MorphoSys AG

Good afternoon, good morning, and welcome to our 2019 full-year results conference call and webcast. My name is Julia Neugebauer, Director of Corporate Communications and Investor Relations at MorphoSys.

With me on the call today are Jean-Paul Kress, our Chief Executive Officer; Jens Holstein, our Chief Financial Officer; and Malte Peters, our Chief Research and Development Officer. Please note that due to the COVID-19 pandemic, we are dialing-in from different location.

So, I would like to apologize for any disruptions this might cause, and we just learnt that there seems to be technical issues with the U.S. dial-in.

So, please, if this does not work, use the U.K. or German dial-in.

Before we start, I would like to remind you that during this conference call, we will present and discuss certain forward-looking statements concerning the development of MorphoSys' core technologies, the progress of its current research and development programs, our transition to a fully-integrated commercial pharmaceutical company, and initiation of additional programs. Should actual conditions differ from the company's assumptions, actual results and actions may differ from those anticipated.

You are therefore cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. You can find the agenda for today's call on page three.

Jean-Paul will start with his opening remarks and an update on our commercial capability. He will then handover to Malte, who will discuss R&D progress we have made in 2019, especially for tafasitamab.

Jens will review the financial results for 2019 and present the financial guidance for 2020. Jean-Paul then will close with the outlook for 2020.

After the presentation, we will all be available for your questions. You will find the slide deck for this call on our corporate Web site.

I would now like to hand over to Jean-Paul.

Thank you, Julia. First, I would like to thank you all for joining our call in these challenging circumstances.

We are all facing difficult and stressful times with this pandemic crisis, a major threat to public health, business continuity, and to our economy. Going to be tough for some time, but I am convinced that we all together will beat the virus.

We at MorphoSys are staying laser-focused on delivering on our strategic goals, and on our mission to bring outstanding medicines to patients suffering from severe diseases. We are in a favorable position as we have already filed our BLA for tafasitamab in many of the relapsed/refractor DLBCL patients of a very poor prognosis, and are primary goal continues to be achieving a complete response, despite the risks.

Now, let me move to our 2019 highlights. 2019 was a very successful year for MorphoSys.

We delivered on many fronts, and we made great strides to us bringing tafasitamab to the market. We reported positive data from our L-MIND and Re-MIND studies.

Both met the primary endpoints, and the data from the basis for the submission of our BLA for tafasitamab to be used in combination with lenalidomide. The BLA was granted prior to review by TSCA and has its PDUFA data of August 30 this year.

According to the FDA, currently no advisory committee meeting is planned. Our main priority is to unlock the full potential of tafasitamab.

Therefore, we are very pleased that our partnership [Ph] discussions ended up successfully with the selection of Incyte to develop and commercialize tafasitamab globally. Our recently established U.S.

commercial organization is now up and running. We are well-prepared for the anticipated launch of tafasitamab, and we will join [indiscernible] with Incyte to significantly raise our share price.

In addition to tafasitamab, we also reported great progress with other programs, such as our proprietary development candidate, MOR202, and otilimab, formerly MOR103. Leading assets in our partner pipeline is Tremfya, developed and marketed by Janssen, which achieved better status in 2019 with more than $1 billion of sales.

And our amyloid beta antibody, Gantenerumab, developed by Roche is currently in two Phase 3 studies in patients with early Alzheimer's disease. We are pleased to see Roche's commitments to move this program forward.

We are very pleased with the completion of the partnership deal with Incyte. Incyte is a strong and dedicated partner for most important project.

The agreement received antitrust clearance at the beginning of March, and we are now fully working together to ensure a flawless launch. We are also working on the joint development plan for tafasitamab, and we'll keep you posted on our progress here.

In addition to getting a strong partner, these deals provide us with a very strong financial position. It enables us to pursue our comprehensive development plans, and also put us in a great position for in-sourcing innovation and in licensing opportunities.

Moving to slide seven, on our launch preparation update, as you know, since joining MorphoSys as CEO mid last year, I have consistently focused the organization in preparing for a successful launch of tafasitamab, and we have been making great progress here. Let me give you a short overview.

In the U.S., around 30,000 patients are newly diagnosed with DLBCL every year, around 40 either do not respond to the current standard of care, [indiscernible], or they relapse after initial response. Our patients who are not eligible for high-dose chemotherapy and transplant are the poor prognosis.

There is high unmet need for new treatment options, and we are working hard to make tafasitamab available for those patients soon. Slide nine, on the key imperatives for a successful launch.

During the past month, we've built a strong U.S. team across all key functions, and we have been able to attract great firms.

Our med affairs, market access, and sales marketing teams have actively been engaging with all important stakeholders, including [indiscernible], payers and providers. And together with Incyte, we will significantly increase our share of voice and leverage synergies.

Through a multi-stakeholder engagement plan, our medical affairs team has been raising awareness on our data and on the potential value proposition of tafasitamab. In order to further advance our lifecycle management, we are conducting an integrated evidence generation program with the implementation of IITs Phase 4 real-world evidence in [HBOR] [Ph] studies.

It is also tested and [indiscernible] program to make tafasitamab available for [indiscernible] in patients in the U.S., who are not eligible for any clinical trials and do not have other treatment options. Moving to market access, our team has been interacting with payers, HCPs, and other important stakeholders.

Our goal is to ensure that access decision-makers have the right information upon approval to make coverage and reimbursement decisions swiftly. We have conducted comprehensive research to design our pricing strategy, and we have a deep understanding of the reimbursement environment.

We've also incorporated feedback from significant stations and provider advocacy groups into our plan patients approach, and we have developed a launch network and a distribution approach that will provide seamless and a [rapid] [Ph] product availability to providers in the community and the academic center settings. Moving to slide 12, on sales and marketing, we're pleased that we've already hired more than 85% of our sales force with great talents bringing excellent track record in the oncology space.

This is a testimony of the value of our product. In addition, Incyte has a great knowledge of the tafasitamab targets, as there is another lab of more than 90% between [indiscernible] targets in the community setting, and we are fully aligned on regions and territories.

We've also developed strong product positioning and messaging based on the target product label. Basically, tafasitamab has the potential to change the lives of patients by unleashing a durable response in DLBCL.

All-in-all, we have the right strategy, the right team, and the right partner to execute on a strong launch. And Malte will now discuss our '19 R&D progress and 2020 outlook.

Malte, please?

Thank you, Jean-Paul. Let's look at slide 14.

We are indeed excited about our key tafasitamab, and the important achievements we made for this program. 2019 was a very successful year for MorphoSys and for the development organization.

I'm really proud that we delivered all key milestones on time as planned and as communicators. Let me quickly summarize.

L-MIND is our Phase 2 open -label single-arm trial evaluating tafasitamab plus lenalidomide in patients with relapsed or refractory DLBCL, who are ineligible for high dose chemotherapy and autologous stem cell transplantation. In June 2019, we showed that a total of 60% of patients had an objective response to the treatment with 43% having a complete regression of that tumor.

The median progression-fee survival was 12.1 month, and the median overall survival was not reached suggesting very durable responses. Complete responders showed an over 90% probability to be fair responding after 22 months.

The L-MIND data are complemented by the data from Re-MIND, our real world data matched control cord looking at the effectiveness of lenalidomide's monotherapy. The primary endpoint of RE-MIND has been met and shows a statistically significant superior best objective response rate of the tafasitamab/lenalidomide combination compared to lenalidomide monotherapy.

The objective response rate was 67% for the combination compared to 34% for the monotherapy. The complete response rate was 40% for the combination versus 12% for the monotherapy.

In addition, there was significant difference observed in overall survival, which was not reached in the combination as, compared to 9.3 months in the monotherapy. L-MIND together with RE-MIND serves as the basis for the BLA submission, which is currently undergoing review for the hope for first approval in the United States.

RE-MIND, our ongoing Phase 3 study in relapsed refractory DLBCL is evaluating tafasitamab in combination with bendamustine, compared to rituximab in combination with bendamustine. The trial passed the futility analysis at the end of 2019, and based on the recommendation of an independent data monitoring committee, we decided to increase the sample size to 450 patients.

Importantly, this study could serve as a confirmatory study if we are granted accelerated or conditional approvals based on L-MIND. As the FDA is currently reviewing our BLA, we want you to provide access to tafasitamab to those patients, who have some no other treatment options.

We are happy to have started and expanded access program in February of this year. This early access program allows us under exceptional and very specific circumstances to make tafasitamab available to selected seriously ill patients in the United States.

We are not eligible for any clinical trials and do not have other treatment options. We also started the Phase 1b part of our plant frontline study First-MIND in DLBCL patients.

For MOR202, our proprietary anti-CD38 antibody, we have opened our Phase 1/2 study in autoimmune membranous glomerulonephritis, which is an inflammatory kidney disease characterized by the presence of auto antibodies directed against certain structures in the kidney. Since MOR202 is a plasma cell depleting agent and possibly immunosuppressive.

We are currently in close contact with investigators, local health authorities and institutional ethics committees to decide how patient safety can be protected in this trial. It is possible that the coronavirus crisis could lead to a temporary halt in enrollment of the [indiscernible] trial, which could cause a delay of the study.

Finally, let me also use the opportunity to thank our colleague Dr. Markus Enzelberger, who has decided to step down as Chief Scientific Officer and a member of the company's management board to explore new opportunities.

The research organization was integrated into the development segment under my leadership. To strengthen the team, I'm very happy to announce that we have hired a very experienced new head of research.

Dr. Dr.

Martin Stockmeier. Martin brings to MorphoSys 20 years of experience in the pharmaceutical industry, focusing on oncology.

Before joining MorphoSys, he had positions of increasing responsibilities within the Roche Group. Let's move to slide 15.

Let me now focus on the most recent update of our clinical development plan for tafasitamab. I've already described the ongoing studies in patients with relapsed refractory DLBCL and now want to focus on the new opportunities, which we will pursue.

First of all, we have decided to investigate tafasitamab in frontline DLBCL. We will start a Phase 3 pivotal study at the beginning of next year.

In this study, we plan to compare to tafasitamab, lenalidomide, and [indiscernible]. Study startup activities have begun.

As a preparation for this pivotal study, we initiated our Phase 1B trial First-MIND and newly diagnosed DLBCL patients to evaluate the safety and preliminary efficacy of tafasitamab with or without lenalidomide in combination with our job as a first line treatment. In patients with frontline DLBCL, and the high risk score, the unmet medical need is high to improve the efficacy of our job, as Jean-Paul has mentioned already.

Remember there are still 40% of the patients are not cured and will progress at some point in time. In COSMOS, we investigate tafasitamab in combination with a PI3 kinase inhibitor idelalisib or BCL two inhibitor venetoclax in patients with relapsed or refractory CLL.

While this study is primarily a safety study, they were encouraging efficacy data from the primary analysis in this study, which heavily pretreated patients. Together with Incyte, we plan to assess the combination of tafasitamab and Incyte's PI3 kinase data inhibitor, parsaclisib in patients with relapsed/refractory NHL and CLL.

We've also made great progress in the design of a pivotal Phase 3 study in patients with relapsed/refractory follicular lymphoma and marginal zone lymphoma. These indolent lymphomas, despite being called indolent, have a high unmet medical need and need better treatment options, because relapsed or refractory patients still ultimately die from this disease.

Together with Incyte, we are currently in the final stages of discussing the proposed design strategy, and we have agreed that Incyte will lead this study. Our plan is that this study will start at the beginning of next year.

We are very happy to work with Incyte to explore the full potential of tafasitamab. We are extremely pleased about the alignment we have already established between the two companies, and are looking forward to share more details joint development plan later this year, as mentioned by Jean-Paul.

In addition to our key asset tafasitamab, we also made very good progress with other development programs during 2019. I would like to briefly mention a few highlights.

Our partner I-Mab who holds the right for MOR202 or anti-CD38 antibody for Greater China has also made significant progress in 2019. I-Mab initiated two pivotal trials in patients with relapsed or refractory multiple myeloma.

In July 2019, we announced good news for the anti -- GM-CSF antibody otilimab. When our partner GSK initiated a new Phase 3 program called ContRAst in patients with rheumatoid arthritis.

The program consisting of three Phase 3 trials will enroll up to 4,100 patients in total. These studies will compare otilimab against the proof drugs such as JAK inhibitors and anti [indiscernible] antibodies.

We are very pleased to see GSK is continuing commitment to the development of otilimab. Also in 2019, we signed an optional agreement with Vivoryon Therapeutics on small molecule inhibitors of the CD47-SIRP alpha signaling pathway in immune oncology.

Pre-clinical studies to assess the activity of the lead candidate from this group PQ912 are currently ongoing. We will give an update as soon as data are available.

Turning now to our Partner Discovery segment, it is a substantial part of our pipeline and we expect this segment to also provide a growing revenue stream in the future. These partnerships leverage the full potential of some products discovered through our technology.

A great example is Janssen's Tremfya, the first therapeutic agent based on our technology to reach the market in psoriasis. Janssen is currently conducting a series of clinical studies with Tremfya in a variety of indications such as psoriatic arthritis and ulcerative colitis, as well as Crohn's disease, which in part is expected to generate data in the course of 2020.

In 2019, Janssen submitted marketing authorization applications to the U.S. FDA and to the EMA for Tremfya for the treatment of psoriatic arthritis.

A decision on these applications could potentially be made in 2020. In summary, overall, we are very happy with the significant progress we have made in our proprietary development and Partner Discovery segments in 2019.

With this, I will hand over to Jen, who will provide you with an update on the 2019 full-year results, as well as in our financial outlook for 2020.

Thank you, Malte. 2019, was indeed a very successful year from all sources, operationally and financially, we are in a very strong position to pursue our ambitious goals to become a fully integrated biopharmaceutical company.

And the collaboration agreement with Incyte from January 13th of this year has massively strengthened our financial ability to support the strategy. In July 2019, we received a milestone payment of €22 million in GSK due to the start of the three Phase 3 clinical trials with otilimab formerly 103 in rheumatoid arthritis.

This led us to increase our financial goals for the full-year of 2019. Increasing sales of Tremfya marketed by our partner Janssen contributed positively to last year's revenues as well.

Tremfya gained a lot of status by reaching a $1 million mark in 2019. Taking the outstanding $750 million U.S.

Incyte into account that we expect to have on our bank accounts by the end of March or perform a cash position as of March 13th, would have been approximately €1.1 billion. To have such a strong financial position in these turbulent days to signal strength and an excellent starting point for us to pursue our ambitious development plan.

Overall, we have met our financial goals for 2019. Group revenues in the coaching year amounted to €71.8 million.

And with this we ended the year at the upper end of our updated and improved guidance in the range from €65 million to €72 million. Our proprietary R&D expenses amounted to €98.6 million and we are fully in line with our guidance from €95 million to €105 million.

EBIT reached minus €107.9 million also fully in line with our updated guidance of minus €105 million to minus €150 million. Please move on with me to slide 20 that illustrates our P&L statement.

As stated before, group revenues amounted to €71.8 million and thus slightly less than in 2018. In 2018, we had booked €47.5 million upfront for the out-licensing of MOR106 to Novartis.

Revenues include royalties on net sales of Tremfya amounting to €31.8 million in its second full commercial year 2019. In Dublin after €16.4 million in 2018, total operating expenses increased from €136.5 million in 2018 to €179.9 million in 2019, based on the ramp up of preparations for our anticipated tafasitamab U.S.

launch. Cost of sales increased to €12.1 million compared to €1.8 million in 2018, mainly driven by materials produced for the launch of tafasitamab.

In 2019, research and development expenses amounted to €108.4 million as compared to €106.4 million in 2018. Selling expenses increased in 2019 to €22.7 million.

This increase primarily resulted from higher expenses for external services and personal expenses, both in connection with the preparation of our intended tafasitamab launch. General and administrative expenses increased by 68% from €21.9 million in 2018 to €36.7 million in 2019.

Again, mainly due to higher personnel expenses as well as costs for external services. Earnings before interest and taxes amounted to minus €107.9 million compared to EBIT of minus €59.1 million in 2018.

In 2019, the consolidated net loss amounted to minus €103 million after minus €66.2 million in the previous year. This translates into a loss per share of minus €3.26 in 2019 compared to minus €1.79 one in 2018.

Let's move on to the balance sheet on Slide 21. As of December 31, 2019, we recorded total assets of €496.4 million compared to €538.8 million at year-end 2018.

At year-end 2019, our cash position including our investment in current and non-current financial assets amounted to €357.4 million. At the end of the previous year this position amounted to €454.7 million.

Number of shares issued totaled 31,957,958 at year-end 2019, after 31,839,572 at year-end 2018. Let me now come to the financial and accounting implications of our Incyte collaboration.

We received antitrust clearance beginning of March, which triggers $750 million U.S. upfront payments from Incyte.

In addition Incyte has to pay us additional $150 million U.S. as a capital investment including a 20% premium on the 30-day volume-weighted average price prior to signature.

The price for ADS has been $41.32. So not everyone for ADS was like one MorphoSys share.

Whereas the equity investment has been already transferred to our accounts, we expect the payment of the outstanding $750 million U.S. by the end of March following the contractual terms of the agreement.

The agreement includes co-commercialization rights for the U.S. market for tafasitamab while we receive royalties from the mid-teens to the mid 20 percentage points for the rest of the world.

MorphoSys will lead the commercialization strategy in the U.S. and we will also record all revenues in the U.S.

market for tafasitamab. Profits and losses in the U.S.

will be shared on a 50-50 basis between the companies. Outside the U.S., Incyte will have exclusive commercialization rights.

We will record all revenues for tafasitamab, and we'll pay royalties on ex-U.S. net sales to MorphoSys.

The companies will share development costs associated with global U.S. specific trials at a rate of 55% by Incyte and 45% while Incyte will cover 100% of the future development costs for trials that are specific to ex-U.S.

countries. Let me quickly summarize the main aspects of the accounting treatment for the contract.

The upfront cash by Incyte is treated as a consideration for the co-commercialization right in the U.S., as well as for the exclusive distribution license of tafasitamab for all territories outside the U.S. Only the portion of the upfront patient, upfront cash allocated to the exclusive distribution license for the rest of the world territory is recognized as revenues in 2020.

The remainder of the upfront cash represents on the balance sheet financial liability of MorphoSys towards Incyte reflecting the U.S. profit participation of Incyte in the years to come.

So the profits for relapsed refractory DLBCL in the coming years generated in the U.S. will trigger payment of MorphoSys to Incyte for the 50% profit right and will therefore reduce the financial liability.

These payments have no EBIT impact. The financial liability needs to be initially measured at fair value and then reassessed quarterly and this might have impact on the financial results in the years to come.

Once the Co-commercialization for relapsed refractory DLBCL in the U.S., MorphoSys will account for 100% of revenues in cost of sales independent which organization has sold the product and both companies, MorphoSys and Incyte will account for the other related costs. All P&L items in connection with the co-commercialization in the U.S.

will be included in the share P&L and the resulting pretax profit or loss will be shared quarterly between the parties on a 50:50 basis in settling cash. Let me now come to our financial guidance for 2020.

For the financial year 2020, MorphoSys will continue to invest strongly in the development of its proprietary candidate, but the primary goal of driving tafasitamab to the market and preparing the company for its commercialization. For 2020, MorphoSys expects to generate revenues in the range of €280 million to €290 million.

This guidance does not include revenues generated from tafasitamab and revenues from future collaborations and or licensing agreements. Revenues are expected to include royalty income from Tremfya of €37 million to €42 million.

Expenses for proprietary R&D or expenses for R&D expenses are anticipated in the corridor of €130 million to €140 million. Due to the buildup of our commercial infrastructure, selling and general expenses will increase including startup costs in connection with a planned launch of tafasitamab, this approved by the FDA, the company expects earnings before interest and taxes of minus €15 million to plus €5 million.

The guidance is based on constant currency exchange rates and does not include any contributions from tafasitamab revenues and any effects from potential in-licensing or co development deals for new development candidates. At this point of time, and we can't judge the magnitude of the ongoing Corona crisis on MorphoSys.

Everybody right now is somewhat affected and there are daily changes taking place that we all need to deal with. The operational and financial guidance therefore does not include a potential long lasting or even increasing impact on the ongoing global COVID-19 crisis on our business operations including, but not limited to our supply chain clinical trials conduct as well as on timelines for regulatory and commercial execution.

We also have no insight in the consequences on royalty payments from our partner Janssen for Tremfya. Despite corona, they're very positive about the prospect of MorphoSys and especially with our strong cash position in hand we see opportunities to grow going forward.

With this, I would like to end my part. I would like to turn the call back to Jean-Paul for his closing remarks.

Thank you, Jens. MorphoSys great science and outstanding antibody technology expertise has resulted in a broad and diversified clinical pipeline.

Combining this with our production and supply chain capabilities and now our commercial infrastructure in the U.S. we are optimally deployed to execute along the entire value chain to achieve our goals, providing patients with improved treatment options.

We have a rich set of milestones ahead of us this year, very excited about the expected U.S. launch of tafasitamab F16, which will be our first product candidate to be approved [indiscernible] MSLI.

We anticipate the submission of the European MAA in mid '20 with a potential launch in Europe in mid '21. We also expect the readouts from the first MIND Phase 1b study by the end of the year, a key milestone to [indiscernible] design of a pivotal study in frontline.

While we focus on executing on our strategies, we do not know how the current pandemic crisis might impact our business. However, as I mentioned earlier, we are on track to build upon on our successes of last year, and we are in a very fortunate situation of a strong financial position and the compound with the data for the BLA completed and the BLA accepted by the FDA.

We will keep you updated on our progress and our potential [indiscernible] if any. Now, moving to the key priorities 2020, I will go fast.

Basically, our first and by far most important goal is a flawless U.S. launch of tafasitamab pending FDA approval.

We are actually preparing for the launch, and we have built the commercial organization in [indiscernible]. The partnership of this deal will add on to that.

The development of tafa in r/r FL/MZL is just the beginning and together with our partner committed to develop the product broadly and to unlock its full potential. And we continue to advance our other programs and in licensing opportunities to complement our propriety pipeline.

In conclusion, I am very pleased with our products. We are building a very strong organization poised for success, and I look forward to keep you updated in the upcoming weeks and months.

Thank you, Jean-Paul. We would now like to open the call for your questions.

Good morning, good afternoon, and thank you for taking my questions. I hope everyone on the MorphoSys team is doing well.

First, given the COVID-19 pandemic, do you expect any disruption to your ongoing and future clinical trials for either tafasitamab or any of your other pipeline assets? I know you touched on this in your prepared remarks, just looking for a more comprehensive overview if that's possible, and likewise, is there any indication that the August PDUFA date for tafa and DLBCL might be delayed?

Hi, Konstantinos, it's Jean-Paul. [The question is simple] [Ph], I will answer, and then Malte will also comment on the program.

We don't foresee any chance to the program [indiscernible] around filing. The good news is that we filed the BLA obviously, and the other thing I would like to comment on is that we are dealing with -- the feedback we get from the [indiscernible] dealing with a severe disease here, patients basically having a life-threatening prognosis and they are kind of used to deal with flu and other infections, so in some ways the treatment prevail.

We have also put in place an EAP, which should help the uptake at launch. And as I mentioned, we have completed our team, which is also very good.

We have now 90% of the reps hired, and we should be done by the end of the month. So that's also a very good.

Now for another point that I would like to make on this issue here is that [indiscernible] I-Mab and tafa is also to put in perspective with potential downturn of [indiscernible] with their logistics. So, in the context it might help.

I will let now Malte to comment on the clinical trials and the registration.

Yes, thank you, Jean-Paul. So, I confirm what Jean-Paul said.

We do not expect a delay in the review of the BLA. As you know, we have received the acceptance letter.

So far all activities that have been pre-briefed with FDA are considered to take place as planned. So, we don't expect a delay there.

For the ongoing studies, Jean-Paul has commented. For the studies that are starting, we can't really say at this moment.

We may have a little bit more difficulties to initiate sites. We don't know this at this point.

We are monitoring the situation in all countries, and as you know, the situation is different from country to country. So, this moment it's a bit early to comment, but the most important message is really that for the BLA, we don't expect a delay, and for the studies that are conducted in cancer patients, we have to always understand that these patients have a life-threatening disease and they need treatment for their life-threatening disease.

So, in our opinion this would be very important consideration for the hospitals when they have to make potential decision on how to deal with this crisis.

Okay, thank you. That's very helpful color.

And then in somewhat related follow-up, I understand that in uncertain time capital preservation is key, but would you guys -- are you considering perhaps given the recent pullback in [indiscernible] MorphoSys along with the broader markets, a stock buyback program or something to that effect?

Jens will answer this question.

Konstantinos, thanks for the question. I think at this point in time, I doubt that this is just a lot.

I mean the situation is the market already is insecure, and I think in something like this at this point in time is not really what we were following. I mean we have the money for other purposes.

We have the money to invest in our clinical programs and to invest in new potential candidates being - calling them from the Incyte from our own early activities or via M&A or in-licensing activities. Instead, we believe we should use that money to just expand our portfolio going forward, and bad as the COVID crisis is with the financial position that we have, we feel good about prospects after this crisis is over.

Okay, thank you. That's helpful.

Thanks guys.

Hi, guys. Good morning.

Thanks for the question. I guess first is a follow-up to the prior question regarding the status of the BLA.

Have you had your manufacturing site inspection yet? And then regarding the extended access program, have you enrolled any patients there, or, do you have any anecdotes that you could share or so?

Thanks.

So you can just take the question?

Jean-Paul?

Go on for the question on manufacturing.

Okay, sorry. Yes, so for the manufacturing all the dates have been set.

And we typically don't comment when certain activities will take place between FDA and MorphoSys or our partners. But, I can tell you, Danielle, that all the necessary procedures that FDA typically takes during the review period of BLA, has been scheduled and are on track.

For the early access program, we are getting request as we speak. We have between five or 10 requests from patients currently.

We have not yet treated patients as we are [indiscernible] Incyte to join forces on the early access program.

So, Danielle, just again on…

Got it, and then I guess…

Sorry. On the manufacturing, we partner with BI for tafasitamab.

It's a very solid partner, very reliable. We are on a daily touch with them, and they have robust continuity plans, and they currently do not [indiscernible] issues.

So, we have -- we should have product for the launch.

Got it, understood, thanks. And I guess one more follow up if I may.

I think last quarter you said you're already engaged with over 700 KOLs, and you were targeting 2000, do you have any updates there on how many of the targets you are now engaged with?

Yes. We have been doing very well in our engagement so far.

And I think we will continue with them by virtual access and webinars and stuff like that, but we have been basically engaged in with a 1400 KOLs also the 2000 target by launch. So we are well on our way for accomplishing this goal.

Excellent, thanks very much for the questions.

Hi, good morning, and good afternoon. I hope everyone from MorphoSys team is well and healthy.

I have a couple, so we just heard on the call that you're committed to a pivotal Phase 3 trial for tafasitamab in the frontline DLBCL starting in 2021. Is this decision triggered by something you saw in your Phase 1 study, and before your pivotal study that's the Phase 3 study next year, are you thinking about stratifying patients based on the risk scores or any biomarkers?

And I have two follow-ups.

Thanks, ShanShan. Malte will take the question.

Yes. Thank you, ShanShan, and thank you, Jean-Paul.

So the decision of launching the pivotal study in the frontline patients is not triggered by the Phase 1b study. The Phase 1b is basically the safety study requirement that we needed to complete before launching a larger study, and we at this point would like to not comment on the details of the protocol.

We are still discussing this with regulatory authorities and with Incyte, but we will come with more details once we had our discussions with authorities possibly after the summer.

Fantastic, thank you, and could you please update with us, where are we regarding the potential combination trials between tafasitamab and the CD47 inhibitor you are license in from Vivoryon. I think this mechanism of action should now really takes interest from physicians and the investors following the acquisition of [indiscernible]?

Yes, thank you. So we -- as you know - the option here included diligence periods, in which MorphoSys was planning to conduct certain preclinical experiments to test the activity of the small molecule CD47 inhibitor, PQ912 in certain cancer models, and we are just about to complete these experiments in the next couple of weeks.

So, at this moment, we prefer not to give you any details here, but we will do so in due time as soon as we have really reviewed all the experiments and have understood what the value is potentially of PQ912 in an oncology setting.

ShanShan I think it's mostly important to mention that we're looking at every possible future combinations with new pipelines and the field is evolving fast. We are thinking that other possibilities beyond the tafa/lena combination, so that's something we really have L-MIND and not only for CD47.

Got it. Last from me, as we are approaching your EMA submission, can you update with us regarding interactions with EMA, any updated sauce in terms of how receptive are to a single study results in relapsed refractory DLBCL i.e.

L-MIND results?

Yes, so I think I spoke about this before in earnings calls. We were quite happy about the positive response that we received from European authorities on both on the local scale and also on EMA scale.

We had very positive discussions with EMA and we are planning to submit the L-MIND study supplemented by Re-MIND, and also by our single-arm NHL study for tafasitamab, as the basis for the MAA, and based on what we have heard. I'm confident that EMA is really excited about the data and that they will be excited to review our package.

Okay, fantastic. Thank you so much.

Great, thank you for taking my question. Just maybe if you could touch a little bit on the potential synergies with Incyte commercial platform, I know you briefly talked about it at the introductory part of the call, but I wondered if you could speak to the level of investment in the community oncology setting versus the academic setting for tafasitamab combination since you know, DLBCL is treated in both community and academic settings?

Yes, thanks sir for the question. I'd like to highlight again that Incyte is the perfect commercial partner, you know, [indiscernible] in the U.S., they've really turned these products in a blockbuster.

We have a very high have a lot of targets with them. Over 90% in the community setting, so that's extremely synergistic.

They obviously know the space, they have intimacy with the space and it's almost a plug in place for them, although they will still hire and [indiscernible] because they need more resources, and we will together and cover the academic and the community setting, more than 70% of our business within in the community setting it's very important that we will cover that's also why we decided to have voice and this high footprints with our synergistic sales teams and field teams. So we're currently aligning since we got the [indiscernible] we're currently aligning with them at the teams already met last week, the U.S.

teams to align and do common launch plans so it's doing very well.

Great, and just one other point, and I joined the call a little bit late, so I don't know if this was commented on. So, I apologize, but I wondered if you could speak to sort of the make-up of the revenue balance in 2020 sort of ex- Tremfya and even sort of guidance on sort of the leading precepts the second half just trying to get a sense of when these revenues could hit in 2020 and how that flows throughout the year?

Jens will take the question.

Yes, happy to take the question. So, I mean, we have given the total guidance on the revenue [indiscernible] the Tremfya guidance that we anticipate for 2020, and that of course the later part will be spread over the year.

So that's sort of normal with a growing speed is my expectations given that they will improve also, as they apply Tremfya in psoriatic arthritis most likely in 2020 in various countries, so not only in Japan, but also in the U.S. and Europe, so we will see a growing revenue path that's our hope.

For Tremfya, in terms of the big amount which reflects the part of the upfront payment; that will be booked in Q1 most likely, so you will see that in the beginning of this year already, and that's the main part of this whole thing. Yes, so.

Yes, thanks so much.

Thank you.

Hi, this is Jameel Bakhsh from Barclays. Thank you for taking my questions.

Got three if that's possible, so the first one, you mentioned that the very healthy cash and capital investment you will from Incyte can strengthen your hands with future in licensing opportunities. Assuming if you could give us just your perspective about what type of M&A or in licensing activity you consider both in terms of size and also in terms of therapeutic area.

Secondly, on the level of rebates and pricing on the scene in DLBCL, I was wondering just on your thoughts about what we could learn from tafasitamab as example about reading into the level of gross to net and adjustments in DLBCL? And finally, if you could give us a few more details about the motivation for increasing the patient's numbers in BMI based on their futility analysis, they would all be much appreciated, and I'll break the trend about having follow-up questions.

I don't have any. Thank you.

Okay. Thanks, Jameel.

I'll take the first one on M&A, and Jens and Malte will take the next two. So, on M&A now we have more space of mind I would say to disclose that now we [indiscernible] based on the Incyte deal we've got cash.

I mean in this question six months ago would have been more tricky, but now I mean we can do, we can look, we can execute on that, but we have to stay very disciplined. So we are currently forming our strategy based on our strengths, and our expertise I think it's basically being at the same time focused on what our strengths are, you know, [indiscernible] and around tafasitamab, you mentioned some combination with tafasitamab possible in the States.

But we will also extend on other possibilities, like biostatistics or other new technologies we bring to try to search on new trends and new technology. So it's this balance between focus and extension that we have to execute.

We have policies, I mean, we have resources and leverage now and with expertise, and also, we have new teams, we have as mentioned Malte our new head of research. So for [indiscernible] will be very, very helpful and we will also strengthen our PD team has proven that it can execute at the highest level with the inside deal.

So very excited about that, and we keep you posted. Now, on the [indiscernible] next question, I'll pass to Jens.

Yes. Thanks, Jean-Paul.

Well, you got to bear with us a little Jameel. That's a topic that we have of course, discussed in great detail with Incyte.

We have done a very thorough analysis of what sort of tafasitamab figure we got a look at. And well it gives you of course, more, we will give more clarity to what you can assume when we, with the launch and when the pricing is fixed.

So I would like to ask you to bear with us before we are more precise on that specific question. But it's not something that is unknown.

I think you should live with and expect what you can, what you see with other innovative products that reach the market, like now in our case tafasitamab.

Thanks, Jens. And do you mind a question Malte?

Yes. I mean, I could ask you to repeat to be my question, there was a bit of a static on the line and I wasn't sure I captured your question, correctly.

Could you please repeat it?

Yes, sure thing. Sorry about that.

We're all working from home now. So the phone thing was a bit worse, and so, just a few further reasons behind the increase in the patient numbers in B-MIND.

I think this is based on the futility analysis that you did at the end of last year?

Yes, okay. So the very precise answer is, we don't know because the decision was made by an independent data review committee.

They looked at the data we at MorphoSys were completely blinded with respect to any efficacy, PK or safety information that was collected in the trial, but the recommendation of the independent review committee was very clear to expand the patient population to 450. And as we said in our press communication and media communication around that moment, we were very pleased with this decision because we consider this as a step forward into a potentially positive outcome of B-MIND, which is of course, very important.

When you consider that it could serve as a confirmatory study in both the U.S. and European geographies.

I would add on that. Yes, the upside, I mean, the B-MIND has an upside now because it could end up to be a new data for potentially the label in the future [indiscernible] treat patients, in a low NK cell patients, but at the same time, it's possible, excluded that we are approved non-condition is that would not require a confirmatory trial, but in case we would B-MIND would serve as a concessionary trial.

Yes. That's correct.

Sure thing, thank you very much.

Thanks.

Hello, thank you for taking my question. Unlike first two, I have two questions.

So the first one, I'd like to touch back again a little bit on the COVID-19 impact and in relation to the launch preparation activities. So we think we know that lot of people now are working from home and I'm wondering whether there you've seen or you expect to see any potential impacts specifically with the MSL, visiting the physician and also in case the lockdown that we've seen in Europe is something that will be repeated in the U.S.

I'm wondering if you can comment on that, you have any thoughts and any backup time to mitigate any of that potential risk?

Yes, Zoe, thanks for the question, and I think I brief here little, but it's very important. In the U.S., especially we've instructed people to also make the right decision to work from home or not, and some centers already don't accept external visitors.

So, you probably hear this from other companies already -- we've already launched products. We've been working already at 18 plants, including the actual calls, digital engagements.

We will plan for more digital marketing and multi-channel engagement in the future. The MSOs, for instance, have been webcast all those kind of things, so the world doesn't stop.

So if you see more difficult, the world doesn't stop. The good news as I said earlier [indiscernible] the reps, which is great, more than 50 reps already onboarded, just really trained and onboarded, and we have all MSOs, so we're not struggling to find people, which is probably a part of the challenge for some companies, and we have E&P in place, we have things in place.

Now, will there be an impact? It will also depend on the timeline.

If things resume by the summer, which will be fine, because our timeline of the launch is the summer, but who knows, but again, I mean I think we're really putting things in place and we have the team, so that's important.

Okay, thank you. And then my second question, there has been step-up in R&D, and I'm wondering if you can give us a split between how much of that is allocated to tafa versus rest of the pipeline?

Okay, maybe for expenses, Jens.

Yes, I'm happy to take that question. Unfortunately, I can't give you a split here.

I mean we never did this in the past, and we of course don't want to create an initial follow-up on Incyte here as well. So, I'm unable to deliver an offer here split of the R&D costs.

And then just a follow-up question, how many patients you currently have recruited for the frontline DLBCL Phase 1 study?

We have -- I think the current count is 10 or 12, which is right on the mark, where we projected to be on the enrolment curve, so enrolment is going well under the really adverse circumstances at the moment.

Great, thank you.

Yes, hello. Just two questions, could you give us a guidance about the cash consumption you expect in 2020?

And secondly, a question regarding the regulatory milestones, could you give us a rough hint how much of the regulatory milestones will be related to the first approval for the first indications? Is it a third half of the regulatory milestones, or any kind of color would be helpful, thanks?

Yes, I'm happy to take those questions. So in terms of cash consumption, I mean we don't have an official cash guidance that we give out, but I would, I think if you think of something like a year-end cash position in the range of €860 million to €900 million, we're probably not too badly placed for a model, and then in terms of milestone payments, there are milestone payments that we got to pay, one we actually paid already for the acceptance of the BLA and there is an approval milestone payment that we got to pay to Senko in the amount of $25 million, and that's included in our cash guidance.

Okay, and I was -- although interested in your receiving end…

Yes. I mean we have in terms of our receiving milestone payments, we never we always have a number of problems that we expect to move into further clinical trial settings, and that's [technical difficulty] always a little bit of basket across month.

[Technical difficulty] some stuff moves on and some stuff is not moving on, and as we have a number of programs, we normally use a mixture. Given that we have not split the revenue figure other than for Tremfya, I would like to just keep that out here as well, but it's -- we are not expecting in the figure that we have given out that there is a major milestone payment of the like of $22 million as we have posted for 2019 and there, so that's not reflected.

Okay, thank you.

Okay, Julia, maybe time to close the call.

That concludes our call today. If any of you would like to follow-up, we are available for the remainder of the day.

We want to thank you for your participation in the call and ongoing support. We look forward to an exciting year and updating you on our progress.