MorphoSys (MOR) has reported a strong performance for the full year of 2023, highlighting their over-delivery on priorities, the advancement of their oncology pipeline, and a strengthened financial position. In a significant development, MorphoSys announced the proposed acquisition by Novartis (LON:0QLR) (SIX:NOVN), which promises an attractive return for shareholders and is poised to boost the potential of their leading drug candidate, Pelabresib. The company has made strides in regulatory filings for Pelabresib and the transfer of tafasitamab to Incyte (NASDAQ:INCY). They concluded the year with a solid cash position and expect their financial runway to last until early 2026. The anticipated close of the Novartis deal in the first half of 2024 remains a key focus, with antitrust clearances already secured in Germany and Austria.
Key Takeaways
- MorphoSys over-delivered on 2023 priorities, advanced its oncology pipeline, and strengthened its financial position.
- The proposed acquisition of MorphoSys by Novartis is set to offer shareholders attractive pay and expedite Pelabresib's potential.
- The acquisition is expected to close in H1 2024, with MorphoSys preparing to submit an NDA for Pelabresib if the deal does not conclude beforehand.
- MorphoSys ended 2023 with EUR 680.5 million in cash and investments, with a cash runway extending to early 2026.
- Antitrust clearances have been received in Germany and Austria, with filings made in the U.S., and no further clearances anticipated.
- R&D expenses for 2024 are projected to be between EUR 170 million and EUR 185 million, with SG&A expenses estimated at EUR 90 million to EUR 105 million.
Company Outlook
- MorphoSys is prioritizing the closure of the Novartis acquisition and regulatory filings for their lead candidate, Pelabresib.
- Financial guidance for 2024 includes R&D expenses of EUR 170-185 million and SG&A expenses of EUR 90-105 million.
Bearish Highlights
- MorphoSys terminated all customer-facing field sales employees following the sale of tafasitamab.
Bullish Highlights
- The company's financial position is strong, with a cash runway until early 2026.
- Antitrust approvals in Germany and Austria, along with the U.S. filing, indicate smooth progress towards the acquisition closure.
Misses
- There were no specific financial misses reported in the earnings call.
Q&A Highlights
- MorphoSys and Novartis are operating independently until the acquisition is finalized.
- A pre-NDA meeting with regulatory agencies is seen as a formality following positive Phase 3 data for Pelabresib.
- The company expressed confidence in the comprehensive data package supporting Pelabresib's regulatory submissions.
MorphoSys has positioned itself for a transformative 2024, with the anticipated acquisition by Novartis being a critical milestone. The company's strategic focus on closing this deal, along with the advancement of their oncology pipeline, particularly Pelabresib, underscores their commitment to delivering value to shareholders and patients. With a robust cash position and clear regulatory pathways, MorphoSys appears poised for continued success in the biopharmaceutical industry.
InvestingPro Insights
MorphoSys (MOR) has shown both promising developments and challenges in its recent performance. The company's market capitalization currently stands at $2.7 billion, reflecting investor confidence despite some headwinds. According to the latest data, MorphoSys has a high gross profit margin of 75.51% for the last twelve months as of Q4 2023, indicating strong profitability in terms of cost management and pricing power.
InvestingPro Tips reveal that the stock is trading near its 52-week high, with a price 98.01% of this peak, which may suggest investor optimism about the company's prospects, especially considering the proposed acquisition by Novartis. The stock has also seen a strong return over the last year, with a 351.89% increase, highlighting significant investor interest and market momentum.
However, analysts have concerns about the company's near-term growth, anticipating a sales decline in the current year and expecting net income to drop. The P/E ratio is currently negative at -11.95, reflecting these challenges and the company's current lack of profitability over the last twelve months. It's important to note that the company does not pay dividends, which could be a factor for income-focused investors.
For those interested in a deeper dive into MorphoSys's financials and future prospects, InvestingPro offers additional insights. There are 6 more InvestingPro Tips available, which could further inform investment decisions. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and unlock the full potential of InvestingPro's analysis for MorphoSys at https://www.investing.com/pro/MOR.
Full transcript - MorphoSys ADR (MOR) Q4 2023:
Operator: Good afternoon, ladies and gentlemen. Welcome and thank you for joining MorphoSys Full Year 2023 Results and Business Update Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. [Operator Instructions]. Be it my pleasure to turn the conference over to Julia Neugebauer. Please go ahead, ma'am.
Julia Neugebauer: Ladies and gentlemen, good afternoon and good morning. My name is Julia Neugebauer, Head of Investor Relations at MorphoSys's, and it is my pleasure to welcome you to our fourth quarter and full year 2023 financial results conference call. Joining me in the call today are Jean-Paul Kress, our Chief Executive Officer, Tim Demuth, our Chief Research and Development Officer; and Lucinda Crabtree, our Chief Financial Officer. Additional information regarding the proposed acquisition of MorphoSys by Novartis will be filed with the United States Securities and Exchange Commission over the coming weeks, and we encourage investors to review this information when it becomes available. I'd also like to remind you that some of the statements made during the call today are forward-looking statements, including statements regarding our development plans and expectations for our compounds in our pipeline, as well as the development plans of our collaboration partners, and statements about the proposed acquisition of MorphoSys by Novartis. These forward-looking statements are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in MorphoSys Form 20-F and annual report, all for the year ended December 31, 2023, 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. This is the agenda for today's call. Jean-Paul will begin with an overview of 2023 and an outlook for 2024. Tim will then share an update on our clinical development work with a focus on Pelabresib. And Lucy will follow this with a summary of our financial results. After our prepared remarks, we will open the call for your questions. I now hand the call over to Jean-Paul.
Jean-Paul Kress: Good morning, and good afternoon everyone. Thanks for joining us today. 2023 was a critical and exciting year for MorphoSys. We over-delivered on our key priorities, advanced our potential best and first-in-class oncology pipeline, and further strengthened our financial position, resulting in the company entering into a business combination agreement on February 5, 2024 to be acquired by Novartis. Pelabresib, our investigational best inhibitor is at the forefront of our promising pipeline. In 2023 we demonstrated the potential for Pelabresib, to shift the myelofibrosis treatment paradigm, as results from our Phase 3 MANIFEST-2 study showed that all four disease hallmarks were improved with the pelabresib and ruxolitinib combination therapy over standard of care at 24 weeks. Patients with myelofibrosis urgently need new options to treat this disease, and pursuing approval of Pelabresib in first-line myelofibrosis remains our top priority. We also see great opportunity to expand Pelabresib into other myeloid disease indications beyond myelofibrosis. We are very pleased with the progress of Tulmimetostat, our investigational, next-generation dual inhibitor of EZH2 and EZH1, which has shown deep responses in heavily pretreated patients across a broad array of advanced solid tumors and lymphomas in a Phase 2 study. We are continuing investigations of this promising agent and look forward to further elucidating its therapeutic potential. Because of this exceptional progress, we recently announced Novartis' offer to acquire MorphoSys. After a thorough review of all strategic options, we firmly believe that this decision is in the best interest of MorphoSys, our shareholders, and cancer patients. Novartis offer provides attractive, immediate, and fair pay in cash value to MorphoSys shareholders. Novartis intends to offer MorphoSys shareholders EUR 68 per share in cash for a total equity value of EUR 2.7 billion. The offer price corresponds to a premium of 94% and 142% on the volume weighted average price during the last month and three months as of the unaffected January 25, 2024 close respectively. Additionally, Novartis' ample resources, additional scientific expertise, and global footprint can help accelerate pelabresib’s potential worldwide. Until the proposed transaction closes, MorphoSys and Novartis are acting as two separate companies. As such, MorphoSys has very clear priorities for the first half of this year. First, we are focused on closing the Novartis acquisition, which we expect will occur in the first half of 2024. The closing process is progressing steadily, and we do not expect any issues. We received antitrust clearances in Germany and Austria and have also made antitrust filings in the U.S. under the HSR Act. The next step in the takeover process is for Novartis to publish their offer document, which is expected next month. Both companies are fully committed to making the acquisition a reality. Next, we are continuing to prepare regulatory filings for the pelabresib and ruxolitinib combination in first-line myelofibrosis with the intention of submitting applications to the U.S. FDA and the European Medicines Agency in the middle of 2024. We are also working to complete transfer of tafasitamab to Incyte, our longstanding collaborator, following the announcement of its sale on February 5, 2024. Lastly, we are diligently managing our cash runway and maintaining business continuity during this exciting inflection point for our company. I would now like to turn the call over to Tim, who will provide a development update. Tim, please.
Tim Demuth: Thank you, Jean-Paul. Good morning and good afternoon, everyone. Since our Phase 3 MANIFEST-2 results were presented at the ASH annual meeting in December, 2023, the myelofibrosis physician community has consistently stated that the pelabresib and ruxolitinib combination has the potential to shift the treatment paradigm of this debilitating and deadly disease. Notably, in the MANIFEST-2 study, pelabresib and ruxolitinib nearly doubled the proportion of patients achieving at least a 35% reduction in spleen volume over placebo plus ruxolitinib at 24 weeks, meeting the primary endpoint of the study. This was a meaningful result given the known association between spleen volume reduction and patient survival. Additionally, compared with placebo plus ruxolitinib, the combination of pelabresib and ruxolitinib showed a strong positive trend in reducing symptom burden and improvements across measures of anemia and bone marrow fibrosis at 24 weeks. Very importantly, the pelabresib and the ruxolitinib combination demonstrated safety results, in line with assessments from prior clinical trials. Further, Pelabresib and Ruxolitinib was associated with fewer grade three or higher adverse events compared with placebo plus Ruxolitinib. These findings point to the potential for Pelabresib and Ruxolitinib to become the new standard of care for patients with myelofibrosis. With these strong results in hand, our key objective is to bring Pelabresib to patients as quickly as possible. This is why our number one priority is preparing and filing our regulatory submissions in the US and Europe by the middle of 2024. We are on track for this process and are confident that our comprehensive Pelabresib data package will provide impactful evidence to the respective regulatory agencies. We are also continuing to prioritize scientific communications and medical education work for Pelabresib across the U.S. and Europe through our experienced medical affairs team. We continue to collect safety and efficacy data, including duration of treatment data from the MANIFEST-2 Phase 3 study. Durability of response is key for physicians treating myelofibrosis, especially as the benefits of currently approved therapies tend to fade over time. We have seen deep and durable responses in patients with myelofibrosis with the Pelabresib and Ruxolitinib combination at and beyond 60 weeks in the Phase 2 MANIFEST study. We plan to share new data from MANIFEST-2 at a Scientific Congress in the first half of this year. Lucinda Crabtree I would now like to turn the call over to Lucy for an update on our financials.
Lucinda Crabtree: Thank you, Tim. Good morning and good afternoon, everyone. Despite an increasingly competitive environment, net U.S. sales for Monjuvi grew to $92 million for the full year of 2023, reaching the higher end of our 2023 financial guidance. Total revenues in 2023 were EUR 238.3 million compared with EUR 278.3 million in 2022. Recall that in 2022 we benefited from the execution of out-licensing agreements. Total cost of sales in 2023 were EUR 58.4 million compared with EUR 48.6 million in 2022. This increase is largely due to one-off effects from write-downs on inventories recognized in 2023. Next, we will turn to operating expenses. R&D expenses in 2023 were EUR 283.6 million compared with EUR 297.8 million in 2022. The decrease in R&D expenses reflects our current clinical study progress and the prioritization of activities across our pipeline. Selling expenses also decreased to EUR 81.4 million in 2023 compared with EUR 92.4 million in 2022. The year-over-year decline is mainly due to active measures to streamline and focus our previous Monjuvi sales efforts. G&A expenses amounted to EUR 65.8 million for 2023 compared with EUR 60.1 million in 2022. This increase was driven by a rise in share-based payment expenses. This is due to the increase in MorphoSys’ share price, which is the valuation basis for our share-based payment programs. For the full year 2023, consolidated net loss was EUR 189.7 million compared to a net loss of EUR 151.1 million in 2022. Because of the sale and transfer of tafasitamab to Incyte on February 5, 2024, MorphoSys 2024 financial guidance published on January 30, 2024 cannot be maintained and therefore was revoked. In 2024, we now expect R&D expenses of EUR 170 million to EUR 185 million, reflecting our investments in the development of pelabresib and tulmimetostat. SG&A expenses are expected to be between EUR 90 million and EUR 105 million. Following the announcement of the tafasitamab sale, we started the transition process immediately and subsequently ceased all field sales activity as tafasitamab was our only commercial product. As our agreement with Incyte did not include the transfer of MorphoSys employees, we made the extremely difficult decision to terminate employment of all customer-facing field sales colleagues. The significant reduction of our forecasted 2024 R&D and SG&A expenses compared with 2023 can be attributed to both, the sale of tafasitamab and the previously announced implementation of broad measures to diligently manage all our available cash. Please note, any effects from the implementation of the Novartis takeover offer are not included in this forecast. We ended 2023 with cash and investments of EUR 680.5 million, which includes the proceeds from our successful raise of EUR 102.7 million in gross funding. Our cash runway now extends until early 2026, inclusive of our convertible debt repayment. I'll now turn the call back over to Jean-Paul.
Jean-Paul Kress: Before we open the line for questions, I'd like to conclude with a few words. 2023 has been marked by exceptional progress at MorphoSys, resulting in our proposed acquisition by Novartis. We are confident that Novartis' global footprint and leadership in oncology innovation will accelerate the speed and scale at which the significant needs of cancer patients are addressed, with pelabresib at the forefront. We at Novartis are fully committed to making this proposed transaction a reality. With that, I would like to open the call for questions. Operator, please open the line.
Operator: Thank you very much. [Operator Instructions] Our first question today is from Derek Archila from Wells Fargo (NYSE:WFC). Please go ahead with your question.
Derek Archila: Hey, good morning and thanks for taking the questions. Just two. I guess, how long after Novartis publishes the offer doc next month should we expect the deal to close? I don't know if there's any analogs you could point to with similar situations. And then I just wanted to confirm whether it would be you at MorphoSys or Novartis that would actually submit the NDA for Pelabresib. Thank you.
Jean-Paul Kress: Thanks, Derek. Lucy will take the first part of the question.
Lucinda Crabtree: Yeah Derek, consistent with our guidance, we expect the deal to close in H1 2024.
Jean-Paul Kress: Tim, second part of the question, please.
Tim Demuth: Sure. Hey Derek. This is Tim. On the question, who will submit the NDA, we said in the business combination agreements that we are operating as independent companies until the deal is closed. And so with that, the guidance will be. We will submit the NDA unless the deal is closed before, and then we'll have to see.
Derek Archila: Got it, understood. Thank you so much.
Jean-Paul Kress: Thanks.
Operator: Our next question comes from Xian Deng from UBS. Please go ahead.
Xian Deng: Thank you so much. Thank you for taking my questions, two please. The first one is, you mentioned you've got antitrust clearance already from Germany and Austria, and you've also made antitrust filing in the U.S. I was just wondering if there are any other major ones that you are still waiting to clear and any updates that you could share on that please. And the second one should be quite straightforward, just so to try my luck. Just wondering if there's anything you could actually disclose on where are you in terms of pre-NDA meeting, please. Thank you.
Jean-Paul Kress: Hi Xian, this is Jean-Paul. I'll take the first part and Tim will comment on the FDA question. Yes, you are correct. We got the antitrust clearance from Germany and Austria. We filed for the U.S. No other jurisdictions are expected to be needed here, and quick progress has been made and have been making. Tim, on the FDA question?
Tim Demuth: Sure. Hi Xian, this is Tim. So we said in the prepared remarks, Jean-Paul as well as myself, that we are intending to file mid-year this year to U.S. FDA as well as EMA. In terms of pre-NDA meeting, we have the practice here at MorphoSys that we do not publicly discuss details of our interactions with regulatory agencies. We previously said, and we stick with that, that having a pre-NDA meeting is a formality that many companies typically do following positive Phase 3 data. And I can just reiterate that we remain confident that the comprehensive data package will provide impactful evidence to the respective regulatory agencies. So everything's on track.
Xian Deng: Thank you very much.
Operator: [Operator Instructions] There are no further questions at this time and I'll hand back to Julia Neugebauer for closing comments.
Julia Neugebauer: Ladies and gentlemen, this concludes today's conference call. MorphoSys Investor Relations team is available to answer any follow-up questions for the remainder of the day. Once again, thank you for joining. Have a great day and goodbye!
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