MorphoSys AG (MOR) 2022 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the year-end results 2022 of MorphoSys. (Operator Instructions)

I would now like to turn the conference over to Julia Neugebauer. Please go ahead, madam.

Ladies and gentlemen, good afternoon and good morning. My name is Julia Neugebauer, Head of Investor Relations at MorphoSys, and it is my pleasure to welcome you to our fourth quarter and full year 2022 financial results conference call.

Joining me on the call today are Jean-Paul Kress, Chief Executive Officer; Sung Lee, Chief Financial Officer; Tim Demuth, Chief Research and Development Officer; and Joseph Horvat, U.S. General Manager, who will join for the Q&A.

Before we begin, I'd like to remind you on Slide 2 that some of the statements made during the call today are forward-looking statements, including statements regarding our expectations for the commercialization of our products and our development plans and expectations for the compounds in our pipeline as well as the development plans of our collaboration partners.

These forward-looking statements are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in MorphoSys' 20-F and annual report or for the year ended December 31, 2022, and from time to time in other SEC documents of MorphoSys. It is important to keep in mind that our statements in this webcast speak as of today.

On Slide 3, you will find the agenda for today's call. Jean-Paul will begin with an overview and we'll give an outlook. Then Tim will provide an update on our development pipeline, before turning the call to Sung for a summary of our fourth quarter and full year 2022 financial results. Following to prepared remarks, we will open the call for your questions. With that, I'll now hand the call over to Jean-Paul.

Thank you, Julia. Good morning and good afternoon, everyone. Thanks for joining us today. 2022 was another transformative year for MorphoSys. We are determined to have two medicines available to cancer patients by 2025, and we are confident that we will accomplish this. This confidence is reinforced by our clear strategy, highly qualified team, financial strength and, most importantly, a best-in-class mid- to late-stage pipeline.

Pelabresib, our investigational BET inhibitor represents our largest and most immediate opportunity. This investigational medicine has great potential to improve the standard of care in myelofibrosis. Today, myelofibrosis treatments revolves around the use of JAK inhibitors. These medications focus on relieving symptoms of myelofibrosis rather than treating its course.

But with this treatment strategy, only about 50% of patients achieved adequate symptom control and for many that release phase with time. People suffering for myelofibrosis are in critical need of treatment options that not only address their symptoms, but also act to change the overall course of their disease. Phase II results from our MANIFEST study suggest that collaborative, in combination with a JAK inhibitor, may offer for launched improvement in both spleen size and symptom severity at and beyond 24 weeks.

In speaking with physicians who treat myelofibrosis patients, we hear that depth and durability of responses are limited with current first-line therapy. During these conversations, physicians reiterate the excitement about the latest pelabresib data and the therapy's potential in helping address their patients' needs. We continue to privatize the Phase III MANIFEST-2 study of pelabresib in myelofibrosis.

We look forward to sharing top line data from this trial in early 2024, in less than a year from now. Beyond myelofibrosis, we also see potential with pelabresib in treating other myeloid diseases. We continue to educate the media community on the efficacy and safety profile of Monjuvi in combination with lenalidomide as a treatment for patients with relapsed refractory diffuse large B-cell lymphoma, also known as DLBCL.

When speaking with treating physicians, we focus our efforts at increasing medium time on therapy to achieve the most durable results in their eligible patients. Monjuvi addresses an important need for patients as the only outpatient in office immunotherapy in second line DLBCL. We are on track with a number of prescriptions we have seen this far in 2023. In the future, we also see these established relationships, helping us educate physicians on the benefits of pelabresib, if it's approved by regulatory authorities as many of these doctors treat patients with both conditions.

We believe the largest opportunity for Monjuvi is yet to come. Beyond the currently approved indication, we are exploring Monjuvi's use in two pivotal studies for patients with first-line DLBCL and for patients with indolent lymphomas. The frontMIND study in first-line DLBCL is progressing very well, and we look forward to sharing data from the trial in the second half of 2025.

Over the past 12 months, we also took steps to optimize our cost structure and to further strengthen our financial position. This included, for example, the adjustment of our selling expenses or, most recently, the decision to stop work and operations in our preclinical research programs. We continue to concentrate our investments on our most advanced clinical programs that will create near-term value.

As part of this focused strategy, last year, we also out-licensed product candidates that are outside our focus in oncology or are in early-stage development. This included a licensing agreement with Novartis for preclinical inhibitors of a new cancer target and with high bio for felzartamab and MOR210. Under the terms of these agreements, we received competitive upfront payments, and we will be eligible to receive certain milestone payments and royalties.

Also, three of our partner programs, Ianalumab, Abelacimab and Setrusumab are now in late-stage clinical development. At the end of last year, we announced that Sung Lee, our Chief Financial Officer; will leave MorphoSy at the end of this week. I would like to thank Sung for his contributions, and I wish him the best for his future. I am very pleased that Lucinda Crabtree, will join MorphoSys as our Chief Financial Officer. She will start in the third quarter of 2023 at the latest.

Lucinda joins us from Autolus. She is a seasoned executive with broad biotech experience in corporate roles and as an investment professional, both on the buy side and the sell side. I would now like to turn the call over to Tim to provide a development update. Tim, over to you.

Thank you, Jean-Paul. In 2022, we advanced our ongoing clinical programs and made great strides. Let's start with pelabresib. As Jean-Paul mentioned, the Phase III MANIFEST study of pelabresib in combination with ruxolitnib, in patients with myelofibrosis is our key priority. The trial is progressing well, and we expect to report top line data in early 2024.

The primary endpoint of the study is the proportion of patients who achieve a 35% or greater reduction in spleen volume at week 24, known as SVR35. Reduction in spleen size is used as a chronical endpoint in myelofibrosis because spleen enlargement cause significant pain and is associated with disease activity. The key secondary endpoint of the study is the proportion of patients achieving a 50% or greater improvement in total symptom score.

As measured by the myelofibrosis symptom assessment form, or MSAF, from baseline at week 24.

Patients with myelofibrosis experience a severely diminished quality of life due to symptoms, such as fatigue, fever and weight loss. The MSAF is a validated tool specifically for myelofibrosis patients that can track changes in these symptoms. Please recall that when we took over the program from Constellation, we optimized the study by increasing the number of patients to approximately 400, and we feel very confident with the improved trial design. The MANIFEST-2 study is supported spread findings from the Phase II MANIFEST trial of pelabresib in combination with ruxolitinib in patients with myelofibrosis, including those who were JAK inhibitor naive.

Updated results from MANIFEST were presented at the ASH Annual Meeting in December 2022. These results suggest that pelabresib in combination with ruxolitinib provides prolonged improvement in both spleen size and symptom severity at and beyond 24 weeks. We also presented preliminary research indicating the association of biomarkers with disease-modifying activity of pelabresib. The results from the MANIFEST study were also recently published in the Journal of Clinical Oncology.

Based on the body of data we have presented thus far our confidence in pelabresib and the Phase III MANIFEST-2 study is high. Moving on to tafasitamab. This medicine continues to address an important need for patients with relapsed or refractory DLBCL. At the 2023 AACR Annual Meeting, final data from our pivotal L-MIND study will be presented during an oral presentation, spotlighting 5-year efficacy and safety results in these patients.

The results, which built on the data presented at SOHO last year, further support the curative treatment potential of etavacitumab and lenalidomide combination for patients with DLBCL, as these patients are experiencing durable remissions and long-term responses with treatment. Beyond the currently approved.

indication, we're exploring tafacitamab in 2 Phase III studies, frontMIND and firstMIND DLBCL and inMIND in relapse or refractory follicular or marginal zone lymphoma, which is being driven by our partner insights.

For about 50% of patients with high intermediate and high-risk DLBCL, the standard of care first-line therapy, R-CHOP is ineffective. And the pronosis for patients with relapsed or refractory disease is very poor. We are investigating the potential of adding tafasitamab and lenalidomide to R-CHOP to increase the DLBCL crates in the first line and help more patients avoid relapse. At the 2022 ASH Annual Meeting, we presented final safety and efficacy results from our Phase Ib trial, firstMIND, the precursor study to frontMIND.

These results underscore the therapeutic potential of tafasitamab in combination with lenalidomide added on to standard R-CHOP therapy for patients with first-line DLBCL. Finally, let's turn our attention to Tulmimetostat, our mid-stage investigational next-generation EZH2 inhibitor. Abnormal EZH2 function is implicated in several ways in cancer and may make tumors more resistant to anticancer treatment.

Tulmimetostat is designed to improve on first generation EZH2 inhibitors to increased potency, longer residence time on target and a longer half-life. Our excitement about this mid-stage program increased in 2022 with the release of early proof-of-concept data. Initial data from our Phase I/II basket study showed encouraging monotherapy responses in heavily pretreated patients with ovarian and endometrial cancers as well as mesothelioma and peripheral T-cell lymphoma. These preliminary results are promising, and we look forward to learning more as the trial progresses.

We have a strong mid- to late-stage pipeline. We look forward to sharing pivotal data over the next few years with the MANIFEST-2 trial results expected in less than 12 months. With that, I'll now turn the call over to Sung to review the financials.

Thank you, Tim. We're pleased to share our financial results for the fourth quarter and full year of 2022. Moving to Slide 17. Monjuvi sales were $25.3 million in the fourth quarter of 2022, reflecting a 7% year-over-year growth driven by demand. Sales in the fourth quarter benefited approximately $1.2 million from seasonal inventory dynamics.

For the full year, Monjuvi sales were $89.4 million, delivering 13% year-over-year growth. In the fourth quarter of 2022, we recorded EUR 0.7 million in royalty revenue for Monjuvi sales outside of the U.S. from our partner Incyte, and recognized EUR 3 million for the full year. As our partner Incyte has recently affiliated, the Monjuvi launch is ongoing in four key markets, with the majority of sales, thus far, coming from Germany.

Total revenues in 2022 were EUR 278.3 million compared to EUR 179.6 million in 2021. This increase resulted mainly from higher revenues from licenses driven by the out-licensing agreements with High Bio and Novartis. Total cost of sales was EUR 48.6 million in 2022 compared to EUR 32.2 million in 2021. Cost of sales specific to Monjuvi U.S. product sales was EUR 22.6 million in 2022 compared to EUR 12.3 million in 2021.

The year-over-year increase was driven by higher sales of Monjuvi and a EUR 5.1 million charge related to activities to optimize the Monjuvi supply chain. Turning to operating expenses. R&D expenses in 2022 were EUR 297.8 million compared to EUR 225.2 million in 2021. The growth was driven primarily by the advancement of our clinical programs and the full year impact of the Constellation acquisition.

Selling expenses decreased to EUR 92.4 million in 2022 compared to EUR 121.5 million in 2021. Recall that we made additional investments in 2021 to support the first full year of the Monjuvi launch. We will continue to carefully monitor our Monjuvi co-commercialization investment to ensure that it is commensurate with revenue expectations.

G&A expenses in 2022 were EUR 60.1 million compared to EUR 78.3 million in 2021. The year-over-year decrease is primarily due to the transaction costs for the Constellation and Royalty Pharma agreements completed in the third quarter of 2021. For the full year of 2022, we reported a consolidated net loss of EUR 151.1 million compared to a net loss of EUR 514.5 million for the same period a year ago.

The lower consolidated net loss in 2022 was driven mainly by the recognition of finance income triggered by the reduction in financial liabilities from collaborations. Turning to our balance sheet. We ended 2022 with cash and investments of EUR 907 million compared to EUR 977 million at the end of 2021. Our solid cash position enables us to not only reach the pivotal data milestone for the Phase III study of pelabresib, which is anticipated in early 2024, so to also provide a cash runway of at least 12 months before the pivotal data readout.

Turning to our guidance for 2023 on Slide 19. We are reiterating our guidance that was provided at the beginning of January this year. All aspects of our guidance remain the same. Specific to Monjuvi U.S. net product sales and the expected pace this year, we expect to see the first quarter of 2023 sequentially lower due to seasonal dynamics and remain on track to deliver within our full year guidance range.

Before I hand the call back to Jean-Paul, I would like to conclude by thanking you, the investment community, I have truly enjoyed our interactions over the past two years. Back to you, Jean-Paul Kress.

Before we go into Q&A, I would like to conclude with a few words. We remain focused on driving our mid- to late-stage pipeline forward. With pelabresib, we have a tremendous opportunity to improve the standard of care for patients with first-line myelofibrosis. And we expect the top line data from our Phase III study in less than a year from now. We are well financed to advance our clinical programs, and we will continue to focus our resources on our strategic priorities. And with that, I'd like to open the call for questions. Operator, please open the line.

(Operator Instructions) The first question comes from James Quigley from Morgan Stanley.

I've got two, please. So first of all, on the POLARIX, AdCom. So Tim, I'll be interested in your views here. particularly around the relative importance of the endpoints. And also, again, maybe it's before your time. But in terms of your discussions with the FDA, did they give you any indication of what they think will be a clinically meaningful absolute PFS benefit and also their thoughts on the importance of the OS trend? And then secondly, with -- again, related to POLARIX and the AdCom. What was your thoughts on the fact that most of the OS benefit or the BRS was driven by the high grades DLBCL patients? Is that something you've seen in other studies. Then a quick one on the firstMIND as well. When can we expect the next cut of the data? You said in the slide that 94% of patients are alive after 24 months. Have you done any work to track what this looks like versus historical R-CHOP? Or the R-CHOP in POLARIX. And then also on firstMIND, can you give us an idea of what the CR rate was as it wasn't split out in the slides or in the ASH presentation.

So let me try to summarize the questions you asked. First of all, you wanted to hear importance of the endpoint FDA expectations on the PFS benefit, importance of OS trends and the contribution of (inaudible) and then some more details on the firstMIND results. So let me try to start with the importance of the endpoint. So first of all, I think the (inaudible) was a very positive ODAC for first time DLBCL patients. It's clearly has a positive read-through on our frontMIND's trial. The panel very clearly endorsed PFS as an accepted endpoint this ousts the need to wait for many, many years to show an overall survival benefit, that I think, is a very important message for us and gives us an even greater confidence being able to gets the frontMIND to an approval and to patients. I guess that also answers your question around the relative importance of that OS trend. It is clear from the advisers that OS could not be shown in a reasonable period of time. At the same time, of course, you want to see a positive trend in OS. And if I go back to the data we've presented from our firstMIND that was poster at ASH last year, it's very nicely shows and gives us a lot of confidence hitting the relevant endpoint here, if I can just quote the over response rates that you were asking for -- we are talking about response rates of close to 94% -- 93.9% to be correct in the overall population, which I think tracks very nicely against what the polatuzumab trial showed as well. Again, additional confident, I'm looking at our 24-month PFS rates, which is right up there with polatuzumab. So I think taking all this together, we have great confidence in being able to have a positive readout from the frontMIND study.

The next question comes from James Gordon from JPMorgan.

James Gordon, JPMorgan. One question was just on [pela]. So hematology being a pretty popular over lots of companies. Is it possible we see anything ahead of you actually announcing the data over next year in terms of partnerships or involvement with other companies? Was it really just wait for the data now? Could there be anything else that happens ahead of it? And then the other question was on Monjuvi. So the Symphony data when I look at February is showing a sequential decline is your competitive intelligence saying that is just seasonality? Or is that the step-up in completion that I think you're expecting to see as well? So do you think we're going to see a sequential growth in Q2 and Q3 as we move through the year? And then looking at longer term, so guidance is roughly from Monjuvi sales to be about flat this year. Do you think this year could be the peak sales because there's more competition in subsequent years? Or do you think you might have some more growth from the existing U.S. readouts refractory to your BCL indication?

Thanks for the question, James. So I'll address this Jean-Paul. I'll address the pillar partnership question. So as you can expect, the window, we are operating in now than 12 months for the pivotal data is extremely encouraging for us. And that means a lot of optionality. But think obviously, the value creation opportunity is so important here that we would rather obviously wait for exercising these options later on after we know the results, and we can publish them, but never say never. Right now, we are focusing mostly on executing swiftly the trial, ensuring the right level of quality. We've been over delivering on that. We're very pleased. The team has done a great job. So the reflection of the very strong enthusiasm from the myelofibrosis community on pelabresib and this study. So it's on the green. And again, it means optionality for potential strategic moves and one of partnerships or other. So we'll keep you posted, of course. And on the second question regarding the module outlook for the year, I'll ask Sung to answer.

Yes, James, thanks for the question. So in my prepared comments, I did mention that we would be sequentially down in quarter 1, and this is just for the usual seasonal dynamics. We did have some inventory take up in quarter 4, which is typical and what we've seen in the prior 2 years of launch. With that said, I think this quarter 1 is very different than the prior 2 years, quarter 1 where we saw an intense outbreak of COVID, Delta, Omicron variants. And obviously, we don't have that in this quarter 1. And therefore, we're tracking right where we want to be, despite the fact that it was predictable that we would be sequentially down in quarter 1. With regard to the rest of the year, yes, we would expect quarter 1 to most likely be the low watermark for us. And we would expect some growth in the subsequent quarters, but I don't want to get too ahead of ourselves here. We did give a guidance range for a reason, and that's to factor in increasing competitive landscape. So with regard to your question about will this be a peak year I'll just highlight that the upper end of the guidance does suggest modest year-over-year growth. And of course, the bottom then suggest a year-over-year decline. So I think it's way too soon to say exactly where we fall in that range, but we feel we're right on track to be within that guidance range.

(Operator Instructions) The next question comes from Rajan Sharma from Goldman Sachs.

Just on pelabresib, can you just kind of discuss -- expectations for the clinical profile? And specifically, I guess, what you think would constitute a best case outcome in terms of SVR and also total symptom score? And then specifically within total symptom score, what do you think the most important underlying symptoms within that? And is there potential collaborative to differentiate on any of these? And then just one follow up on Monjuvi. So in terms of the prescriber base, I think split out kind of the 70/30 between community and academic. Do you think that's steady state now? Or do you see that to change over the next kind of 12 to 24 months?

Thanks Rajann for the question. Tim, elaborate the MANIFEST-2 question and Joe, the Monjuvi question.

This is Tim. So on the SVR expectation, I think we are in a very comfortable position. We have the MANIFEST study, particularly ARM 3 that's investigating pelabresib in combination with ruxolitinib in that naive patient population myofibrosis where, of course, we showed data at ASH last year with a very good [screen] response rates of 68% at week 24. And which I guess is a quite competitive parameter if you compare that to some of the other drugs available in that space. On TSS, also very good data from the same study with a 56% -- 54% TSS improvements at week 24. So I think we know what to expect. And as I mentioned in my prepared remarks, when we took over the study from Constellation, we increased the sample size to further boost the confidence hitting that TSS endpoint. And again, confidence is very high on making that.

Joe on the first?

So I think in the normal evolution of any launch, academics are quicker to adopt. But as we know, the sheer volume of patients are seen out in the community. We approximately have a 70-30 split right now. And as we continue to increase awareness and understanding and utility, the sites of care growth that we see a greater amount of is coming from the community. So I think you continue to see a bit of a shift to more of a community. So I think that's the right way of looking at it.

(Operator Instructions) We have the next question from Suzanne Voorthuizen from BLK.

Firstly, I would like to ask if you can elaborate a bit on the operating expenses. For R&D, can you indicate what proportion of the total roughly EUR 300 million relates to the major parts, pelabresib versus tafasitamab and the rest. And then circling back to your fine-tuned sales and marketing expenses and the decision to also not the (inaudible) preclinical programs. I was just wondering how are you looking to -- or are you looking to further reduce expenses going forward? Can we expect further cost savings initiatives during the coming year?

This is Sung. I appreciate the question. With regard to operating expenses and specifically R&D and how it's broken out by the various clinical stage programs, I think the way to look at this is about 2/3 of our R&D expense is driven by the pivotal studies. So that's substantial. And this year, you would expect the collaborative pivotal study manifest to be peaking. The other studies that are related to tafasitamab or Monjuvi frontMIND and inMIND, we are past the peak on those. So hopefully, that gives you a way to think about the direction of these different pivotal studies in terms of how they impact R&D expense. Now with regard to your other question about other things the company could do in terms of cost structure optimization. Look, there is no complacency here, and that's reflected in the actions we've taken over the 18 months. Since we've acquired Constellation in mid-2021, we've realized a lot of synergies. We're way off of our peak headcount. As you remember, more than a year ago, we, basically, closed the research discovery operations at Constellation. We optimized our commercial expenses and we'll continue to keep an eye on that based on developments of Monjuvi revenue. And of course, the recent action of a difficult decision to close our operations on research and discovery efforts here in Germany. These are very important decisions to help us optimize our cost structure and the work will be ongoing. There's no complacency as I mentioned before, and we'll continue to monitor this as things develop.

Got it. And one follow-up, if I may. Given the somewhat complicated accounting with the inside partnership, TREMFYA royalties and the one-offs from the last years. Can you help us understand what your current cash burn rate is?

Well, if you look at last year, it was above -- on an operating cash burn basis, it's over EUR 30 million per month. Now I would expect this year to be somewhat at similar levels and maybe even slightly lower -- but the important thing here is with our EUR 907 million at the end of last year, this gets us well past the pivotal data for pelabresib. And in fact, I mentioned in my prepared comments, we expect to have at least 12 months of cash post the pivotal data for pela. And I think the way to look at this is, when we get to that inflection point, the pela data readout and if it's positive, which we believe it can be, I think we will have good options to consider. So I think that should be the focus right now is we have ample cash, more than enough to get through that inflection point and then we'll think about -- we deal with the options at that point.

(Operator Instructions) Madame and gentlemen (inaudible) no more questions from the phone. We have a question right now from Mohammed (inaudible) from (inaudible) Main Research.

Maybe I missed it. So I have just one question. With the Phase III MANIFEST-2 study expected to report top line data in early 2024, can you provide any updates on the progress of this trial and what potential impact this data could have on the future of the more pipeline and strategy?

This is Jean-Paul. This MANIFEST-2 study is our pivotal study, as you probably know, our main asset pelabresib and it's some far our largest opportunity for, one, changing the standard of care in myelofibrosis -- one, I would say, value creation. So this is really an extremely important study for us. And so far so good, as we mentioned several times, we have have been executing in a very swift pace. We've advanced the pace of the top line results to early 2024, as you just mentioned. And again, the demand on the study from the space of the investigators has been very, very high. So all is on the cream for this one, which is full blast on execution continuing to balance the speed versus quality. And we are now in this less than 12 months window. So super important for us, we are super exciting and we are very, very excited by the potential outcome for the patients and the company.

Just a very short question. So do you see any kind of the portfolio focus on prioritization like how is the company actually prioritizing its development pipeline and allocating the resources to different programs, something like that?

Yes. We've already done that. We -- in fact some said that in his comments on the on the expenses allocation, I mean, we've really reprioritized or prioritized towards these late-stage programs namely the pelabresib program and the MANIFEST-2 trial. We've made this -- we've taken these difficult decisions to an earlier discovery stage programs and operations. And so that prioritization is operated. Now we continue with no complacency to look at our cost base, but it's already -- we crossed a Rubicon on this one, first of all, because our strategy is very clear toward our late-stage pipeline and opportunities but also because we've executed and implemented to us, but we want to talk.

There are no further questions at this time. I would now like to hand the conference back over to Julia Neugebauer for any closing comments. Thank you.

Ladies and gentlemen, this concludes today's conference call. If any of you would like to follow up the Investor Relations team for this is available for the remainder of the day. Once again, thank you for joining our call. Have a good day, and goodbye.

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