MorphoSys AG (MOR) 2015 Q4 法說會逐字稿

Ladies and gentlemen, welcome to the MorphoSys yearend results conference call. (Operator Instructions).

Now, I would like to turn the conference over to Dr. Gutjahr-Loeser, please go ahead.

Good afternoon, and also good morning and welcome to our 2015 yearend results conference call and webcast.

I am Claudia Gutjahr-Loeser, I'm 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 CEO' and Marlies Sproll, our CSO.

Simon and Jens will present you a review of the year 2015, and provide an outlook for 2016. After the presentation, we will be all available for your questions.

For those on the conference call, you will find the slide deck for this presentation, on our corporate website.

Before we start, I would like 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 programs; 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.

In the presentation, we will review 2015, and provide an outlook for 2016. We will cover our most advanced development candidates and Jens will review the financial results 2015, and the financial outlook. The presentation will last about 30 minutes.

I would now like to hand over to Simon Moroney.

Thanks Claudia, and also from me a warm welcome to our yearend call.

Over the last year MorphoSys has accelerated its transformation from a technology provider to a drug development Company. We have built one of the strongest and most differentiated biopharmaceutical pipelines in our industry.

With the first partnered programs approaching the market, and our proprietary portfolio gaining momentum, we intend to invest additional resources to advance our programs as quickly as possible.

Our two most advanced proprietary programs, MOR208 and MOR202, will receive the lion's share of this investment. We're increasingly confident about the potential of these two programs, based on the data we're seeing.

The excellent cash position on our balance sheet plus the recurring cash flows that our business generates, means that we invest in R&D from a position of strength.

This is in line with our long-term strategy, and is the best way to create sustainable, long-term value. Our ability to invest is not affected by the current market downturn, nor will we allow the market's volatility to distract us from executing our strategy.

I'll now run through the main programs in our pipeline. Right at the start, I want to remind you that there are simply too many programs to discuss in detail, so this presentation will focus only on the most advanced ones.

I'll start with our anti-CD19 antibody, MOR208, the most advanced of our proprietary development programs.

We presented updated clinical data from the Phase 2 study or MOR208, in Non-Hodgkin's lymphoma, at the 2015 ASCO and ASH conferences. We also saw first data from an investigator-initiated combination trial, of MOR208, plus lenalidomide and CLL, at ASH in December.

These data all confirm that MOR208 has very attractive characteristics for the treatment of certain B cell malignancies. In a competitive space, MOR208 is differentiated by the following key properties.

It has all the advantages of an unmodified antibody: a benign safety profile, a long half-life in circulation and very good manufacturing characteristics.

But, through a very minor structural modification, greatly enhancing the molecules ability to kill B cell, it has the clinical activity required to be a successful anti-cancer drug.

The clinical studies, as well as trends in the market, have helped us define our development plans for MOR208, which we're now rolling out.

MOR208 is ideally suited to be a key component of combination therapy in B cell malignancies. While the Phase 2 data showed a very encouraging level of single agent activity, we believe that MOR208 will be most effective in combination with other agents.

Our development plan is aimed at two of the biggest unmet needs in cancer therapy, namely relapsed or refractory diffused large B cell lymphoma; and in CLL patients, who failed the treatment with ibrutinib, or other BTK inhibitors.

Starting with the relapsed or refractory DLBCL setting, this year we'll start two Phase 2 combination trials in these patients.

What we've seen so far is that MOR208 can be effective in patients who no longer respond to the current gold standard, which is Rituximab-based therapy.

Our development plans are focused on exactly this setting, and the two new studies will give us a great opportunity to show that MOR208 can make a real difference here.

The first study, which we'll start shortly, will combine MOR208 with lenalidomide. This will be a single arm, open-label study, in 80 relapsed or refractory DLBCL patients. We expect to present first data from the study next year.

The second study, which will start later in the year, will combine MOR208 with bendamustine. This study consists of two parts, the first of which is intended to assess the safety of the combination. This is a small study and is required, by the regulatory authorities, before we can start a pivotal study.

We expect the first part to be completed around the end of this year, and to transition into the second part next year. This will be the Phase 3 and pivotal portion of the study in which we'll compare MOR208 plus bendamustine, head-to-head with Rituximab plus bendamustine, in up to 320 patients.

This we see as the fastest path to market for this program.

The CLL study, which is scheduled to start shortly, also addresses a major area of unmet need. Here we're focused on patients who have been treated with ibrutinib or other BTK inhibitors, but have had to discontinue due either to unacceptable toxicity or progressive disease.

It's becoming increasingly clear that these patients have a very poor prognosis, with no remaining treatment options. The unmet medical need in these patients is thus extremely high. Their tumors continue to express CD19 and, therefore, should be susceptible to MOR208.

This segment is likely to grow significantly over the coming years as ibrutinib uptake increases.

The trial that we'll run will be a Phase 2 study combining MOR208 with idelalisib in ibrutinib or other BTK refractory CLL patients. We're aiming to recruit 120 patients into a single arm, open-label study and expect first data from the trial next year.

Meanwhile, the investigator initiated trial of MOR208 and CLL continues at Ohio State University. We saw encouraging first data from this trial at ASH in December of last year.

Altogether, we expect 80 patients to be treated in this trial. The settings are MOR208 plus lenalidomide in relapsed refractory naive or Richter's transformation CLL; and MOR208 on top of ongoing ibrutinib in CLL patients, who are failing ibrutinib therapy.

In ALL we had planned to support another investigated trial -- investigator initiated trial. We have recently learnt, however, that due to personnel changes at St. Jude's Children's Research Hospital in the US, this trial will now not take place.

The next program I'll talk about is our anti-CD38 anti-body MOR202. Despite an unexpected setback in March of last year, when our partnership with Celgene ended, we reported very encouraging clinical data from the ongoing open-label Phase 1/2A study in relapsed or refractory multiple myeloma at ASCO and ASH last year.

We're continuing with three arms in this study; MOR202 alone, MOR202 plus lenalidomide, and MOR202 plus pomalidomide. Since ASH, we have gathered more data from the 16 mg/kg monotherapy and 8 mg/kg [inert] combination cohorts.

These data provide further evidence of the potential for MOR202 to provide a clearly differentiated treatment alternative in multiple myeloma.

First, we continue to be very positive about the drug safety profile. MOR202 is administered in a two-hour infusion, as yet un-optimized. In the intended regimen we've so far seen only one patient with mild infusion reactions.

Patients receiving MOR202 plus pomalidomide have shown very encouraging responses, which have deepened considerably since first data was reported at ASH in December 2015.

If the responses that we've seen are borne out in more patients as the study continues, then there is reason to believe that MOR202 could potentially be best-in-class in terms of efficacy, safety, as well convenience.

As always, we'll reserve detailed data presentation for a suitable medical conference.

Pre-clinical data that we presented at ASH suggests that one of the key advantages of MOR202 could be preservation of natural killer cells. We showed that, in contrast to other CD38 antibodies, MOR202 spares NK cells, while multiple myeloma cells are killed with efficacy similar to that shown by other antibodies.

Since NK cells are a key piece of the mechanism of action of these drugs, it's desirable to preserve them. Although this has to be validated clinically, we hypothesize that this feature of MOR202 may translate into a more durable response than is seen with other anti-CD38 antibodies.

Based on all the pre-clinical and clinical data we have collected so far, MOR202 is shaping up to be a genuine advance in the treatment of multiple myeloma, potentially offering patients superior outcomes and quality of life.

Well, we are often asked about our plans for partnering MOR202 and MOR208; both programs clearly have substantial market potential. We feel that in order to extract the maximum value from each program, we intend to partner them for later stage clinical development, and certainly for commercialization.

In each case, we aim to maximize value MorphoSys and our stakeholders within the partnerships we enter. This will mean retention of significant rights for MorphoSys.

Optimizing the terms in any negotiations is easier when the data package around the program is convincing, and this is our focus right now, further adding to our strong data packages for both MOR208 and MOR202.

The third clinical program in our propriety development segment is MOR209. This bi-specific antibody for prostate cancer is currently the subject of a co-development agreement with the originator, Emergent BioSolutions.

The Phase 1 clinical trial in castration-resistant prostate cancer patients was commenced in March of last year. After a joint examination of the initial data, we decided, together with Emergent, to adjust the drugs dosing regimen and administration.

Clinical development will continue in 2016, under an adapted trial protocol and updated agreement.

Under the terms of the updated agreement, the parties have reduced MorphoSys's cost sharing over the next three years, and reduced future milestone payments payable by MorphoSys to Emergent from $163 million originally, to a total of up to $74 million. Other financial terms and the split of the commercial rights remain unchanged.

Behind these clinical programs are two compounds that are currently in late pre-clinical development, which are both scheduled to enter the clinic this year.

The first of these is MOR106, an antibody against an inflammatory target from our joint discovery and development collaboration with Galapagos.

We expect the start of the Phase 1 trial in the first half of 2016. This will evaluate safety and pharmacokinetics of the antibody in healthy volunteers and also in patients. We plan to disclose more information as soon as the clinical development has started.

The second is MOR107. This compound is a lanthipeptide from our acquisition of Lanthio Pharma last May. The compound is an agonist of the angiotensin II type 2 receptor, which is a key component of the unexploited protective arm of the renin-angiotensin system.

MOR107 has shown anti-fibrotic efficacy in animal models, and is being developed for diseases with a fibrotic component. We're aiming to start clinical trials towards the end of this year.

In addition to MOR107, the acquisition of Lanthio Pharma brought us three additional anti-peptide drug candidates in earlier stages of development.

The most advanced program is a lanthipeptide that stimulates the mast receptor, which represents a second key target of the protective arm of the renin-angiotensin system. This compound has also shown strong efficacy in animal models.

MOR103 rounds out the review of the proprietary portfolio. This HuCAL antibody against GM-CSF has been out-licensed to GSK, but we continue to include it in our proprietary development segment, because it originated as an internal discovery program that we took through Phase 1b/2a development before partnering.

GSK has announced its plans for the program, renamed GSK3196165 last year. It is currently in a Phase 2b trial in rheumatoid arthritis, which will recruit approximately 210 patients. We expect to see results of the study next year.

GSK also announced that they intend to start a Phase 1b/2a clinical trial of MOR103 in osteoarthritis of the hand this year.

Before moving on, I'd like to stress here that we see a lot of potential in our proprietary portfolio. For each program, there is an unmet medical need and very clear differentiation of the compounds versus competing programs in the same space. These criteria are essential for us when we consider where to invest and we're convinced that each program deserves, and will benefit from, the increased investment that we plan this year.

A key element of our development strategy is ensuring a sustainable flow of programs. For this reason, our discovery and target sourcing activities are important.

In 2015, we entered new agreements with the biotech companies, Immatics and G7, as well as with the University of Stuttgart. The objective of these collaborations is to source novel targets against which we apply our antibody and/or peptide platforms to discover innovative drugs.

The Immatics collaboration is a great example of this. Their platform identifies novel tumor-associated peptides presented on the surface of malignant cells. We have shown that our Ylanthia technology is ideally suited to making differentiated antibodies against technically challenging targets of this type.

The collaboration is, therefore, a perfect match and we hope that it will be the source of a number of innovative anti-cancer programs for us.

A different type of collaboration is that with Merck KGAA. Here, we are using our Ylanthia platform to discover and develop antibodies against selected checkpoint targets. This is more representative of the type of collaboration we'll enter in the future: shared risk, shared reward and a genuine co-development setting, rather than limiting our involvement to antibody generation only.

I'll turn now to the pipeline arising from our path of discovery alliances. The most advanced program is bimagrumab, the HuCAL antibody we made from Novartis which they are developing in a number of muscle-wasting conditions. Recruitment into the Phase 3 trial in sporadic inclusion body myositis is complete and we expect the results of this trial shortly.

Recall that Novartis has breakthrough therapy designation from the FDA for this program. We would therefore expect, given favorable results, that the regulatory process in the US could go quickly.

If approved, bimagrumab would become the first marketed product from our technology platform. Market entry will start the transformation of our revenue statement to one based on product sales.

In addition to inclusion body myositis, Novartis is also developing bimagrumab in patients who have undergone hip fracture surgery, those with cytopenia and cachexia, with several Phase 2 clinical trials ongoing. Clinical data from some of these studies is expected next year.

Right behind bimagrumab is guselkumab, a HuCAL antibody being developed by Janssen for psoriasis and psoriatic arthritis. Janssen is currently running six Phase 3 trials in psoriasis settings, three of which will read-out this year.

Janssen has recently confirmed that they expect to file for approval of guselkumab before year end and, given favorable results, we could expect it to come to market next year. Guselkumab would then be the second marketed product based on our technology and the second source of royalty-based income.

A year ago, we talked about Roche's discontinuation of the HuCAL antibody gantenerumab in a Phase 3 clinical trial in prodromal Alzheimer's disease.

One year on, the picture looks much better. Roche sees potential in this program and has decided to explore higher doses of gantenerumab. They've, therefore, converted both active Phase 3 trials in prodromal and in mild patients to open label.

Results from the dose-finding studies will guide next steps and Roche has mentioned that a new Phase 3 study could start next year.

Most recently, Bayer's antibody drug conjugate anetumab ravtansine entered a global Phase 2 clinical trial in mesothelioma, a study designed to support registration. The antibody part of this conjugate is derived from our HuCAL platform and targets mesothelin, a target implicated in other solid tumors, such as non-small cell lung cancer, as well as mesothelioma.

In conclusion, our entire pipeline now comprises 103 programs at all stages of development, an increase of nine over last year. There are 89 partnered discovery programs and 14 in our proprietary development segment. Of the 103 programs, 25 are in clinical development, an increase of three over last year.

With that, I'll conclude and hand over to Jens for his wrap-up of the financials.

Thank you, Simon. Ladies and gentlemen, also from my side a warm welcome to our conference call for the financial results of 2015.

2015 was operationally another solid year for MorphoSys. We made significant progress advancing the Company and its pipeline. In terms of our financial results, we ended the year slightly exceeding our updated guidance from the end of March of last year.

Our solid financial foundation of close to EUR300 million in cash and other financial assets at the end of 2015 allows us to operate from a position of strength. This enables us to increase R&D expenses to grow and advance the Company's pipeline and value without sight of prudent and efficient use of resources.

Let me now turn your attention to the financial highlights of the year 2015. Revenues came in just above the guidance range of EUR101 million to EUR106 million, at EUR106.2 million.

EBIT amounted to EUR17.2 million. Comparing the yearend EBIT with our guidance of EUR9 million to EUR16 million, we closed slightly above the upper end of the EBIT range.

Our financial position remains very strong. We ended the year with a healthy cash position of EUR298.4 million.

I would like to remind you that our 2015 revenue contained a significant contribution from FX in connection with the ending of the Celgene collaboration in the amount of approximately EUR59 million. Those positive non-recurring effects are fully reflected not only in the revenues but also in the earnings figures for 2015.

As background information, you may recall that we received an upfront payment from Celgene amounting to nearly EUR71 million in 2013, when we had started the collaboration. According to IFRS, we had to consider this payment on the balance sheet as deferred revenues.

After ending our collaboration in March 2015, we had to recognize the deferred revenues in full and realize the nice positive effect for our P&L. This explains the exceptionally strong year-on-year increase in revenues, both for the Group and the proprietary development segment, as well as in earnings and causes the related changes for a number of corresponding balance sheet positions.

Let's now have a closer look at our income statement. On slide 21, you can find the profit and loss statement 2015 in comparison to 2014. Revenues increased from EUR64 million to EUR106.2 million.

As planned, total R&D expenses increased by EUR22.7 million to EUR78.7 million in 2015, mainly due to higher costs for external laboratory services and personnel. R&D expenses on behalf of partners remained in the same ballpark as in previous years and just slightly increased to EUR22.1 million. As planned, proprietary R&D expenses increased by 55% to EUR56.6 million.

General and administrative expenses slightly increased to EUR15.1 million, mainly as a result of higher personnel expenses.

Other income and expenses totaled EUR4.7 million and mainly stemmed from earnings effects from the fair value measurement of the shares already held in Lanthio Pharma BV in the amount of EUR4.5 million.

Earnings before interest and taxes amounted to EUR17.2 million.

Finance income and expenses for 2015 amounted to EUR3.4 million versus EUR1.6 million in 2014 and included mainly interest income, as well as realized and unrealized gains from foreign exchange transactions.

The Group reported income tax expenses of EUR5.7 million comprising current tax expenses of EUR4.2 million and deferred tax expenses of EUR1.5 million.

All in all, in 2015, MorphoSys generated a consolidated net profit of EUR14.9 million. This results in a diluted net profit per share of EUR0.57 versus a diluted net loss per share of EUR0.12 for the previous year.

Let's now turn to the segment reporting. Here, in 2015, the proprietary development segment achieved revenues of EUR59.9 million basically stemming from the collaboration with Celgene.

Looking at our partnered discovery segment, revenues amounted to EUR46.3 million. Segment revenues for 2015 included EUR42.3 million in funded research and licensing fees and EUR4 million success-based payments.

Due to the increased efforts in the clinical development of our proprietary pipeline, operating expenses for proprietary development rose from EUR33.5 million in 2014 to EUR54.1 million in the reporting year.

In partnered discovery, operating expenses increased slightly to EUR25.9 million in 2015 from EUR23 million in 2014.

Hence, the proprietary development segment reported an EBIT of EUR10.7 million, while the partnered discovery segment achieved an EBIT of EUR20.4 million in 2015 compared with EUR25.9 million in the previous year.

Let's move on to the balance sheet on slide 23. As of December 31, 2015 total assets amounted to EUR400.1 million and were EUR26.4 million lower compared to the end of the previous year.

On December 31, 2015 the Company held liquid funds and marketable securities, as well as other financial assets in the amount of EUR298.4 million compared to EUR352.8 million on December 31, 2014. This amount includes cash and cash equivalent financial assets and bonds available for sale, as well as financial assets classified as loans and receivables.

Please note that our cash balance is shown at five different line items in the balance sheet. The existing funds actually available for investments are, therefore, significantly higher than the pure cash and cash equivalents position indicate.

Total Group equity amounted to EUR362.7 million at yearend compared to EUR348.8 million on December 31, 2014, resulting from the exercise of 80,848 convertible bonds in 2015. The number of shares issued rose to 26,537,682 million by December 31, 2015.

Net cash outflow from operating activities in 2015 totaled EUR23.5 million.

This brings me to the outlook section and the financial outlook for 2016. MorphoSys expects Group revenues for 2016 financial year in the range of EUR47 million to EUR52 million. This is in line with the 2015 revenue figure taking the sales and effect of EUR59 million into account.

Based on our intention to further advance and broaden our product pipeline, the Company's R&D budget for proprietary drug development will rise further in 2016 in comparison to previous years. The majority of the expenses will flow into the clinical development of MorphoSys' most advanced drug candidates.

R&D expenses for proprietary drug development are expected to rise to EUR76 million to EUR83 million from EUR56.6 million in 2015. We expect an EBIT for 2016 in the range of between minus EUR58 million to minus EUR68 million.

We would like to reiterate again that we deliberately increased R&D spending based on the solid financial foundation of close to EUR300 million in cash and other financial assets at the end of 2015. This will enable us to grow the Company's pipeline and the value from a position of financial strength and, needless to say, not losing sight of our well-disciplined approach to investments.

The guidance does not include any potential in-licensing or co-development of further development candidates, nor does it include any revenues from new business deals.

With that, I would like to finish my presentation and hand back to Simon for a short operational outlook before we start the Q&A session.

Thanks, Jens, and to conclude I'll summarize briefly what you should expect from us over the next 12 to 18 months.

By the end of this year, we could have two products in registration and five programs for our proprietary development activities in clinical development.

First, bimagrumab; we hope to see positive data from Novartis' Phase 3 trial and sporadic inclusion body myositis in the near future. With breakthrough therapy designation, we hope for a quick regulatory review by the FDA. All going well, bimagrumab could be approved in the US this year.

Guselkumab read-outs from three of Janssen's Phase 3 studies in psoriasis are expected mid-year, which could provide the basis for regulatory filing this year and market introduction next year.

MOR208; this year we will start Phase 2 trials of MOR208 plus lenalidomide and of MOR208 plus bendamustine in relapsed or refractory DLBCL. The bendamustine combo trial is a safety study that should transition to a pivotal trial in 2017.

We'll also start a Phase 2 trial of MOR208 plus idelalisib in ibrutinib refractory CLL patients.

The investigator-initiated trial of MOR208 and CLL will also continue. We plan to report first clinical data from some of the new studies next year.

In 2016 we expect to have data from the NHL monotherapy trial and we might see updated data of the investigator-initiated trial for MOR208 and combination with lenalidomide in CLL patients this year.

MOR202; we'll continue the Phase 1/2a study of multiple myeloma and expect to have completed the three ongoing arms monotherapy and the combo arms with lenalidomide and pomalidomide by the end of the year. We aim to provide updates on this program at ASCO in mid-year and at ASH in December.

MOR209; we plan to continue the current clinical trial under an amended protocol with recruitment to start around mid-year. We currently do not plan to publish any clinical data in this year, but more likely in 2017.

MOR106; we expect to start a Phase 1 trial of this anti-inflammatory antibody, together with our partner Galapagos in the first half of this year.

MOR107; we expect to start a Phase 1 trial of this lanthipeptide for fibrotic disease towards the end of this year.

MOR103; we expect our licensee, GSK, to commence a Phase 1b trial of osteoarthritis of the hand during the year and first data from the Phase 2b trial in rheumatoid arthritis in 2017.

As always, we expect several data read-outs from partner programs during the course of the year, especially Phase 2 trials for Novartis' ophthalmology program, LFG316 and their cancer program, LJM716, which will be completed during 2016. We expect to see clinical data at upcoming medical conferences.

For the pipeline as a whole, we expect up to five new program starts. We also expect around five clinical milestones; that is programs either entering into clinical development or transitioning between clinical development stages.

As usual, we expect to enter partnerships with other companies in our industry aimed at maximizing value from our technology platform and/or proprietary programs. Discussions and negotiations are ongoing and as always, we do not provide guidance on the nature of any deals or their possible timing.

Right now, our plate is full in terms of proprietary developments, as is apparent from the level of investment we're making and the addition of new compounds through in-licensing or other types of transaction is not high on our list of priorities.

In closing, we have a great pipeline with truly differentiated compounds and are looking forward to the first product approvals.

We're very optimistic about our proprietary development portfolio, and are pleased that we have the financial strength to invest at the level required to ensure maximum value generation from these programs.

This is going to be a big year for MorphoSys and we're excited about what's ahead of us.

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

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

(Operator Instructions). James Quigley, JPMorgan.

On MOR209 would you be able to give us a bit more detail on what led to the new dosing regimen? Was it efficacy based or safety based, or were there some other factors?

Also, with the change in the milestone payments and the agreement with Emergent, does that now translate to a lower -- or the commercial opportunity is lower given that you're now paying less away, and also less in terms of R&D costs?

And MOR202 plus pom data, can you give us a bit more -- or elaborate a bit on the deepening responses? I think at ASH the response rate was round about 6% to 7% for this cohort. How is it going in terms of the deeper responses, and have you got more patients within the cohorts?

On the guidance, working through the numbers, it implies potentially EUR10 million of additional SG&A. Could you talk us through where that's coming from?

Finally, getting back onto MOR202, what's the response been from KOLs, you spoke to on the importance of the NK cells bearing? And could the benefit potentially be limited versus other CD38s, given that they also take out T rogue cells, so the NK cells that are left have less inhibition? Thank you.

James, thanks for those questions, Arndt. I'll start with 209 and then hand over and then go 202.

So your question's the factors that have led us to start a new dosing regimen, this time we are -- as you're well aware in the dose escalation part, this is a safety part early times Phase 1. We will update when we have new data on the new dosing regimen, and we'll update when we start and have data next year.

This time we're not disclosing any specific details. I think you're well aware of these early safety trials that we look at safety signals and [NK]. So looking at that data has led us to use a different more frequent dosing of the antibody and we want to share more detail when we have more data from the next phase. Maybe I'll hand over to Simon for the milestone question.

Yes sure, James. Obviously, having to change the protocol here that impacts not least the timeline for the entire program. Given what we saw, we sat down with our partners, Emergent, and had a discussion about whether the terms that had been originally agreed in the agreement were a fair reflection of where the program was at, given what we were seeing clinically, and actually very quickly reached an agreement that we should make some adjustments there.

The agreement was amended accordingly in terms of some of the payments, both the development payments and milestone payments. So that was a very quick and -- very quickly agreed between the two parties, and I think it's a fair reflection of where the program stands now.

Jens, continue with the question 202, what we have seen, deepened responses in the 202 with pom combination cohort.

Yes, indeed, since we last reported you're right. We had a clinical benefit rate of 67% there. Of course, this is small patient numbers. We feel very encouraged, because the depth of the response has deepened. This time we don't want to give a clear -- what responses we have seen, we want to do that, is the proper way, in a conference.

What we have seen consistently also a treatment over time that the depth of the response has deepened, so we feel very encouraged about that.

In terms of where we hypothesize that the sparing of the NK cells, as Simon mentioned in his speech, may have influence on the durability of the response, and that's also durability and quality of life. Yes, we have seen this pre-clinically. As we said, we need to validate it clinically.

And if I got your question right, there are some -- with the other CD38, that there is some depletion of regulatory T cells. We haven't looked at that specifically. We have looked at the NK cell, that's something we're also going to analyze going forward.

Just coming back to the NK cell, because we see that sparing pre-clinically needs to be validated clinically. It could have a bearing on the durability of the response as we all know. There are some limitations that investigators would like to see prolonged. That's also the feedback that we see. Anything that could help that is good.

Also adding, you might have seen the poster at ASH where we see -- actually, we don't see a decrease in CD38 expression as some -- again, pre-clinically as some with the other antibodies that also could be a factor that's, in the long run, having a positive bearing on durability of response.

Then, James, maybe to your guidance question, was a bit tough to understand, but I guess I hope I understood it correctly. Your question was if we would have some EUR10 million for G&A expenses included in our guidance if that is correct.

Maybe to remind everybody, in 2015 we had general and administrative expenses of roughly EUR15 million; EUR15.1 million. You should expect going forward for 2016 a slight increase here. So that is certainly reflected in our overall EBIT guidance of minus EUR58 million to minus EUR68 million. I hope I got your question right here.

Yes, my question is just it implies, potentially, a EUR10 million uplift based on the EBIT. I'm just wondering where that came from?

No, there is no EUR10 million uplift. It will be just a smaller uplift, as in every other year that we had over the last couple of years.

Okay. Thank you.

Daniel Wendorff, Commerzbank.

It's actually relating to the underlying level of payments you get from Novartis. Can you update me again on the duration of this long contract? Is there another option to prolong it? How should we think of this line beyond 2016 and the years to come? Thank you.

Yes, Daniel, remember it goes -- scheduled to run until December of next year. And remember that Novartis has an option to extend for a further two years. Currently, we don't know whether they will do so or not.

The way the contract is currently structured, they pay us roughly EUR40 million, split pretty much half-half technology access fees and FTE funding.

Okay, thank you. Yes, that's it.

(Operator Instructions). George Zavoico, JonesTrading.

A couple of quick questions. First one regarding MOR202, the NK cell effect; was that something that was planned in with the design of the antibody?

And if not, are you in the process of figuring out exactly the mechanism of why you're getting an NK sparing? And could that be a property that you might be able to then apply to other antibodies in development?

Second question is that at one point you were very much involved or focused on the cancer space and now you're broadening out into inflammatory and perhaps autoimmune on your proprietary pipeline. So are you becoming more opportunistic now in terms of broadening your indications?

Then a very quick question. The five new programs that you mentioned bringing up, are those all proprietary?

And finally, I wonder if you could provide a little bit more information on the checkpoint space, because that is clearly a very rapidly evolving area, and could also provide perhaps an accelerated or faster path to market. Thanks.

George, this is Arndt, thanks for your question. I'll start and kick off the 202 NK cell question. This is something we looked at. It wasn't predesigned. There are some possible explanations. It could have to do with the affinity of the antibody.

Remember that the CD38 expression on NK cells is lower than in multiple myeloma cells and, together with the affinity, that could have an effect. It's not something currently we see we want to engineer going forward, but, of course, any antibody, any program where these effector cells play a role, that needs to be monitored and maybe we learn something going forward.

With that, I'll hand over, I think, to Simon with the indication increasing out of the cancer space.

Yes, George, thanks for the question. So remember that we've worked in the inflammatory space before, MOR103 remember, for rheumatoid arthritis. We picked the target a long time ago and worked it up, made the antibody, took into the clinic and then out-licensed it to GSK.

So we have expertise beyond cancer. If we see opportunities to make great molecules against targets, perhaps inflammatory targets, which is what we think MOR106 is, together with Galapagos, then we're able and prepared to pursue that.

So the main focus will continue to be cancer, but we are certainly opportunistic, where we see targets and unmet medical needs outside of the cancer space.

In terms of those five new program starts for this year, that's probably a mixture between proprietary development programs and new programs being initiated by our partnered discovery pilots, which, at this stage, is Novartis.

George, this is Marlies; I'm happy to take your question about the checkpoint space. So, of course, we are very well aware and actively following this area of highly innovative research, which is ongoing and I think all the major pharma partners are looking into that and are excited about it as we are.

So to answer your question, yes, indeed, we are following the scene. We have a number of programs ongoing as well in our partnered segment, but also in our proprietary portfolio.

The one that has been disclosed is a co-development program, where we are actively working on with our partner, Merck, in Darmstadt, and various other ideas where we will be happy to inform the outside world when we are there and ready to talk about it.

I can't remember asking on the Merck program. Is that a -- are they focused on PD-L1? I can't remember offhand.

No, no. So it's not PD-L1, but the target has not yet been disclosed, so it's a different molecule.

Not yet disclosed, okay. Okay, great. Thank you. Thank you very much.

Welcome.

Sachin Soni, Kempen & Co.

A few questions from my side. On MOR202, as you dose up, do you see any infusion-related reactions coming up in the higher dose, or it doesn't change much and you only see the efficacy there?

Then you mentioned that you would like to see the data strong enough for both 202 and 208. Can you please elaborate what would be strong enough in your definition? Is 20 or 20.4 months duration of response in the DLBCL not strong enough currently, or is it still there?

And can you say something about 4-1BB program on going with Pfizer, what should we expect from that [front] as well? Thank you.

Thank you, Sachin; Arndt. So in terms of the infusion reactions, no, we have not seen an increase. Remember our ASH poster on 202 last year, we had one patient at the 16-mg MOR202 alone cohort where we had two infusion reactions low grade. That hasn't increased. So we haven't seen any increase -- well, we haven't dosed higher, but, of course, higher -- well, we haven't dosed higher in the monotherapy. We'll now go with 16 plus len and pom.

So that is starting now and we'll see if -- I expect the infusion reaction not to change, so no change there. Very low currently in terms of the infusion tolerability, best in class and quite lower than the other antibodies.

Then in terms of your question about strengthening the data packages. You rightly said in terms of durability of response, we see it exceeding 20 months now for 208. We see increase and very encouraging data for 202; that's true.

However, we feel we're not in a rush. As Simon said, we do plan to partner but we would like to gather more data. Quality is good. But as you can imagine, we're now starting the combo trials for 208.

Again, as we referred in the trial -- in the speech, we expect the best setting to be in combination therapy. When you look at 202, we are very excited about that. We'd like to share the data. But also we are now just starting the [16 plus image] combo cohorts, then the confirmation cohorts.

So it will be interesting how that develops if very encouraging response that we've seen can be sustained. That's what we mean really by strengthening the package.

And, Sachin, let me take the 4-1BB question. I think I'm right in saying that the last time we saw data in public was at ASCO last year, in the middle of last year. I think I'm right also in saying that since then we haven't seen anything published for 4-1BB.

As far as we're aware, Pfizer is very committed to the program. I think it's highlighted actually on Pfizer presentations as one of their top four or five pathway programs.

It looks to have some advantages that antibody compared to the BMS 4-1BB program, which got stopped for toxicity. So we continue to be excited about it. But we're not aware of any new data since ASCO of last year.

Okay. Sounds good. Thanks a lot.

Thank you.

Mick Cooper, Trinity Delta.

A few questions. First of all, with 107, can you give us an indication which areas of fibrosis in (inaudible) area, it's pulmonary, cirrhosis, if you can give some guidance there.

On the financial front, can you give some guidance on what you expect yearend cash to be. And am I right in assuming that the current financial guidance excludes any potential milestone from bimagrumab?

And finally just a follow-up on the previous checkpoint inhibitor question. Are you looking at just monospecific? Are you looking at some bi-specifics there? Can you tell us?

Mick, I'll start with your question on 107. Indeed, as we said, we've seen very encouraging pre-clinical efficacy in different fibrosis models.

Currently, we are focusing on diabetic. Nephropathy is one fibrosis area. Of course, that could be expanded to others. But that's where the current focus is we're targeting; and again, targeting to move into the clinic towards the end of the year.

Thank you.

And then maybe to the two financial questions, Mick. Regarding the cash position yearend, our estimate is that it will be somewhere between EUR225 million to EUR235 million. That should be the sort of ballpark you can expect for the cash position yearend 2016.

In terms of the milestone payments, and bimagrumab specifically, that's the question if that in included. As always, we have a number of potential milestone payments that we expect during a year.

Out of our guidance, as Simon mentioned earlier, we have some EUR40 million that come from Novartis. So in the other section there is certainly various milestone payments. Maybe as a general statement again for milestone payments with our partners, we receive milestone payments with a filing, as well as with the approval. So you should then expect that in general for the programs that we have with partners that we have such a split.

Okay. Sorry, just to follow up on that, is the total of the filing and approval milestone for bimagrumab potentially round EUR10 million? Is that a reasonable estimate?

No, that is not a reasonable estimate. I think we always communicated that it goes up -- it depends very much on the partner and so on. But, in general, it goes up to within a range of up to EUR10 million for milestone payments from the beginning to market approval. So I would expect that the filing milestone is significantly lower.

Okay. I was meaning the EUR10 million in total for the filing plus approval.

I don't want to give guidance on that sort of thing. Please bear with us on this for me, when we publish the figures.

But within the EUR7 million to EUR12 million roughly that you see, that comes on top of the EUR40 million from Novartis, there are certainly milestone payments in there. We have a couple of very interesting milestone payments that could occur in 2016, and bimagrumab is one of them.

Okay, thanks.

Yes, and Mick, this is Marlies again. Happy to take your last question, which was how about potential performance for antibodies targeting the checkpoint field.

We are exploring different opportunities, of course, and we are quite excited about some of our experiments [we] have been done here. But it's, at that point in time, simply too early to be more specific. So we need to explore the various [work], and when we have made our decisions and agreed with our partner what to disclose we will be happy to do so.

Okay, thank you.

Victoria English, Evernow Publishing Ltd.

Yes, Simon, when you mentioned the fact that you will eventually want to partner 208 and 202, how important in your preparations for discussions is the fact that MOR208 targets CD19 where there are only a couple of other products for this type of cancer?

If your question is about the competitive space in the CD19 area, sure, indeed, there are. I think what that tells you is what a great target CD19 is.

You're referring, of course, to the [T] approaches. I think the interesting thing there is that's a very new technology. And when people are also going out what target to go after, they didn't choose CD20 to engineer their T-Cells; they chose CD19. That tells you right there that CD19 is actually the better target.

For us, what else is going on in the CD19 space is a little bit secondary to the data that we are generating in the specific indications, which is [relapsed] refractory, which means CD20 refractory, DLBCL, and the [ibrutinib] refractory CLL.

So as we think about competition we look at exactly the programs that are targeting those indications and sub-indications. Those are really the relevant things for us. I think for us, based on the data that we've generated so far, with MOR208 monotherapy, we feel very good about the possibility to increase the levels of efficacy that we have seen in the appropriate combinations that we're now testing. That's really the key for us and it's much less about what else is going on in the CD19 space.

Yes, thank you.

(Operator Instructions). We have no further questions coming through. So I will now hand back to Dr. Gutjahr-Loeser to wrap up today's call. Please go ahead.

That completes our call. Should any of you wish to follow up with us directly we are all in the office for the remainder of the day. Thanks again for joining the call, and good bye.

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