Q2 2022 MorphoSys AG Earnings Call
[music].
Please stand by.
Please standby we're about to begin.
We're about to begin.
Good day and welcome to the MorphoSys Q2 2022 Financial Results Conference Call.
Good day and welcome to the Morphosis Q2, 2022 financial results conference call.
Today's conference is being recorded.
I would now like to hand the call back over to Julia for any additional or closing remarks.
Today's conference is being recorded at this time I'd like to turn the conference over to Julia Neugebauer. Please go ahead.
At this time, I'd like to turn, the conference over to Julia Neugebauer.
Ladies and gentlemen, good afternoon or good morning. My name is Jim <unk> head of Investor Relations at My forces and it is my pleasure to welcome you to our half year 2022 financial results Conference call.
Please go ahead.
Ladies and gentlemen, this concludes today's conference call.
Ladies and gentlemen, good afternoon or good morning.
If any of you would like to follow up, the Investor Relations team of MOPHOS is available for the remainder of the day.
My name is Julia Neugebauer, Head of Investor Relations at MorphoSys, and it is my pleasure to welcome you to our half-year 2022 Financial Results Conference Call.
With me on the call today are Sean Paul Kress, Chief Executive Officer sung Lee Chief Financial Officer Martha.
Peters, Chief Research and development Officer, and Joe Hart U S General manager.
Before we begin I'd like to remind you on slide two said some of our 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.
During those described in the <unk> 20-F annual report or for.
For the year ended December 31, 2021, and from time to time in other SEC documents with morphosis.
It is important to keep in mind that our statements in this webcast speak as of today.
With me on the call today are Jean-Paul Kress, Chief Executive Officer, Sung Lee, Chief Financial Officer,
Once again, thank you for joining our call.
On slide three you'll find the agenda for today's call <unk> will begin with an overview and we'll give an outlook.
Jo Ann will provide a commercial update and Michael will provide an update on our development pipeline before turning the call to Sam for a summary of our second quarter 2022 financial results.
Following these prepared remarks, we will open the call for your questions.
With that I'll now hand, the call over to John Poehler.
Malte Peters, Chief Research and Development Officer, and Joe Horvath, U.S. General Manager.
Have a good day and goodbye.
Thank you Julia welcome everyone and thank you for joining us today.
In the second quarter, we made progress on our strategy and commitment and becoming a leader in hematology oncology.
Before we begin, I'd like to remind you on slide two that some of our 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.
And with that, that does conclude today's call.
And making a meaningful difference in the lives of cancer patients.
Thank you for your participation.
Starting with Bon Jovi, our commercial cancer immuno therapy.
We are pleased with a bounce back in sales in the second quarter.
Brian months, such as becoming increasingly more competitive.
Joe will provide more details shortly.
We are encouraged by what we're seeing and the trends related to duration of therapy.
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, an annual report, all for the year ended December 31st, 2021, and from time to time in, other SEC documents of MorphoSys.
However, we also recognize the competitive landscape has increased.
Including recent approvals of additional second line treatment options.
It is important to keep in mind that our statements in this webcast speak as of today.
As such we lowered our expectations for growth in the second half of 2022.
Which is reflected in our revised sales guidance from four modules.
We continue to drive solid online growth and work closely with health care professionals on the importance of generation of treatments to ensure the best outcome for the appropriate patients.
Turning now to our late stage pipeline.
We are encouraged with the pace of enrollment for pillar Recip and module pivotal phase III studies.
We continue to work in a focused manner to transform the treatment paradigm for difficult to treat team all diseases and to have a positive impact for patients.
Collaboration is being studied in first line myelofibrosis in combination with rux related.
If approved this regimen could chance to standard of care for patients and generate more than $1 billion in peak sales.
We're excited about <unk> potential disease, modifying dynamics, where the data continues too much here.
We recently presented positive data at Aesop and continues to receive excellent KOL feedback, which Martin will talk to later.
Beaumont jewelry the.
The largest opportunity is in the first line <unk>.
Whereas there remains a large unmet need.
There is significant interest from the medical community in the frontline study.
That is having a positive effect on enrollment.
The study focuses on high risk patients with a <unk> core of three to five which we believe distinguishes us from others.
We also have a mid stage assets with CPI <unk> hundred nine.
Which is our easy hedged inhibitor and we will be providing data later this year.
Looking now at business development, where we're excited to enter into an equity participation and license agreement with Hyatt <unk> four.
For <unk>.
And more to Tim.
The high bio team are very experienced drug developers and scientific experts in autoimmune diseases.
<unk> are exceptionally well positioned to successfully advanced cell.
And multi <unk> into new medicines for patients who are in desperate need of better treatment options.
Okay.
This agreement allows us to focus our resources on hematology oncology.
The benefits of the deal are also reflected in our updated R&D guidance.
Separately.
We entered a clinical trial collaborations with Pfizer.
As they look to combine <unk> with their CD 47 candidates called <unk> two in all <unk>.
Okay.
We also continue to be encouraged about the progress within our partner pipeline.
We expect pivotal data Readouts from Rosh Foregone center remodel in Alzheimer's disease and from GSK for <unk> in our eight by the end of this year.
As mentioned in our Q1 earnings call.
<unk> <unk> and <unk>. The next wave of partner programs has reached late stage clinical development.
We remain focused on executive commercially and advancing our late stage pipeline.
Sales teams are driving Monrovia awareness and education.
And as I prevention previously mentioned, we are very encouraged with the pace of enrollment of our pivotal studies, which operate on potential large value creating opportunities, although the mid to long term.
We have a strong balance sheet and cash runway, we have further strengthened as we exercised our option to draw on $300 million.
Villa development funding bonus as per our agreement with royalty pharma.
On slide three, you find the agenda for today's call.
Thank you and with that I will turn the call now over to Joe <unk>.
Showpiece.
Okay.
We seem to have a technical glitch here. So we will go to master far the development updates multiplicity.
Jean-Paul will begin with an overview and will give an outlook.
Thank you John Paul.
Good morning, and good afternoon everybody.
We have a very strong pipeline and we are very pleased with the progress we're making in advancing our clinical trials.
Joe then will provide a commercial update and Malte will provide an update on our development pipeline before turning the call to Sung for a summary of our second quarter 2022 financial results.
First let me start with our key pivotal phase III studies.
Following these prepared remarks, we will open the call for your questions.
For pillar, Brazil patient enrollment in our manifesto study in first line myelofibrosis is progressing very well.
Sito mob patient enrollment in front line. Our study in first line <unk> and <unk> mines, our study in relapsed or refractory Follicular marginal zone lymphoma that is being executed by each side is also progressing very well.
This quarter, we also progressed and ends up with new partnerships to further investigate chunghwa telecom up in combination with other novel therapy as a treatment for <unk>.
We entered a clinical trial collaboration with five <unk> insights to investigate the immuno therapeutic combination of Pfizer <unk> 62, a novel fusion protein targeting the CD 47.
And <unk> plus lenalidomide in patients with relapsed or refractory <unk>, who are not eligible for autologous stem cell transplantation.
In addition, <unk> initiated a study investigating the combination of San Francisco mob Lenalidomide.
And then a little minds and Plum watermark, then cause <unk> bispecific antibody in patients with relapsed or refractory <unk>.
We believe that the addition of novel Immunotherapies to the combination of <unk> and Lenalidomide may have the potential to provide new chemo.
Combination treatment options to these patients.
This quarter, we also released new findings highlighting the potential of <unk> as a first line myelofibrosis treatment.
In June at the European Hematology Association Congress, we presented the latest clinical and translational research from the phase III monotherapy trial.
The data showed that <unk> has the potential to normalized cellular effects seen in myelofibrosis, and thereby getting at the root cause of the disease.
Correlated with clinical response.
We analyzed deriving from the blood of patients who are enrolled in the moniker trial and from healthy volunteers.
The findings indicated that collaborates with alone or in combination with a JAK inhibitor with Sunitinib may have the potential to improve the typical imbalance in the tool white blood cell populations, the myeloid and lymphoid cells and.
And Ted restore normal blood cell development.
These improvements concurred with decreases in Mega carrier slide clustering in bone marrow and correlated with decreases in volume.
Mega carrier sites are the cells in the bone marrow are responsible for making placements and the clustering of research one of the signs of myelofibrosis.
Additionally, <unk> alone or in combination decreased pro inflammatory and pro fibrotic signaling and monetize.
Getting a potential at generation of BD process.
These findings suggest that <unk> may help improve outcomes for patients with myelofibrosis and reaffirms our confidence in the phase III management suite study.
We continue to evaluate the data from the manifest study and are excited to present more mature data on the durability of spleen volume reduction and total symptom score reduction later this year.
We also expect to release new data on top of Pizza and our second generation <unk> inhibitor CPI <unk> hundred nine later this year.
<unk>, we will present updated longer term follow up data of patients enrolled in the <unk> study who responded to treatment.
Including patients who have been treated for more than five years.
These data firewall suggests a curative treatment potential of the comprehensive lenalidomide combination for patients with <unk>.
As patients are experiencing durable remissions and longer term responses with treatment.
Also later this year, we will present updated data from first line our phase <unk> study in first line <unk>.
These data reaffirm our assumption of the synergistic effect of tougher system up and Lenalidomide in patients with first line via DCF.
We are excited to study this effect in our ongoing pivotal phase III study frontline and the potential to provide these patients with a more effective treatment options.
Now our <unk> two inhibitor CPI <unk> hundred nine is currently being assessed in a basket trial of severance for several solid tumor as well as lymphoma.
We are encouraged by the preliminary efficacy data we are observing in multiple indications, which we will also release during a medicine <unk> things in the second half of this year.
As you can see we expect to deliver a steady flow of clinical data over the next several years.
We have made a lot of great progress and we are excited about our pipeline potential.
With that, I now hand the call over to Jean-Paul.
With that I will now turn the call over to Tom for a review of the financials.
Thank you, Julia.
Yes, ladies and gentlemen, apologies for this SaaS model technical glitch, we shouldn't you have back with US now so I would like to ask Charlie to cover it in commercial results now Joe.
Welcome, everyone, and thank you for joining us today.
In the second quarter, we made progress on, our strategy and commitment in becoming a leader in hematology-oncology and making a meaningful difference in the lives of cancer patients.
That is not working then <unk> would have to jump in and go over the commercial results. Thank you Joe.
Joe.
Returning now to our module <unk> commercial results.
Starting with Monjovi, our commercial cancer immunotherapy.
<unk> net sales in the second quarter and were $23 3 million.
Representing 29% year over year growth.
On a sequential basis, we saw a positive 25% increase.
Underlying demand was notably the highest since launch which further underscores module V as an important treatment for patients.
Our sales teams are now in person.
As customers for 90% of the total visits educating on module with value proposition.
This is important as it lowers our teams the opportunity to conduct a complete office call and ensure a broad understanding of module.
To all key staff that interact with patients.
We are pleased with the bounce back in sales in the second quarter in an environment that is becoming increasingly more competitive.
Through the second quarter, we closed two maintained leading market share in second line new patient starts.
Joe will provide more details shortly.
We expanded our reach with more than 12 150 sites of care ordering module V since launch and having approximately eight.
Pursuant upsides repeating the orders.
Greater than 70% of orders came from the community setting where we continue to have good traction and the balance from the academic setting.
Our share of voice remains high ensuring an increasing level of walnuts homeowners jewelry.
This provides us with an opportunity to continue expanding its use for a greater number of patients.
As outlined in our updated guidance.
The treatment landscape is evolving and.
And became more competitive over the past few months due to new entrants into the market.
However, we will continue to deliver modules is differentiated profile.
Donnelley immunotherapy option in second line that can be administered at the physician's practice and in those patients who remain in their communities and local practice.
They receive treatment.
Our focus earlier this year as you know was on educating healthcare providers on the optimal duration of therapy and the benefits of keeping patients on our immunotherapy treatment longer.
We are encouraged by what we are seeing in the trends related to duration of therapy.
However, we also recognize the competitive landscape has increased, including recent approvals, of additional second-line treatment options.
We are actually seeing some positive trends in persistence and are committed to working with physicians to increase the treatment duration, so that appropriate patients have the best and most durable outcomes possible.
To date, we have seen a number of patients continuing on treatment for more than a year.
As such, we lowered our expectations for growth in the second half of 2022, which is reflected in our revised sales guidance range for Monjovi.
We believe there is continued opportunity ahead of <unk> and we look forward to updating you further.
With that I will turn the call over to China for a fee.
Finance update countries.
We continue to drive second-line growth and work closely with healthcare professionals, on the importance of duration of treatment to ensure the best outcome for the appropriate patients.
Turning now to our late-stage pipeline, we are encouraged with the pace of enrollments, for our Pellabrasib and Monjovi pivotal phase III studies.
Paul we're pleased to share our financial results for the second quarter and first half of 2022.
With this, we continue to work in a focused manner to transform the treatment paradigm, for difficult-to-treat heme-onc diseases and to have a positive impact for patients.
Pellabrasib is being studied in first-line myelofibrosis in combination with roxolitinib. If approved, this regimen could change the standard of care for patients and generate, more than $1 billion in peak sales.
Moving to slide 14, as John stated earlier <unk> sales were $23 3 million in the second quarter of 2022, growing 25% sequentially and 29% year over year.
We also recorded a <unk> 7 million euros and royalty revenue for many <unk> sales outside of the U S from our partner insight in the second quarter of this year.
As our partner insight has recently stated sales thus far have been mostly from Germany, and the royalties are reflective of that we expect royalties to grow as many juvie achieved pricing and reimbursement in other countries in Europe .
On slide 15 total revenues in the second quarter of 2022 were $59 4 million euros compared to $38 2 million euros in the same period a year ago.
Total cost of sales was $17 2 million euros in the second quarter compared to $10 1 million euros a year ago.
The year over year increase was primarily driven by higher <unk> sales in the U S. And then JV supply outside of the U S.
Recall that <unk> provides insight with managed UV supply for ex U S sales.
This supply is recorded as revenue and reflected in licensing milestones and other category under revenue.
And an equal amount is recorded in cost of sales, yielding a zero gross margin.
Cost of sales specific to <unk> U S product sales with $4 3 million euros in the second quarter of 2022.
Yes.
Turning to operating expenses R&D expenses in the second quarter of 2022 were $60 9 million euros compared to $40 5 million euros for the second quarter of 2021.
Year over year growth, primarily reflects the inclusion of constellation and increased investments to support the advancement of our clinical stage programs.
Selling expenses decreased to 24 million euros in the second quarter of 2022 compared to $28 5 million euros for the same period in 2021.
The year over year decline was driven by the additional investments made in 2021 to support the first full year of the <unk> launch.
G&A expenses in the second quarter of 2022 were $12 4 million euros compared to 35 million euros in the second quarter of 2021.
The second quarter of 2021 included $18 8 million euros and transaction costs related to the acquisition of constellation and agreement with royalty pharma.
For the second quarter of 2022, we reported a consolidated net loss of 235 million euros compared to a net profit of $20 9 million euros for the same period, a year ago recall that the profit in the second quarter of 2021 was driven by the recognition of noncash <unk>.
Finance income due to a decrease in the financial liabilities from the collaboration with insight.
Turning to our balance sheet. We ended the second quarter of 2022 with a with cash and investments of 750.
$754 3 million euros compared to $976 9 million euros at the end of 2021.
We recently notified royalty apartment that we intend to draw $300 million from the development funding bond and anticipate receiving the proceeds in September of this year.
The funds will be used to advance our pivotal studies and prepare for future product launches with our existing cash and investments on hand, and the future proceeds from the development funding bond, we're well capitalized to fund operations through several important clinical milestones.
Turning to our guidance for 2022 on slide 16.
As we previously communicated on July 26, several components of our financial guidance for 2022 were updated which I'll summarize.
<unk> U S. Net product sales are expected to be in the range of 90 million to 100 $110 million compared to the previous range of $110 million to $135 million.
Gross margin for module B U S. Net product sales remains unchanged and is anticipated to be in the range of 75% to 80%.
R&D expenses are expected to be in the range of 275 million to 300 million euros compared to the previous range of 300 million to 325 million euros.
The significant reduction in the R&D guidance range was achieved by partnering outflows artemev to high buyer.
SG&A expenses are anticipated to be in the range of $150 million to 165 million euros.
The previous range was $155 million to 170 million euros.
With that I would like to hand, the call back to John Paul.
We're excited about Pellabrasib's potential disease-modifying dynamics, where the data, continues to mature.
Before we go into Q&A I'd like to conclude with a few words.
We recently presented positive data at IHRA and continue to receive excellent KOL feedback, which Malte will talk to later.
We are intensively focusing on enrolling our pivotal studies of Petrobras had been tougher September .
And we're making great progress on this front.
In Montjuvis, the largest opportunity is in the first-line DLBCL setting, where there, remains a large unmet need.
We remain motivated and committed to driving the uptake of module <unk>.
With a potential flagship indication in first line <unk> yet to come.
There is significant interest from the medical community in the FrontMind study that is having, a positive effect on enrollment.
We believe the successful execution on the late stage pipeline over the next three years has the potential to create significant value for patients and all stakeholders.
With that we'd like to open the call for questions.
The study focuses on high-risk patients with an IAPI score of 3 to 5, which we believe, distinguishes this study from others.
Erica.
We also have a mid-stage asset with CPI-0209, which is our easy H2 inhibitor, and we will, be providing data later this year.
Looking now at business development, we were excited to enter into an equity participation, and license agreement with HiBio for Felzartamab and Mor210. The HiBio team are very experienced drug developers and scientific experts in autoimmune diseases, and are exceptionally well-positioned to successfully advance Felzartamab and Mor210 into new medicines for patients who are in disparate need of better treatment options.
Of course, thank you.
This agreement allows us to focus our resources on hematology-oncology.
The benefits of the deal are also reflected in our updated R&D guidance.
Separately, we entered a clinical trial collaboration with Pfizer as they look to combine Montjuvis, with their CD47 candidate called TTI622 in RR-DLVCL.
I'd like to ask a question. Please signal by pressing star one on your total.
We also continue to be encouraged about the progress within our partner pipeline.
<unk> keypad.
If you are using a speaker phone. Please make sure your mute function is turned off.
Signal to reach our equipment.
If your question has been answered and you want to remove yourself from the queue Press star two.
And it is star one if you would like to ask a question and we'll pause just for a moment to allow everyone an opportunity to signal for questions.
We expect pivotal data readouts from Roche for Gontenarimab in Alzheimer's disease and, from GSK for Otilimab in RA by the end of this year.
And we will go ahead and take our first question from Jason Butler with <unk>.
<unk> Securities. Please go ahead.
As mentioned in our Q&A in school, with Ianalumab, Abelacimab, and Cetrusumab, the next wave, of partner programs has reached late-stage clinical development.
We remain focused on executing commercially and advancing our late-stage pipeline.
Hi, Thanks for taking the questions.
The field teams are driving Montjuvi awareness and education.
First one on one <unk> can you just talk a little bit more about the competitive dynamics youre.
And as I previously mentioned, we are very encouraged with the pace of enrollment of, our pivotal studies, which represent potential large value creating opportunities over the mid to long term.
You are seeing in the quarter on what Youre doing.
Either reinforce or refine the messaging to prescribers and then when you look at your share in second line patient starts has that what's the trend been throughout the quarter can you give us any more color there.
The share was at the beginning versus at the end of the quarter.
Thanks, Jason.
Look regarding the competitive environment.
Yes, it's not a secret that <unk> has been.
Pretty competitive lately and increasingly we've seen some new entrants.
And obviously, we've reflected that in our guidance a bit recently, but again, let me tell you why we are we are.
Very excited we swung jewelry.
But the bottom line is that we are the best suited option foreign community setting, we basically a little patients to stay in their homes with long term outcomes.
I mentioned earlier that we have no patients with almost two years of treatment in real life.
So that's actually a very impressive outcome and was corrected potential sale.
Some of the options out there don't have this possibility to keep the patient at home and ultimately that's what to a day. One so we're very proud of with our growth year over year and we keep we keep obviously a close eye on competition, which we believe we are extremely.
Well placed for <unk>.
<unk> and on your questions on the second line patients tough.
I mean, the market share we've communicated in the past that we've basically kept hearing between one out of three to two out of three new patients in second line.
And that fluctuates quarter to quarter, and there are low and in our data, but yet the second quarter, we were probably more.
Close to one of the three patients and we are hopeful obviously that will go back to higher numbers.
Great. Thanks, and then just my.
My last question is on <unk>.
Can you talk about the feedback you've been getting from Kols and specifically.
Physicians.
Enrolling in manifest to what the feedback was on the disease modifying data that you presented it.
Hey, thanks.
Thanks, Jason.
<unk> will address your question.
Yes. Thanks helpful. Thanks, Jason.
We have received very successful leasing efforts.
Okay.
Sure.
Investigators using IC in my career I have.
Yeah.
We're meeting with so many participants and so much excitement in the room.
Yeah.
The common denominator. We are hearing is that <unk> is the.
The best.
An approved treatment option for patients with myelofibrosis.
Pretty much.
The bottom line that we are hearing from everybody and.
Yes.
I can give you maybe a one or two anecdotes that sort of speaking to this direction.
After we acquired the trial the trial also.
Adopted the <unk> after the constellation acquisition.
We have seen really tremendous.
China Rollins an increase in the pipeline.
Putting patients on the study.
Paul.
After having a slow start.
This study is now enrolling really at an unprecedented.
He then I'm Super happy with the progress we're making there.
Second a quick anecdote I can give you is.
We are currently doing a road show all of the.
R&D fault at multiples that are basically going in visits key pipe in Asia, and the U S and in Europe and the feedback. We are hearing is really very positive and we are seeing this again.
Reflected by our booth in the normal so I can be only super positive, Jason and I Hope. The study continues to enroll as well as a group are doing right now.
And we are Super excited obviously to.
Two fewer data as soon as we can.
Okay. Thanks for the color and thanks for taking the questions.
Mhm.
And we'll go ahead and take our next question of Raymond James Gordon with Jpmorgan. Please go ahead.
Hello, James Gordon from JP Morgan, Thanks for taking the questions three questions. Please.
First one.
When Televisa you've called out some more competition in the second half of this year that you wont anticipate any slowdown we're looking beyond a bit more.
Car T competition, when they get to start to see between <unk> and 'twenty competition. So next year do you think you maintain the current pace you accelerate decelerate how should we think maybe say please.
First question.
Second question is on Opex and some of the question I think SG&A on a clean basis will be down about 20%. This year when you updated guidance.
Have you done in terms of the ability to take out cost and might even need to ramp up spend.
Deal with low competition will you still seem like many areas you can cut back on cost as we go into subsequent years.
And then.
The third question, which is profitability.
What is the latest thinking on when you could reach profitability on an operating basis.
And will the cash runway as I think you said.
Cash through chemo states.
Saying that you have money to cash to sustain these with 114 24, and that's when you demand as rates move money.
Thanks, James we would've stopped by question two and three with Sun and then we'd go back to the commercial question Joe Yes.
Yes, So Jamie you had a couple of questions are on SG&A are generally opex cash runway and profitability. So let me address your question about SG&A. So.
We did fine tune, our SG&A guidance coming down 5 million euros on the bottom and top end of the range.
But keep in mind that we are facing as well as other companies have some major FX headwinds and of course, the vast majority, 95% plus of our commercial.
Expenses incurred in the U S, where we co promote <unk> with insight. So I think you would've seen a further reduction in the SG&A guidance were it not for the FX headwinds and generally for the entire year.
Total opex were facing about a negative 7% FX headwind because the majority of our expenses are incurred in the U S, especially with the acquisition of constellation So I think that needs to be factored in.
There was room in SG&A for further trim, but.
We suffered from the FX headwinds and obviously that impacts R&D expenses as well.
But when we look to the future we're constantly looking at our cost structure, we're constantly fine tuning this and that will not stop of course.
When we started this year, we took a major action with our research organization consolidating that in Germany.
So that was able to help us in terms of cost reduction. So we will continue continued to be very vigilant on.
Looking at ways to.
Optimize our cost structure.
On your question on profitability.
I think what I've said before following the constellation acquisition is our goal is to be profitable and cash flow positive in 2026, that's a year, we would anticipate anticipate having the first full year of collaborative revenues in the U S. But.
Let me kind of changed the question to something else and I don't know if you were alluding to this.
If youre just looking at the <unk> co commercialization in.
In terms of when can that be profitable between us and insight and of course, it's a sort of a skinny down P&L.
Just having the cocom components, we don't think we're that far away.
If we generate <unk> sales in the upper 20 millions low $30 million per quarter that gets us to profitable scenarios than we think.
Well within reach in the next 12 months.
And then in terms of our cash runway.
We said this many times with our organic cash the 754 million euros.
We have a strong balance sheet and cash runway. We have further strengthened this as we exercise our option to draw on $300 million via development, funding bonds as per our agreement with Royalty Pharma.
This will take us to mid 2024, and obviously the $300 million proceeds from the development funding bonds from royalty pharma is that will increase our flexibility.
And we're in a good spot in terms of being able to fund our pivotal programs. So I'll leave it at that and I think.
I'll hand, it over to Joe with regard to the question on <unk> second half competition.
Thank you.
Thanks sung and hopefully everyone can hear me and thank you for the question James.
The <unk> space has been competitive.
Since we entered it.
And it evolves every year with new current entrants to the market and additional upcoming competition.
We are aware of this dynamic competitive environment.
As it is also reflected in our updated guidance.
And with that, I will turn the call now over to Joe for a commercial update.
With that said I'd like to come back to our Q2 results, where we saw the strong demand from our <unk> sales since launch we.
Joe please.
We continue to have leading share in second line with our attractive off the shelf value proposition, which is based on a strong safety profile.
Efficacy safety and convenience.
Being the only in practice outpatient immunotherapy that allows patients to stay in their homes in our communities and with the local teams.
And <unk>.
Looking forward we will.
I'd like to point you to the new full year guidance, we provided which would give you a good idea of the growth. We see ahead in the second half.
We seem to have a technical glitch here.
Thank you and then if you can hear me.
The question was be looking beyond this year do you think is more JV accelerating as we go into next year or two.
To maintain in the face of the competition will could things slip how are you thinking about the exit rate for the year.
So absolutely.
Yeah.
Yes, just I wanted to ask <unk> to come on the longer term, yes. So James obviously these are recent.
<unk> dynamics, we're highlighting with the entrance of a couple more treatment options in second line.
I think we'd like to get a few quarters of experience here under this new dynamic to make the call more longer term obviously.
Making a call on the longer term it has implications for us in our in terms of financial liability.
So we want to be very measured and cautious in terms of <unk>.
Putting out any statements with regard to the long term of module, but our optimism is still there look.
Questions about peak sales nothing.
Nothing.
Beyond this year fundamentally has changed in terms of how we're thinking about the long term opportunity for <unk>.
This will be an education process, but we're seeing improvement on the persistence side and we just need a few more quarters of experience to see what impact if any.
The changing of the recent change in competitive dynamics have on the long term and I will add that.
The first line opportunity, obviously builds up significantly in the profile of and best practice hormone. Julie This is a very large untapped opportunity for us.
Thank you.
So we will go to Malte for the development update.
Thanks.
We will go ahead and move on to our next question with Zain name with Baird. Please go ahead.
Malte please.
Thank you. Thank you for taking my questions.
I have two please.
The first one <unk> multiple.
Thank you, Jean-Paul.
Good morning and good afternoon, everybody.
General question regarding the.
We have a very strong pipeline and we are very pleased with the progress we are making, in advancing our clinical trials.
The new guidance.
Just very generally just wondering what are your assumptions for the general macro economic conditions, what are your thoughts on that.
You kind of already explained a bit on FX.
Strengthening of the U S dollar and inflation interest rate hike just wondering what are your assumptions for the upgraded guidance.
First, let me start with our three pivotal phase three studies.
That would be great.
Question is it correlate with more.
On the module B, if that's all right.
So in your presentation.
Hi.
Fishing community setting leading share in second line I also on third positive by the same time, you lowered the full year guidance.
I was just wondering in terms of competition.
Hey, guys.
We felt that the bispecific will not come in parallel to your next year I'm. Just wondering if you could elaborate a bit more.
And in terms of near term competition, whether it's <unk> or even khaki, yes, any comment there would be great. Thank you.
For Pelabrasib, patient enrollment in our Manifest-2 study in first-line myelofibrosis, is progressing very well.
For Tafasitamab, patient enrollment in front-line, our study in first-line VLBCL, and in-line, our study in relapsed or refractory follicular or marginal sone lymphoma that is being executed by Insite is also progressing very well.
This quarter, we also progressed and entered new partnerships to further investigate Tafasitamab, in combination with other novel therapies as a treatment for DLBCL. We entered a clinical trial collaboration with Pfizer and Insite to investigate the, immunotherapeutic combination of Pfizer's TTI622, a novel fusion protein targeting the CD47 pathway, and Tafasitamab plus lenalidomide in patients with relapsed or refractory DLBCL, who are not eligible for autologous stem cell transplantation.
In addition, VENCOR initiated a study investigating the combination of Tafasitamab, lenalidomide, and plamotamab, VENCOR's CD20, CD3 bispecific antibody in patients with relapsed or refractory, DLBCL. We believe that the addition of novel immunotherapies to the combination of Tafasitamab and lenalidomide, may have the potential to provide new chemo-free combination treatment options to these patients.
Yes. Thank you for the questions I'll start by the commercial question.
This quarter, we also released new findings highlighting the potential of Calabrasib as, a first-line myelofibrosis treatment.
In June, at the European Hematology Association Congress, we presented the latest clinical, and translational research from the Phase II Manifest trial. The data showed that Pilabrasif has the potential to normalize cellular defects seen in myelofibrosis, and thereby getting at the root cause of the disease, correlated with clinical response. We analyzed cells deriving from the blood of patients who enrolled in the Manifest trial, and from healthy volunteers. The findings indicated that Pilabrasif alone, or in combination with a JAK inhibitor ruxolitinib, may have the potential to improve the typical imbalance in the two white blood cell populations, the myeloid and the lymphoid cells, and help restore normal blood cell development.
These improvements concurred with decreases in megakaryocyte clustering in bone marrow, and correlated with decreases in spleen volume. Megakaryocytes are the cells in the bone marrow responsible for making platelets, and the clustering of these cells are one of the signs of myelofibrosis. Additionally, Pilabrasif alone, or in combination, decreased pro-inflammatory, and pro-fibrotic signaling in monocytes, suggesting a potential attenuation of disease process.
Also, later this year, we will present updated data from FIRST-MIND, our Phase 1b study in first-line DL-BCL.
These findings suggest that Pilabrasif may help improve outcomes for patients with myelofibrosis, and reaffirms our confidence in the Phase 3 Manifest 2 study.
These data reaffirm our assumption of the synergistic effect of Tafafetamab, and Lenalidomide in patients with first-line DL-BCL.
We continue to evaluate the data from the Manifest study and are excited to present, more mature data on the durability of spleen volume reduction and total symptom score reduction later this year.
Some of us have already answered it.
We also expect to release new data on Tafafetamab and our second-generation, EZH2 inhibitor, CPI-0209, later this year. For Tafafetamab, we will present updated, longer-term follow-up data of patients, enrolled in the L-MIND study who responded to treatment, including patients who have been treated for more than five years. These data further suggest a curative treatment potential, of the Tafafetamab-Lenalidomide combination for patients with DL-BCL, as patients are experiencing durable remissions and longer-term responses with treatment.
I'll come back to the fact that you know this new labels for some competitor associated therapies. This is pretty recent.
We are excited to study this effect in our ongoing, pivotal Phase 3 study, FRONT-MIND, and the potential to provide these patients with a more effective treatment option.
Now, our EVH2 inhibitor, TPI-0209, is currently being assessed in a basket trial, for several solid tumors, as well as lymphoma.
We are encouraged by the preliminary efficacy data we are observing in multiple indications, which we will also release during a medical conference in the second half of the year.
That doesn't really change the fundamentals here, which is that we basically are the most suitable option for.
As you can see, we expect to deliver a steady flow of clinical data over the next several, years.
Community patients again, we enabled patients to stay at their homes and that's very important and it is how we get the most traction and continue to work on that and engage and indicate on the.
We have made a lot of great progress, and we are excited about our pipeline's potential.
You combine that with the duration of treatment, which I mentioned, we have some patients in real life flurry have almost two years of treatment.
Which is which is absolutely fantastic.
And this is with the curative potential. So yes. This is a very dynamic market. We are aware of the competitive landscape evolving there will be new competitors, but we are very competitive and will continue to to educate and engage on the benefits of our drug in the current indication and in the first line indication in <unk>.
Their indications to come.
On your other question.
Plus Tucson.
With that, I will now turn the call over to Sung for a review of the financials.
Yeah, ladies and gentlemen, apologies for this small technical glitch.
Yes.
We should, have Joe back with us now, so I would like to ask Joe to cover the commercial results now.
Thank you for your questions and you are basically asking about the macroeconomics macroeconomic effects on our guidance.
With regard to inflation interest rates FX.
I think the guidance range that we've said we factored in all of these macroeconomic events in the range can account for.
Some variation in FX, although basically we're assuming current rates in the second half, but if there is a slight.
The strengthening of the U S. Dollar then certainly there is some.
The range can absorb.
Some fluctuation, but not extreme fluctuations in it.
<unk> is something that we have to keep an eye on as to all companies.
So I think.
Thats, an ongoing topic that will continue to be monitored now with regard to interest rates I think this is a.
Very interesting variable in somewhat of a wildcard.
A lot of our businesses in the us.
Our business is tied to interest rates in the U S and of course.
The U S Fed reserve Federal reserve has been very aggressive.
Hiking interest rates.
When interest rates increase VIX and this can have a negative impact on the weighted average cost of capital for companies.
Now what does this mean for morphosis.
There is a risk that further rises in interest rates.
Could decrease the carrying value of goodwill, which in turn.
Cause a noncash impairment charge.
Our guidance ranges for SG&A and R&D.
Exclude any potential impairment charges, so I think thats something very important to keep in mind.
Joe?
Thank you very much.
Thank you.
We'll go ahead and take our next question from Pablo Pritchard with Morgan Stanley . Please go ahead.
Hi, there. Thanks for taking my questions. Just a few from me Firstly would you be able to take us through the dynamics of accounting for the interest on the cash flows around the repayment of the development.
Interest paid on a quarterly basis or does it roll up over time, and then what is the timeframe and repayment and what the options for refinancing with Ctrip.
Second one on one GB highlights to therefore competition has increased in the second line <unk>, Bcl setting, which seem to FASB CD 19 car T assets you mentioned earlier.
You've already.
Commented on the competitive dynamics I was wondering if there were any concerns mentioned around the sequencing of CD 19 directed therapies.
Just want to use the coffee first followed by <unk> JV will lay round.
And then a very quick one for me is there an interim analysis planned on pulp asset. Thank you.
And if that's not working, then maybe, Jean-Paul, you would have to jump in and, go over the commercial results.
Great. Thanks for your questions before we start by then <unk> complete.
Competitive question <unk> question, and then milestone the fifth question on Pwc.
Thanks a lot.
Alright, Thanks, Sean Paul So with regard to the royalty pharma developing funding bond of $300 million that we're going to be taking the basic terms are the first repayment will start in Q3 of 2024, so thats two years away.
The first four quarterly payments will be $9 $7 million each.
The next 32 quarterly payments will be 19 $4 million each so basically.
You are looking at 36 quarters of repayment.
On this fund starting in Q3 of 2024.
Yeah, I'm jumping in, and we're turning now to our Monjuvi commercial results.
So show.
Monjuvi net sales in the second quarter were $23.3 million. Representing 29% year-over-year growth. On a sequential basis, we saw a positive 25% increase.
Underlying demand was notably the highest since launch, which further underscores Monjuvi as an important treatment for patients.
And most of that actually.
On the CD 19 sequencing.
Absolutely. Thank you John Paul and thanks for the question Peppa.
Our sales teams are now in person, with customers, for 90% of their total visits educating on Monjuvi's value proposition.
This is important, as it allows our teams the opportunity to conduct a complete office call and ensure a broad understanding of Monjuvi to all key staff that interact with patients.
Through the second quarter, we continue to maintain leading market share in second-line, new patient staff. We expanded our reach with more than 1,250 sites of care ordering Monjuvi since launch, and having approximately 80% of sites repeating the orders.
Greater than 70% of orders came from the community setting, where we continue to have good traction and a balance from the academic setting. Our share of voice remains high, ensuring an increasing level of awareness for Monjuvi.
From a competitive perspective, obviously there is some physicians that question, whether or not you can use <unk>.
Juvie land or sequence CD 19.
As we've seen them sequence CD <unk>.
We've not had we've not seen any issues to date.
When physicians have used.
Capital one prior to car T.
But obviously I'll turn that over to Walter to talk about the clinical.
<unk>.
Dynamics, there, but it has come up in some accounts.
And then.
Then handled by our medical team.
Yeah. Thanks, Joe a couple of remarks on my end. So to date, we have not seen any evidence that the CD 19 expression goes down significantly offset the tariffs.
Lenalidomide combination treatments.
We have actually published flights.
<unk>.
Publications to this point, we have also seen a number of patients who have been moved from San Francisco mob Lenalidomide combination treatment to car T cell treatment with good outcomes.
The car T cell treatment and the last comment I wanted to make a search.
Knowing our understanding that this is an important topics for investigators we are actually going to hold.
Together with our colleagues at insight <unk> symposium on the CD 19 expression pattern at Ash. So we are going to.
Compile all available data and presented in one session at the upcoming Ash.
Meeting, but to date, so thats absolutely no evidence that a patient would not respond to a car T cell treatment. After the patient has been treated with San Francisco mob Lenalidomide combination.
Jack could you on the <unk> announced that it takes up yet.
Sorry, you should handle the <unk> question. Thanks, Martha Okay, Yes, sorry.
So for the interim analysis, if the question we actually frequently received.
And we have consistently.
Said that our preference is not to give any details on our statistical analysis plan and that includes whether or not we are going to conduct an interim analysis and that gives you a very short reason of why that is.
FTA strongly advises companies not to disclose any details on the statistical analysis.
Processes and that includes interim analysis and the reason is very simple.
One fuel have spoken about whether or not you have plans to do an interim analysis. This would potentially change the enrollment pattern and the clinical trial.
Introducing bias in the.
Clinical trial and Thats something.
The regulator has grown like and Thats why the strong recommendation from regulators not to speak about it and we are following that want to come back to my prepay.
Prepared remarks and said how.
Paul.
Happy and.
Satisfied we are with the extreme.
High interest in enrollment.
Two trial and how fast enrollment goal.
Apologies for not giving you more color here.
Better safe than sorry.
At June and the study is progressing well.
Okay understandable, thank you very much.
Thank you.
We will take our next question from Bonnie <unk> with Citi. Please go ahead.
Okay.
Okay.
Anthony Your line is open. Please go ahead.
Operator.
Yes, let's move on to the next.
Due to no response, we'll move on to our next question from Victor <unk> with Stifel. Please go ahead.
Hi, everyone, having suffered from Stifel. Thanks, a lot for taking my question I have two so first of all I was wondering if you have any updates on treatment duration.
I remember correctly, you mentioned, a three months figure during the last conference call.
Im wondering issue.
Jeff any improvements you've been and my second question is about the ex U S sales momentum, which is quite challenging. So I was wondering if you could provide any updates on your commercial efforts in Europe as well as the reimbursement process there. Thanks.
Thanks, Victor Joe will answer your question.
Excellent. Thank you Victor.
So as it relates to duration of treatment. We are encouraged with the progress that we're seeing on duration of treatment.
Treatment.
As you mentioned.
<unk>, we stated that duration of treatment was roughly around three months.
But we are now seeing this start to trend towards four months.
Keeping in mind that this elongation of treatment duration of treatment will take time we're.
We're committed to continuing to educate physicians about the nuances of using immunotherapy.
As it relates to ex U S performance.
We continue to see good progress by our partners in sight.
Who are commercializing men juvie outside of the U S.
Based off of the pricing and reimbursement plan that they laid out for Europe . They are progressing.
Quite well, we are quite happy and pleased with what we see.
And we continue they continue to work with.
With the health authorities to make sure that they are getting men Judy into the markets as quickly as possible.
And I would add.
Joe.
<unk>.
They are making good commercial products progress already in Germany would have launched and they have an ecu.
Pay to HQ and Frost.
They make progress, but they don't report sales.
Yes.
Yes. Thank you.
Thanks for that.
Thanks.
And with that that does conclude our question and answer session for today I would now like to hand, the call back over to Julia for any additional or closing remarks.
This provides us with an opportunity to continue expanding its use for a greater number of, patients.
As outlined in our updated guidance, the treatment landscape is evolving and became more competitive over the past few months due to new entrants into the market.
However, we will continue to deliver Monjuvi's differentiated profile as the only immunotherapy option in second-line that can be administered at a physician's practice and allows patients to remain in their communities and local practice as they receive treatment.
Our focus earlier this year, as you know, was on educating healthcare providers on the optimal, duration of therapy and the benefits of keeping patients on our immunotherapy treatment longer. We are actually seeing some positive trends in persistence and are committed to working, with physicians to increase the treatment duration so that appropriate patients have the best and most durable outcomes possible. To date, we have seen a number of patients continue on treatment for more than a year.
We believe there is a continued opportunity ahead of Manjubi, and we look forward to updating, you further.
With that, I will turn the call over to Sun for a financial update.
Sun, please.
There are low ends in our data.
Ladies and gentlemen. This concludes today's conference call. If any of you would like to follow up the Investor Relations team of my first is available for the remainder of the day. Once again. Thank you for joining our call have a good day and goodbye.
Thank you, Jean-Paul.
But yet, the second quarter, we're probably more close to one out of three patients.
We're pleased to share our financial results for the second quarter and first half of 2022.
And we're hopeful, obviously, that we'll go back to higher numbers.
Moving to slide 14, as Jean-Paul stated earlier, Manjubi sales were $23.3 million in the second, quarter of 2022, growing 25% sequentially and 29% year-over-year. We also recorded €0.7 million in royalty revenue for Manjubi sales outside of the U.S, from our partner, Insight, in the second quarter of this year. As our partner, Insight, has recently stated, sales thus far have been mostly from Germany, and the royalties are reflective of that.
And Malte, we'll address your question.
Great, thanks.
We expect royalties to grow as Manjubi achieves pricing and reimbursement in other countries, in Europe.
Yeah, thanks so far.
And then just my last question is on Pallabrasib.
On slide 15, total revenues in the second quarter of 2022 were €59.4 million, compared, to €38.2 million in the same period a year ago. Total cost of sales was €17.2 million in the second quarter, compared to €10.1 million, a year ago. The year-over-year increase was primarily driven by higher Manjubi sales in the U.S, and Manjubi supply outside of the U.S.
Thanks, Jason.
Can you talk about the feedback you've been getting from KOLs and specifically, you know, physicians, you know, enrolling in Manifest-2, what the feedback was on the disease modifying data that you presented at EHA?
Recall that Morphosis provides Insight with Manjubi supply for ex-U.S. sales. This supply is recorded as revenue and reflected in licenses, milestones, and other category, under revenue, and an equal amount is recorded in cost of sales, yielding a zero gross margin.
So we had a really very successful meeting at EHA.
Thanks.
Cost of sales specific to Manjubi U.S. product sales was €4.3 million in the second quarter, of 2022.
We hosted a Manifest-2 investigator meeting. I think in all my career, I have never seen a meeting with so many participants and so, much excitement in the room. The common denominator we are hearing is that Pallabrasib is the best, unapproved treatment option for patients with myelofibrosis. That's pretty much the bottom line that we are hearing from everybody. And I can give you maybe one or two anecdotes that is sort of speaking to this direction.
Thanks, Jason.
Turning to operating expenses, R&D expenses in the second quarter of 2022 were €60.9, million, compared to €40.5 million for the second quarter of 2021. The year-over-year growth primarily reflects the inclusion of Constellation and increased, investments to support the advancement of our clinical stage programs.
One is after we acquired the trial, after we adopted the trial form after the cancellation acquisition, we have seen really a tremendous turnaround and increase in excitement in putting patients on the study.
Selling expenses decreased to €24 million in the second quarter of 2022, compared to, €28.5 million for the same period in 2021. The year-over-year decline was driven by the additional investments made in 2021 to support, the first full year of the Manjubi launch.
So after having a slow start, the study is now enrolling really at an unprecedented speed, and I'm super happy with the progress we are making.
G&A expenses in the second quarter of 2022 were €12.4 million, compared to €30.5 million, in the second quarter of 2021. The second quarter of 2021 included €18.8 million in transaction costs related to the, acquisition of Constellation and agreement with Royalty Pharma.
The second quick anecdote I can give you is we are currently doing a roadshow.
For the second quarter of 2022, we reported a consolidated net loss of €235 million, compared to a net profit of €20.9 million for the same period a year ago. Recall that the profit in the second quarter of 2021 was driven by the recognition of non-cash, finance income due to a decrease in the financial liabilities from the collaboration with Insight.
All the senior R&D folks at MorphoSys are basically going and visiting key sites in Asia, in the US, and in Europe.
Turning to our balance sheet, we ended the second quarter of 2022 with cash and investments, of €754.3 million compared to €976.9 million at the end of 2021. We recently notified Royalty Pharma that we intend to draw $300 million from the development, funding bond and anticipate receiving the proceeds in September of this year. The funds will be used to advance our pivotal studies and prepare for future product launches. With our existing cash and investments on hand and the future proceeds from the development, funding bond, we're well capitalized to fund operations through several important clinical milestones.
And the feedback we're hearing is really very positive.
Going to our guidance for 2022 on slide 16, as we previously communicated on July 26, several components of our financial guidance for 2022 were updated, which I'll summarize. Monjuvi U.S. net product sales are expected to be in the range of $90 million to $110, million compared to the previous range of $110 million to $135 million.
And we are seeing this again as reflected by a boost in enrollment.
The gross margin for Monjuvi U.S. net product sales remains unchanged and is anticipated, to be in the range of 75% to 80%. R&D expenses are expected to be in the range of €275 million to €300 million compared, to the previous range of €300 million to €325 million.
So I can be only super positive, Jason, and I hope the study continues to enroll as well as it is doing right now.
And with that, that does conclude our question and answer session for today.
And with that that does conclude today's call. Thank you for your participation you may.
The significant reduction in the R&D guidance range was achieved by partnering out Philzartimat, to HiBio.
And we are super excited, obviously, to see the data as soon as we can.
SG&A expenses are anticipated to be in the range of €150 million to €165 million.
Okay, thanks for the color and thanks for taking the questions.
The previous range was €155 million to €170 million.
And we'll go ahead and take our next question from James Gordon with J.P. Morgan.
With that, I would like to hand the call back to Jean-Paul.
Please go ahead.
Before we go into Q&A, I'd like to conclude with a few words.
Hello, James Gordon from J.P. Morgan.
We are intensively focusing on enrolling our pivotal studies of Pellabrasib and Tafacitamab, and we're making great progress on this round.
Thanks for taking the questions.
We remain motivated and committed to driving the uptake of Monjuvi with a potential flagship, indication in first-line DLVCL yet to come.
Three questions, please.
We believe the successful execution on the late-stage pipeline over the next three years, has the potential to create significant value for patients and all stakeholders.
The first one was on 1, 2, Vita.
With that, we'd like to open the call for questions.
You've called out some more competition in the second half of this year, but you aren't anticipating a slowdown.
Operator?
But looking beyond, you've got a bit more CAR-T competition and maybe the start of TB3, TB20 competition.
Of course.
So next year, do you think you maintain the current pace, you accelerate, or you decelerate?
Thank you.
How should we think about the moving parts there, please?
And if you'd like to ask a question, please signal by pressing star 1 on your telephone, keypad.
That's the first question.
If you're using a speakerphone, please make sure your mute function is turned off to allow, your signal to reach our equipment.
The second question is on OPEC, and a similar question.
If your question has been answered and you want to remove yourself from the queue, press, star 2.
I think SG&A, on a clean basis, will be down about 20% this year on your updated guidance.
Again, it is star 1 if you would like to ask a question.
Are you done in terms of the ability to take that cost?
And we'll pause just for a moment to allow everyone an opportunity to signal for questions.
And might you even need to ramp up spend to deal with more competition?
And we'll go ahead and take our first question from Jason Butler with JMP Securities, please, go ahead.
Or are you still seeing many areas you can cut back on cost as we go into subsequent years?
Hi, thanks for taking the questions.
And then that sort of links through to the third question, which is profitability.
First one on Monjuvi, can you just talk a little bit more about the competitive dynamics, you're seeing in the quarter and what you're doing to either reinforce or refine the messaging to prescribers?
So what is the latest thinking of when you could reach profitability on an operating basis, and what the cash runway is?
And then when you look at your share in second line patient starts, what's the trend been, throughout the quarter?
I think you said that you'll have cash through key milestones.
Can you give us any more color there, what the share was at the beginning versus the, end of the quarter?
So is that saying that you'd have, money to cash to sustain you through tele-reporting in 2024, and that's when you then might need to raise more money?
Thanks.
Thanks, James.
Thanks, Jason.
We will start by question two and three with Sam, and then we'll go back to the commercial question with Joe.
Look, regarding the competitive environment, yeah, it's not a secret that DLVCL has been, pretty competitive lately. And increasingly, we've seen some new entrants. And obviously, we've reflected that in our guidance a bit recently.
Yeah, so James, you had a couple of questions there on SG&A, generally OPEC's cash runway and profitability.
But again, let me tell you why we are very excited with Monjuvi.
So let me address your question about SG&A.
But the bottom line is that we are the best suited option for community setting.
So we did fine-tune our SG&A guidance coming down 5 million euros on the bottom and top end of the range.
We basically allow patients to stay in their homes with long term outcomes. I mentioned earlier that we have now patients with almost two years of treatment in real, life.
But keep in mind that we are facing, as well as other companies, some major FX headwinds.
So that's actually a very impressive outcome and with curative potential.
And of course, the vast majority, 95% plus of our commercial expense is incurred in the U.S., where we co-promote Monjuby with Insight.
So some of the options out there don't have this possibility to keep the patients at home.
So I think you would have seen a further reduction in the SG&A guidance were it not for the FX headwinds.
And ultimately, that's what they want.
And generally for the entire year, total OPEC, we're facing about a negative 7% FX headwind, because the majority of our expenses are incurred in the U.S., especially with the acquisition of Constellation.
So we're very proud with our growth here over a year.
So I think that needs to be factored in, that there was room in SG&A for further trim, but, we suffered from the FX headwinds.
And we keep obviously a close eye on competition, which we believe we are extremely well placed, for these community setting patients.
And obviously, that impacts R&D expenses as well.
And on your questions on the second line patient stuff, you know, I mean, the market share, we've communicated in the past that we've basically kept hearing between one out of three to two out of three new patients in second line.
But when we look to the future, we're constantly looking at our cost structure. We're constantly, fine-tuning this.
And that fluctuates quarter to quarter.
And that will not stop.
Of course, when we started this year, we took a major action with our research organization, consolidating that in Germany.
So that was able to help us in terms of cost reduction.
So we'll continue to be very vigilant, on looking at ways to optimize our cost structure.
And then your question on profitability, I think what I've said before following the consolation acquisition is our goal is to be profitable and cash flow positive in 2026. That's the year we would anticipate having the first full year of collaborative revenues in the U.S.
But let me kind of change the question to something else, and I don't know if you were alluding to this.
If you're just looking at the Monjuvi co-commercialization in terms of when can that be profitable between us and Insight, and, of course, it's a sort of a skinny down P&L, just having the co-com components.
We don't think we're that far away. If we generate Monjuvi sales in the upper 20 millions, low 30 million per quarter, that gets us to profitable scenarios, and we think that's well within reach in the next 12 months.
And then in terms of cash runway, you know, we've said this many times with our organic cash, the 754 million euros. This will take us to mid-2024, and obviously the 300 million proceeds from the development funding bonds from Royalty Pharma, that will increase our flexibility.
And, you know, we're in a good spot in terms of being able to fund our pivotal programs.
So I'll leave it at that, and I think I'll hand it over to Joe with regard to the question on Monjuvi second half competition.
Thanks, Sung, and hopefully everyone can hear me, and thank you for the question, James.
You know, the DLBCL space has been competitive since we entered it, and it evolves every year with new current entrants to the market and additional upcoming competition.
We're aware of this dynamic competitive environment, as it's also reflected in our updated guidance.
You know, with that said, I'd like to come back to our Q2 results, where we saw the strongest demand for Monjuvi sales since launch.
We continue to have leading share in second line with our attractive off-the-shelf value proposition, which is based on a strong safety profile of efficacy, safety, and convenience, being the only in-practice outpatient immunotherapy that allows patients to stay in their homes, in their communities, and with their local teams.
And looking forward, we'd just like to point you to the new four-year guidance we provided, which would give you a good idea of the growth we see ahead in the second half.
Thank you, and I don't know if you can hear me, but that's very helpful.
The question was looking beyond this year, do you think is Monjuvi accelerating as we go into next year, or do you hope to maintain in the face of more competition, or could things slow?
How are you thinking about sort of the exit rate for the year?
Absolutely.
Yeah, I just wanted to ask something to come on the longer term.
Yeah, so, James, obviously, these are recent competitive dynamics we're highlighting with the entrance of a couple more treatment options in second line.
I think we'd like to get a few quarters of experience here under this new dynamic to make the call more longer term.
Obviously, you know, making a call in the longer term has implications for us in terms of financial liability.
So we want to be very measured and cautious in terms of putting out any statements with regard to the long term of Monjuvi.
But our optimism is still there.
Look, the questions about peak sales, nothing beyond this year fundamentally has changed in terms of how we're thinking about the long term opportunity for Monjuvi.
This will be an education process, but we're seeing improvement on the persistent side, and we just need a few more quarters of experience to see what impact, if any, the recent changing competitive dynamics have on the long term.
And I will add that the first line opportunity obviously builds up significantly in the profile and perspective for Monjuvi.
This is a very large untapped opportunity for us.
Thank you.
Thanks.
We'll go ahead and move on to our next question with Xian Deng with Berenberg.
Please go ahead.
Thank you.
Thank you for taking my questions.
I have two, please.
The first one is more of a, sort of general question regarding the, you know, the new guidance.
Just very generally, just wondering, you know, what are your assumptions for the, you know, general macroeconomic condition?
You know, what are your thoughts on, as you kind of already explained a bit on FX, but how about, you know, strengthening of the, you know, U.S. dollar and the inflation, interest rate hike?
Just wondering, you know, what are your assumptions for the upgraded guidance?
That'd be great.
And the second question is, it's probably a bit more on the Montjuvi, if that's all right.
So, I mean, your presentation is that, you know, very high usage in community setting, leading share in the second line.
It all sounds very positive.
But at the same time, you lowered the full year guidance.
I was just wondering, you know, in terms of competition, because we felt that the bi-specifics are not coming probably until next year.
I'm just wondering, you know, if you could elaborate a bit more on, you know, in terms of near-term competition, you know, whether it's, you know, Polyvay or even CAR-T. Yeah, any comments, that'd be great.
Thank you.
Yeah, thank you for the questions.
I'll start by the commercial question, as some of us have already answered it.
But I'll come back to the fact that, you know, these new labels for some competitors, especially the CAR-Ts, this is pretty recent.
And that doesn't really change the fundamentals here, which is that we basically are the most suitable option for community patients. Again, we enable patients to stay at their homes. That's very important.
And this is how we get the most traction and continue to work on that and engage and educate, on that.
You combine that with the duration of treatment, which I mentioned, we have some patients in real life who already have almost two years of treatment, which is absolutely fantastic.
And this is with a creative potential.
So yeah, this is a very dynamic market.
We are aware of, the competitive landscape evolving.
There will be new competitors, but we are very competitive and we continue to educate and engage on the benefits of our drug in the current indication and in the first line indication and other indications to come.
On your other question, I'll pass to Sam.
Yeah, Dion, so thank you for your questions.
And you were basically asking about the macroeconomic, effects on our guidance with regard to inflation, interest rates, FX. I think the guidance range that we've said, we've factored in all these macroeconomic events and, the range can account for some variation in FX, although basically we're assuming current rates in the second half. But if there is a slight strengthening of the U.S. dollar, then certainly the range can absorb some fluctuation, but not extreme fluctuations.
Inflation is something that we have to keep an eye on, as do all companies.
So I think, that's an ongoing topic that will continue to be monitored.
Now, with regard to interest rates, I think this is a very interesting variable and somewhat of a wild card. A lot of our business is in the U.S. and our business is tied to interest rates in the U.S. And of course, the U.S. Federal Reserve has been very aggressive in hiking interest rates.
When interest rates increase, this can have a negative impact on the weighted average cost of capital for companies.
Now, what does this mean for MorphoSys?
There is a risk that further rises in interest rates could decrease the carrying value of goodwill, which in turn would cause a non-cash impairment charge.
Our guidance ranges for SG&A and R&D exclude any potential impairment charges, so I think that's something very important to keep in mind.
Thank you very much.
Thank you.
We'll go ahead and take our next question from Philippa Pritchard with Morgan Stanley.
Please go ahead.
Hi there.
Thanks for taking my questions.
Just a few from me.
Firstly, would you be able to take us through the dynamics of accounting for the interest on and the cash flows around the repayment of the development bonds?
Is interest paid on a quarterly basis or does it roll up over time?
And then what is the timeframe to repayment and what are the options for refinancing in the future?
Do doctors want to use the CAR-T first, followed by Monjuvi or the other way around?
And then a very quick third one for me.
Is there an interim analysis planned on Pellabrasib?
Thank you.
Great.
Thanks for your questions, Philippa.
We'll start by Son, then Joe for the competition question, and then Malte on the question on Pellabrasib.
Thanks, Jean-Paul.
So with regard to the Royalty Pharma Developing Funding Bond, the $300 million that we're going to be taking, the basic terms are the first repayment will start in Q3 of 2024. So that's two years away. And the first four quarterly payments will be $9.7 million each.
The next 32 quarterly payments will be $19.4 million each.
So basically, you're looking at 36 quarters of repayment on this bond, starting in Q3 of 2024.
So Joe and Malte, actually, on the CD19 sequencing.
Absolutely.
Thank you, Jean-Paul.
And thanks for the question, Philippa.
From a competitive perspective, obviously, there's some physicians that question whether or not you can use Monjuvi Lent or sequence CD19, as we've seen them sequence CD20.
We've not seen any issues to date when physicians have used Tafel N prior to CAR T. But obviously, I'll turn that over to Malte to talk about the clinical dynamics there.
But it has come up in some accounts.
And then that's been handled by our medical team.
Thanks, Joe.
A couple of remarks from my end.
So to date, we have not seen any evidence, that the CD19 expression goes down significantly after the tougher lenalidomide combination treatment.
We have actually published quite a number of publications to this point.
We have also seen a number of patients who have been moved from tapasitomab lenalidomide combination treatment to CAR T cell treatment with good outcomes upon the CAR T cell treatment.
And the last comment I wanted to make is that knowing or understanding that this is an important, topic for investigators, we are actually going to host, together with our colleagues at Insight, a whole symposium on the CD19 expression pattern at ASH.
So we are going to compile all available data and present it in one session at the upcoming ASH meeting.
But to date, there's absolutely no evidence that a patient would not respond to a CAR T cell treatment after the patient has been treated with tapasitomab lenalidomide combination.
Malte, thank you.
Should I talk to you?
Or shall I take the...
Yeah, you should.
Sorry, you should handle the line-interim question.
Thanks, Malte.
Okay.
Yeah, sorry.
So for the interim analysis, it's a question we actually frequently receive.
And we have consistently said that our preference is not to give any details on our statistical, analysis plan, and that includes whether or not we are going to conduct an interim analysis. And I'll give you a very short reason of why that is.
So FDA strongly advises companies, not to disclose any details on the statistical analysis processes, and that includes interim analysis. And the reason is very simple. Once you have spoken about whether or not you have plans, to do an interim analysis, this could potentially change the enrollment pattern in a clinical trial, introducing bias in the clinical trial.
And that's something regulators don't like, and that's why the strong recommendation from regulators is not to speak about it, and we are not following this.
But I want to come back to my prepared remarks and say how happy and satisfied we are with the extreme high interest in the enrollment of the MONIQA2 trial and how fast enrollment goes.
So apologies for not giving you more color here, but better safe than sorry, and stay tuned, and the study is progressing well.
Completely understandable.
Thank you very much.
Thank you.
We'll take our next question from Vaneet Agrawal with Citi.
Please go ahead.
And Vineet, your line is open, please go ahead.
Operator.
Yes, let's move on to the next.
Due to no response, we'll move on to our next question from Victor Floch with Stiepel.
Please go ahead.
Hi, everyone.
Victor Floch from Stiepel.
Thanks a lot for taking my question.
I have two.
So, first of all, I was wondering if you have any updates on treatment duration.
If I remember correctly, you mentioned a three-month figure during the last conference call.
So I'm wondering if you have seen any improvements since then.
And my second question is about the ex-US sales momentum, which is quite challenging.
So I was wondering if you could provide any updates on your commercial efforts in Europe, as well as the reimbursement process there.
Thanks a lot.
Thanks, Victor.
Joe will answer your question.
Excellent.
Thank you, Victor.
So as it relates to duration of treatment, we are encouraged with the progress that we're seeing on duration of treatment.
As you mentioned previously, we stated that duration of treatment was roughly around three months. We are now seeing this start to trend towards four months.
Keeping in mind that this elongation of treatment, duration of treatment will take time.
We're committed to continuing to educate the physicians about the nuances of using immunotherapy.
As it relates to ex-US performance, we continue to see good progress by our partners Insight, who are commercializing Minjuvi outside of the US based off of the pricing reimbursement plan that they laid out for Europe.
They're progressing quite well.
We're quite happy and pleased with what we see.
And, you know, we continue to they continue to work with the health authorities to make sure that they are getting Minjuvi into the markets as quickly as possible.
And I would add, Joe, that the they are making good commercial products progress already in Germany, where they have launched and they have an ATU, paid ATU in France, where they make progress, but they don't report sales.
Yes, thank you.
Thanks for that.
Thanks.