Q3 2023 MorphoSys AG Earnings Call
Ladies and gentlemen, thank you for standing by.
Welcome and thank you for joining the third quarter statement 2023 of more furbish throughout.
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I would now like to turn the conference or basically you would I know you'd goodbye with please go ahead.
Ladies and gentlemen, good afternoon or good morning. My name is reliable I'm head of Investor Relations at Nephrologist and it's my pleasure to welcome you to our third quarter 2023 financial results Conference call.
With me on the call today are some Paul Kress, our Chief Executive Officer, Tim Dilute, our Chief Research and development Officer, and Lucy correctly, our Chief Financial Officer.
Before we begin I'd like to remind you on slide two 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.
Forward looking statements are subject to a number of risks uncertainties that may cause our actual results to differ materially including those described in our 20-F annual report for the year ended December 31st 2022, and from time to time and other SEC documents of Massachusetts.
It is important to keep in mind that all statements in this webcast speak as up to date.
On slide three you'll find the agenda for today's call I'll call will begin with an overview and give an outlook after that Tim wish you an update on our clinical development work and then Lucy will provide a summary of our third quarter 2023 financial results.
Following our prepared remarks, we will open the call for your questions.
With that I hand, the call over to John Pollok.
Thank you Yung.
Good morning, and good afternoon, everyone. Thanks for joining us today.
We are very excited that the topline results from our phase III manifest to study of pit upgrades.
Combination Rick solids in Nib in first line myelofibrosis.
We'll be available by the end of November.
Shortly after <unk>.
We will present detailed findings from this study.
2023 Ash annual meeting during our Knowhow presentation on Sunday December 10th.
Right.
To elaborate scheme.
Our investigational <unk> inhibitor.
Has the potential to meaningfully improve upon the current standard of care for myelofibrosis.
Right now we believe we have the best new molecule to treat this disease.
Our phase II manifest study showed that the strong efficacy and safety profile of pillar <unk> in myelofibrosis.
His deep and durable improvements in claims volume and symptom reduction.
24, 48, and 60 weeks.
Further to this in.
In the manifest study Chan.
John just in Biomarkers correlated with improvements in <unk> clinical measures of treatment success.
Listing potential disease modifying effects of pillar Brigitte.
These phase II data.
It's called the strengths of this combination therapy.
And we remain very confident in the outcome of the manifest to study.
[noise] combination treatment is the highly anticipated next step to address that in that equates spleen size reduction symptom control and lack of response durability observed with JAK inhibitors in myelofibrosis.
On standard of care.
Our market research shows that the majority of U S community and academic based physicians view.
<unk> combination therapy.
The way of the future in myelofibrosis.
The pillar <unk> and <unk> combination therapy was ranked among the highest in top product attributes driving treatment decisions against <unk> nib.
We may not see nib.
And the <unk> and <unk> combination.
These physicians commented on pillar <unk> impressive efficacy and we're pleased that the combination was well tolerated and appeared to have a benefit for anemia.
This reaffirms the excitement we continue to hear from physicians around pillar breakeven.
Afflicting the dire need for.
<unk> and went to their rates of therapies to treat myelofibrosis.
Moving to modules.
Module B, our CD 19 targeting immunotherapy.
Continues to be prescribed to <unk> adult patients.
With relapsed or refractory <unk>.
In the first quarter.
<unk> net sales were $23 4 billion U S dollar.
This represents a 5% year over year growth and is on track with our 2023 guidance.
Allowing us to narrow our full year 2023 guidance target.
Beyond these currently approved indication.
The largest potential upside for moms UV.
In the first line <unk>.
Which we are investigating in our phase III <unk> study.
Data from that trial.
Which randomized nearly 900 patients.
Our projected for the second half of 2025.
<unk> is also being explored in the phase III in mind study in.
In relapsed refractory Follicular lymphoma, and marginal zone lymphoma, which is being run by our partner insight.
These data will be available in 2024.
The strong U S commercial infrastructure, we have in place someone juvie.
We'd also enabled a smooth launch of elaborated.
As we have encountered a large overlap in treating physicians <unk> and myelofibrosis, especially in the community setting.
Beyond our pivotal programs.
We're pleased with the progress to be made to.
Our investigation of next generation dual inhibitor of <unk> and easy page Swan.
In September 2023.
The F D a.
<unk> fast track designation for <unk>.
While the treatment of patients with advanced recurrent.
Metastatic <unk> restated all dmitry outcomes here.
Whose disease has progressed.
Moving at least one prior line of treatment.
Continued exploration of these promising assets in our phase one two study.
Across GMO types, now with and that you should know that lower dose cohorts.
Inform our future development plans.
Our key partner programs.
Via our legacy antibody technology platform.
Also progressing well.
Both <unk> and May Railroad, Biopharma recently announced interim phase II data demonstrating that <unk> significantly reduced hot cure rates in patients with <unk>.
On tough get upticks revealed that this phase II study of <unk>.
In patients with atrial fibrillation was stopped early due to overwhelming positive.
Highly significant reductions in bleeding events versus standard of care.
Why not.
Not central to our business strategy. These programs offer potential upside and provide us with options for non dilutive financing.
I would now like to turn the call over to Tim to provide the development update.
Jim over to you. Thank.
Thank you star product.
Morning, and good afternoon, everyone.
Eager to release top line results from the phase III manifest through study.
Soon as they become available.
These data will be released by the end of November.
We will disclose these results.
Hock Company press release, which will include the primary and key secondary endpoint spleen volume and symptom reduction at week 24.
As well as a general statement on safety findings.
Beyond <unk>, <unk> 35, and TFS 50 Manny.
Manifesto is assessing several other important clinical endpoints, including absolute change and percent change in total symptom score progression free survival overall survival and duration of the splenic and total symptom score responses among others.
These endpoints reflect the challenges that patients with myelofibrosis and counter Damian.
Helping us to better evaluate the efficacy and tolerability of the <unk> and <unk> combination.
We remain confident that the comprehensive manifest two data package will provide impactful insights now and over time into.
And to the potential benefits of this first line therapy for patients with myelofibrosis.
We are also very pleased that shortly after we released the manifest through top line results.
I'll have the opportunity to that.
The detailed findings from this study during an oral session at the 2023 Ash annual meeting on Sunday December 10th.
With ash being the world's largest professional society, serving both clinicians and scientists focused on hematologic cancers.
The perfect stage present, these highly anticipated pivotal trial results.
Seven additional abstracts on collaborative and temperature the map. We're also accepted at Ash 2023.
While our primary focus for collaborative it's in first line myelofibrosis, we see strong additional opportunities for this investigational medicine.
This indication.
At the 2023, <unk> and <unk> annual meeting.
Presented positive results from our four of the phase II manifest study, which is investigating collaborative as a monotherapy in patients with high risk essential thrombocythemia.
Also known as <unk>.
Cause disease is refractory or intolerant to hydroxyurea.
These robust proof of concept results support collaborative expansion into other myeloid diseases.
As such we will continue our ongoing evaluation of collaborative and ETE in the manifest study.
We will also initiate a phase II study in lower risk Myelodysplastic syndrome also known as Mds in 2024.
Patients with Mds experienced progressive anemia, it can require regular blood transfusions or subcutaneous injections, often diminishing quality of life.
Furthermore, patients have low long term response rate to currently available treatments, reflecting a need for new therapeutic options.
The outcomes of these assessments and ETE and MBS will inform our phase III development plan.
With that I will now turn the call over to Lindsay.
Thank you, Tim and good morning, and good afternoon to everyone.
We're pleased to share our financial results for the third quarter and first nine months of 2023.
<unk> sales were $23 $4 million in the third quarter of 2023.
$67 $8 million for the first nine months of 2023.
Reflecting a year over year growth of five 6% respectively.
Allowing us to narrow our revenue guidance for the year for the full year 2023.
We also recorded $1 2 million euros or $1 $3 million in royalty revenue from <unk> sales outside of the U S from our partner insight in the third quarter of this year.
Recall that the results of the second quarter of this year included a one time effect coming from previously deferred revenues related to <unk>.
This early access program in France.
Total revenues in the third quarter of 2023 was $63 8 million euros compared to $95 8 million euros in the same period a year ago.
The year over year decrease resulted primarily from lower revenues from licenses compared to the prior year.
Recall that Q3 2022 benefited from the out licensing agreements with high by <unk>.
Total cost of sales was $15 1 million euros in the third quarter of 2023 compared to 8 million $8 1 million euros a year ago.
Cost of sales specific to <unk> U S product sales was $7 5 million euros in the third quarter of 2023 compared to $4 5 million euros in the third quarter 2022.
Turning to operating expenses.
R&D expenses in the third quarter of 2023 decreased to $63 2 million euros compared to $77 8 million euros to the third quarter of 2023 22.
Wholesale selling expenses decreased to $19 9 million euros in the third quarter of 2023 compared to $23 5 million euros for the same period in 2022.
The year over year decline was driven by streamlining and focusing our selling efforts.
G&A expenses in the third quarter of 2023 with 15 million euros compared.
Compared to $15 6 million euros in the third quarter of 2022.
The third quarter of 2023, we reported a consolidated net loss of $119 6 million euros compared to a net loss of $122 9 million euros in the third quarter of 2022.
Turning to our balance sheet.
We ended the third quarter of 2023 with cash and investments of $642 2 million euros compared to $907 2 million euros at the end of 2022.
This provides us with a cash runway into 2025, which is more than 12 months beyond the two readouts are collapsing.
Turning to our guidance for 2023.
On October 25th we provided an updated financial guidance narrowing the guidance for <unk> net product sales now.
And now expecting it to be in the range of $85 million to $95 million.
Following the recognition of one time write offs for raw materials used in the production of <unk>. We now expect gross margin from <unk> net product sales to be approximately 75%.
All other aspects of our guidance remains the same.
With that I'll now turn the call back over to John pool.
Yes.
Before we open up the line for questions I want to conclude with a few words.
2023 has been marked by exceptional progress at multiple years.
We have also delivered on our key priorities and have a very strong cash position.
Allowing us to continue this great momentum in the final weeks of the year and beyond.
To elaborate Steve represents an opportunity to meaningfully improve the standard of care for patients with myelofibrosis community in dire need of more effective and wealth at a rate that the treatment options.
We very much look forward to sharing the results of the many phase II study with you soon.
With that I'd like to open the call for questions.
Operator, please open the line.
Ladies and gentlemen at this time, we will begin the question and answer session.
Anyone who wishes to ask a question you May press star followed by one on their Touchtone telephone.
If you wish to remove yourself from the question queue. You May press star followed by two.
In the interest of time, please limit yourself to two questions only.
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The first question comes from the line of Datacom, Sheila with Wells Fargo. Please go ahead.
Hey, good morning, everyone and thanks for taking my questions and congrats on the progress here. So just two questions from US I guess first in the manifest to trial. It looks like you enrolled more patients with intermediate one myelofibrosis.
Yes.
And then you had kind of seen in cohort.
I'm trying to get your thoughts on how that might impact the trial.
In terms of SBR 35 in TSS 50, and then also just second question.
Looking at some of these myelofibrosis trials it looks to us the mean change in TSS as is highly variable across studies.
This was most recently demonstrated with the <unk> trial, but also with the lithium so what do you think is really the main driver of this variability.
Hi, Derek this is Tim.
The.
Population in the manifest phase II study and potential differences on SVR and TFS 50.
When we look at that JCR manuscript arm three we see very clearly that the stairs no difference in SVR response between the one and.
Two slash high population confidence intervals are completely overlapping.
The data for TSS 50 has not been published however, if there is a waterfall plots in the ACL manuscripts were you can derive.
Americold for patients with the respective risk categories. If you put then the confidence intervals around those.
See that they are also completely overlapping while yes, there may be small numerical differences. However.
Clearly related to the very small sample size.
On the.
The variability as you call. It an mean change in TSS baseline parameters between different historical studies and one of the more recent one.
In our perspective this is really in the natural fluctuation of baseline scores.
And I would even.
Say that in the most recent phase III readout that youre, referring to the 11 points change.
<unk> TFS change from baseline in the <unk> arm appears to be very well within the range of what what one would expect from historical <unk> control arm, if I put this together.
The SVR response rates that was reported for that Rux arm, which is exactly in the line of what one would have expected.
We actually feel very very confident in the fact that the phase three it's a very good replica of phase II results.
Okay.
Got it thank you very much.
Forward to the data.
Yeah.
Thank you.
The next question comes from the line of Shannon Bank with UBS. Please go ahead.
Hey, Thank you for taking my questions. Two please if I may.
First one is just wondering if you could confirm whether you have got the data in house or not at this moment.
And secondly is on PSS 50, please.
Just wondering what sort of efficacy do you think that you're in.
You need to hit statistical significance.
Just any color on your confidence Lockheed and PFS safety that would be great. Thank you very much.
Richard This is Tim again on.
The first question do we have to date on how the answer is very clearly no. We don't have data in house and as we mentioned in the prepared remarks.
Soon after we have the data it will be made available through that AD hoc press release, Anthony said the data would come by the end of November.
Second question.
Confidence on TFS 50 results.
I would go back to.
What I mentioned previously.
First of all faced here.
In myelofibrosis as we learned very recently is very predictive of phase three readouts with respect to SVR.
With the recent phase III hitting on the decimal point on SVR response for the treatment arm and the control arm and as we just discussed.
The Wells Fargo question.
Also TSS seems to be very well behaved on the Rex control arm vis vis historical control, giving us confidence in our phase III Readouts. Additionally, chest too.
It's a range what we said before in Europe, very well aware of that's when must hostess.
Took over the manifest study from constellation we increased the sample size from 310 to 400 patients we over enrolled to $4 31, and with that we are.
Very well set up for.
Yes.
What we anticipate a positive readout of the study.
On the last question regarding powering.
That previously.
We have not disclosed the powering assumptions.
The 56% TSS response rates in manifest arm three year and a historical record performance.
Fifth in expectations, we do feel confident in our readout.
Thank you very much.
Sure.
The next question comes from the line of Jason Butler with JMP. Please go ahead.
Hi, Thanks for taking the questions.
Hi, congrats on the progress as well.
Yes.
Assuming positive results from manifest to can you just walk us through the steps.
So from that point to regulatory submissions.
Other ancillary studies that need to be completed.
And is there anything screen gating for submission and then second question for me is just on reimbursement can you just talk about the work that you've done so for sure.
To get patient access for <unk> seven.
Any learnings or leverage some of the margin.
Thank you.
Hey, Jason This is jumbo thanks for your question.
On the regulatory pathway, we are totally ready to.
Rolled the ball here, we've been having.
Many interactions with the FDA and EMEA.
As customary and as you can expect.
We'll be ready to share the.
All of them data and the global nature of the data. That's also what I wanted to insist on beyond the two endpoints, we mentioned that we have many.
Are there data that we will.
Sure with the regulators because it's our experience and nowhere observation that.
The agencies have evolved.
And have been evolving lately with.
The way to a prion disease as we've seen for example with <unk>.
Total 80 of the data is also something very important we've been mentioning that and we have a rich set of data.
For example, the anemia.
Which as you know very impressive phase II and we anticipate that in our phase III rules will have a very good.
It's a call on that one.
And this is this is very important to put in the package. So we will be ready to file.
Swiftly.
With the totality of the data and the rich set of data. We are we are preparing we already have and will have with the phase III.
Both on the efficacy and the safety side.
Now on the reimbursement.
I expect well, it's all based on the data.
It's a value based approach with what do we know from the phase two already we know.
That we have.
We are building value here for the patients and that's what is recognized by the payers.
<unk>.
It will be.
Leveraging that in our discussions later on with the with the figures in the U S and ex U S and we believe that with the incremental significantly incremental value brought by the product while the patients on many aspects we have been discussing several times, we can sustain strong.
On reimbursement and pricing.
Komatsu rates of the innovation, we bring in here.
Great. Thank you, we're very excited to see the data.
We are too thanks.
The next question comes from Alex James Gordon Jpmorgan. Please go ahead.
Hello, James Gordon Jpmorgan, Thanks for taking the questions.
Firstly in the release last night you suggested you saw the potential to meaningfully improve upon current first line treatments can you just confirm that that is confidence in the stat Sig benefit on both the SVR 35 primary TSS 50 secondary.
Second question was looking at the scheduling for the manifest to data ash.
Can you.
At the organized to seen any element of the study result, or they totally blended.
How do you hope for more permanent session.
Firstly, the suddenly session of a presidential session or anything like that.
And then third and final just on funding assuming manifesto does delivered hopefully it does how are you thinking about next funding steps for the company. So would you partner in some geographies that you would raise equity what would you do to fund some of the things you laid out in the presentation.
Hey, Jamie this is Tim.
Tim again.
So the study has.
The primary endpoint of spleen volume reduction and a secondary endpoints. We're looking at the improvement in symptomatology and of course, they are connected to a P value.
On the question of the Ash manuscripts. After you see are the ash abstract rather.
We submitted the abstract as it appeared.
<unk> recently, so without data.
It's highly unusual for ash as you know to except the AE data free abstracts and for that we are very very pleased to have gotten.
<unk> presentation.
What counts for us is the opportunity to be able to share this data and in all formats with the scientific community.
For example, you could have gotten that opportunity from ash.
On the partnering and financing question.
James.
So the great thing, which Deleveraged <unk> is why we were so keen on acquiring constellation at the time 2021 that is not tied to any is that tied to any.
Previous partnership that the company actually was thinking doing so we have the whole slates.
Being said.
After the data we will think about what kind of deployment. We want we are ready in the U S.
Pension is to commercialize ourselves in the U S. We have.
And experience.
Our module.
<unk> organization.
Very strong overlap with the money with the myelofibrosis <unk>.
So this is very important and very different situation than when we launched <unk> four years ago. So we'll see but you can always imagined non dilutive possibilities for <unk>.
<unk> ex U S. All these kind of things so more to come on that it.
It will be a great problem to have when we have the data and the financing I'll pass on to loosen.
Hi, James.
Of course, the priorities is to ensure we continue to retain a strong balance sheet and in the future.
That intent, obviously is important too to make sure we continue to deliver value and and as you might expect.
We will continue to weigh up all appropriate funding options available to us and we will update as and when its an S. One.
When we can.
As a reminder, if you wish to register for a question. Please press star followed by one.
The next question comes from the line of paper pre charge with Morgan Stanley. Please go ahead.
Hi, Thank you for taking my questions just a couple from me please.
So firstly on the manifest your endpoint you mentioned that that other endpoints such as apps Etfs PFS etcetera that.
It would be important to look at alongside TSS 15 F 35.
As I mentioned before that the totality breadth and depth of data are important to look at and consider amongst other things.
The impression so far has been static TFS 50 benefit needs to be seen for appraisal. So could you. Please expand on and remind us how flexible you believe regulatory authorities may be in the event that PFS 50 may not be.
Secondly, just a question related to slide number seven.
You mentioned that 30% of U S physicians.
Lifestyler did they give any reason as to why they were huston was it because it costs us efficacy. If you could give some color on that and then a final one to squeeze in just relates to the question before on partnering if you could let US know what you would look for in an ideal partner should you choose to partner that would be very useful. Thank you.
Hey, thanks for the questions. So on the first one on the.
The evolving landscape of myelofibrosis, including for the regulators.
Got.
It all starts with this very high unmet medical need.
With the concept the same current standard of care for the for decades, now and the appetite for new options and again as we've said several times and.
And we hear consistently the combination in first line is the number one.
Opportunity to improve the standard of care here.
Very important for all stakeholders, including designated areas into agencies.
And based on our ongoing interactions are experience the recent approvals we've observed.
Even with mixed clinical trial results.
This tells us that regulators will look at the totality of the data inclusive of efficacy and safety reasons very important to keep in mind.
Now on the market research question and physician feedback we've been we had a couple of those market research along the way since we acquired constellation and the great thing is that he does really really well.
From two or three years ago. When there was the novelty factor about combination people with a little bit.
Wondering how they would do that first line and though we have an overwhelming.
Number of physicians more than 80%.
Both in community Hematology and Academy existing who are ready for the combination first languishes, which is great and show how we have been in <unk>.
Hinting that space with <unk>.
Engagements based on our phase two data.
Your last question on partnering again here.
When your partner yielded valuable.
You have to be very clear.
I mean, we have the whole slate right now.
It's a great position to be in.
Then we will with Nomura later and again.
Partnering would come into the discussion I mean this is this is probably more for ex U S.
Because we believe that we have what we need in the U S.
We'll keep you posted on this one.
Great. Thank you.
Thanks.
The next question comes from the line of dynamics from Archrock Keys with Deutsche Bank. Please go ahead.
Thank you very much just quickly I wanted to clarify if you could give a bit more color on slate.
Important youre, saying it is.
So both 35 and 50, so wood and extremely positive outcome with one point mitigate lower efficacy outcome on the other end point.
And also a commercial one so given the synergies in the sales force with <unk>.
<unk> and.
In a scenario of ideal positive results would you expect to see further investment into our sales force and thus could we make an argument that one jewelry sales could potentially benefit as a result.
Hey, Manav this is Tim <unk>.
Based on the discussions with regulators the assumption.
<unk> 35.
The symptom improvement alright.
Important points that we'll look at.
Ongoing interactions and experienced from recent approvals in the myelofibrosis space with mixed results.
Certainly tell us that regulators.
Really appreciate the unmet needs in this patient population and that's what they're responding to it.
In addition to spleen volume and symptomatology. We are also looking in the study at the changes.
<unk> as well as patent change in symptom score, we're looking at PFS and overall survival.
And as I mentioned in the prepared remarks duration.
Spleen and symptom response.
We are confident that the comprehensive data sets that we will be able to share apps to time will really demonstrate and underscore the potential of the combination therapy to regulators.
On your question two regarding Salesforce synergies as mentioned there is a very high overlap between the <unk> more than 80%, especially in the community hematology side. So we would most likely needs to do some incremental investments to have the right to Cheryl voice and.
B just at the level of the opportunity here, but we're not going to start from scratch.
Qualitative and quantitative qualitatively because we already know the targets and we have the relationships and the engagements.
Well oiled.
And also quantitative because it's not going to be a fools buildup, which would require more opex.
You asked about demand Julie benefit for sure it's positive because you will have.
Our reps out there and our medical affairs people, having two products.
Which means the farm size, which means more commitments towards hematology and.
These two products in the market, we would definitely be the leader, which is yet to us.
Ladies and gentlemen that was the last question I hand, it back to you we don't know antibody <unk> for closing comments.
Ladies and gentlemen. This concludes today's conference call. If any of you would like to follow up with Investor Relations team is available for the remainder of today. Once again. Thank you for joining have a great.
Good day and Goodbye.
Ladies and gentlemen, the conference is now concluded and you may disconnect. Your telephone. Thank you for joining and have a pleasant day goodbye.
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