MorphoSys AG (MOR) 2016 Q4 法說會逐字稿

Ladies and gentlemen, welcome to the MorphoSys Year-End Results Conference Call. Please note that for duration of the presentation, all participants will be in listen-only mode. After the presentation, there will be an opportunity to ask questions. (Operator Instruction) I would like now to turn the conference over to Anke Linnartz. Please go ahead.

Good afternoon, good morning and welcome to our 2016 year-end results conference call and webcast. My name is Anke Linnartz, Head of Corporate Communications and Investor Relations at MorphoSys.

With me on the call today is our complete management board. Simon Moroney, our CEO; Jens Holstein, our CFO; Marlies Sproll, our CSO and our new CDO as of March 1, Malte Peters. 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's core technologies, the progress of its current research and development 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.

In the presentation, Simon and Jens will present to you a review of the year 2016 and provide an outlook for 2017. We will cover the most advanced candidates in our pipeline, reviews of financial results for 2016 and provide a financial and operational outlook. After the presentation, we will be available for your questions. You will find the slide deck which accompanies the presentation on our website. I would now like to hand over to Simon Moroney.

Thank you, Anke, and also from me a warm welcome to our financial results call for 2016. Before we get going, we would like to take this opportunity to introduce our new Chief Development Officer, Malte Peters and give him the chance to introduce himself to you personally.

Thank you, Simon. Good morning, good afternoon, everybody. My name is Malte Peter. I started my position at MorphoSys as Chief Development Officer on March 1, so just a couple of days ago. You can imagine that I'm in the process of becoming acquainted with all the data and I'm looking forward to working with you in the future and interacting with you in our future calls and relationships. So with this, I turn back to Simon.

Terrific. Thanks, Malte. 2016 was a very rewarding year for us. In November, the first therapeutic antibody from our platform guselkumab was filed for market approval by our partner Janssen. We saw our product pipeline advance to a record high of 114 programs in R&D at the year end, making it one of the broadest portfolios in the biopharmaceutical industry. We made significant progress with our own drug candidates, in particular our proprietary antibodies MOR208 and MOR202 made promising advances in their respective indications.

We took advantage of investor interest to strengthen our financial position and successfully completed a capital increase of EUR115 million. Cash at year-end stood at EUR360 million, and last but not least, we fully achieved our financial guidance.

Turning to our pipeline, across our pipeline, we see many programs, which have the potential to transform the treatment of the diseases that they address. As already stated, our pipeline comprised 114 programs at year-end, 29 of which were in clinical development. The golden bars on the chart that you see on slide 7 refer to our proprietary programs. Six of the 29 clinical programs, so about 20%, are from our proprietary development segment. We'll start the review with a look into each of these.

First up is MOR208 on slide 8. This is our Fc-enhanced CD19 antibody, the most advanced of our proprietary development programs. We began three Phase 2 trials in 2016 investigating MOR208 in combination with other cancer drugs. We're currently focusing on two indications, namely relapsed/refractory diffuse large B Cell lymphoma or DLBCL and BTK inhibitor refractory and intolerant chronic lymphocytic leukemia (CLL) and the CLL-subtype small lymphocytic leukemia (SLL). In the trial known as L-MIND, we are testing MOR208 in combination with the immunomodulatory agent lenalidomide in patients with relapsed/refractory DLBCL. In the trial known as B-MIND, we compare MOR208 together with the chemotherapy bendamustine with rituximab plus bendamustine in relapsed/refractory DLBCL.

The third trial we started last year, namely COSMOS looks at MOR208 in combination with idelalisib in patients with CLL or SLL, after discontinuation of the BTK inhibitor therapy. DLBCL is the most common type of non-Hodgkin's lymphoma in adults, comprising 30% to 40% of all NHL cases. The disease is very aggressive and there's a high unmet medical need for novel treatments for sufferers, especially for those who relapse or are refractory to current treatment options.

Our focus is on those relapsed/refractory patients who are ineligible for stem cell transplantation, that's around half of that population. One of the key findings from the clinical studies we've done so far is that in a number of patients, MOR208 monotherapy could provide durable responses. Our goal is to build on these encouraging results, take advantage of the acceptable safety profile we've seen for MOR208 and aim to increase both depth and duration of response in the combo studies.

Chronic lymphocytic leukemia is the most common form of leukemia in adults. Today, patients are increasingly and fairly successfully being treated with BTK inhibitors. However, for those patients who do not respond or no longer respond to this treatment, options are very limited and the prognosis is poor. This results in a high unmet medical need for this patient group after discontinuation of a prior BTK inhibitor therapy. Data suggest that these patients' tumors continue to express CD19, which means they could respond to an anti-CD19 therapy. Our goal here is to provide doctors with a regimen, which significantly improves the prospects for these patients.

The next program I'll mention is our anti-CD38 antibody MOR202 for multiple myeloma. MOR202 shows the potential we would expect for an antibody in this exciting new target class. At the ASH Conference in December last year, we reported data from the ongoing Phase 1/2a study of MOR202 in relapsed/refractory multiple myeloma patients. We've reached clinically meaningful dose levels that start to allow us to compare MOR202 with competing programs.

Without going into the data here, overall, the picture that's emerging is that MOR202 has very encouraging efficacy at least comparable to other drugs in this class plus potentially best in class safety and convenience.

Turning to MOR209, together with our partner Aptevo Therapeutics, formerly known as a spin-out from Emergent in the US, we are developing MOR209, also known as ES414, in a Phase 1 clinical study in patients suffering from metastatic castration-resistant prostate cancer. MOR209 is an innovative, bispecific anti-PSMA/anti-CD3 antibody based on Aptevo's

proprietary platform and we've seen very promising preclinical data with the molecule. Prostate cancer is the most commonly occurring cancer in men with approximately 900,000 new cases annually worldwide. Last year, we adapted the study design together with Aptevo and the trial started enrolling patients under the amended dosing scheme in Q4 of 2016.

Turning to MOR106, in April last year, we brought MOR106 into the clinic together with our co-development partner for this program, Galapagos. MOR106 is an antibody from our Ylanthia platform and the first publicly known antibody in clinical development worldwide against IL-17C. This target molecule is implicated in a number of inflammatory skin disorders and quite distinct from other members of the IL-17 cytokine family. Based on pre-clinical data we've generated together with Galapagos, MOR106 could be developed in a number of indications. We have encouraging preclinical data in atopic dermatitis and have chosen this as the lead indication for the program. This is an area of major unmet need, which we expect to be transformed by biologic therapies, in the way that other inflammatory indications have been in the last two decades.

Turning to MOR107, slide 10. Just a few weeks ago, we announced the start of the Phase I trial with MOR107, making it the sixth program from our proprietary development segment to enter clinical trials. MOR107 is a lanthipeptide based on our subsidiary Lanthio Pharma's proprietary technology platform and the first lanthipeptide in our clinical pipeline. MOR107, a selective agonist of the angiotensin II receptor type 2, has shown promising preclinical data in a number of disease models and we're very excited to see this innovative agent being developed in the clinic.

Turning to MOR103, MOR103 is an antibody that was discovered and clinically developed by MorphoSys into proof of concept before we fully outlicensed it to GlaxoSmithKline in 2013. GSK is developing the antibody and bears all related costs. MOR103 is directed against granulocyte macrophage-colony stimulating factor or GM-CSF, a central player in the emergence of inflammatory diseases such as rheumatoid arthritis, a blockbuster market that is still growing dynamically. In our view, MOR103 has the potential to become the first marketed anti-GM-CSF antibody. In 2016, GSK further advanced MOR103 in the clinic. With the ongoing phase 2b trial in rheumatoid arthritis, GSK reported that a high bar futility hurdle was achieved. In addition, GSK started two Phase 2a trials, one in rheumatoid arthritis and one in hand osteoarthritis in 2016.

I'll turn now to slide 11 to our Partnered Discovery segment, which is nearing the point in which it becomes a royalty-based revenue generator for MorphoSys. Overall, the Partnered Discovery segment continued to grow in number and also in maturity as programs move into later stages of development. We're extremely proud of all of our longstanding collaborations, which produced so many programs based on our technology. There are too many programs to speak about here, so I'll highlight just a couple.

One of the highlights of 2016 was positive Phase 3 data and the subsequent regulatory filing of guselkumab, a potential new treatment for psoriasis by our partner Janssen. The efficacy and safety data published in October by Janssen are compelling. Latest Phase 3 data published by Janssen just last week at the AAD Conference in Orlando was also strong. Guselkumab showed significant superiority versus Humira, adalimumab.

In addition, guselkumab showed significant superiority to STELARA ustekinumab in patients with prior inadequate response thereto. This impressive efficacy coupled with a convenient dosing scheme makes guselkumab look to us like an extremely promising new drug. If approved, it could be the first MorphoSys antibody to reach the market, possibly as early as the end of this year. We were very pleased that Janssen also reported positive Phase 2 data for guselkumab in a second indication namely psoriatic arthritis.

According to Janssen, a substantially higher percentage of patients receiving guselkumab achieved the ACR 20 primary endpoint of the trial compared with patients receiving placebo. Janssen has already announced plans to start a Phase 3 program with guselkumab in this indication. The most significant event in our Partnered Discovery segment in 2016 was Bayer's start of a pivotal Phase 2 study with the HuCAL-based antibody-drug conjugate anetumab ravtansine. This drug candidate targets mesothelin, one of the most promising solid cancer targets. The lead indication is malignant pleural mesothelioma, a rare cancer of the lung with high unmet medical need.

Last year, Bayer reported encouraging data from a Phase 1 trial, highlighting the fact that some patients are still responding for more than two years after starting therapy, which is substantially longer than current response durations. Bayer has underscored its commitment to the program by investing in clinical development in a number of other cancer types in which the target mesothelin is implicated.

Overall, our entire pipeline, both partnered and proprietary, showed terrific growth in the reporting year. The total number of programs increased from 103 to 114, and the number of programs in the clinic rose from 25 to 29. We saw 11 new programs in discovery, four new INDs, two transitions from Phase 1 to Phase 2, and one program anetumab ravtansine entering a pivotal trial. Our deep pipeline is a tremendous asset and will be an extremely lucrative value driver in the years to come. With that, I'll handover to Jens for his wrap-up of the financials.

Thank you, Simon. Ladies and gentlemen, also from my side a warm welcome to all of you and thanks for your interest in the company. 2016 was another very successful year for MorphoSys in which we again achieved our goals for the year. Group revenues came in at EUR49.7 million fully in line with our guidance, which ranged from EUR47 million to EUR52 million. Our proprietary R&D expenses amounted to EUR78.5 million and were also well in line within the guided corridor of EUR76 million to EUR83 million. EBIT reached minus EUR59.9 million and came in at the upper end of our guidance of minus EUR58 million to minus EUR68 million.

Please move on with me now on to the next slide that illustrates our P&L statement. As said before, Group revenues came in at EUR49.7 million in contrast to EUR106.2 million in 2015. The difference stems from a significant one-off effect in 2015 that resulted from the termination of the MOR202 core development and co-promotion agreement with Celgene. The financial impact in [2016] of that event was around EUR59 million. Regular followers of MorphoSys are aware of one-time effects from the past and are familiar with the resulting implications on our profit and loss statement. Therefore, in like-for-like comparison, in other words, by taking the mentioned one-time effect out of our 2015 numbers, revenues in 2016 increased by approximately 5%. Total operating expenses came in at EUR109.8 million, exceeding last year's number by 17%. The increase was planned and results from our intensified investments in our proprietary clinical compounds, particularly the start of three Phase 2 trials with our most advanced clinical compound MOR208, driven forward in 2016 in selected blood cancer indications, resulted in an increase of the Company's R&D spending. Total R&D expenses rose by 22% to EUR95.7 million versus EUR78.7 million in 2015.

General and administrative expenses in turn declined by 7% to EUR14.1 million versus EUR15.1 million in 2015. Earnings before interest and taxes came in at minus EUR59.9 million, compared to an operating profit of EUR17.2 million in 2015. Again, the EBIT in 2015 was positively impacted by the already mentioned one-time effect from Celgene. In 2016, the consolidated net result amounted to minus EUR60.4 million in contrast to a positive EUR14.9 million in 2015, which translate into a diluted net result per share of minus EUR2.27 in 2016, compared to positive EUR0.57 in 2015.

Let's move to page 15 of the presentation, for the newcomers in this call, in our Proprietary Development segment, we focus on the research and clinical development of our own drug candidates in the field of cancer inflammation. In 2016, this segment recorded revenues of EUR0.6 million. In 2015, we reported EUR59.9 million including the one-time effects from Celgene.

Proprietary R&D expenses plus expenses for our own technology development activities, rose by 39% to EUR78.5 million. As a consequence, the segment EBIT came in at minus EUR77.6 million, compared to plus EUR10.7 million in 2015. In the Partnered Discovery segment, we apply our proprietary technology to discover new antibodies for third parties, benefiting from the partners' development advancements through success-based milestone payments and royalties.

In 2016, revenues were up 6% to EUR49.1 million from EUR46.3 million. The increase was mainly driven by milestone payments from partners, such as Janssen and Novartis. Segment revenues comprised EUR43.6 million in funded research and license fees, slightly above the previous year's number of EUR42.3 million and EUR5.6 million in success-based payments, up versus the previous year by 40%.

EBIT in the Partnered Discovery segment climbed by 52% to EUR31 million, mainly based on the increase in success-based milestone payments from partners and lower costs incurred in the segment..

Let's move on to the balance sheet on slide 16. As of December 31, 2016 we recorded total assets of EUR463.6 million. This represents an increase of EUR63.5 million compared to the end of the previous year. At year-end 2016, we had a cash position of EUR359.5 million compared to EUR298.4 million as of December 31, 2015. Please remember that our total liquidity position is reported under various positions in our balance sheet. Cash and cash equivalents, available-for-sale financial assets, bonds available-for-sale, as well as current and non-current financial assets classified as loans and receivables.

To sum it up, our growing and maturing pipeline is supported by very solid financial resources of close to EUR360 million at the end of 2016. We strengthened our financial position by a successful capital increase with gross proceeds of EUR115.4 million in 2016. Overall, our financial strength enables us to invest in the development of our own drug candidates to grow the company's value without losing sight of our prudent and efficient use of resources. I'm now coming to the financial guidance for 2017 before I will pass the call on to Simon for the strategic and operational outlook.

For the financial year 2017, we expect to generate Group revenues in the range of EUR46 million to EUR51 million, fairly comparable to the range of last year's guidance. As pointed out in the past, our guidance does not include any additional revenue from potential future collaborations and/or licensing partnerships nor effects from potential in-licensing or co-development deals for new development candidates. This is important to understand as partnering deals would very likely have a significant impact on our financial results. As previously communicated, we expect the collaboration with Novartis to terminate at the end of November, 2017 in accordance with the contract. We do not anticipate that Novartis will exercise its option to extend the contract, and this is also reflected in our guidance. In turn, we cannot exclude that some collaborative work might be still performed going forward. Nonetheless, we do not plan for such an event as the magnitude is unclear.

R&D expenses for proprietary drug development in 2017 are anticipated in the corridor of EUR85 million to EUR95 million. As a consequence, we expect earnings before interest and taxes of minus EUR75 million to minus EUR85 million. Finally, I would like to end my section with a positive outlook for the years beyond 2017. Regarding revenues coming from royalties in the years to come, we are, especially on the back of the recently announced positive data on guselkumab, very optimistic. With anetumab ravtansine, a second partnered compound could follow soon. We certainly need to give drug candidates like guselkumab and anetumab some time to reach peak sales levels but both compounds have, if approved, blockbuster potential. Royalties on those compounds should move our revenues to new levels going forward.

In addition, our expectations on revenues generated by milestone payments as, for example, for MOR103 could be significant and our collaboration with LEO could also contribute high-single digit millions in the mid-term future. All this could potentially come on top of regular milestone payments, partnership deals from MorphoSys' proprietary assets as well as proprietary technology deals. Having said this, we are confident in respect of our financial prospects in the years to come. And with this, I would like to end my part and would like to hand over back to Simon.

Thank you, Jens. To conclude, I'll summarize what operational progress you should expect from us throughout the year 2017. Our top priority is our growing portfolio of highly promising proprietary drug candidates, some of which are nearing the decisive stages of clinical development. We're delighted to have the financial and human resources to drive these programs forward at a critical stage in their development. A look at each program in turn. First MOR208, in 2017 we aim to transition the B-MIND study into Phase 3. The trial is in patients with relapsed/ refractory DLBCL, who are ineligible for stem cell transplantation. There is currently no approved treatment for this patient population and the medical need is extremely high. The transition into Phase 3 will occur on successful completion of the safety run-in part, which is currently ongoing. As a reminder, this is a head-to-head study of MOR208 plus bendamustine versus rituximab plus bendamustine in the comparator arm.

Rituximab plus bendamustine is one of the most widely used regimens in the relapsed/refractory setting. The study has a PFS endpoint, and a design that could support registration of MOR208. As a pivotal trial, it is, of course, blinded for us until the primary endpoint readout. So you shouldn't expect to hear any news until at least the interim analysis, which we expect in late 2018, so end of next year. Overall, we expect a primary endpoint read out in the first half of 2020. This is the first pivotal trial in our proprietary portfolio and will mark another important step on our way to becoming a fully integrated biopharmaceutical company. Also with MOR208, we expect to present first data from our ongoing L-MIND trial during the course of this year at an appropriate medical conference. Again as a reminder, this is the open label Phase 2 study in which we're investigating MOR208 in combination with lenalidomide in relapsed/refractory DLBCL. The third trial with MOR208, COSMOS will continue during 2017. From the ongoing open label arm comprising 208 plus idelalisib, we expect to see the outcome of the safety run-in this year. We expect to add another arm to the study shortly, combining MOR208 with the second CLL drug. We also expect to see further data during this year from our collaborator John Byrd from Ohio State University, he is also investigating MOR208 in a Phase 2 investigator-initiated trial in CLL, and that data will be most likely presented at appropriate medical conferences during the year.

Turning to MOR202, we expect to complete phase 1/2a dose-escalation trial in relapsed/refractory multiple myeloma and to report data from all three cohorts, MOR202 alone and in combinations with pomalidomide and with lenalidomide. We hope to give a comprehensive update at an appropriate medical conference around mid-year.

For MOR209, we expect our partner Aptevo to continue the ongoing Phase 1 trial of this bispecific antibody in metastatic castration-resistant prostate cancer, with the adapted dose regimen and we aim to provide an update on progress during the year.

For MOR106, together with our partner Galapagos we will complete the current Phase 1 trial. We expect to report data from the Phase 1 trial in the fourth quarter of this year, comprising both the healthy volunteer, single ascending dose part and the multiple ascending dose study in atopic dermatitis patients.

For our lanthipeptide MOR107, we expect to present topline data from the ongoing Phase 1 study in healthy volunteers in the second half of this year. We're excited about this innovative new target class in our clinical portfolio and we're now evaluating the options for the next potential clinical development steps in patients.

Finally, for MOR103, three Phase 2 trials are scheduled to conclude this year according to our partner GSK. Most advanced is a Phase 2b study of MOR103 in moderate to severe rheumatoid arthritis, which we expect to conclude late this year. We also expect completion of a smaller Phase 2a rheumatoid arthritis study, which has as its primary endpoint changes in biomarker data. Also later this year, we expect conclusion of the Phase 2a study of MOR103 in inflammatory hand osteoarthritis.

Turning to our Partnered Discovery segment, slide 20, in this segment results from up to 31 different clinical trials by our partners are due this year. As always, we have no control over what our partners communicate, but there will potentially be a lot of data relevant to our pipeline. Right now, we'll just highlight a couple of programs with expected news flow in 2017. Guselkumab, as we've said, to become the first therapeutic antibody-based on MorphoSys's HuCAL technology to receive market approval. We expect the FDA decision on Janssen BLA filing in the second half of 2017. Guselkumab has also been filed in Europe, but here we expect a decision rather in 2018. In our opinion, guselkumab looks the best of the new generation of biologics for psoriasis. Efficacy, safety and especially convenience look absolutely compelling in our view.

Bayer's program anetumab ravtansine is expected to report results in the second half of 2017 from the pivotal Phase 2 trial in mesothelioma. Bayer has publicly announced that recruitment into the trial shows enormous interest and that favorable results could support a regulatory filing of the compound next year for a potential market introduction in 2019. Given the high medical need in mesothelioma and the number of indications in which the compound has shown potential, we believe it is fair to say that this is another blockbuster candidate in our partnered pipeline.

Last Monday, we published that our partner Roche has decided to initiate a pivotal Phase 3 program for gantenerumab in patients with prodromal to mild Alzheimer's disease. Roche expects to initiate two new Phase 3 trials later this year. The start of these trials shows Roche's ongoing commitment in Alzheimer's disease and specifically to the amyloid hypothesis. Utomilumab, the anti-41BB antibody generated in our collaboration with Pfizer showed evidence of immune response in a Phase 1b study in combination with the anti-PD-1 antibody pembrolizumab. To fully exploit the immune-oncological potential of utomilumab, Pfizer has recently started a 2 component study, i.e. Phase 1 directly followed by Phase 3, testing their anti-PD-L1 antibody avelumab in combination with various agents including utomilumab in DLBCL.

As always, we don't issue guidance on expected deal flow. But I would like to give you a flavor of where our business development efforts lie. First and foremost, we are focused on securing the future of MOR202. As already mentioned, the clinical data that we have seen suggests significant potential in multiple myeloma. Increasing evidence from a number of sources suggests that anti-CD38 antibodies may also have potential in other indications, including solid tumors as well as some auto-immune diseases. The opportunity for MOR202 is potentially enormous and we want to do everything possible to ensure that MOR202 is developed as broadly as possible. We feel that this is best done by partnering the further development of MOR202 and we feel that the data package we have gives us a good chance to enter an appropriate partnership. This is one of the most important projects currently ongoing at MorphoSys.

Last year, we entered a strategic antibody discovery deal with Leo Pharma. We will continue to explore opportunities to collaborate with other companies at early stages of drug development, where our technology base and expertise can be put to work. Deals of this type serve as sources of revenue as well as providing for additional pipeline growth.

To conclude, slide 21, we're looking forward to a great year for MorphoSys. We hope to see the first approval for a product, guselkumab, based on our technology. This is, of course, the best possible validation for a technology platform. We expect guselkumab to be only the first of a flow of products that could receive market approval in the years to come. A growing body of clinical data suggests that within our pipeline are a number of products that have substantial potential. This year will also mark the beginning of our transition to a company whose P&L statement will increasingly be based on revenues from products.

We expect programs from our Partnered Discovery segment such as guselkumab, to form a growing revenue base in the years to come. This revenue will support investment in our proprietary programs and help us execute our plan to build MorphoSys into a commercial, product-based biopharmaceutical company. The increasing visibility on the potential of our pipeline as a growing revenue source, upcoming inflection points for our lead proprietary oncology programs entering decisive stages of clinical development, plus the financial strength to invest at the level required to maximize returns, mean that we are well positioned to build substantial value in the years ahead.

We are now ready to start our Q&A session. First of all, thank you, Simon and thank you Jens for your presentation. And please register for questions.

(Operator Instructions) James Gordon, JPMorgan.

Thanks for taking my questions. A couple of pipeline questions or more so too please. One will be, I think you mentioned convenience being an advantage for the product, then I've also seen what J&J have said about doing a subcu version of DARZALEX with a [5-hour] infusion time. Would you still see being an angle to have a convenience advantage versus that, or would that make it more challenging to have a convenience benefit? The second question on 202 was assuming you find a partner, when is the earliest the Phase 3 could start, is there any other things need doing or are you just ready to go apart from having a partner?

And then you also mentioned solid tumors are autoimmune for the class, do you have any preclinical or data anything like that is encouraging for activity? And then, I just have one follow-up financial question which is on partnered R&D, can you give any comment about how big that might be this year, does that taper off for the Novartis collaboration ending at the end of December, or similar level to previous years, how big should we think that might be?

Thanks, James. Let me start with the MOR202 questions and then hand over to Jens for the R&D question. As you pointed out, we're aware of the plans that Janssen has for DARZALEX in order to overcome the challenges that they have with the administration of the current intravenous administration. We need to see what actually they said - where they finish up at. As you know, we are two hours without infusion currently and that's something that we haven't even tried to optimize. So that's something that we expect to be able to reduce further.

Obviously, the advantage that we currently have looking at our two-hour infusion versus their perhaps initial up to 8-hour infusion and subsequent, perhaps, five or six hours infusion, that diminishes if they are indeed able to come with a subcutaneous version, which is administered in less than an hour or so. But I think we are also very intrigued to see what the experience is for the patient ultimately, the data that we saw at ASH involved 60 and 90 milliliters subcutaneous infusions at rotating sites around the abdomen weekly. I think what's going to determine the relative comfort of the two approaches is the actual patient experience in reality, rather than the absolute amount of time required for the administration.

Coming on to your second question around the timing of a Phase 3 start, that in turn depends on the precise setting that the Phase 3 would be run in, that's something that we would, of course, discuss and agree with potential partners and it's premature at this stage to speculate as to when that could take place.

Regarding your third question on any preclinical evidence we have regarding solid tumors, we do have some evidence with the suppressive effect of MOR202, looks to be similar to other anti-CD38 antibodies. So this idea that, for example, anti-CD38 antibodies can suppress MDSCs in a tumor microenvironment is something that we have been able to verify as well preclinically. So based on that, one would expect the same kind of effect in man in a solid tumor setting as is supposed for other CD38 antibodies.

And then James regarding your question on the Novartis revenue impact, so to remind everyone on the phone, the current amount of money that the company generates within the year, within 12 months, is EUR40 million. So the contract runs out end of November. Novartis still have the opportunity to review its options contractually. So it's a little bit premature to give guidance on how the impact would be going forward. So for this year in our guidance, you have to calculate something like EUR36.5 million that we have anticipated coming in as a revenue figure. Again for 2018, a little bit too early to say how the financial implication would be in case that we have some sort of further collaboration with Novartis, but we certainly will keep you updated on this. Just would like to maybe highlight in that respect, that our LEO co-operation has a bigger financial implication as we have originally indicated. So in that respect, in that some sort of similar sort of setting, we estimate that this figure over the next two years will increase to a high-single digit million figure minimum. So at least it's not making up for the EUR40 million as we always said, but it would help a little bit at least.

Jean Mannie, Kempen.

Two short ones, you mentioned 208 L-MIND study, and there will be additional data this year, is it reasonable to expect that that could be also mid-year, I thought I recall from previous conversations, it could be around ASCO or something? And second one I noted on MOR209 that was an extension of the terms the initial terms to June 2017, end of June 2017, how does that relate to the ongoing Phase 1 trial, could you shed a bit more light on that? Thanks.

Thanks, Jean Paul. Indeed, we would hope to have some L-MIND data at ASCO, and so mid-year. But certainly at ASH at the end of this year, but I think we feel reasonable that we could have something to share with you at ASCO. Regarding MOR209, you referred correctly to a renegotiation of the agreement with Aptevo, which simply was a reflection of the fact that because we had to sort of pause and reformulate the drug and then kind of restart, the timeline is delayed compared to what we originally thought when we entered the agreement with them. And we were able to therefore agree with them to renegotiate that six-month period from the end of last year, up until the end of June this year. So it's really just a contractual arrangement that doesn't have any bearing on the trial itself.

We currently have no further questions in the queue. So I'll just give another reminder. (Operator Instructions) Mick Cooper.

I have just got three questions. Firstly, following on from the previous question about MOR202, might you do small Phase 1b studies in either solid tumors or in autoimmune indications?

Secondly, could you give us some more information about the characteristics of 107 and I noticed that you're doing the Phase 1 trial in patients on a low sodium diet, is that particularly important, low sodium diet?

And finally, just could you give us some cash guidance for the end of year? Thank you.

Yes. Thanks, Mick. Let's start with the MOR202 question. I think the exciting thing about MOR202 is they just have massive possibilities in all sorts of indications. We originally thought of it as an MM drug, with maybe application in AML, CLL perhaps, but now we've seen speculation that a CD38 antibody could be developed in all sorts of places. It's unrealistic for us to think that we can reasonably cover the universe of trials and studies that could be done. So as I said during the presentation, we feel that the best way forward is to secure a good partner that can help us exploit the potential in MOR202. So our focus right now is on completing the ongoing study and in engaging in appropriate discussions with potential partners.

Regarding MOR107, there was the question about the characteristics and the approach using - testing it in patients with low sodium, Marlies, is -

Yes, I can take the question, thanks. So your first question was about the molecule itself, as described it's a first lanthipeptide, an angiotensin AT2 receptor. The study that has been initiated is a study in healthy volunteers, single ascending doses and multiple ascending doses, and you are right, in the second part of the trial, we will kind of investigate the characteristics of the molecules in healthy volunteers with a low sodium diet and you might recall we are looking into different possibilities like fibrotic diseases, kidney diseases. So it's important for us to understand that behavior.

And then regarding your third question, Mick, on the cash position expected for year-end 2017. You should expect an amount somewhere around EUR275 million to EUR285 million.

Victoria English.

Yes, just one question about your lanthipeptide program. Can you give us some idea of where you see that developing in the next year or two. And then secondly, I don't know whether you're still in a legal conflict with Genmab over the CD38 patent. Could you bring us up to date on that?

Thanks. Victoria. Your question about lanthipeptide was specific to MOR107. As Marlies just mentioned, we see this has certainly potential in a variety of fibrotic diseases based on the preclinical data we have, but we haven't yet made the decision in going from a healthy volunteer study, which is currently ongoing into precisely what patient setting we would look next. But it certainly seems to have potential in a variety of fibrotic and potentially other indications as well. Regarding the legal thing, yes, indeed, recall that we had sued Janssen and Genmab for patent infringement and that case proceeds and we're in, what I would describe, as the procedural formalistic parts of the process as well known under American law. So at this stage - we actually provided a brief update a couple of weeks ago, I think, in a press release about the first Markman hearing, but at this stage we're simply working our way through the process.

Okay, we have no further questions in the queue. So I shall hand you back over to your host for any concluding remarks.

Thank you very much everyone for participating in the call today. As we said, we're looking forward to a very exciting 2017 with lots of data to be expected and we look forward to keeping you updated on progress throughout the course of the year.

Ladies and gentlemen, thank you for joining today's call. You may now replace your handsets.