MorphoSys Q3 2023 Earnings Call Transcript

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November 16, 2023

Key Takeaways

  • Phase III MANIFEST 2 Readout: Top line results for the pelabresib plus ruxolitinib combination in first-line myelofibrosis are expected by end-November with detailed data to be presented at ASH on December 10.
  • Monjuvi Commercial Momentum: Q3 net sales of $23.4 M represent 5% YoY growth, aligning with 2023 guidance and narrowing full-year sales expectations to $85–95 M.
  • Fast Track for Tulmimetostat: The FDA granted Fast Track designation for the dual EZH2/EZH1 inhibitor in ARID1A-mutant endometrial cancer, with additional Phase III studies planned across tumor types.
  • Q3 Financial Results: Total revenues declined to €63.8 M from €95.8 M year-over-year, driven by lower licensing revenues, and the company reported a consolidated net loss of €119.6 M.
  • Strong Cash Position: End-Q3 cash and investments totaled €642.2 M, providing a cash runway into 2025, more than 12 months beyond the pivotal MANIFEST 2 readout.
AI Generated. May Contain Errors.
Earnings Conference Call
MorphoSys Q3 2023
00:00 / 00:00

There are 11 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the Q3 Statement 2023 of MorphoSys. Throughout today's recorded call, all participants will be in a listen only mode. The presentation will be followed by a question and answer session. I would now like to turn the conference over to Euler Neuerbauer.

Operator

Please go ahead.

Speaker 1

Ladies and gentlemen, good afternoon or good morning. My name is Eulan Neubauer, Head of Investor Relations at MorphoSys, and it's my pleasure to welcome you to our Q3 2023 financial and results conference call. With me on the call today are Jean Paul Kress, our Chief Executive Officer Tim DeMuth, our Chief Research and Development Officer and Lucie our Chief Financial Officer. Before we begin, I'd like to remind you on Slide 2 that some of the statements made during the call today are forward looking statements, including statements regarding our expectations for the commercialization of our products and our development plans and expectations for the compounds in our pipeline as well as the development plans of our collaboration partners. These forward looking statements are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in MorphoSys 20F and Annual Report or for the year ended December 31, 2022, and from time to time in other SEC documents of MorphoSys.

Speaker 1

It is important to keep in mind that our statements in this webcast speak as of today. On Slide 3, you'll find the agenda for today's call. Jean Paul will begin with an overview and give an outlook. After that, Tim will share an update on our clinical development work, Then Lucie will provide a summary of our Q3 2023 financial results. Following our prepared remarks, we will open the call for your questions.

Speaker 1

With that, I hand the call over to Jean Paul.

Speaker 2

Thank you, Julia. Good morning and good afternoon, everyone. Thanks for joining us today. We are very excited at the top line results from our Phase III MANIFEST II study of pelabrasib In combination with ruxolitinib in first line myelofibrosis will be available by the end of November. Shortly after, we will present detailed findings from the study at the 2023 ASH Annual Meeting during an oral presentation on Sunday, December 10.

Speaker 2

Belabrasib, Our investigational BET 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 the strong efficacy and safety profile of pelabrasib in myelofibodies with deep and durable improvements in clean volume and symptom reduction at 24, 48 60 weeks. Further to this, in the MANIFEST study, Changes in biomarkers correlated with improvements in certain clinical measures of treatment success, suggesting a potential disease modifying effect of pelabrasib. These Phase 2 data underscore the strength of this combination therapy and we remain very confident in the outcome of the MANIFEST 2 studies.

Speaker 2

Combination treatment is the highly anticipated next step To address the inadequate spleen size reduction, symptom control and lack of response Durability observed with JAK inhibitors in myelofibrosis, the current standard of care. Our market research shows that the majority of U. S. Community and academic based physicians View combination therapy as the way of the future in myelofibrosis. The pelabrasib and bruxolitinib combination therapy was ranked among the highest in top product attributes driving treatment decisions against ruxolitinib, momelotinib and the navitoclax and ruxolitinib combination.

Speaker 2

These physicians commented on pelabrasib's impressive efficacy And we are pleased that the combination was well tolerated and appeared to have a benefit for our Anemia. This reaffirms the excitement we continue to hear from physicians around pelabrasib, reflecting the dire need for more effective and well tolerated therapies to treat myelofibrosis. Moving to MONJUVY. MONJUVY, our CD19 targeting immunotherapy, Continues to be prescribed to certain adult patients with relapsed or refractory DLBCL. In the Q3, Monjuvie net sales were USD 23,400,000.

Speaker 2

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 its currently approved indication, The largest potential upside for MINJUVY is in the first line DLBCL setting, which we are investigating in our Phase 3 FRONSC MIND study. Data from that trial which randomized nearly 900 patients are projected for the second half of twenty twenty five. Monjuvie is also being explored In the Phase 3 in mind study in relapsedrefractory follicular lymphoma and marginal zone lymphoma, which is being run by our partner Incyte. These data will be available in 2024.

Speaker 2

The strong U. S. Commercial infrastructure we have in place for Monjuvy would also enable the smooth launch of pelabrasib As we have encountered a large overlap in treating physicians for DLBCL and myelofibrosis, especially in the community setting. Beyond our pivotal programs, we are pleased with the progress of tulmimetostat, our investigational next generation dual inhibitor of EZH2 and EZH1. In September 2023, the FDA granted Fast Track designation for tulimatostat For the treatment of patients with advanced, recurrent or metastatic ARID-1a mutated endometrial cancer whose disease has progressed following at least one prior line of treatment.

Speaker 2

Continued exploration of this promising asset in our Phase III study across tumor types, Now with an additional lower dose cohort, we'll inform our future development plans. Our key partner programs developed via our legacy antibody technology platform are also progressing well. Ultragenyx and Mereo Biopharma recently announced interim Phase 2 data demonstrating that cestrusumab significantly reduced fracture rates in patients with osteogenesis imperfecta. Anthos Therapeutics revealed that this Phase 2 study of abelastimab in patients with atrial seborrheition Was stopped early due to overwhelming positive results, highly significant reductions in bleeding events versus standard of care. While not central to our business strategy, These programs offer potential upside and provide us with options for non dilutive financing.

Speaker 2

I would now like to turn the call over to Tim to provide a development update. Tim, over to you.

Speaker 3

Thank you, Jean Paul. Good morning and good afternoon everyone. We are eager to release top line results from the Phase 3 MANEFEST 2 study as soon as they become available. These data will be released by the end of November. We will disclose these results Here an ad hoc company press release, which will include the primary and key secondary endpoints, spleen volume and symptom reduction at week 24 as well as a general statement on safety findings.

Speaker 3

Beyond SVR35 and TSS50, MANIFEST II is assessing several other important clinical endpoints, Including absolute change and percent change in total symptoms score, progression free survival, oval survival and duration of the splenic and total symptom score responses among others. These endpoints reflect the challenges The patients with myelofibrosis encounter daily, helping us to better evaluate the efficacy and Tolerability of the pelabrasib and ruxolitinib combination. We remain confident that the comprehensive MANIFEST 2 data package We'll provide impactful insights now and over time into the potential benefits of this first line therapy for patients with myelofibrosis. We are also very pleased that shortly after we release the MANIFEST II top line results, We will have the opportunity to present the detailed findings from the 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, this is the perfect stage to present these highly anticipated pivotal trial results.

Speaker 3

7 additional abstracts on pelabrasib and tafasitamab were also accepted at ASH 2023. While our primary focus for Palabrasib is in first line myelofibrosis, we see strong additional opportunities for this investigational medicine beyond this indication. At the 2023 ASCO and EHA Annual Meeting, We presented positive results from arm 4 of the Phase 2 MANIFEST study, which is investigating pylabrasib as a monotherapy In patients with high risk essential thrombocythemia, also known as ET, whose disease is refractory or intolerance to hydroxyurea. These robust proof of concept results support CalabrioSib's expansion into other myeloid diseases. As such, we will continue our ongoing evaluation of pelagrosyb in ET in the MANIFEST study.

Speaker 3

We will also initiate a Phase 2 study in lower risk myelodysplastic syndrome, also known as MDS in 2024. Patients with MDS experience progressive anemia that 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 in ET and MDS will inform our Phase 3 development plans. With that, I will now turn the call over to Lucie.

Speaker 4

Thank you, Tim, and good morning and good afternoon to everyone. We're pleased to share our financial results for the Q3 and 1st 9 months of 2023. Monduvi sales were $23,400,000 in the Q3 of 2023 $67,800,000 for the 1st 9 months of 2023, reflecting a year over year growth of 5% 6%, respectively, allowing us to narrow our revenue guidance for the year for the full year 2023. We also recorded €1,200,000 or $1,300,000 in royalty revenue from MINJUVY sales outside of the U. S.

Speaker 4

From our partner Incyte in the Q3 of this year. Recall that the results of the Q2 of this year included a one time effect coming from previously deferred revenues related to Incyte's early access program in France. Total revenues in the Q3 of 2023 was €63,800,000 compared to €95,800,000 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 Hi Bio.

Speaker 4

Total cost of sales was €15,100,000 in the Q3 of 2023 compared to €8,100,000 a year ago. Cost of sales specific to MONJUVY U. S. Product sales was €7,500,000 in the Q3 of 2023 compared to €4,500,000 in the Q3 for 2022. Turning to operating expenses.

Speaker 4

R and D expenses in the Q3 of 2023 decreased to €63,200,000 compared to €77,800,000 for the 3rd quarter of 2023 2022. Also, selling expenses decreased to €19,900,000 in the Q3 of 2023 compared to €23,500,000 for the same period in 2022. The year over year decline was driven by Streamlining and focusing of selling efforts. G and A expenses in the Q3 of 2023 were €15,000,000 compared to €15,600,000 in the Q3 of 2022. For the Q3 of 2023, we reported a consolidated net loss of €119,600,000 compared to a net loss of €122,900,000 in the Q3 of 2022.

Speaker 4

Turning to our balance sheet. We ended the Q3 of 2023 with cash and investments of €642,200,000 compared to €907,200,000 at the end of 2022. This provides us with a cash runway into 2025, which is more than 12 months beyond the pivotal readout for palabrasib. Turning to our guidance for 2023. On October 25th, we provided an updated financial guidance, Narrowing the guidance from ENJUVY net product sales and now expecting it to be in the range of $85,000,000 to $95,000,000 Following the recognition of one time write offs for raw material used in the production of MONJUVY, we now expect gross margin for MONJUVY U.

Speaker 4

S. Net product sales to be approximately 75%. All other aspects of our guidance remain the same. With that, I'll now turn the call back over to Jean Paul.

Speaker 2

Before we open up the line for questions, I want to conclude with a few words. 2023 has been marked by exceptional progress at MorphoSys. We have over 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. Elabrasib represents an opportunity to meaningfully improve the Standard of care for patients with myelofibodies, the community in dire need of more effective and well tolerated treatment options. We very much look forward to sharing the results of the MANIFEST 2 study with you soon.

Speaker 2

With that, I'd like to open the call for questions. Operator, please open the line.

Operator

Ladies and gentlemen, at this time, we will begin the question and answer session. In the interest of time, please limit yourself to 2 questions only.

Speaker 5

The first question comes from

Operator

the line of Derek Archila with Wells Fargo, please go ahead.

Speaker 6

Hey, good morning, everyone, and thanks for taking the questions and congrats on the progress here. So just two questions from us. I guess, first, in the MANIFEST-two trial, it looks like you enrolled more patients with intermediate 1 myelofibrosis Then you had kind of seen in cohort, kind of get your thoughts on how that might impact the trial in terms of SVR35 and TSS 50? And then also just second question, just looking at some of these myelofibrosis trials, it looks to us the mean change And TSS is highly variable across studies. This was most recently demonstrated with the nevediclax trial, but also with ruxolitinib.

Speaker 6

What do you think is really the main driver of this variability? Thanks.

Speaker 3

Hi, Derek. This is Tim. On the population in the MANIFEST Phase 2 study and potential differences On SVR and TSS 50, when we look at the JCL manuscript, ARM3, we see very clearly that there is No difference in SVR response between the INT1 and the INT2high population Confidence intervals are completely overlapping. The data for TSS 50 has not been published. However, there is a waterfall plot in the JCO manuscript where you can derive numericals for patients with the respective risk Categories, if you put then the confidence intervals around those, you will see that they are also completely overlapping while yes, there may be Small numerical differences.

Speaker 3

However, those are clearly related to the very small sample size. On the variability as you call it on mean change in TSS baseline parameters between different historical studies and one of the more recent ones. In our perspective, this is really within the natural fluctuation baseline scores. And I would even say that in the most recent Phase 3 readouts That you're referring to the 11 point change, absolute TSS Change from baseline in the ruxolitinib arm appears to be very well within the range of what one would expect from historical rux control arms. If I put this together with the SVR response rates that was reported for that rux arm, Which is exactly in the line of what one would have expected.

Speaker 3

We actually feel very, Very confident in the fact that the Phase 3 is a very good replica of Phase 2 results.

Speaker 6

Got it. Thank you very much. Look forward to the data.

Speaker 3

Thank you.

Operator

The next question comes from the line of Shandeng with UBS. Please go ahead.

Speaker 7

Hey, thank you for taking my questions. 2, please, if I may. The 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 TSS 50, please. Just wondering what sort of efficacy Do you think that you need to hit statistical significance?

Speaker 7

Just any color on your confidence on hitting TSS 50, that will be great.

Speaker 3

This is Tim again. On the first question, do we have data in house? The answer is very clearly no, we don't have data in house. And as we mentioned in the prepared remarks, As soon as we have the data, it will be made available through that ad hoc press release and we said the data would come by the end of November. 2nd question, confidence on TSS-fifty results.

Speaker 3

I would go back to what I mentioned previously. First of all, Phase 2 In myelofibrosis, as we learned very recently, is very predictive of Phase III readouts With respect to SVR, there's a recent Phase 3 hitting on the decimal point on SVR Response for the treatment arm and the control arm. And as we just discussed on the Wells Fargo question, Also, TSS seems to be very well behaved on the rux control arm visavishistorical control, Giving us confidence in our Phase 3 readout. Additionally, just to reiterate what we said Before and you are very well aware of that, when MorphoSys took over the MANIFEST 2 study from Constellation, We increased the sample size from 310 to 400 patients. We over enrolled to 431 and with that We are very well set up for what we anticipate a positive readout of the study.

Speaker 3

On the last question regarding powering, we said previously that we have not disclosed the powering assumptions. That's the 56% TSS response rate in manifest arm 3 and a historical rux Performance within expectations, we do feel confident in our readout.

Speaker 7

Thank you very much.

Operator

The next question comes from the line of Jason Butler with JMP. Please go ahead.

Speaker 5

Hi, thanks for taking the questions. And Lenea, my congrats on the progress as well. Assuming positive results from manifest too, can you just walk us through the steps From that point to regulatory submissions, other ancillary studies that need to be completed? And is there anything time gating to submission? And then second question for me is just on reimbursement.

Speaker 5

Can you just talk about the work that you've done to prepare to get patient access for Well, I've received any learnings or leverage from the Monjeev experience? Thank you.

Speaker 2

Hey, Jason, this is Jean Paul. Thanks for your question. On the regulatory pathway, we are Totally ready to roll the ball here. We've been having many interactions With the FDA and E and A as customary and as you can expect, we'll be ready to share the Relevant data and the globality of the data, that's also what I wanted to insist on. Beyond the two endpoints we mentioned, we have many Other data sets that we will share with the regulators because it's our experience and our observation that The agencies have evolved and have been evolving lately with the way to As we've seen, for example, with momelotinib.

Speaker 2

So the totality of the data is also something very important. We've been mentioning that and we have a rich set of data. I would, for example, quote the anemia data, which, As you know, very impressive in our Phase 2 and we anticipate that in our Phase 3, we'll also have a very good score on that one. And 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 preparing, we already have and we have with the Phase 3, both on the efficacy and the safety side.

Speaker 2

Now on the reimbursement aspect, well, it's all based on the data. It's a value based approach. With what we know from the Phase 2 already, we know that we have We're building value here for the patients and that's what is recognized by the payers. We will be Leveraging that in our discussions later on with the payers in the U. S.

Speaker 2

And ex U. S. And we believe that with incremental Significantly incremental value brought by the product or the patients on many aspects we've been discussing several times, We can sustain a strong reimbursement and pricing, commercial rate of the innovation we're bringing here.

Speaker 3

Great. Thank you. We're excited to see the data.

Speaker 2

We are too. Thanks.

Speaker 5

The next question comes from

Operator

the line of James Gordon with JPMorgan. Please go ahead.

Speaker 8

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 there is confidence in a stat sig benefit on both the SVR35 primary and TSS 50 secondary? Second question was looking at the scheduling for the MANIFEST-two data, ASH, can you let's say, have the organizers seen any element of Study result or were they totally blinded? And how do you hope for a more prominent session versus the Sunday session like a presidential session or anything like that?

Speaker 8

And then 3rd and final just on funding, assuming Manifest II does deliver and hopefully it does, how are you thinking about next funding steps for the company? So would you partner in some geographies or you'd raise equity? What would you do to fund some of the things you were laying out in the presentation?

Speaker 3

Hey, James. This is Tim again. So the study has the primary endpoint of Volume reduction and 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 Manuscript, as you see or the ASH abstract rather, we submitted the abstract as it appeared Just very recently, so without data, which is highly unusual for ASH, as you know, to accept a data free abstract. And to that, we are very, very pleased to have gotten a oral presentation.

Speaker 3

And what counts for us is The opportunity to be able to share this data in an oral format with the scientific community and again We have gotten that opportunity from Ash.

Speaker 2

On the partnering and financing question, James? So the great thing with Stelabrasib and this is why we were so keen on acquiring Constellation at the time 2021 is not tied to any previous partnership that the company actually was thinking doing. So we have the whole slate. That being said, after the data, we will think about what kind of deployment we want. We are already in the U.

Speaker 2

S. The intention is to commercialize ourselves in the U. S. We have an experienced Monjuvie organization With a very strong overlap with the myelofibody treaters. So this is very important, very different situation than when we launched Monjuvia 4 years ago.

Speaker 2

So we'll see. But you can always imagine the non dilutive possibilities for partnering ex U. S. Or this kind of thing. So more to come on that.

Speaker 2

It will be a great problem to have when we have the data. Then the financing, I'll pass on to Lucie.

Speaker 4

Yes. Hi, James. Of course, the priority is to ensure we continue to retain a strong balance sheet in the future. That in turn obviously is important to make sure we continue to deliver value. And as you might expect, we'll continue to weigh up all appropriate

Operator

The next question comes from the line of Pippa Pritchard with Morgan Stanley. Please go ahead.

Speaker 9

Hi there. Thanks for taking my questions. Just a couple for me, please. So firstly, on the MANIFEST 2 endpoints, you mentioned that there are other endpoints Such as absolute TSS, PFS, etcetera, that would be important to look at alongside TSS 50 and SVR 35. I know that it's been mentioned before that the totality, breadth and depth of data are important to look at and consider amongst other things.

Speaker 9

But the impression so far has been that a static TSF50 benefit needs to be seen for approval. So could you please expand on and remind us how flexible you believe regulatory authorities may be In the event that TSF-fifty may not be that sick. Secondly, just a question related to Slide number 7, where you mentioned that 13% of U. S. Physicians Were hesitant to utilize Pella.

Speaker 9

Did they give any reason as to why they were hesitant? Was it cost? Was it efficacy? If you could give some color on that. And then a final one to squeeze in just related to the question before on partnering.

Speaker 9

If you could let us know what you would look for in an ideal partner, should you choose the partner that would be very useful? Thank you.

Speaker 2

Hey, Pippa, thanks for the questions. So on the first one, on the Evolving landscape of myelofibrosis, including for the regulators. It all starts with this very high unmet medical need With the same current standard of care for decades now and the appetite for new options, and again, as we've said several times And we hear consistency, the combination in first line is the number one opportunity to improve the standard of care here. That's very important for all stakeholders, including the regulators and the agencies. And based on our ongoing interactions, our 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 results, very important to keep in mind.

Speaker 2

Now on the market research Question and the future 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 it has really, really evolved from 2 or 3 years ago when there was the novelty factor of a combination. People were still a bit wondering how they would do that first line. And now we have an overwhelming Number of physicians, more than 80%, both in community hematology and academic setting who are ready for the combination first line, which is great and show how we have been Imprinting the space with our engagements based on our Phase II data.

Speaker 2

Your last question on partnering again here. When you partner, you let value go. You have to be very cautious here. I mean, we have the whole slate right now. So it's a great position to be in.

Speaker 2

Then we will know more later. And again, if partnering would come in the discussion, I mean, This is probably more for ex U. S. Because we believe that we have what we need in the U. S.

Speaker 2

But We'll keep you posted on this

Speaker 1

one. Great. Thank you.

Speaker 2

Thanks.

Speaker 5

The next question comes from

Operator

the line of Manos Maserakis with Deutsche Bank. Please go ahead.

Speaker 10

Thank you very much. Just quickly wanted to clarify if you could give a bit more color actually how important you think it is To show both SVR35 and TSS 50, so would an extremely positive outcome on one endpoint mitigate lower efficacy outcome on the other endpoint? And also Commercial 1, so given the synergies in the sales force with MINJUVI and filabrevziib, In a scenario of ideal positive results, would you expect to see further investment into the sales force? And thus, could we make an argument that MONJUVY Sales could potentially benefit as a result. Thank you.

Speaker 3

Emmanuel, this is Tim. As Schopold stated, based on the discussions with the regulators, the assumption is SVR35 And symptom improvement are important points that we'll look at. Ongoing interactions and experience 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. In addition to Screen volume and symptomatology, we are also looking in the study at the changes, absolute as well as percent change in symptom score. We're looking at PFS, overall survival, and as I mentioned in the prepared remarks, duration of spleen and symptom response.

Speaker 3

And we are confident that the comprehensive data sets that we will be able to share at the time will really demonstrate and underscore the potential of the combination therapy to regulators.

Speaker 2

On your question 2 regarding sales force synergies, as mentioned, there is a very high overlap between the treaters, More than 80%, especially in the community hematology side. So we would most likely need to do some incremental investments You have the right share of voice and be just at the level of the opportunity here. But we're not going to start from scratch. It's 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 full buildup, which would require more OpEx.

Speaker 2

You asked about the Monjuvie benefit. Well, for sure, it's positive because you will have Our reps out there and our medical affairs people having 2 products, which means the franchise, Which means more commitment towards hematology. And with these two products on the market, We would definitely be as a leader, which is virtuous.

Operator

Ladies and gentlemen, that was the last question. I hand back to Julia Neugebauer for closing comments.

Speaker 1

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

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