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MorphoSys AG (NASDAQ:MOR)
Q4 2019 Earnings Call
Mar 19, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, welcome to the MorphoSys Year-End Results 2019. Please note that for the duration of the presentation, all participants will be in a listen-only mode, and the conference is being recorded. [Operator Instructions]

Now, I would like to turn over the conference over to Dr. Julia Neugebauer. Please go ahead.

Dr. Julia Neugebauer -- Director Corporate Communications & Investor Relations

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 3. 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 website.

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

Dr. Jean-Paul Kress -- Chief Executive Officer

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 to 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/refractory DLBCL patients of a very poor prognosis, and our 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 the FDA and has 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 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 faster 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 our 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 7, 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, [Indecipherable] 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 9, 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 KOLs, 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 HEOR studies. It is also tested in extended active program to make tafasitamab available for studies 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 patients and provider advocacy groups into our planned patient support approach, and we have developed a launch network and a distribution approach that will provide seamless and a rapid 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 an overlap of more than 90% between Jakafi and the tafa 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 RR DLBCL. All-in-all, we have the right strategy, the right team, and the right partner to execute on a strong launch.

Malte will now discuss our '19 R&D progress and 2020 outlook. Malte, please?

Dr. Malte Peters -- Chief Development Officer

Thank you, Jean-Paul. Let's look at Slide 14. We are indeed excited about our key asset 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 communicated.

Let me quickly summarize. L-MIND is our Phase 2 open -label single-arm trial evaluating tafasitamab plus lenalidomide in patients with relapsed/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-free 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 still 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, who are not eligible for any clinical trials and do not have other treatment options.

We also started the Phase 1b part of our planned 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 Million-Trace [Phonetic], 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. 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 R-CHOP with R-CHOP alone.

Study start-up activities have begun. As a preparation for this pivotal study, we initiated our Phase 1B trial First-MIND in newly diagnosed DLBCL patients to evaluate the safety and preliminary efficacy of tafasitamab with or without lenalidomide in combination with R-CHOP as a first line treatment. In patients with frontline DLBCL and a high risk score, the unmet medical need is high to improve the efficacy of R-CHOP, as Jean-Paul has mentioned already. Remember, that 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/refractory CLL. While this study is primarily a safety study, there was encouraging efficacy data from the primary analysis in this study with heavily pre-treated 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/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/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-IL6 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.

Jens Holstein -- Chief Financial Officer

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 EUR22 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 U.S. $750 million impact into account that we expect to have on our bank accounts by the end of March, our proforma cash position as of March 13th would have been approximately EUR1.1 billion.

To have such a strong financial position in these turbulent days is a signal of 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 reported year amounted to EUR71.8 million. And with this, we ended the year at the upper end of our updated and improved guidance in the range from EUR65 million to EUR72 million. Our proprietary R&D expenses amounted to EUR98.6 million and are fully in line with our guidance from EUR95 million to EUR105 million.

EBIT reached minus EUR107.9 million, also fully in line with our updated guidance of minus EUR105 million to minus EUR150 million.

Please move on with me to Slide 20, that illustrates our P&L statement. As stated before, group revenues amounted to EUR71.8 million and thus slightly less than in 2018. In 2018, we had booked EUR47.5 million upfront for the out-licensing of MOR106 to Novartis. Revenues include royalties on net sales of Tremfya, amounting to EUR31.8 million in its second full commercial year 2019, and doubling after EUR16.4 million in 2018.

Total operating expenses increased from EUR136.5 million in 2018 to EUR179.9 million in 2019, based on the ramp up of preparations for our anticipated tafasitamab U.S. launch.

Cost of sales increased to EUR12.1 million compared to EUR1.8 million in 2018, mainly driven by materials produced for the launch of tafasitamab. In 2019, research and development expenses amounted to EUR108.4 million as compared to EUR106.4 million in 2018.

Selling expenses increased in 2019 to EUR22.7 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 EUR21.9 million in 2018 to EUR36.7 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 EUR107.9 million compared to EBIT of minus EUR59.1 million in 2018.

In 2019, the consolidated net loss amounted to minus EUR103 million after minus EUR66.2 million in the previous year. This translates into a loss per share of minus EUR3.26 in 2019 compared to minus EUR1.79 one in 2018.

Let's move on to the balance sheet on Slide 21. As of December 31, 2019, we recorded total assets of EUR496.4 million compared to EUR538.8 million at year-end 2018. At year-end 2019, our cash position including our investment in current and non-current financial assets amounted to EUR357.4 million. At the end of the previous year, this position amounted to EUR454.7 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 U.S. $750 million 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. To remind everyone, four ADS was like one MorphoSys share. Whereas the equity investment has been already transferred to our accounts, we expect the payment of the outstanding U.S. $750 million 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 and U.S. specific trials at a rate of 55% by Incyte and 45% by us, 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 as financial liability of MorphoSys toward 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. have started, MorphoSys will account for 100% of revenues in cost of sales, independent of 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 shared P&L and the resulting pre-tax 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, with the primary goal of driving tafasitamab to the market and preparing the company for its commercialization.

For 2020, MorphoSys expects to generate group revenues in the range of EUR280 million to EUR290 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 EUR37 million to EUR42 million. Expenses for proprietary R&D -- expenses for R&D expenses are anticipated in the corridor of EUR130 million to EUR140 million.

Due to the buildup of our commercial infrastructure, selling and general expenses will increase, including start-up costs in connection with a planned launch of tafasitamab. If approved by the FDA, the company expects earnings before interest and taxes of minus EUR15 million to plus EUR5 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 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.

Dr. Jean-Paul Kress -- Chief Executive Officer

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 on 16, which will be our first product candidate to be approved that we will also commercialize. 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 [Indecipherable] 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 a de-risked front 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 deviations from our communicated trends, 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 charge of it. The partnership of this deal will add on to that.

The development of tafa in RR DLBCL 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.

Dr. Julia Neugebauer -- Director Corporate Communications & Investor Relations

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

Questions and Answers:

Operator

[Operator Instructions] And the first question is from Konstantinos Aprilakis from Deutsche Bank. Your line is now open.

Konstantinos Aprilakis -- Deutsche Bank -- Analyst

Good morning, good afternoon and thank you for taking my questions. I hope everyone in 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?

Dr. Jean-Paul Kress -- Chief Executive Officer

Hi, Konstantinos. Thanks for the question. It's Jean-Paul. I'll answer and Malte will also comment on the program. We don't foresee any change to the program, the tafa current filing. The good news is that we filed BLA obviously and the other thing I'd like to comment on is that we are dealing with the feedback we get from the -- we're dealing with a severe disease here, patients basically having a life threatening prognosis and they are kind of used to deal with flu or other infections, so in some ways the treatment prevailed.

We also put in place an EAP, which should help the uptake at launch. And as I mentioned, we've 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 very good.

Now, for another point that I'd like to make on this issue here is that convenience of I-Mab and tafa is also to put in perspective with potential downturn of [Indecipherable]. So, in the context it might help. I'll let Malte to comment on the clinical trials and the registration.

Dr. Malte Peters -- Chief Development Officer

Yes. Thank you, Jean-Paul. So, I'll 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.

Konstantinos Aprilakis -- Deutsche Bank -- Analyst

Okay, thank you. That's very helpful color. And then maybe a somewhat related follow-up. I understand that it's an uncertain time and capital preservation is key. But would you guys -- are you considering, perhaps given the recent pullback in shares of MorphoSys along with the broader markets, a stock buyback program or something to that effect?

Dr. Jean-Paul Kress -- Chief Executive Officer

Jens will answer this question.

Jens Holstein -- Chief Financial Officer

Konstantinos, thanks for the question. I think at this point in time, I doubt that this -- it's just a lot. I mean, the situation is the market is very insecure, and I think 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, 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.

Konstantinos Aprilakis -- Deutsche Bank -- Analyst

Okay, thank you. That's helpful. Thanks guys.

Operator

The next question is from Danielle Brill, Piper Sandler. Your line is now open.

Danielle Brill -- Piper Sandler -- Analyst

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.

Dr. Jean-Paul Kress -- Chief Executive Officer

So, you can just take the question.

Dr. Malte Peters -- Chief Development Officer

Sorry, Jean-Paul, what?

Dr. Jean-Paul Kress -- Chief Executive Officer

Go on for the question on manufacturing, Pete.

Dr. Malte Peters -- Chief Development Officer

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 5 or 10 requests from patients currently. We have not yet treated patients as we're teaming up Incyte to join forces on the early access program.

Dr. Jean-Paul Kress -- Chief Executive Officer

So, Danielle, on the manufacturing, we partnered 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 have personal issues or supply issues. So, we have -- we should have product for the launch.

Danielle Brill -- Piper Sandler -- Analyst

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 2,000. Do you have any updates there on how many of the targets you've now engaged with?

Dr. Jean-Paul Kress -- Chief Executive Officer

Yes, we've been doing very well in our engagement so far. And I think we will continue with the virtual access and webinars and stuff like that. But we've been basically engaging with 1,400 KOLs out of the 2,000 target by launch. So, we're well on our way for accomplishing this goal.

Danielle Brill -- Piper Sandler -- Analyst

Excellent. Thanks very much for the questions.

Dr. Jean-Paul Kress -- Chief Executive Officer

Thanks, Danielle

Operator

The next question is from ShanShan Xu, Berenberg. Your line is now open.

ShanShan Xu -- Berenberg Capital Markets LLC -- Analyst

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.

Dr. Jean-Paul Kress -- Chief Executive Officer

Thanks, ShanShan. Malte will take the question.

Dr. Malte Peters -- Chief Development Officer

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.

ShanShan Xu -- Berenberg Capital Markets LLC -- Analyst

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're licensing from Vivoryon? I think this mechanism of action should now really takes interest from physicians and the investors following the acquisition of 47 by Q end [Phonetic].

Dr. Jean-Paul Kress -- Chief Executive Officer

Malte?

Dr. Malte Peters -- Chief Development Officer

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.

Dr. Jean-Paul Kress -- Chief Executive Officer

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-LEN combination, so that's something we really have in mind, and not only for CD47.

ShanShan Xu -- Berenberg Capital Markets LLC -- Analyst

Got it. Last one from me. As we are approaching your EMA submission, can you update with us regarding interactions with EMA, any updated thoughts in terms of how receptive are to a single study results in relapsed/refractory DLBCL, i.e. L-MIND results?

Dr. Jean-Paul Kress -- Chief Executive Officer

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, 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.

ShanShan Xu -- Berenberg Capital Markets LLC -- Analyst

Okay, fantastic. Thank you so much.

Operator

The next question is from Etzer Darout, Guggenheim Securities. Your line is now open.

Etzer Darout -- Guggenheim Securities -- Analyst

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 wondered if you could speak to the level of investment in the community oncology setting versus the academic setting for tafasitamab combination, since DLBCL is treated in both community and academic settings?

Dr. Jean-Paul Kress -- Chief Executive Officer

Yes. Thanks, Etzer for the question. I'd like to highlight again that Incyte is the perfect commercial partner. You know, they're in track record with Jakafi in the U.S., they've really turned this product in a blockbuster. We have a very high overlap 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 plug-n-play for them, although they will still hire new personnel's and few teams for that, because they need more resources. And we will together cover the academic and the community setting. It's more than 70% of our business within the -- the 70% in the community setting, it's very important that we will cover that. That's also why we decided to have a voice in this high footprint with our synergistic sales teams and field teams.

So, we're currently aligning since we got the [Indecipherable] we're currently aligning with them and the teams already met last week, the U.S. teams to align and do common launch plans. So, it's doing very well.

Etzer Darout -- Guggenheim Securities -- Analyst

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 precept of the second half, just trying to get a sense of when these revenues could hit in 2020 and how that flows throughout the year?

Dr. Jean-Paul Kress -- Chief Executive Officer

Jens will take the question.

Jens Holstein -- Chief Financial Officer

Yes. I'm happy to take the question. So, I mean, we have given the total guidance on the revenue. We've given the Tremfya guidance that we anticipate for 2020, and that of course the latter part will be spread over the year. And 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.

Etzer Darout -- Guggenheim Securities -- Analyst

Thanks so much.

Dr. Jean-Paul Kress -- Chief Executive Officer

Thank you.

Operator

The next question we received is from Jameel Bakhsh from Barclays. Your line is now open.

Jameel Bakhsh -- Barclays Investment Bank -- Analyst

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.

I was wondering 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 only seen in DLBCL, I was wondering just on your thoughts about what we could learn from tafasitamab's example about reading into the level of gross to net adjustments in DLBCL?

And finally, if you could give us a few more details about the motivation for increasing the patient numbers in B-MIND based on the futility analysis? That would all be much appreciated. And I'll break the trend about having follow-up questions. I don't have any. Thank you.

Dr. Jean-Paul Kress -- Chief Executive Officer

Okay. Thanks, Jameel. I'll take the first one on M&, 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 [Indecipherable] 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, [Indecipherable] and around tafasitamab, you mentioned some combination with tafasitamab possible in this space. 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 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 for diligence. It'll be very, very helpful. And we also strengthened our PD team, has proven that it can execute at the highest level with the Incyte deal. So, very excited about that, and we keep you posted.

Now, on the other question, gross to net -- on the gross to net question, I'll pass to Jens.

Jens Holstein -- Chief Financial Officer

Yes. Thanks, Jean-Paul. Well, you got to bear with us a little bit, 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 gross to net figure we got to 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 not 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.

Dr. Jean-Paul Kress -- Chief Executive Officer

Thanks, Jens. And the B-MIND question, Malte?

Dr. Malte Peters -- Chief Development Officer

Yes, Jameel, could I ask you to repeat the B-MIND question? There was a bit of a static on the line and I was not sure I captured your question correctly. Could you please repeat it?

Jameel Bakhsh -- Barclays Investment Bank -- Analyst

Yes. Sure thing. Sorry about that, we're all working from home now. So, the phone sync is 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?

Dr. Malte Peters -- Chief Development Officer

Yes, OK. 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.

Dr. Jean-Paul Kress -- Chief Executive Officer

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 labour in the future [Indecipherable] difficult to treat patients, low NK cell patients. But at the same time it's possible, excluded that we are approved non-conditionally, so that would not require a confirmatory trial. But in case we would, B-MIND would serve as a confirmatory trial.

Dr. Malte Peters -- Chief Development Officer

Yes. That's correct.

Jameel Bakhsh -- Barclays Investment Bank -- Analyst

Sure thing. Thank you very much.

Dr. Jean-Paul Kress -- Chief Executive Officer

Thanks.

Operator

The next question is from Zoe Karamanoli from RBC. Your line is now open.

Zoe Karamanoli -- RBC Capital Markets -- Analyst

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 in relation to the launch preparation activities. So, we know that lot of people now are working from home and I'm wondering whether you've seen or you expect to see any potential impacts, specifically with the MSLs 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?

Dr. Jean-Paul Kress -- Chief Executive Officer

Yes, Zoe. Thanks for the question. And I think I'll briefly add it's [Phonetic] very important. In the U.S., surely, we've instructed people to also make the right decision to work from home or not, and some centres already don't accept external visitors. So, you probably hear this from other companies already who've already launched products.

We've been working already at alternative plans, including virtual calls, digital engagements. We will plan for more digital marketing and multi-channel engagement in the future. The MSLs, for instance, are being webcast, all those kind of things. So, the world doesn't stop. So, it's more difficult, but the world doesn't stop.

The good news as I said earlier that we've hired our teams. We're 90% complete of the reps, which is great. More than 50 reps already onboarded, just really trained and onboarded, and we have all MSLs. 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, it should 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.

Zoe Karamanoli -- RBC Capital Markets -- Analyst

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?

Dr. Jean-Paul Kress -- Chief Executive Officer

Maybe for expenses, Jens.

Jens Holstein -- Chief Financial Officer

Yes, I'm happy to take that question, Zoe. 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 and offer here a split of the R&D costs.

Zoe Karamanoli -- RBC Capital Markets -- Analyst

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

Dr. Jean-Paul Kress -- Chief Executive Officer

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

Zoe Karamanoli -- RBC Capital Markets -- Analyst

All right. Thank you.

Operator

The next question is from Holger Blum, Patinex Management. Your line is now open.

Holger Blum -- Patinex Management -- Analyst

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?

Jens Holstein -- Chief Financial Officer

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 EUR860 million to EUR900 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.

Holger Blum -- Patinex Management -- Analyst

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

Dr. Jean-Paul Kress -- Chief Executive Officer

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 always a little bit of basket across -- 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 in there, so that's not reflected.

Holger Blum -- Patinex Management -- Analyst

Okay. Thank you.

Dr. Jean-Paul Kress -- Chief Executive Officer

Okay. Julia, maybe time to close the call.

Dr. Julia Neugebauer -- Director Corporate Communications & Investor Relations

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.

Operator

[Operator Closing Remarks]

Duration: 65 minutes

Call participants:

Dr. Julia Neugebauer -- Director Corporate Communications & Investor Relations

Dr. Jean-Paul Kress -- Chief Executive Officer

Dr. Malte Peters -- Chief Development Officer

Jens Holstein -- Chief Financial Officer

Konstantinos Aprilakis -- Deutsche Bank -- Analyst

Danielle Brill -- Piper Sandler -- Analyst

ShanShan Xu -- Berenberg Capital Markets LLC -- Analyst

Etzer Darout -- Guggenheim Securities -- Analyst

Jameel Bakhsh -- Barclays Investment Bank -- Analyst

Zoe Karamanoli -- RBC Capital Markets -- Analyst

Holger Blum -- Patinex Management -- Analyst

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