guidance for the year. We've reduced our original guidance loss range of minus EUR11 million to minus EUR16 million in October of last year to reflect a better revenue development and reduced spending. Finance income totaled EUR1.8 million and mostly included the interest income and gains from the sale of securities. Finance expenses EUR4.2 million was mainly the result of banks.

For the year 2014, the group reported an income tax benefit of EUR1.3 million comprising its current tax expense of EUR4.3 million and a deferred tax income of EUR1.6 million. In 2014, a net result of minus EUR3 million was generated resulting 2014 diluted net result per share amounted to minus EUR0.12.

Turning to page 16. Revenues in the proprietary development segment decreased to EUR50 million versus EUR26.9 million in 2013. These revenues were mainly from co-development activities with Celgene. The decline in comparison o the previous year was caused by the upfront payment recognized in 2013 and the connection with the out-licensing of MOR103 to GlaxoSmithKline. The operating expenses for proprietary development increased by 22% to EUR33.5 million, the segment EBIT amounted to minus EUR18.4 million.

Looking at our partnered discovery segment, revenue amounted to EUR49 million compared to EUR51 million in the previous year. In 2014 milestone payments added up to EUR5.4 million compared to EUR3 million in 2015. The decline in license fees was caused by non-recurring effect in the first half of 2013, resulting from the sale of the AbD Serotec business unit to Bio-Rad. Operating expenses amounted to EUR23 million in comparison to EUR25.5 million in the previous year. The segment EBIT increased to EUR25.9 million. The EBIT margin for the partner discovery segment was therefore roughly 50%.

Let's now move to the balance sheet on page 17. Total assets amounted to EUR426.5 million as of December 31, 2014. On December 31, 2014, the Company held liquid funds and marketable securities, as well as other financial assets in the amount of EUR352.8 million compared to EUR390.7 million on December 31, 2013. This amount includes cash equivalents of EUR32.2 million, marketable securities and bonds available for sales amounted to EUR113.5 million, short term financial assets of EUR157.1 million, as well as long-term financial assets in the amount of EUR50 million.

Please note that our cash balance is shown at 5% line items on the balance sheet. The existing funds available for investment are therefore significantly higher than the pure cash and cash equivalent position indicate. Non-current assets amounted to EUR104.1 million, up from EUR41.1 million due to an investment in a fixed-term financial asset. In-license research programs increased to EUR28.3 million due to the collaboration with emerging bio solutions for the development of MOR209 and ES414,

Current liabilities remain more or less unchanged at EUR32.6 million. Non-current liabilities decreased from EUR60.1 million to EUR45 million due to a decrease in deferred revenues. Please be reminded that more forced to received an upfront payment of EUR71 million from sales unit and a premium on top of roughly 3% share participation in connection with more to deal.

Following IFRS accounting rules, we need to spread the recognition of those amounts or the development time of the compound that contributes to our revenues, which in turn reduces the deferred revenue figure on the balance sheet. Total group equity amounted to EUR348.8 million compared to EUR352.1 million on December 31, 2013. This brings me to the outlook section and the financial outlook for 2015.

Before I start with the guidance, let me address the recent volatility in exchange rates versus the Euro and how it affects more sources. At this point in time our FX exposure is limited to the US dollar with studies running in the US and on the other hand some milestone payments that are paid in US dollar. We expect a limited exposure to the US dollar in terms of our revenues for 2015 and we expect our costs are exposure is currently estimated to be somewhere around $10 million in 2015.

In line with our policy hatching of plant revenues and costs for 2015 has been initiated already in 2014. We expect that the net impact on our earnings after taxes to be not material in 2015, but certainly everybody doing business in the US and Europe is exposed these days at least to some extent.

Cumming now to the guidance. The Company's R&D budget for proprietary drug development will rise further in 2015 in comparison to previous years. The majority of the investments will flow into clinical development of MorphoSys advanced drug candidates. Further investments are planned in the areas of target validation and antibody discovery and development as well as in the area of technology development. MorphoSys expect group revenues for the 2015 financial year in the amount of EUR58 million to EUR63 million as for 2014.

Based on management's secure planning R&D expenses for proprietary programs and the development of technology are expected to increase to a range of EUR48 million to EUR58 million in 2015. MorphoSys plans to initiate more clinical trials in addition to continuing to chart currently underway for MOR208 and MOR202. The Company expects earnings before interest and taxes of approximately minus EUR20 million to minus EUR30 million in 2015. This guidance does not include additional in-licensing costs for further development candidates, the Company might require co-develop.

Having said that, we would like to reiterate again that we remain interested in expanding our existing technology and product portfolio by doing this also de-risking as the proprietary portfolio further. We are actively pursuing ideas and opportunities for in-licensing acquisitions and our Innovation Capital initiative.

With that, I would like to finish my presentation and hand back to Simon for the operational outlook.

Thank you Jens. We'll now turn to our operational outlook. I'll start with the reminder of our strategy within which our operational objectives are framed. Our strategy is to establish a valuable drug pipeline comprising programs made on behalf of partners and increasingly those developed for our own account. Our main goal is to expand and enrich a diversified this pipeline. While we continue to support our biggest discovery partner Novartis, our internal R&D is focused increasingly on building a portfolio of differentiated proprietary drugs through a combination of another discovery supplemented by in-licensing of already existing programs. Let me provide some more clarity on our plans for the current clinical programs starting with MOR208. Updated data from the phase 2 study of MOR208 and NHL will be presented at one or more medical conferences during this year. Meanwhile, we are finalizing plans with two combination trials of MOR208 relapsed or refractory DLBCL, which is scheduled to start in the second half of the year. The two combination studies will look at MOR208 and combination with lenalidomide and bendamustine. Combining MOR208 with bendamustine aims at challenging the current standard of care in this setting, which is Rituximab plus bendamustine.

For lenalidomide, there is a strong preclinical rationale for combining an immunomodulatory agent, which augments natural killer cell cytotoxicity with therapeutic antibodies, which use this mechanism. We believe MOR208 is -- thanks to its FC enhancement ideally suited to take advantage of the NK cell effect of lenalidomide. The lenalidomide combination trial we expect first stage from 2017 whereas for the larger bendamustine trail first results will become available later.

As I mentioned earlier, we have fast-track designation from the FDA, DLBCL and we're certainly seeing the benefit of this and our interactions with the regulatory authorities. The part of the discussion concerns the best and fastest possible path to market for MOR208 and this is guided our choice of combination partners for the next trials in DLBCL.

Meanwhile, development of 208 in CLL continues within the investigator sponsored trial with our collaborator John Byrd. We might see first stage of the combination of MOR208 would be immunomodulator lenalidomide and CLL in late 2015. This study will lead into an additional combo study and relapsed refractory CLL in early 2016, which will evaluate MOR208 and combination with another small molecule. Regarding ALL, the ongoing phase 2 trial will be discontinued in order to refocus on a promising new approach in this indication. Despite some encouraging responses early in the trial, the overall response rate was not sufficient to justify continuing with mono-therapy.

MOR208 clearly has activity in ALL that we believe that in this indication and also the purchase required, which will be the subject of an investigator sponsored trial set to start later this year. The plan here is to transfer NK cells from a parental DNA to children suffering from ALL. CD19 is widely expressed in the B-cells available patients and the NK cell infusion should give the immune system of the recipient of boost, which will in turn support the therapeutic effect of MOR208. We aim to realize this trial in collaboration with some St.Jude Children's Research Hospital in the US.

From MOR202 first clinical data from the phase 1/2a trial in relapsed or refractory multiple myeloma patients we presented this year possibly at ASCO to which we have submitted abstract. We expect to have data for approximately 30 to 40 patients focusing on safety pharmacokinetics and preliminary efficacy. Before mid-year, we plan to commence cohorts combining MOR202 with lenalidomide and with pomalidomide. We also aim to show updated data at ASH in December. Given the competitive situation in this space, we believe that the results of these combination studies will be important for us to understand the true potential of MOR202.

MOR209 is about to enter a phase 1 trial in metastatic castration-resistant prostate cancer. This trial will recruit up to 130 patients across sites in the USA and Australia. MOR209 will be administered intravenously once weekly for three months and biweekly thereafter until disease progression in the trial. First clinical data from the trial is expected in 2016.

MOR106 from our collaboration with Galapagos is an antibody against an inflammation target that is currently being prepared for entry into clinical development next year. An important part of our strategy is about building our product portfolio beyond those existing programs, disease focuses on cancer, although we are prepared to be opportunistic when we see promising targets or compounds and other indications.

In-licensing is one part of the strategy as exemplified by our deals with [Genco] and Emergent for MOR208 and MOR209 respectively. We expect a larger proportion of our proprietary portfolio to be built (inaudible) by applying our proprietary technologies and expertise against novel targets. This is why we continue to invest in technology development. Having a proven and differentiated technology capability, makes it easier to secure access to promising targets and to make differentiated drug candidates against those targets. Our investments in Ylanthia illustrates this point. This state of the odd antibody technology has been leveraged to secure access to novel targets as exemplified by the deal we signed last year with Temple University.

We are looking for more deals of this type of academic institutions this year. Our deal with Merck Serono provides a related example, Ylanthia was the key which turn this into a true co-development deal with a pharmaceutical company in the checkpoint space. Again, we're looking to do more of these. The key is to ensure that we have the ability to make truly differentiated drug candidates against promising targets.

Looking at the partnered pipeline, there is a lot of potential for news flow. As always, we can't be sure what I promised, which you said about clinical results most important is positive progress with or without an announcement. The most candidates to deliver tangible progress -- the most likely candidates to deliver tangible progress of the following.

First, bimagrumab. We expect the completion of the ongoing trial of this Novartis program and sporadic inclusion body myositis at the end of the year. This Program is listed by Novartis as being planned for filing in 2016 phase 2 trials. We will continue in other indications and Novartis has announced an approval in sarcopenia and recovery from the hip fracture surgery, could be expected in 2019.

Second is ultimate. This program was repeatedly highlighted by Johnson & Johnson as planned for filing in 2016 or 2017. We expect the increase dynamic seen in 2014 with this program to continue in 2016. Clinical data from a HuCAL program, however, is meanwhile to be expected elsewhere in J&J's autoimmune portfolio, mainly through the molecule CNTO 6785. The HuCAL antibody against them as you've undisclosed target molecule is currently being evaluated in RA and COPD and two phase 2 trials are scheduled for completion of this year. Another two potential phase 2 readouts could come from Novartis' eye disease program, LFG316, most specifically from trials in multifocal choroiditis and panuveitis and a second trial in geographic atrophy associated with age-related macula degeneration.

Looking earlier in the product pipeline, eight Phase 1 trials from partners will come to an end in 2015 and could deliver data. With regards to clinical milestones in 2015, we expect up to six events this year, including five new clinical trial starts and one program transitioning from phase 1 to phase 2. Overall, we expect approximately 10 new partnered discovery programs to be started in 2015.

To summarize our proprietary R&D investment to EUR48 million to EUR58 million is that Jens mentioned will be channeled into the following; finishing the ongoing phase 2 trial for MOR208 in NHL and initiating the bendamustine and lenalidomide combination trials in DLBCL, supporting our investigator response trials with MOR208 and CLL and ILL with clinical grade material, preparing an additional clinical trial in CLL using MOR208 in combination with a small molecule to start in the early 2016, continuation of the phase 1/2a trial of MOR202, including the forthcoming combination studies of MOR202 with pomalidomide and lenalidomide, financing our share of the phase 1 trial with MOR209/ES414 in metastatic castration-resistant prostate cancer within our alliance with Emergent, continuation of the co-development of MOR106 with Galapagos, continuation of our co-discovery alliance and the immune checkpoint space with Merck Serono, initiation and continuation of new programs in the area of antibody discovery and preclinical development and further development of the lanthipeptide and bi specific platforms.

In conclusion, we look forward to another year of progress in our pipeline, both with proprietary as well as partner programs. The pipeline is maturing nicely proving the power of our technologies as well as our discovery and development capabilities. MorphoSys is well positioned to continue its growth.

Thank you for your attention. I'll now hand back to Claudia for the Q&A session.

Thank you, Simon. We're now opening the call for your questions.

(Operator Instructions) Sarah Potter, Bank of America.

I've got two things. I think in an update on your thinking around the partnering of MOR208. Would you wait for the data from the new combination studies after 2017 or you open to discussions at any time? And as a follow on from that, I know there are two things to combine a lot of your assets with Celgene, with Celgene products. Is there any potential that Celgene would be interested in partnering this program and continuing the relationship you have following from MOR202?

And then my second question is on guselkumab. There are a number of phase 3 studies ongoing by NHL no one head to head to that (inaudible). Could you talk about how you see the positioning of this agent versus the 17, which is starting to come through which have shown superior to (inaudible).

So let me start with 208. We don't see any immediate need to partner 208. We have a way little that means the plans to take that to continue to take the compound forward on alone and that doesn't necessarily mean that we'll go all the way on our own, but we feel that we can continue to create value by generating additional data as many settings as possible for considering a partnership. So that's our media plan to continue to build value within the program. And the second part of your question, we have of course complete freedom to partner the program with wish and as and when the time comes that we would seek a partner. We would engage with those many parties as possible to identify the best possible party to take the program forward whoever that might be. So there is no decision and no even early thoughts that might be. We will cross that bridge when we come to it. Regarding guselkumab, Marlies will take that question.

Yeah. Thanks Sarah for your question on guselkumab and its positioning, of course, this is a very interesting question but for your understanding that we are not able to comment on the positioning strategy of our partner here. So let's see how it will go.

Igor Kim, Oddo Seydler.

I've got a couple of questions. The first question is could you provide us sort of timeline for the proprietary R&D expenses, I believe the bulk of these expenses should be in the second half of the year. And the second question is could you specify the in terms of quarters when you expect the data from ALL mono-therapy and from DLL combo trail.

I'll take the first one and second will be then answer by Arndt. The timeline of the R&D expenses, yeah Indeed, I think it's a fair assumption to assume that the second half normally has a higher proportion of the costs than the first half. But I mean I can't give you more granularity than this at this stage.

Okay, thank you.

I got you have a question about ALL data and CLL data, for the ALL as Simon said, we're going to wrap that up. The expectation is that we would share, that's probably by the end of the year. For the next, I think that was your question -- I think you asked that a CLL combo trail or

Right

DLL. So the CLL combo trail we said which starts in early 2016. So that would probably -- it's a little bit too early may be to comment, because we haven't even specified what the design would look like most likely couple of years later possibly since this most likely going to be an open-label trial the following years, so let's say 2017 probably preliminary with more robust data in 2018. And of course the CLL also has the ongoing IST with John Byrd, State University combining this lenalidomide and there we might see first data, preliminary data by the end of this year.

Gunnar Romer, Deutsche Bank.

Thanks for taking my question. The first one would be, with regard to MOR202, rather the bigger picture question here. I can recall your intention was to catch up with competitors in the field however, given the significant progress, especially DARA has made, what's your thinking around potential catch up here? And then secondly, if you could remind us on MOR202 when the first potential milestone payments from strategy would come. Is that anything that could already happened next year or should we assume that this would have been happen at the earliest in 2016? Then secondly, question to Jens, as always, it would be much appreciated if you could provide us with an idea of where you expect net cash by year end obviously, excluding any potential additional to it?

So, Good, I'll take the first question. Your bigger picture question 202 and where we are kind of in the race with the on top competitors. So I think we have active knowledge DARA is ahead, they're very broad most likely will be first to market. But DARA, there is no possibility to catch up. I think we know now with very encouraging data brought development. They will be possibly be launching in 2016 where we see ourselves, but with a molecule and we said we would share first data mostly safety, PK but also then at the conference possibly at ASCO first efficacy data and comparing to the (inaudible) molecule, we could potentially be second of course that as always depends on the data and the progress of the further studies.

And then Gunnar, your second question, I'll take that regarding the timing of the potential milestone in the 202 program. What we can tell you is that we're not assuming anything for this year for that program. And beyond that would really be premature to speculate on that. As you know, we don't give guidance beyond the current year anyway. So I think all we can say at this moment is that there is nothing currently assumed in our financial guidance for this year regarding MOR202.

Yes. On top of that Gunnar, regarding the cash position, I think that sort of payout range. You can assume for 2015 end of the year is EUR300 million to EUR310 million. That should be the net cash position.

All right, perfect. Maybe one follow-up if I may. On your assumptions regarding the top line, I think you've talked about six potential transitions and five programs are if I could recall that correctly and one potentially move into Phase 2, is there any chance that you see one of your partner programs moving into Phase 3, which could be then linked to a milestone payment for you?

In general it could be, but it's as you know extremely difficult to predict. We have seen surprises as in last year, but in terms of being early and we have seen the other way around the partners have been later than they originally estimated. So, as you know, we always assume some sort of mixture and that also drives the range you see on the top line, because we just can't be sure when certain programs, which we assume should move in the next phase and are scheduled to move in the next phase, really will move to the next phase and then bring us some additional revenue milestones.

Igor Kim, Oddo Seydler.

Thanks for taking my follow-up. I have a question regarding the overall trend. The number of partnered programs have significantly increased up to 84, I think compared to the prior year. And at the same time, the mix between -- in terms of employees between two segments, proprietary and partners has also shifted towards the proprietary programs. So the question is, should we expect another strong year in terms of partnered programs for 2015 or considering that you focused more on proprietary programs, it should be rather flat in terms of partnered programs for the current year.

Yeah, happy to answer the question Igor. Indeed, our stronger focus is on our proprietary activity with the existing setting of people involved in our partnered business. We are able to manage the programs and after we have made the antibody for the partners. We handed over to the partner and from there on they take over the further development and also cover the costs. And there is only limited sort of volatility in the number of people being involved in that segment. But with a stronger focus of MorphoSys on proprietary assets and our intention to in-license additional assets, there will be a stronger -- a higher number of people working on our proprietary activity.

The partner will be rather stable if there should not be some big additional corporations coming up, but the main focus is really to workup proprietary assets in the development arena to a great extent.

Mick Cooper, Edison.

Couple of questions. Firstly, with the lanthipeptides and also the bi-specifics. How far away are these from entering the clinic potentially? And also you just got very strong cash position, but how much -- can you give us some indication of how much is tied up and how much is available to in-license and to develop another program or programs?

This is Marlies, ready to take your first question on the lanthipeptide and bi-specifics. So this is still early work where we undevelop the technology and make it ready to be used in a kind of industry setup. So, I would say those programs are still very young programs and it's not possible to predict exactly the point in time when they might reach the clinical development.

And in terms of your second question Mick, indeed, we have a very solid financial basis as also mentioned in my speech, and despite the fact that the cash flow cost is in the range of EUR300 million and EUR310 million by year-end. I mean, that's certainly indicates that we have sufficient financial resources to in-license additional compound. So, we don't see a limitation in respect of the financial resources to do this at this point in time. It's rather a question of getting the right assets in-house that's a much more challenging job to do to undertake, but the financial resources are there and for the foreseeable future they should be also there.

Olav Zilian, Baader Bank.

It would be about an update on your collaboration behalf of GSK on MOR106 and the related question to that one is, who is actually the manufacturer of this antibody?

So, thanks Olav for the question. You know that we have the collaboration with GSK and a little hesitant to really publicly specifically comment on their plans. We know they're working on the next 2b study, to be started probably this year. I can't really be more specific than that, because the arrangement is that the new partner really comments on that itself. We see there's very good commitments, all the resources going to the plants are getting ready and certainly the next study is well on its way.

Thank you. And on the manufacturing. Please?

I mean, I can take that question Olav. This is Marlies again. I mean just to remind you of course as it's in the hands of our partner GSK, we won't be able to comment and disclose the manufacture of the molecule.

Okay, thank you.

George Zavoico from [John's] Trading.

Thank you taking my questions. I have three quick questions, I think I hope. First one regards the molecular weight and CD 19 target, this is clearly a focus also in the T-cell programs in a number of other companies and academic institutions, first question how do you see molecular weight fitting into the spectrum of care for CD 19, CD 20 associated diseases? Second question, with regard to your collaboration with Emergent and you're moving into biospecific and other types of antibodies. Is that partnership moving further or beyond the 209 into other biospecifics as you mentioned you're exploring new technologies. EBS has from my understanding credit position in those kinds of antibodies. And my last question, considering your progress and movement into number of different programs, your G&A expenses have diminished remarkably in the light of the sort of expansion that you've had. So could you describe a little bit how you manage to arranging some of your G&A expenses? Thank you.

George, this is Arndt. Thanks for the first question, your question was about how this CD 19 208, fits in the spectrum of CD 19 20s basically positioning there in the space. What we feel is, you know, we have a FC enhanced molecule that has shown very well behaved in all respects in terms of production, safety, very much, we have had very encouraging first efficacy signals. The final data CLL where it really compares favorably with the CD20s, actually all CD20s and CD 19s in relapsed-refractory CLL, there are promising the first data, preliminary in DLBCL follicular lymphomas of the NHL space. So we think well-positioned with the really naked antibody that is very safe and shows efficacy, that you know when you think about cell therapy just to say it is more commonly, which is quite demanding in terms of infrastructure needed at the different centers. We believe we'll be something that will be very much used in that space. So that should make it unique possible for positioning in the CD19 space.

And George, let me take the second question. So just to be really clear about the relationship with Emergent that is confined just at the one program, the MOR209 program and there is currently at least nothing going on beyond that within our collaboration with Emergent. Having said that, we have our own and that's where it comes from our own activities in the bi-specific field. As I mentioned, we have some developments there that's we like and we'll continue to pursue to give ourselves independent of others, the ability to make bi-specific antibodies against targets that we're interested in.

And then coming to the G&A expenses, in general, it's our intention to really keep G&A as low as possible to invest the money instead of G&A people into the R&D arena. But we also have to be fair that in 2013, we had some additional expenses that the numbers up in comparison to this year driven by, if you have a slim team and certainly arenas you need some external support like lawyers for certain appreciation as we did in 2013 with Celgene, with the GSK and with the sale of AbD Serotec and so on. So certainly there are also some costs that have to be associated to these jobs. But nonetheless, our intention definitely is to spend too much money on the G&A area, but really focus on the R&D area.

So R&D (inaudible) CD19 and MOR103 sort of prolonging treatment for patients with these diseases on antibodies before they need to go on to (inaudible) as many other people do sort of therapy at last resort. And Jens regarding G&A expenses, I suppose 2013 was sort of an outlier and not 2014 in terms of (inaudible) you basically have more expenses in 2013 and 2014 is more in line with 2012 then. Is that a correct interpretation?

Yeah, maybe I'll start, because you address at last. I think, you have to expect for 2015 slight increase versus the 2014 figures to some extent is really a lower figure and then normally an 2018 wasn't may be an outlier in terms of the amount. So for the near future at least for this year giving guidance, I would not expect, I would expect the number, which lies between the two.

And maybe just to briefly address again, George. So you know, I think we see it of course very different than cartisol that would see that independent. Let me make one more comment, since we know disclosed and as we said, we're going to start these two Phase II trials in DLBCL where we saw a very promising results, they know that might end in bendamustine and here with bendamustine really the goal is to really replace the rituximab plus bendamustine regimen, which is well-established in the second line those patients that are non-eligible for stem-cell transplant in high dose chemotherapy. So here, and I think that was one of the original question in that specific setting, the goal would really be to replace a setting that is already established there. So we want to take that on and answer that impartment question earlier on.

thanks. Thank you very much for the clarification. Thank you taking my questions.

Sachin Soni, Kempen & Co

Good afternoon, everyone. My question is regarding your collaboration with Merck Serono and immuno oncology in general. Is the partnership but Merck Serrano is totally in isolation as far as this collaboration is concerned or is it in combination with Pfizer or you're talking to the same people? And what is the interaction there, what is the strategy to develop what kind of candidate? That's one. And the other one is, your own BO2 and license new products, Simon you mentioned you're still focused on oncology, but oncology is too broad, is there a way you approach this process to pick up a new candidate, can you share some light in that? Thank you.

Sure. Thanks sachin. Starting with Merck Serono, this is a collaboration, which focused on specific checkpoint targets. Its unrelated to whatever else they maybe doing elsewhere with others. There are certain checkpoint targets that they are interested in and we are interested in and we're using our Lanthio technology to make antibodies against those particular targets. What's not disclose this, how many targets are involved there, what's not disclosed is the identity of the targets as is normal for this stage of the of the project, but it is a standalone project. Secondly, regarding in licensing of new products, what we look for is we look at the landscape out there for antibodies or antibody like molecules that we think are differentiated. Preferences for cancer, as you've seen, we are able to in-licensed compounds that are outside of our very core focus few hematology or HemOnc when we brought in this molecule for Emergent's in prostate cancer. The key point is really the differentiation and we look -- we've looked at a lot of compounds not just in cancer, but also outside cancer and really look at the data are available and whether those modules are sufficiently differentiated that are viewed justify the investment of course, not on the investments in getting our hands on them, but the investment that's required them to develop them. And when we can negotiate a suitable agreement with the other side, as we've done with Genencor and now with Emergent and we're prepared and able to act.

Maybe a quick follow-up on this one. How much your time has spent on this particular process over the full year?

You mean the be personally or do you mean time of the Company.

Time of the management.

Yeah. I can't give you a precise number, but a significant chunk of time the way it works is, we have a little team here, part of our business development team whose job is to scale the landscape and evaluate sort of engage with people and evaluate the potential opportunities that are out there. That business development group reports to me, so a significant chunk of my time was spent working with them, looking at these opportunities, considering them inevitably, (inaudible) involved as well as its cost R&D relevant. So it is a big part of what we do and an important part of our strategy, which as we said aimed at building as valuable of pipeline as we can and we simply can't do all of that totally on our own, which is why the in-licensing is such a priority for us.

Victoria English, [Avenal] Publishing Limited.

I was bit curious about the pediatric trial the investigator-sponsored pediatric trial, which will combine MOR208 with the transfer NK cells from a parent to a child. Is there any precedents for this in the literature or otherwise?

Victoria this is Arndt, I will be glad to take this question. So, yes, there is actually, we're going to do this with St. Jude Hospital and they and others have actually before used these also called haploidentical as a parental NK cell transfusion good literature that's safe to do that, of course purified, clean, there is rarely any safety events seen when this is being done and the full concept is you know, we have to mention that CLL is a very, very acute disease, usually the immune system is battered with high dose chemotherapy that these children and young adults and adults gets and specifically in children. So the idea is with an FC-enhanced antibody that works through NK cells and of course would be weakened by a battered immune system to restore that to really give the anybody the ability to act as it should be.

We currently have no questions coming through. (Operator Instructions) (inaudible).

Thank you for taking my question. The question on head count. What is your number you are heading for the current year, especially at the next round of your intense proprietary activities? And another question is around your presence in the US, the time to be more present in the US right Now? Thank you.

Yes, Thomas, thanks very much for your question. Regarding the head count, we see -- a slight increase in the range of 5% to 10% for this year, where the focus as I mentioned earlier based on the question raised on the proprietary for the proprietary segment.

Regarding the US presence. Thomas. We are already very present in the US in terms of our Investor Relations activities where there're a lot doing road shows, doing conferences, talking to investors and so on. As you know we have collaborations with a number of US academic institution and also companies over there. It's an important place for us to be. And without giving any details you should expect in general our visibility and presence over there to increase with time.

But there's no actual need to be more closer to your partners in academic who in the industry?

We're happy with the way we manage that, we have a lot of experience of managing relationships and interacting with companies really all over the world, so we know how to do that. But as I said, you should without wanted to go into any details as (inaudible) you should expect the US to become an even more important part of our activities in the future.

Thank you. We have no further questions coming through. I will now hand back over to Dr. Moroney to wrap up today's call.

Thank you. And to conclude the call, would like to remind you of the key taken messages. We're excited about the prospects of progress this year. Strengthening our own portfolio will be at the center stage of our efforts. We plan to advance the clinical development of MOR208, MOR202 and MOR209, while at the same time continuing to build a sustainable portfolio through our discovery activities.

You can expect that our partnered pipeline will continue to mature and grow. Within the next 18 months to 24 months, we expect to see clinical data for various programs, including readouts from pivotal studies bimagrumab and guselkumab, which will provide clarity on market introduction of the first antibodies. We continue to execute our long-term plan to build the broadest and most valuable antibody pipeline in the biotechnology industry including unique approaches that I aim to help patients in serious conditions. That completes the presentation. Thank you very much for your attention.

Should any of you wish to follow-up with us directly, we are in the office for the remainder of the day. Thank you for joining the call and good bye.

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