MorphoSys AG (MOR) 2016 Q1 法說會逐字稿

Ladies and gentlemen, welcome to the MorphoSys quarterly results conference call. (Operator Instructions). The conference is being recorded.

Now I would like to turn the conference over to Claudia. Please go ahead. Thank you.

Good afternoon and also good morning and welcome to our Q1, 2016 conference call. I'm Claudia Gutjahr-Loeser, Head of Corporate Communications and Investor Relations of MorphoSys.

With me today are Simon Moroney, our Chief Executive Officer; and Jens Holstein, our Chief Financial Officer.

Simon will start by giving you an operational overview of the first quarter. Before we open the call for your questions, Jens will review the financial results of the first three months of 2016. Afterwards, Simon and Jens will answer questions on these topics.

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

Before we start the presentation, I have 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 programs and the initiation of additional programs.

Should actual conditions differ from the Company's assumptions, actual results and actions may differ from those anticipated. You are therefore cautioned not to place undue reliance on such forward-looking statements which speak only as of the date hereof.

I would now like to hand over to Simon Moroney.

Thank you, Claudia, and also from me a warm welcome to our Q1 call.

For the biotech sector as a whole Q1, 2016 will not be fondly remembered, with the major indices down substantially as a result of massive fund outflows.

MorphoSys was also affected by this trend, which was not company specific. Indeed we made significant progress in our pipeline during the first quarter, which I'll cover in my operational review.

The news about bimagrumab after the quarter ended was obviously disappointing, and I'll also cover this and selected other partner discovery programs.

As usual I'll start with the proprietary portfolio beginning with MOR208. During Q1 we initiated the first Phase 2 combo trial of MOR208. We've named this trial L-MIND, an abbreviation for lenalidomide plus MOR208 IN DLBCL). The trial is based on the extremely promising data we generated in relapsed or refractory DLBCL with MOR208 monotherapy.

The trial is an open-label study and aims to evaluate safety and efficacy of the combination of lenalidomide plus MOR208 in 80 patients who have received one or two prior therapies and who are ineligible for autologous stem cell transplantation.

The primary endpoint is objective response rate with progression-free survival and overall survival amongst the secondary endpoints.

We expect to report first data from this trial next year.

The second Phase 2 combo trial of MOR208 will also start this year. This is the so-called B-MIND trial, which will look at bendamustine plus MOR208 IN DLBCL. We are in the late planning stages for this trial, which should start around mid-year.

While the patient setting is the same as for L-MIND, this trial is set up differently. The first part will be in a small number of patients to assess the safety of the bendamustine MOR208 combination. This should lead directly into the pivotal Phase 2b part of the study next year.

The third intended Phase 2 trial for MOR208, which we've named COSMOS, which was planned in chronic lymphocytic leukemia and particularly ibrutinib-refractory CLL.

Our original plan was to investigate the combination of idelalisib plus MOR208 in the setting. These plans have been impacted by the discontinuation of several idelalisib combo studies by Gilead and the imposition of clinical holds by the regulatory authorities in Europe and the US.

As a result of this development, we're currently reworking our plans as we await feedback from the authorities which may bear on trials involving idelalisib.

We hope to be able to update you on our plans for COSMOS in our Q2 call.

Turning to MOR202 on slide 5 of the presentation. The phase 1/2a trial in relapsed or refractory multiple myeloma continues according to plan, and we're on track to present updated clinical data mid-year.

As a reminder, the study is looking at increasing doses of MOR202 up to 16 mg per kg in 3 arms, antibody alone, antibody plus lenalidomide and antibody plus pomalidomide.

At ASCO we will present data on patients who receive the highest dose of MOR202 alone and the cohorts comprising 8 mg per kg of antibody plus len and plus pom.

The poster was selected for the poster discussion session on Monday June 6.

Turning to MOR209, we have amended our clinical study design and received a green light from the authorities to restart the Phase 1 trial. We're on track to enroll the next patients by mid-year.

In Q1 we announced the entry into the clinic of MOR106. This program is being developed within our alliance with Galapagos. MOR106 is the first antibody from our new Ylanthia platform to enter clinical trials and is directed against the target that is involved in inflammatory indications. We'll provide more information on this program later this year, as soon as the clinical study moves into the second stage and starts to treat patients.

To round out the overview of clinical programs out of our proprietary development segment, shortly after the quarter ended our partner, GSK, announced the start of a new Phase 2a clinical study of MOR103, now named GSK3196165. This trial is designed to investigate the effectiveness and safety of this HuCAL antibody against GM-CSF in patients with inflammatory hand osteoarthritis.

Meanwhile, the Phase 2b study of the same antibody in rheumatoid arthritis continues. We expect data from the Phase 2b RA study next year.

All together, our proprietary development segment comprises 14 therapeutic programs, one of which, MOR103, is outlicensed. Of these 14, five are in clinical development, one is in preclinical development, and eight are in the discovery stage.

I'll turn now to our partnered discovery segment. In January, we announced that our partner, Bayer, commenced the Phase 2 clinical study of the antibody-drug conjugate, anetumab ravtansine. This study is designed to support registration of anetumab ravtansine as a potential new treatment for mesothelioma.

After the quarter concluded, we learnt from our partner, Novartis, that a Phase 2b/3 study of bimagrumab in sporadic Inclusion Body Myositis did not meet its primary endpoint. Data are currently being reviewed and will inform decisions on the bimagrumab development program.

Ongoing clinical trials are being continued at this time. In addition to the Inclusion Body Myositis, bimagrumab is in Phase 2 studies in sarcopenia and in patients recovering from hip fracture surgery.

Guselkumab, the antibody which is being developed by our partner, Janssen, for the treatment of psoriasis, is on track to deliver Phase 3 data in the second half of this year. There are currently six Phase 3 studies ongoing, of which three have the primary completion date this year.

All together, the pipeline emerging from our partnered discovery activities now comprises 90 programs -- 21 in the clinic, of which three are in Phase 3, nine are in Phase 2, and nine are in Phase 1 development.

At the end of the first quarter, our overall product pipeline comprised a total of 104 therapeutic antibodies, 26 of which are in clinical development.

That concludes my operational overview. I'll now hand over to Jens for the financial update.

Yes, thank you, Simon. Ladies and gentlemen, good morning and good afternoon and thanks for participating in the call.

Before I start my overview of the most important financial figures for the quarter, I would like to shortly mention the new format of presenting our quarterly results.

Due to the recently introduced adaptions in the financial reporting requirements for German-listed companies, we will publish interim statements rather than quarterly reports for the first and the third quarter of each financial year.

Those interim statements allow MorphoSys to present the key operational events and the financial results in a condensed form, focusing on the key events in a less formulistic manner. For the half-year, though, we will continue to publish a half-year report, as you've been used to in the past, according to the requirements.

Let me now start the financial section with an overview of the most important financial figures for the first three months of 2016. Please turn to slide 8, the income statement.

Here you see the total Group revenues declined by EUR58.3 million to EUR12.1 million for the first quarter of 2016. However, please be aware that revenues in the comparable period of 2015 contained the one-off effect in the amount of about EUR59 million from the termination of the participation with Celgene.

Total operating expenses increased by 24% to EUR21.9 million. The expenses thereof for research and development amounted to EUR18.6 million as compared to EUR14.7 million in the previous year. General and administrative expenses increased to EUR3.2 million.

In line with our current guidance, expenses in proprietary product and technology development increased by roughly 40% compared to the previous year, and amounted to EUR14.6 million.

In the first three months of 2016, the EBIT amounted to minus EUR9.7 million in comparison to EUR52.8 million in the previous year. The Group presents a net loss after taxes of EUR7.2 million in the first three months of 2016 compared to a net profit of EUR40.9 million in the first quarter of 2015. The decline in EBIT and net profit is mainly driven by the one-off effect in 2015, as I explained before.

Turning to slide 9, the segment reporting. The proprietary development segment achieved revenues of EUR0.1 million compared to EUR59 million -- EUR59.4 million in Q1, 2015, as a result of a terminated cooperation with Celgene.

Operating expenses in this segment increased to EUR14.6 million. The segment EBIT amounted to minus EUR14.3 million compared to EUR49.7 million in the same period of the previous year.

The partnered discovery segment generated revenues in the amount of EUR12 million in the first three months of 2016, an increase of roughly 8% compared to the previous year.

Operating expenses in this segment declined versus Q1, 2015 to EUR4.3 million. The segment EBIT amounted to EUR7.7 million compared to EUR5.8 million in Q1, 2015.

Turning to the balance sheet on slide 10. On March 31, 2016, the Group's liquidity position equaled EUR287 million compared to EUR298.4 million on December 31, 2015. This decrease was mainly the result of the use of cash for operating activities during the first three months of this year, and for the repurchase of shares for the Group's long-term incentive plans.

We have executed the share buyback program in March 2016. MorphoSys acquired 52,295 MorphoSys shares from the stock market. The value of the share buyback program amounted to EUR2.2 million. The shares will mainly be used for the Company's long-term incentive program, as mentioned.

Let's now turn to slide 11. Before we open the call for your questions, we would like to reconfirm our financial guidance for 2016, which was first published in March, in connection with the presentation of our 2015 annual report.

For 2016, MorphoSys anticipates total Group revenues in the range of EUR47 million to EUR52 million, and an EBIT in the range of minus EUR58 million to minus EUR68 million. Proprietary R&D expenses are expected to rise to EUR76 million to EUR83 million.

Ladies and gentlemen, that concludes my review of the first three months of 2016. I'll now hand back to Claudia for the Q&A session.

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

(Operator Instructions). James Gordon, JPMorgan.

Two questions, please, on partnered products. The first one was about guselkumab, which seems to be the next key catalyst coming up in terms of the partnered products.

Can you talk about why you think the product might be differentiated versus other therapies like Cosentyx, that do hit IL-17, and I think this product would also hit IL-17 downstream. Is there something you're excited about mechanistically beyond IL-17?

And just when the data comes out, would you hope that to show a better [pathway] benefit than the products that are already available? What could be the differentiation there?

And the second question would be on Bimagrumab. So we saw that sIBM was negative, but I know there are already other trials ongoing on sarcopenia and in hip fracture patients. Are there reasons why the mechanism might be more effective there than it has been in the trial that's already reported that mean that we should still be optimistic there?

Thanks, James. I'll take those two. Guselkumab in terms of differentiation, just as a reminder, so it hits and it's specific for IL-23, which as you pointed out is upstream of IL-17 in the pathway.

If you look at the Phase 2b data that Janssen published, it actually looks a bit better than the IL-17's. The efficacy data is as good as it gets for a biologic. To what extent that slight, let's say, superiority will make a commercial difference is perhaps hard to estimate at this stage.

I think where there is a clear opportunity for differentiation is in the frequency of administration where, again on the Phase 2b trial, Janssen looked at dosages every two, and indeed, every three months, which is much less frequent than the IL-17's Cosentyx, for example, is dosed.

So that is an obvious, I think, advantage that we've seen so far, is much less frequent administration. And that, on top of the slightly better efficacy that we've seen in the trials so far, we think could be an interesting advantage for guselkumab over the other compounds.

Regarding Bimagrumab, as we announced, of course, the primary endpoint in the Inclusion Body Myositis trial was not hit. There's a lot of anecdotal data out there that maybe the six-minute walking test, which was the primary endpoint, is perhaps not the best endpoint in this particular setting.

But any conclusions on whether it has an opportunity to be developed and be successful in Inclusion Body Myositis or not will await Novartis' analysis of the data, obviously. So all we can conclude at this stage is that the primary endpoint was not hit. We await to see a more detailed analysis of the data which looks at a number of other metrics as well.

In terms of sarcopenia and hip fracture surgery, if you think of those patient populations, one thing that's obvious is that these are essentially healthy people. Sarcopenia is simply older people. Hip fracture surgery patients are people who've suffered hip fracture obviously. And it may be that, again this is speculation, that the drug works better in patients who have fundamentally healthy muscles, as opposed to Inclusion Body Myositis which is obviously a disease, a wasting disease of the musculature.

Speculation, but that is a clear differentiation, or a clear difference, between the clinical trials that are being run with that compound.

I think the main point about Bimagrumab is, of course we're disappointed that the primary endpoint wasn't hit in Inclusion Body Myositis, but I think there's a lot of water to flow under the bridge here with this program. And I would not write it off too soon by any means.

Thank you.

Victoria English, MedNous.

Simon, in the past you've talked about in-licensing opportunities in terms of building up your proprietary portfolio. Could you update us on what the Company's attitude is towards that?

And secondly, is there anything that you can say, at this stage, about Gantenerumab?

Thanks, Victoria. So regarding in-licensing, we're always on the lookout for programs to add. And remember that MOR208, for example, was a program that was sourced through an in-licensing deal. So we've done it before. And we'll probably do it again.

Right at the minute, we have our hands very full, I must say. By the end of this year we should have five proprietary programs in the clinic. So there's a lot going on quite frankly.

So although we're always interested, and we're always looking, it's not absolutely top of our priority list right now. Top is executing on what's in front of us, because we feel very good about the programs that are in the clinic and are coming into the clinic. So that's really the focus at the moment.

Regarding your second question, that was Gantenerumab, right, the Alzheimer's antibody you're asking about?

Yes.

Yes. So again it's a little bit like Bimagrumab, actually; this is something that, I think, a lot of people wrote off a year and a half ago now, when the prodromal trial was stopped for futility. Since then, what's emerged is, obviously the Biogen data on aducanumab, and the realization that Gantenerumab is actually rather similar in terms of its properties to aducanumab. And I think this has led Roche to relook at the program and perhaps conclude that it hasn't been dosed high enough in the trials that have been done so far.

So what's happening right now is that both the prodromal and the mild Phase 3 trials have been converted to open label studies in which higher doses of Gantenerumab are being investigated. And we haven't seen anything yet. But we're hopeful that perhaps a higher dose can be established, and that trials can then continue at that higher dose, which the feeling is, the hope is, could perhaps be effective, and could represent the future for that program. So again, not to be written off by any means. It's alive and well at the moment.

Thank you.

We currently have no questions coming through. (Operator Instructions). Mick Cooper, Trinity Delta.

Just two quick questions from me, which I suspect I know the answer to both of them. First of all, with MOR208, given AstraZeneca's announcement with regard to their CD19 product and developing it in neuromyelitis optica, are you looking at any inflammatory disease yourself?

And secondly, given the share price weakness, are you tempted to expand your share buyback program?

Thanks, Mick. Let me take the first one of those two, and then Jens will comment on the second one.

So with 208 right at the moment, we're very busy and very full with the B-cell malignancies that are the core focus here. Obviously we're well aware that an anti-CD19 antibody has opportunities in a variety of other diseases, a whole stack actually. But for us at the moment, because of the compelling data that we have in DLBCL, because of the very encouraging data and the opportunity in CLL, little known follicular lymphoma where we also have good data, the focus at the moment is on those B-cell malignancies.

And then, Mick, regarding your second question on the share buyback program. Clearly we have no current plans to extend that program and buy back shares to do something for the share price. I think we need the financial resources. And we plan to use those financial resources to allocate the money into our programs that has a much higher implication on the value creation, on the development of the share price, than a short-term share buyback program in our view.

So there are currently no plans to do something like this.

Thanks.

(Operator Instructions). Thank you, we have no further questions coming through, so I will now hand you back over to Dr. Simon Moroney to wrap up today's call. Thank you.

To conclude the call, I'd like to remind you of the main points to take away.

First, clinical development of our proprietary programs MOR208, MOR202, MOR209, and now MOR106, is proceeding according to plan.

MOR103, outlicensed to GSK, is into clinical development in a second indication.

Our partner, Bayer, has advanced one of our antibodies into a Phase 2 trial.

And finally, after the quarter was completed, we learnt that Bimagrumab did not meet its primary endpoint in the lead indication, although ongoing clinical trials will continue.

That concludes our call. If any of you would like to follow up, we are in the office for the remainder of the day.

Thank you for your participation on the call and goodbye.

Thank you, ladies and gentlemen. You may now disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.