Dr. Claudia Gutjahr-Löser, Head of Corporate Communications & IR, MorphoSys AG

Transcription

1 MorphoSys AG Pipeline Update - Conference Call Text September 8, 2015 The spoken word shall prevail. Dr. Claudia Gutjahr-Löser, Head of Corporate Communications & IR, MorphoSys AG Safe Harbor Good afternoon and good morning and welcome to today s conference call. I am Claudia Gutjahr-Löser, Head of Corporate Communications and Investor Relations of MorphoSys. Before we start the presentation, I have to remind you that during this conference call we will present and discuss certain forward-looking statements concerning the development of MorphoSys s core technologies, the progress of its current research programs and the 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. Today on the Call With me on the call today is our complete Management Board: Simon Moroney, our CEO, Jens Holstein, our CFO, Arndt Schottelius, our CDO, and Marlies Sproll, our CSO. Simon and Arndt will provide an update on our proprietary development portfolio. After the presentation, all four will be available for your questions. I would now like to hand over to Simon Moroney. MorphoSys AG - Pipeline Update - Conference Call Manuscript Page 1 of 12

2 Dr. Simon Moroney, CEO, MorphoSys AG Thank you, Claudia, and also from me, a warm welcome to the call. Today we issued a press release detailing the Company s plans for our proprietary product portfolio. On this call, we will provide some more color around the announcement and give you the opportunity to ask questions. Let me open by stating that we are very excited with the status of our overall pipeline, comprising programs which we are pursuing, as well as those based on our technologies, but being developed by partners. We are confident that the first products from this pipeline will reach the market within the next 1-2 years. This will mark the beginning of a transformation of MorphoSys to a company whose revenue will be increasingly based on returns from product sales. Now is therefore a great time for us to be investing in our growing proprietary portfolio. Beyond the product candidates, we are committed to investing in technologies and targets to be able to generate truly differentiated drug candidates. This is the best way to ensure that we have a sustainable product portfolio for the long-term. At the forefront of all of our programs is MOR208. This antibody has already produced very promising clinical outcomes in a number of B-cell malignancies, in particular DLBCL and CLL. Based on what we have seen so far, and the medical need for improved therapeutic options in these, and related indications, we intend to broaden substantially the development of MOR208. We see a clear path to market and a compelling commercial case for MOR208 and MorphoSys is focused on pursuing this opportunity. MOR208 is at the center of our plans to transition MorphoSys into a fully-integrated, commercial-stage biopharmaceutical company. This is just one of a number of programs that we are excited about, and I would now like to hand over to Arndt who will talk in more detail about this and our other planned activities. MorphoSys AG - Pipeline Update - Conference Call Manuscript Page 2 of 12

3 Dr. Arndt Schottelius, CDO, MorphoSys AG Thank you, Simon and also from me a very warm welcome to the call. As Simon has said in his introduction, we have communicated today an updated plan for our proprietary development activities. In total, our plans currently include five new clinical trials under MorphoSys s sponsorship to start within the next roughly 15 months, which is a significant expansion of our clinical development program. I will now add a little more detail on each program individually, before we open the call for your questions. MOR208 Let s start with our lead cancer compound MOR208. MOR208 is an innovative, Fc-enhanced antibody, which has shown great promise in the clinic. We are very excited about this compound. Our goal is to establish MOR208 as a new backbone therapy and as an ideal combination agent for several other drugs used in a broad range of lymphomas and leukemias. MOR208 addresses central gaps in the current B-cell cancer treatment landscape. The majority of NHL and CLL patients do not respond to therapy or relapse. We see significant opportunity to improve the treatment options for patients who for example show CD20 downregulation and are thereby no longer well served using drugs such as rituximab or obinutuzumab. We see further opportunities with patients who have relapsed after treatment with a tyrosine kinase inhibitor, patients unable to manage the side effects of these TKIs or with patients where high-dose chemotherapy with autologous stem cell support may not be appropriate due to comorbidities or older age. For our MOR208 program we have communicated today a comprehensive set of combo trials commencing in 2015 and 2016, leading into a pivotal trial which we aim to start in 2017 to exploit the full potential of the drug. In DLBCL, MOR208 will be tested in combination with lenalidomide in up to 80 patients with relapsed/refractory DLBCL. The trial will be designed as an open label, single arm study with the primary endpoint of objective response rate and multiple secondary endpoints, including progression-free survival, overall survival and time to progression. The trial is expected to commence before year-end. We have also announced today, that we intend to start a new CLL study which will combine MOR208 with idelalisib. The response rate in our completed Phase I study in R/R CLL showed that MOR208 could be superior to other CD19 and CD20 antibodies in this setting. This trial will include 120 patients previously treated with Bruton tyrosine kinase inhibitor therapy. Again, we have chosen an open label, single arm trial design with the primary endpoint of overall response rate and a number of relevant secondary efficacy endpoints. This trial is expected to start in Q In addition, MorphoSys is preparing a pivotal phase 3 trial in DLBCL, which will test MOR208 plus bendamustine in a head-to-head setting against the combination of rituximab and bendamustine. The trial shall include approximately 320 patients with relapsed/refractory MorphoSys AG - Pipeline Update - Conference Call Manuscript Page 3 of 12

4 DLBCL, who are ineligible for high-dose chemotherapy and autologous stem cell transplantation. We aim to start this trial in As you can see, this sums up to a very ambitious development plan aimed at addressing unmet medical need in lymphoma and leukemia. MOR208 is also being studied in two investigator-initiated trials. The first is an ongoing phase 2 trial in CLL, which is being conducted by MorphoSys s academic partner Dr. John Byrd, Director, Division of Hematology, Department of Internal Medicine at Ohio State University and Dr. Jennifer Woyach as principal investigator. This study is exploring a combination of MOR208 and lenalidomide in treatment-naïve, older CLL patients, and relapsed/refractory CLL patients and has recently added the possibility to include patients with Richter's transformation, meaning the development of aggressive lymphoma during the course of the CLL. For those of you who are not familiar with John Byrd s work, he has substantially contributed to the development of several hematology drugs over the years, more recently the development of ibrutinib. We are therefore delighted that his interest in MOR208 continues and that he is willing to invest resources of the Ohio State University into our program. The second investigator-initiated trial is a pediatric study in ALL to be conducted in collaboration with St. Jude Children's Research Hospital. This study will test MOR208 in combination with NK-cell transplantation. Patient recruitment for this study is anticipated to start in the first half of That concludes the part on MOR208. MOR208 is without doubt a very important element of our portfolio, but one of a number of important assets for MorphoSys which we believe can bring significant benefit to patients in need. With this, I would like to move on to the other programs that we want to cover today. MOR202 Turning to MOR202, the ongoing Phase 1/2a trial in relapsed or refractory multiple myeloma is continuing as planned. First encouraging clinical data from this trial were published at ASCO this year. These data provided evidence that MOR202 is safe and tolerable when dosed either weekly or bi-weekly, with potentially best-in-class infusion tolerability and administration. Very importantly, we saw early signs of clinical activity, and cases of long-lasting tumor control. Altogether, what we have seen points towards a balanced and potentially best-in-class safety/efficacy profile. The current status is that we are dosing the last cohort of the monotherapy arm of the study at 16 mg/kg, and are about to start dosing in the two combination arms, combining MOR202 with lenalidomide and pomalidomide. We aim to give a further update on the program with first data from the 16 mg/kg cohort and potentially first results from the combination with LEN and POM at a medical conference later this year, most likely at ASH. MorphoSys AG - Pipeline Update - Conference Call Manuscript Page 4 of 12

5 Everything beyond that will of course be data driven. Assuming a positive outcome of the combination cohorts of this study, we could initiate a subsequent phase 3 trial as early as 2017 and we are making the appropriate preparations in this regard. MOR209 MOR209/ES414 is a bi-specific anti-psma/anti-cd3 antibody being developed for the treatment of prostate cancer. This immunotherapeutic protein activates the patients T-cell immunity specifically against prostate cancer cells expressing Prostate Specific Membrane Antigen (PSMA), an antigen commonly over-expressed in this tumor. A phase 1 study of MOR209/ES414 is ongoing, and will be conducted in two stages, a dose-escalation and a dose-extension arm. The study will enroll up to 130 patients and will run through First clinical data are however expected in Early-stage Programs In addition to our ongoing clinical studies, MorphoSys has established a broad network of relationships with big pharma, biopharma companies of various sizes and academia that could generate a stream of attractive product opportunities and clinical candidates. The next clinical output is expected from our relationships with Galapagos and Lanthio Pharma. More precisely MOR106, the anti-inflammatory compound we are working on together with Galapagos and MOR107, the anti-fibrotic therapeutic peptide we gained through the Lanthio acquisition are next in-line for the initiation of clinical studies. We expect both compounds to enter phase 1 in Beyond these two programs, we will continue to invest in our immuno-oncology focused collaborations with Merck Serono and the recently announced one with Immatics, our alliances with Heptares and G7 Therapeutics to support development of a portfolio of therapeutic programs targeting G protein-coupled receptors and other transmembrane proteins, and a growing target sourcing network with leading academic organizations such as Temple University. Ladies and Gentlemen, that concludes my part of today s portfolio update, and I ll now hand back to Claudia for the Q&A session. Claudia Gutjahr-Löser, Head of Corporate Communications & IR, MorphoSys AG Thank you. We will now open the call for your questions. MorphoSys AG - Pipeline Update - Conference Call Manuscript Page 5 of 12

6 Questions and Answers Session Igor Kim Oddo Seydler: Thanks a lot for the detailed update. I just have a couple of questions. The first one is, if I correctly understood it, the DLBCL pivotal study will be started in So does it mean that we might expect the phase 2 results and readout over the next year? Or could you specify when exactly, if it's possible. And the second question is regarding CLL. Could you probably say when you might start the pivotal study in this indication? Is it also possible for 2017? And the third question is regarding R&D. I believe that for 2016 we should expect much higher R&D expenses. But I know that you will give a financial guidance for 2016 next year. But could you happen to provide some color regarding R&D for 2016, and perhaps onwards? Thanks. Dr. Arndt Schottelius, CDO, MorphoSys AG: Thank you, Igor. This is Arndt; for your first two questions I'll address those. Your first question was about the pivotal study we aim to start in 2017; indeed, that's the target date. Your question about when we would see data, I believe you're referring to the ongoing study. Now the ongoing study in DLBCL, as part of the NHL monotherapy trial, recall we had very encouraging data specifically in DLBCL, also follicular lymphoma 26%/27% overall response rate. Now that data, combined with the evidence we see in our preclinical studies, given that bendamustine with rituximab as standard of care in this relapsed/refractory second line population that is non-eligible for high dose chemotherapy supported by autologous stem cell therapy, leads us to those plans of the pivotal trial. So basically, we don't need new data to rate. And as outlined on the slides, we will start with a safety evaluation that will then lead into the anticipated pivotal trial targeting In terms of your question pivotal trial in CLL, yes, we do have plans in mind. Of course, we're now focused to get this study started, in combination with idelalisib in patients that had previous therapy BTK failures, 120 patients. That will now run up to the end of 2018 when we would expect about the data and then we can think about a pivotal study to start thereafter. Now we refer to Jens or Simon for the R&D costs. Jens Holstein, CFO, MorphoSys AG Yes, happy to take the question on the R&D expenses, Igor. As you pointed out, indeed it's our intention to give guidance early 2016 on the financial figures. It's a fair question, though. You MorphoSys AG - Pipeline Update - Conference Call Manuscript Page 6 of 12

7 should be perfectly clear with the activities which we are now planning to undertake, broadening really our activities with our MOR208 compound and also with the other activities on MOR202, MOR209, and the earlier stuff, the guidance which we have given out for 2015 being EUR 56 million to EUR 63 million for those proprietary activities, including tech development will increase in 2016 and the years beyond, and will increase certainly by a bigger amount. Unfortunately, I think it's a touch too early to really go into the financial guidance for 2016 at this point in time, but we'll share it with you as soon as we can. Early 2016 I think is certainly something which we normally would prefer to do. And at this point in time, please bear with us that we can't give more color than I just did. Igor Kim Oddo Seydler: Okay. Thanks a lot, I appreciate it much. Thank you. James Quigley JPMorgan: Thanks for taking my questions. I've got a couple of quick ones. For the first question on MOR208, what is the max patient population you think you can continue to target with, as you were saying, with the rituximab refractory, and some of the other different cut offs? And secondly, I just want to understand what's given you the confidence to spend more and to move into a more clinical development? Could it perhaps be that discussions on MOR202 have become more fruitful in recent times? And then finally, any update on the MOR202 program, and how you are progressing with finding a partner, would be great. Thank you. Dr. Arndt Schottelius, CDO, MorphoSys AG: James, thanks for the question. I'll start with your question about the DLBCL population. I believe your question was what we think we can target. So just one of those numbers also on the slides; DLBCL in the US alone we have 26,000 new cases every year. Now we're looking at a second-line population. And part of that, a smaller part of that, is those that are non-eligible for high dose chemotherapy advanced autologous stem cell therapy. There's a really great medical need there because all the available therapies and what's in the treatment guidelines really don't help the patients. They quickly relapse. They have a very dismal prognosis, so extremely high medical need. And we believe that MOR208, given its excellent safety profile, you asked about the confidence, we have great confidence with the single agent activity we have seen. I've just referred to that in our just been concluded phase 2 trial. MorphoSys AG - Pipeline Update - Conference Call Manuscript Page 7 of 12

8 The data was last updated at ASCO again. DLBCL single-agent therapy relapsed/refractory difficult to treat patient population, 27% overall response rate is very encouraging, compares well. So that gives us the confidence to move in that patient population. It's not large, but it will be the first stepping stone to bring this to approval quickly and then enlarge from there. Maybe I will let Simon comment on any updates strategically on MOR202. I can give you, I think that was in your question too, where we are. So as I pointed out in my speech, we are at the end of the original dose escalation, which has now, as you know, been added by weekly dosing cohorts. We're just in that 16 mg weekly plus DEX[amethasone] cohort, and we are about to commence these combination cohorts where we start with 8 mg, and then escalate to 16 mg plus LEN[alidomide] or POM[alidomide] plus DEX. Now these will commence; they are commencing as planned. And, as I said, we plan to provide an update by -- during the year there's a couple of conferences, most likely at ASH at the end of the year, to be updating you on the 16 mg weekly cohort, potentially also some first data on those combination cohorts with POM and LEN. Dr. Simon Moroney, CEO, MorphoSys AG: And maybe just to add to that, James, in terms of the level of confidence that you mentioned regarding our programs, we hope that that comes across that that confidence is high, based on what we've seen so far. Specifically regarding MOR202, we know there's a lot of interest out there in the program. We also know that CD38 is a very validated target, the multiple myeloma, and we know that we have potentially a shot at being the second CD38 antibody to market. And we see that as being a very exciting position to be in and, therefore, the desire to commit to the program and to make sure that we give the program the best possible chance of being successful. James Quigley JPMorgan: Thank you. Just one follow-up, if I may? A lot of this -- obviously bringing forward and initiating new trials is obviously going to be very, very, very, cash intensive. What's changed from previous to now that has allowed that cash to be utilized in this way? Dr. Simon Moroney, CEO, MorphoSys AG: Maybe let me start on that, and perhaps Jens can add to it as well. I think it's a set of factors that come together. One is the level of confidence that we have in the programs themselves, based on the data that we've seen, and have generated. And secondly is the greater clarity that we have on partner products coming to market. We're closer than ever before to seeing first partner products being approved, and of course, most important for us, starting to generate a royalty stream. MorphoSys AG - Pipeline Update - Conference Call Manuscript Page 8 of 12

9 And what that means is that the financial picture if you like, for MorphoSys, our financial profile as a Company, will evolve over the coming years as more and more of our revenue is based on product sales, royalties initially, of course. So I think, just given the combination of where our proprietary programs are at, the data that we've seen, plus where the pilot programs are at, and the potential for first approvals, tells us that, altogether, this is an ideal time for us to be investing more in that proprietary portfolio. Jens Holstein, CFO, MorphoSys AG And if I may add, Simon, and you made the big point here, you may have seen that the breadth of our own proprietary portfolio has expanded over time quite significantly. So I think, back in 2013, we had six proprietary assets; now we're talking about 14 proprietary assets. So we're broadening the own development activities and we did that quite successfully over time, we in-licensed compounds or acquired compounds as well, in addition to our own activities that we have in-house. So those activities certainly also, to some extent, de-risk any further activities which we'll undertake. And I think we are very confident, as Simon pointed out, that we'll have very interesting, very well differentiated assets in-house, which we like to push forward. And we have financial means to do that as well. We're talking about, at the end of the first half, EUR 325 million in cash, and we want to make use of that case to create more value for our shareholders. James Quigley JPMorgan: Perfect. Thank you very much. Sachin Soni Kempen & Co I have a couple of questions. One is regarding Novartis collaboration as it might be coming closer to an end of its tenure. How do you see the bridge of that EUR 40 million, which comes in every year, to be taken care of? I do understand that you have over EUR 300 million cash, but should we expect that, in the coming three year plan, you have cash burn, actually cash going down significantly, because it might not be compensated with the revenue post collaboration? Second question is regarding rationale for doing actually open-label studies. Why, if you're confident enough, why don't you go for actually head-to-head or blinded studies, when most of the competitive drugs are out there? That's something a little bit I would like clarity on. And the third question on MOR202; are you worried about recruitment when a competitive drug could be in the market as early as next year? Thank you. MorphoSys AG - Pipeline Update - Conference Call Manuscript Page 9 of 12

10 Dr. Simon Moroney, CEO, MorphoSys AG: Thanks, Sachin. Let me start with the first part of that and then I'll hand over to Arndt for parts two and three. So regarding Novartis, as is well known, that deal was signed in 2007, scheduled to run for 10 years, until the end of 2017 then, with an option for Novartis to extend for another two years on the same terms. At this stage, we don't know whether that option will be exercised. Just to answer your question, under the assumption that it's not exercised, indeed the revenue from that deal would obviously fall away, then, at the end of However, the variable that I think you need to take into account here is that, as I mentioned in an answer to a previous question, our revenue will start to transform, potentially from next year, as first partner products come to market. That's the first point. So as those revenues from royalties kick in, that will be a new component of the revenue statement. Secondly, as our proprietary programs move forward, and become more advanced, the possibilities to enter strategic alliances around those deals increase -- around those programs increase. And those, in turn, add the possibility for revenue generation in the form of upfront payments, milestone payments and eventually, of course, sales. So I think, as we think about Novartis, we shouldn't be thinking about it in the context of MorphoSys as it was, as we were three or four years ago. We should be thinking about in the context of MorphoSys as we will be in two or three or four years' time, and that's quite a different picture than we have been historically. Dr. Arndt Schottelius, CDO, MorphoSys AG: Sachin, I will be glad to take your questions on MOR202 and 208. Let me start with 202. Your question was recruitment issues with compounds that are nearing the market. Currently, as I said, we are on target; we don't see any issues. I think the centers that are recruiting here in Austria and Germany are excited; obviously, also going into those combination cohorts, it is getting very interesting. Now clearly, we have seen encouraging data. Recruitment always depends on how the data pans out in the future, where we're very encouraged and confident. We cannot exclude there is some kind of impact from the compounds on the market, even though I stay optimistic. If you see it this way, CD38 if to be established as a new standard of care in that space, Simon has said potentially here MorphoSys being second. There are not that many molecules out there. Yes, there are a number of studies, that's true, but we feel quite confident. We have good relationships with investigators built up that we can recruit those studies that we plan. Now coming to your question, why open labels studies at all, if we are confident in MOR208? Maybe let me just do a little bit of a broader scope. What is the strategy here specifically in DLBCL? MorphoSys AG - Pipeline Update - Conference Call Manuscript Page 10 of 12

11 The strategy in DLBCL is to bring this molecule to approval in this second-line patient population DLBCL, non-eligible for high dose chemotherapy, supported by ASCT. Now that will be a pivotal study; that is the main study we put our emphasis on. You should see the open-label study with lenalidomide, which is also a very interesting combination partner, as supportive. Also as a, in a way, risk mitigation strategy. We have very good compelling data to use the combination with bendamustine, but it's always quite prudent to try different combinations. And it will allow us also with lenalidomide, after go, no-go, the end of that study, to go into pivotal studies from there. Similar with CLL, we have chosen here an open-label design, which as you know of course, also has the advantage of gaining speed. Yes, you are right, one could choose different designs, head-to-head, with some of the drugs already on the market, makes it larger, more expensive and longer. And we feel quite confident with the design we have chosen to then get these studies started and getting to the readouts that we look forward. So again, please keep in mind that, while we have these open-label studies, we are targeting this pivotal study to start in 2017, which we see as that study to bring us to market with 208. Sachin Soni Kempen & Co Great. If I can have a quick follow-up on the collaboration response? If I look at the chart on slide 4, which you have presented, is it fair to assume the Company is currently in between second and third stage of development, which is pure out-licensing and co-development? And MOR208 is eventually aimed to be partnered out, if not now, after certain clinical trials which you have currently planned? And it is not currently the issue that you would take it all the way to the approval yourself? Is that correct to assume? Dr. Simon Moroney, CEO, MorphoSys AG: Just to be clear on that, Sachin, because that is a good question. The intention is, and the belief is, that we can bring MOR208 all the way to market. However, having said that, I think it is unrealistic to expect that we can commercialize MOR208 worldwide on our own. So what that means, of course, is that we would certainly need, and at the appropriate time would seek, a partner to assist us in commercializing the compound which may, for example, be in particular geographies. We may retain a particular geography and we may look for a partner or partners to help commercialize the compound in other geographies. MorphoSys AG - Pipeline Update - Conference Call Manuscript Page 11 of 12

12 But in terms of getting the compound to market, we believe that that's something that we can do on our own. But decisions about with whom to partner the program, and precisely when to partner the program, have not been taken yet and will be taken when the need arises. Sachin Soni Kempen & Co Okay. That's very clear. Thanks a lot. Claudia Gutjahr-Löser, Head of Corporate Communications & IR, MorphoSys AG That concludes the call. Thank you for your participation on the call and goodbye. HuCAL, HuCAL GOLD, HuCAL PLATINUM, CysDisplay, RapMAT, aryla, Ylanthia and 100 billion high-potentials are registered trademarks of MorphoSys AG. Slonomics is a registered trademark of Sloning BioTechnology GmbH, a subsidiary of MorphoSys AG. MorphoSys AG - Pipeline Update - Conference Call Manuscript Page 12 of 12