MorphoSys Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 4, 2023

Key Takeaways

  • Pelabrasib Phase 3 success: Enrollment in the MANIFEST 2 study for first-line myelofibrosis completed ahead of schedule, with top-line data now expected by the end of 2023, underscoring potential disease-modifying benefits.
  • Monjuvi momentum: Q1 net sales of US$20.8 million (+11% YoY) and 5-year Phase 2 L-MIND data showing 40% survival support its curative potential in relapsed/refractory DLBCL, while frontMIND Phase 3 enrollment in first-line DLBCL is now complete.
  • Strong balance sheet & cost focus: Q1 net loss narrowed to €44.4 million versus €122.7 million a year ago, bolstered by convertible bond repurchases, and cash reserves of €791.5 million fund programs through key data readouts.
  • Rich mid-late stage pipeline: Upcoming ASCO presentations include proof-of-concept data for pelabrasib in essential thrombocythemia and tomimetostat in advanced tumors, reflecting broad development across myeloid and solid cancers.
AI Generated. May Contain Errors.
Earnings Conference Call
MorphoSys Q1 2023
00:00 / 00:00

There are 8 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the Q1 Interim 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. By 1 on your touchtone telephone.

Operator

Please press star key followed by 0 for operator assistance. I would now like to turn the conference over to Julia Neugebauer. Please go ahead.

Speaker 1

Ladies and gentlemen, good afternoon or good morning. My name is Julia Nagelbauer, Head of Congratulations, MorphoSys, and it is my pleasure to welcome you to our Q1 2023 financial results conference call. Joining me on the call today are Jean Paul Kress, Chief Executive Officer Kim Vanout, Chief Research and Development Officer and Joe Hovart, U. S. General Manager, who will join for the Q and A.

Speaker 1

Before we begin, I'd like to remind you on slide 2 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 a number of risks and uncertainties that may cause our actual results to differ materially, including those described in MorphoSys' 20 F and Annual Report also the year ended December 31, 2022, and from time to time in other SEC documents of MorphoSys. It is important to keep in mind that our statements in this webcast speak as of today. On Slide 3, you will find the agenda for today's call. Jean Paul will begin with an overview of the outlook.

Speaker 1

After that, Tim will share an update on our clinical development work, Then we will provide a summary of our Q1 2023 financial results. Following our prepared remarks, we will open the call for your questions. With that, I now hand the call over to Jean Paul.

Speaker 2

Good morning and good afternoon, everyone. Thanks for joining us today. We had a strong Q1 marked by numerous achievements. We are more focused than ever on the opportunities ahead of us this year, and I'm confident that we will deliver. Pelabrasib, our investigational BEST inhibitor, It is a potential best and 1st in class foundational first line treatment for patients with myelofibrosis.

Speaker 2

It represents our largest and most immediate opportunity. This quarter, we announced that we completed enrollment of our Phase 3 MANFEST 2 study of pelabrasib in myeloid fibrosis ahead of schedule. As a result, the top line data from the trial are now expected by the end of 2023, months earlier than previously anticipated. This advancement of the trial timeline also provides us with the opportunity to bring pelabrasib to patients much earlier. The MANIFEST 2 study enrolling ahead of schedule underscores that there is a significant need for better treatment options for patients with myeloid hypothesis.

Speaker 2

Further, it shows the enthusiasm of investigators and treating physicians for Telabresil. In speaking with physicians who treat myelofibrosis patients, We constantly hear that depth and durability of responses to treatment are limited with current first line therapy. Results from our Phase 2 MANIFEST study of pelabrasib in myelofibrosis suggest that pelaprasib in combination with JAK inhibitor may offer prolonged improvement in both Spleen size and symptom severity at and beyond 24 weeks. Further to this, in the MANFAST study, changes in biomarkers correlated with improvements in clinical measures of treatment success, suggesting a potential disease modifying effect of belabrasid. The body of data presented on Telabrasid to date reiterates Its potential to address the critical needs of myelofibrosis patients.

Speaker 2

We are laser focused on delivering the top line data from the Phase III MANIFEST II study by the end of this year. We also see great potential for collaborative beyond myelofibrosis and we will continue to explore it in treating patients with other myeloid diseases. Mongeovi continues to address critical needs of patients living with relapsed of refractory diffuse large B cell lymphoma, also known as DLBCL. In the Q1, Monjuvie net sales were US20.8 million dollars representing an 11% year over year growth And on track with our 2023 guidance. At the 2023 AACR Annual Meeting, We presented final 5 year follow-up data from the Phase 2 L MIND study.

Speaker 2

These data show that MANJUVI plus lenalidomide offers prolonged and durable responses In adults with relapsed or refractory DLBCL, with 40% of patients We received the regimen still alive after 5 years. The durable responses And consistent safety profile observed in the 5 year analysis further support the MANJUV regimen as a potential curative option for appropriate patients. We believe the largest opportunity for Mondialvi is in the first line DLBCL setting. Last month, we announced that enrollment of the Phase III France Mine study is also complete with more than 8 80 patients enrolled in the trial. The study He's exploring tafasitamab plus lenalidomide in addition to R CHOP, the current standard of care for this patient population Versus R short alone has a first line treatment for patients with high intermediate and high risk DLBCL.

Speaker 2

We look forward to sharing data from the trial in the second half of twenty twenty five. We have a rich set of pivotal catalysts over the next 2 years, starting with the collaborative Phase 3 data in first line myelofibrosis later this year. To ensure we are set up for success, we continue to take steps to optimize our cost structure and further strengthen our financial position. For example, We recently purchased parts of our convertible bonds that are due in 2025 to reduce our debt. We did this to take advantage of the market dynamics as the bond is trading with significant discount.

Speaker 2

As a result, we were able to buy back approximately 19% of our outstanding principal amount at a lower cost. We continue to concentrate our investments on our most advanced clinical programs that we create near term value. I would now like to turn the call over to Tim to provide the development update. Tim, over to you.

Speaker 3

Thank you, Jean Francois. We continue to advance our ongoing mid to late stage clinical programs and make exceptional progress. We'll start with palapacib. The Phase III MANIFEST II study is our number one priority. MANIFEST II is a global multicenter double blind study of more than 400 patients who were naive to JAK inhibitors.

Speaker 3

Patients were randomized 1 to 1 to palabrasib in combination with ruxolitinib or placebo plus ruxolitinib. The primary endpoint of the study is the proportion of patients who achieve a 35% or greater Reduction in spleen volume at week 24, known as SVR35. The key secondary endpoints is a proportion of patients achieving a 50% or greater improvement in total symptom score at week 24. This is known as TFS-fifty and is measured by the myelofibrosis symptom assessment form version 4.0. The MANIFEST II study is supported by findings from the Phase II MANIFEST trial of pelabrasib in combination with ruxolitinib in patients with myelofibrosis, including those who were JAK inhibitor naive.

Speaker 3

Updated results from MANIFEST were presented at the ASH meeting in December 2022 and were recently published in the Journal of Clinical Oncology. These results suggest that palabrasib in combination with ruxolitinib provides prolonged improvement in both spleen size and symptom severity at and beyond 24 weeks. In the MANIFEST study, changes in biomarkers correlated with improvements in clinical measures of treatment success. This included SVR35, TSS50 and hemoglobin increases indicative of improved anemia, suggesting a disease modifying effect of pelabrasib. Examined biomarkers included Bone marrow scarring, known as fibrosis and the frequency of the JAK2 allele that is known to drive disease activity.

Speaker 3

All patients who had clinical responses plus reduced allele frequency and improvement in bone marrow fibrosis were naive to JAK inhibitors. Based on the body of data we have presented thus far, our confidence in palabrasib And the Phase III MANIFEST II study is high. And we look forward to releasing the top line data from the trial data this year. Moving on to tofacitamab. As Jean Paul mentioned, at the 2023 AACR Annual Meeting, Final data from our Phase II L MIND study were presented during a late breaking oral presentation, spotlighting 5 year efficacy and safety results in patients with relapsed or refractory DLBCL.

Speaker 3

As the data cut off, the overall response rate of patients enrolled in the study was 58% And complete response was observed in 41% of patients. The median overall survival was 34 months with 40% of patients alive at 5 years. The regimen was well tolerated and no new safety signals were identified. The prolonged and durable responses seen at 5 years among patients in this study are very meaningful and show that the MONJUVY treatment regimen has curative potential. Beyond the currently approved indication, we're also exploring tafasitamab in 2 Phase III studies, front mind in first line DLBCL and in mind in relapsed or refractory follicular or marginal zone lymphoma, which is being driven by our partner Incyte.

Speaker 3

For about 50% of patients with high intermediate and high risk DLBCL, the standard of care first line therapy Archhub is ineffective and the prognosis for patients with relapsed or refractory disease is very poor. We are investigating the potential of adding tafasitamab and lenalidomide to our chart to increase the DLBCL cure rate In the first line and help more patients avoid relapse. At the ASCO 2023 Annual Meeting in early June, We will present data that reinforces the strong potential of our pipeline. Our presentations feature proof of concept data on palabrasib in essential thrombocythemia and tumimetostat, our investigational next generation dual inhibitor of ECH2 and ECH1 in a broad array of advanced tumors. In our Phase II MANIFEST study, palabrasib is also being investigated in patients with essential thrombocythemia In addition to myelofibrosis, these indications are both myeloproliferative neoplasms, which are types of blood cancers Let's begin with the genetic change in bone marrow stem cells.

Speaker 3

One arm of the MANIFEST study is exploring as monotherapy in patients with high risk essential thrombocytemia who are refractory or intolerant to hydroxyurea, the chemotherapeutic agents most used to treat this disease. Proof of concept data from this arm of the Phase II study will be presented during a poster discussion session. Tedomimidostat is being evaluated in a Phase III trial in patients with advanced solid tumors or lymphomas, including ARID-1a mutated ovarian carcinoma and endometrial carcinoma, BAP1 mutated mesothelioma and peripheral T cell lymphoma. Tonimatostat was designed to improve on 1st generation ECH2 inhibitors So increased potency, longer residence time on target and a longer half life, offering the potential for enhanced antitumor activity. Preliminary results from the Phase II portion of the study Evaluating tolmimatostat across multiple tumor types will be presented during a poster session.

Speaker 3

In summary, The data we are presenting at ASCO 2023 showcase the wealth of potential opportunities that our pipeline offers to address the critical needs of people living with blood cancers, including myeloid malignancies and those patients with solid tumors. With that, I'll now turn the call over to Julia to review our financials.

Speaker 1

Thank you, Tim. We're pleased to share our financial results for the Q1 of 2023. WENUV sales were $20,800,000 in the Q1 of 2023, reflecting a year over year growth of 11% driven by higher demand. On a sequential basis, sales declined by 18%, largely due to the inventory dynamics and demand seasonality. We continue to be excited for the new Julli opportunity outside of the U.

Speaker 1

S, which our partner Insight is responsible for. In the Q1 of 2023, We recorded €700,000 or €800,000 in volatility revenue for Minitubine. Total revenues in the Q1 of 2023 were €62,300,000 compared to €41,500,000 in the same period a year ago. This increase resulted mainly from higher revenues from the sale of clinical buyers. Total cost of sales We had €21,000,000 in the Q1 of 2023 compared to €7,900,000 a year ago.

Speaker 1

The year over year increase reflected primarily from expenses related to biophase to our partner Incyte. Cost of sales specific to Monjube U. S. Product sales was €3,100,000 in the Q1 of 2023. Turning to operating expenses.

Speaker 1

R and D expenses in the Q1 of 2023 were €83,100,000 compared to €65,000,000 for the Q1 of 2022. The growth primarily reflects the additional costs incurred due to the positive development of the patient recruitment in the major ongoing clinical studies and a onetime effect resulting from severance payments in connection with the restructuring of the research area. Selling expenses decreased to €16,900,000 in the Q1 of 2023 compared to €21,900,000 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 Q1 of 2023 were 10 €900,000 compared to €14,600,000 in the Q1 of 2022.

Speaker 1

For For the Q1 of 2023, we reported a consolidated net loss of €44,400,000 compared to a net loss of 122 point €7,000,000 in the Q1 of 2022. The lower consolidated net loss in 2023 was driven mainly By the recognition of finance income in relation to the financial liabilities from future payments to royalty pharma and by additional finance income derived from the repurchase of a portion of outstanding convertible bonds. Turning to our balance sheet. We ended the Q1 of 2023 with cash and investments of €791,500,000 compared to €907,200,000 end of 2022. Our semi cash position enables us not only to reach the pivotal data milestone for the Phase 3 study of Tilapisib now expected by the end of 2023, but to also provide a cash runway of at least 12 months beyond the pivotal data readout.

Speaker 1

Turning to our guidance for 2023. We are reiterating our guidance that was provided at the beginning of January this year. All aspects of our guidance remain the same. With that, I now turn the call back to Jean Paul.

Speaker 2

Before we go into Q and A, I want to conclude a few words. We made exceptional progress this quarter, And we are more focused than ever to build on this great momentum and drive our strong mid to late stage pipeline forward. With pelabrasib, we have the opportunity to bring a foundational first line treatment to patients living with myelofibrosis with the potential to improve the standard of care. Now that our Phase III MANIFASE 2 study As completed enrollment earlier than anticipated, we will release top line data later this year. On Wednesday, June 21, we will host a virtual event that provides an in-depth overview of pelaprosid and its potential.

Speaker 2

Doctor. John Mascarenas, Professor of Medicine and Director of the Adult Leukemia Program at the Tisch Cancer Institute at Mount Sinai, New York We'll speak and be available for questions. Further details about this session will be provided closer to the date. We are well financed to deliver on our priorities and we continue to focus our resources on our most advanced clinical programs that will create near term value. With that, I would like to open the call for questions.

Speaker 2

Operator, please open the line.

Operator

Ladies and gentlemen, at this time, we will begin the question and answer session. If you are using speaker equipment today, please lift the handset before making your selection. One moment for the first question please. And the first question comes from Jason Butler from JMP Securities. Please go ahead.

Speaker 4

Hi, thanks for taking the questions and congrats on all the progress. Just one on MANIFEST So can you now you've completed enrollment, can you comment on the comparability of the patient population in MANIFEST II to arm 3 of the MANIFEST I trial? And then wondering if you could just walk us through a little bit more detail of your commercial press For Plavrisib and what you're doing to build awareness ahead of data? Thanks.

Speaker 2

Thanks, Jason. Tim will take the first part of the question and Joanna will answer the second part.

Speaker 3

Yes. Hey, Jason, this is Tim. In terms of comparability between the population of MANIFEST 2 and ARM 3 in the MANIFEST, Generally, the populations are very comparable. That was intentional. So we can really use manifest as a very good Benchmark for what to expect in MANIFEST 2, so highly comparable patient populations there.

Speaker 2

And Jason, on the commercial, really, a couple of thoughts here. 1st and foremost, We have our organization, Commercial LNG, already interacting, as you know, with the space For Montjuvian, there is a very high level of overlap in the target. So we don't have to start from scratch. Obviously, we make adjustment with time. We have time for that.

Speaker 2

What is really important now is to continue to Engaged with the key opinion leaders, and we've been doing that through our development program. We've basically Interacted with the most relevant sites worldwide, including very much so in the U. S. For that. But at the same time, now we are Our medical affairs organizations work with the field on engaging on the data and raising excitement.

Speaker 2

So it's doing very well, and We constantly hear very strong endorsement of our regimen and the desire to continue these interactions and engagements. And again, the fact that we have enrolled that swiftly and ahead of time It's a really, really strong indicator of the interest for the firm. Great. Thank you. Thank you for taking the questions.

Operator

And the next question comes from James Quigley from Morgan Stanley. Please go ahead.

Speaker 5

Hello. Thank you for taking my questions. I've got 3, please. So on pelagretib and thinking about other endpoints Beyond SBR35 and TSS50, so in terms of additional data on bone marrow fibrosis and survival data, At what point can we expect this data to come through? And it's not listed as a secondary endpoint on clinicaltrials dot gov, but how important could these additional data be in terms of driving uptake or from your conversations, Does that not matter?

Speaker 5

It's more of a nice to have for the future. Secondly, on MONGEV curative potential. In the L MIND5, your update. Are there any patients that have stopped therapy and not rebounded? So are there any patients that Going to complete response, managed to stop therapy or come off therapy and not see their cancer return, just thinking about that in terms of demonstrating curative potential?

Speaker 5

And finally, on R and D, there's a bit of a step up in Q1 due to the Phase III trials. Give us a sense of what portion of your current R and D is late stage or is related to late stage assets. Obviously, you stopped the early stage research, but how should we think about how R and D develops over time? You

Speaker 2

Thanks, James. I'll start by the last question and Tim will address the line, the Mond Juli questions. Regarding the evolution of our focus and capital allocation towards the R and D spectrum, you're correct. We are obviously now very much focusing on our late stage opportunities, and There will be a phasing with that. Right now, you can probably assume that we are at the peak in terms of our Phase III results.

Speaker 2

But we've got the PELA manifest 2 study, we've got the front mine study And together with in mind with Incyte, we have the in mind study with for follicular lymphoma. But that will kind of decrease in the future. So we're not saying that we must start new things, but If you take the ISO picture here, that we're probably peaking now. And so we'll actually have seen an OpEx Tradition to help R and D and development in the future. So, yes, for that answer to that.

Speaker 2

And Indeed, we have greatly reduced our expenses in preclinical to make sure that we could fuel the opportunities that we mentioned. Jim, on the two other questions.

Speaker 3

Yes. Thank you. So hi, James. On the first question, Other endpoints beyond SCR and TSS. So yes, there are other endpoints in the study, as you mentioned.

Speaker 3

Just to come back To the primary endpoint and the key secondary, obviously, health authorities are expecting and we know that from interactions with them are expecting us to demonstrate winning on SVR35 and TSS 50 both at week 24. Those are the accepted and expected regulatory endpoints, and we feel very good about meeting those endpoints. You remember, We particularly increased the sample size from 330 to 400 patients to be particularly well powered for that Secondary endpoint, the TSS-fifty. As regards bone marrow fibrosis, that's clearly an important Translational endpoints and endpoints that very much speaks to potentially altering the natural history of the disease When we're talking of the disease that is carrying the bone marrow, being able to demonstrate reversal of that fibrosis, I think helps a lot understanding for the trajectory. And there is a lot of reason to believe That improvement in bone marrow fibrosis will translate to long term cycle.

Speaker 3

And Those are, of course, endpoints that we're assessing in the study. You mentioned they're not listed on clinicaltrials.gov, yet they are definitely part of the protocol. And we will analyze this data as soon as we're done with analysis of the top line data and then have this ready For presentation at an available scientific conference in the near future. As it comes to tafasitamab and the curative potential, you asked about are there patients who stopped Treatment with CR and continue to show that survival benefit, absolutely yes. If I can just refer you back to that ACR presentation that Professor Doyle was giving just a few weeks ago.

Speaker 3

In Florida, there are a number of patients who actually complete and discontinue treatments And who remain in complete response despite discontinuing or Completing treatment, again, really supporting the potential for cure in these Patients treated with tafalin. And we're very excited about these findings and so are some of the investigators speaking with about this data.

Speaker 5

That's great. Thank you very much.

Operator

And the next question comes from Zane Ibrahim from JPMorgan. Please go ahead.

Speaker 6

Hello. Thank you for taking my questions. Just 2 for me, please. So my first question would be on MANIFEST 2. You forward the timing for this So the study a few times now and that's because of completing enrollment, but is there any chance of that readout being brought forward even further or is the earliest now expect the data end 2023.

Speaker 6

And my second question would be on the myelofibrosis competitive landscape. So one of A potential competitor for PAPELLA, memelotinib that's due for approval in June, possibly in second line, but I think there's some discussion at the moment as to whether that could receive a line agnostic approval.

Speaker 7

How are you

Speaker 6

thinking about positioning of Pella and Jakavi combination relative to momelotinib and also other potential competitors that we've seen?

Speaker 2

Zane, thanks for your questions, Jean Paul. From manifest The timing is already greatly improved compared to what we had in mind probably A year ago or a year and a half ago, 2 years ago in the Cryo constellation. I mean, there are not many companies that are studies, Phase III studies in oncology, especially I think we've done extraordinarily well here and we don't want to signal any potential upside. It's a couple of more months. I think now it's about making sure that we deliver the right quality together Within this time line, so that's for the time line.

Speaker 2

Regarding the competitive the positioning of Okay. Let me proceed in the landscape. First of all, the landscape is evolving very much. And it has been a decade of The same standard of care with monotherapy, JAK inhibition, building up a very big deal of unmet need. And this is really, really giving us the opportunity to make a big change here.

Speaker 2

And this is what we hear constantly from the space. There is also lots of expectations for first line combination in myelofibrosis. And pelabrasib, From what we know from the data and what we hear as feedback is the longer wait of the opportunity to establish this far line change For helping patients in first line, because the very important point here is that as much as you hear about many other products coming up, Mostly in the Jack inhibition segment actually. The real net need is the paradigm change in first line in combination, which Should increase and improve the quality of life of the patients and the ultimate survival of the patients. They need to live longer and better lives and we can't provide that with our regimen.

Speaker 2

The other agents are probably going to feed some Segments of the market. And I would end my comments by saying that you can't exclude that we do not partner with some of them. We're exploring some combinations. So we start by the beginning, which is establishing the strong registration with Collaborative plus futility, but there are other possibilities, which would put us as a cornerstone in the treatment of myelofibrosis.

Speaker 6

Perfect. That's really helpful. Thank you.

Speaker 2

Thank you.

Operator

And the next question comes from Vinit Agarwal from Citi. Please go ahead.

Speaker 7

Yes. Hi, Vinit here from Citi. Thanks for taking my question. Tim, I just want to check if you have shared any data on the weight of the patients on the pelabricit combo. I'm Just trying to understand how important is the weight gain for these myelofibrosis patients.

Speaker 7

And just on the biomarker analysis, I think navitoclax showed 50% of patients reaching more than 20% reduction in JAK2LL frequency. I'm wondering if you could comment on your positioning there from the biomarker analysis perspective. Thank you.

Speaker 3

Yes. On the first Have we shown data regarding weight gain in manifest? The answer is no, we haven't done that. It's Something the team is looking into. As far as it goes, in terms of the JAK A little burden.

Speaker 3

We had a presentation on translational data from the Arm 2 and Arm 3 of the MANIFET study, I'm showing that's palabrasib very clearly reduces That's Jack to a legal burden in our study. I don't think that we can do Reasonably across trial comparison. But the overall reduction in the JAK2 allele burden is certainly very impressive and something that Again, fits together into that picture of modifying disease Tivity, particularly when you put this together with some of the cytokine data that was presented also at EHA last Here together with the megakaryocytes declustering and the fibrosis improvement, I think a pattern is emerging that suggests very strongly that, pelaroxolitinib have a very positive effect On modifying the disease.

Speaker 7

Great. Thank you.

Operator

So there are no further questions at this time. And I hand back to Jurgen 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 our call. Have a good day and goodbye.

Operator

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone.

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