MorphoSys AG (MOR) Q4 2021 Earnings Call Transcript

MorphoSys AG (MOR 0.06%)
Q4 2021 Earnings Call
Mar 17, 2022, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, welcome to the NCR Results 2021 conference call of MorphoSys. Please note that this conference is being recorded. [Operator instructions] Now I would like to turn the conference over to Julia Neugebauer. Please go ahead.

Julia Neugebauer -- Senior Director, Investor Relations

Ladies and gentlemen, good afternoon or good morning. My name is Julia Neugebauer, senior director, investor relations at MorphoSys, and it is my pleasure to welcome you to our fourth quarter and full year 2021 financial results conference call. Joining me on the call today are Jean-Paul Kress, chief executive officer; Sung Lee, chief financial officer; Malte Peters, chief research and development officer; and Joe Horvat, U.S. general manager, who will be available for the Q&A session.

Before we begin, I'd like to remind you on Slide 2 that some of the statements made during the call today are forward-looking statements, including statements regarding our expectations for the commercialization of our products and our development plans and expectations for the compounds in our pipeline as well as the development plans of our collaboration partners. These forward-looking statements are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in MorphoSys 20-F and annual report, all for the year ended December 31, 2021, and from time to time in other SEC documents of MorphoSys. It is important to keep in mind that our statements on this webcast speak as of today. On Slide 3, you will find the agenda for today's call.

Jean-Paul will begin with an overview and we'll give an outlook. Malte will provide an update on our development pipeline, before turning the call to Sung for a summary on our fourth quarter and full year 2021 financial results. Following these prepared remarks, we will open the call for your questions. With that, I'll hand now the call over to Jean-Paul.

Jean-Paul Kress -- Chief Executive Officer

Thank you, Julia. Welcome, everyone, and thank you for joining us today. At MorphoSys, our ambition is to be a leader in hematology oncology with two commercial products by 2025. 2021 was a transformational year for us.

It was marked by our first full year of the Monjuvi launch in the U.S. and approvals and launches outside of the U.S. with our partner, Incyte. We also took a bold step with the acquisition of Constellation Pharmaceuticals, which expanded our clinical pipeline in hematology oncology.

Our clinical pipeline has never been as robust as it is today. We currently have three pivotal studies enrolling, one for pelabresib in first-line myelofibrosis, which we believe has the potential to change the standard of care for patients with myelofibrosis, and two for Monjuvi with one in first-line DLBCL; and the second, in relapsed refractory follicular lymphoma and marginal zone lymphoma. We are also progressing two Phase 2 programs with CPI-0209 and felzartamab. In 2022, the major focus of us will be on rapidly enrolling our pivotal studies.

Turning to our commercial results on Slide 6. Monjuvi fourth-quarter net sales were $23.6 million and $79.1 million for the full year. The fourth quarter grew 39% year over year and 7% sequentially. The fourth-quarter growth was driven primarily by demand, and roughly 70% of orders from sites of care come from the community setting and the balance from the academic setting.

Since launch and through the end of 2021, approximately 2,000 patients have been treated with Monjuvi. We view this as significant considering the relatively short time Monjuvi has been available in the U.S. Close to thousand sites of care have ordered Monjuvi since launch through the end of 2021, which is an increase from Q3, where we stood at 850. In the fourth quarter, more than 70% of our orders from sites of care were repeat orders, which is indicative of the regular use of Monjuvi at those sites of care.

We continue to have the leading market share of second-line new patient starts, and we are very pleased that Monjuvi was recently designated as a preferred regimen by the NCCN guidelines for the second-line treatment for adult patients with relapsed or refractory diffuse large B-cell lymphoma. This will further facilitate the use of Monjuvi in earlier line patients as doctors receive clear guidance on the treatment sequence in this disease. We continue our efforts to educate healthcare providers on the optimal duration of therapy and the benefits of keeping patients on our immunotherapy treatment longer. The traditional behavior for physicians in the R/R DLBCL setting has been to treat for a few months.

This is consistent with what we see with Monjuvi. While the actual time on treatment with Monjuvi is as long or even slightly longer than other available options, it's definitely not where the optimal regimen should be within immunotherapy. Given the profile of the Monjuvi lenalidomide combination and the recent NCCN guideline, we are working to change this treatment behavior and to increase persistency over time. Moving to Slide 7.

Beyond the currently approved indication, we see the biggest opportunity for Monjuvi in first-line DLBCL. Our pivotal frontline trial is enrolling very well with significant interest from the medical community. Recently published data from competitor trials have validated our approach to focus on high-risk patients with an IPI of three to five. Another significant opportunity is pelabresib, which we added to our portfolio through the acquisition of Constellation Pharma last year.

We believe that pelabresib has the potential to change the standard of care for patients with myelofibrosis. There remains a large unmet need for these patients, and this indication alone represents a significant commercial opportunity. We are especially excited about the opportunity in first-line myelofibrosis, where pelabresib is currently being studied in a pivotal study called Manifest-2, and the enrollment of this trial is progressing very well. We recently announced exciting data at the ASH Annual Meeting, where the ARM 3 of the Manifest Phase 2 trial confirmed earlier data cutoffs and increased our confidence for the pivotal trial and its probability of success.

As we look to catalysts for 2022, we are excited that Roche is planning to announce data from the two pivotal graduate studies with gantenerumab in Alzheimer's disease in the fourth quarter of this year. Roche also just initiated an additional Phase 3 study with gantenerumab for the prevention of Alzheimer's, which is indicative of their confidence in this monoclonal antibody. We also expect GSK to share pivotal data for otilimab in rheumatoid arthritis. And for both programs, we retain a substantial share of their royalties.

Now for our own mid-stage programs, the EZH2 inhibitor, CPI-0209, and felzartamab in autoimmune diseases, we are expecting proof-of-concept data this year. In addition, from a financial standpoint, we have a strong balance sheet that takes us through pelabresib pivotal data in 2024. We continue to stay focused on and invest in our largest potential value-creating opportunities and remain disciplined with our capital deployment. With that, I will now turn the call over to Malte for an R&D update.

Malte, please?

Malte Peters -- Chief Research and Development Officer

Thank you, Jean-Paul. As Jean-Paul mentioned, 2021 was a transformational year for MorphoSys. We significantly expanded our pipeline, supporting our ambition to become a leader in hematology and oncology. Let's start with pelabresib, our BET inhibitor.

Pelabresib is currently being developed as a potential treatment for myelofibrosis. Myelofibrosis is a bone marrow cancer for which only limited treatment options are available, affecting approximately 35,000 people in the United States and in Europe. The current standard of care for myelofibrosis is ruxolitinib, a JAK inhibitor, but only 50% of patients are being adequately treated. Based on recently published data, we believe that pelabresib has the potential to change the standard of care in the treatment of myelofibrosis, and we are receiving very positive feedback from key opinion leaders.

We have two ongoing clinical trials. First, the Manifest Phase 2 study is evaluating pelabresib in different settings. The key setting is ARM 3 in which we are exploring pelabresib in combination with ruxolitinib as first-line treatment for patients with myelofibrosis. In December 2021, at ASH, we presented the latest data from the Manifest study, both for the primary end point SVR35, which refers to a 35% spleen volume reduction at week 24 as well as the secondary endpoint, TSS50 referring to a 50% reduction of total symptom score at week 24.

The results demonstrated an SVR35 score in 68% of patients and the TSS50 score in 56%, which is numerically significantly higher to what was observed in ruxolitinib single-agent clinical trials. Additionally, analysis from an exploratory endpoint presented at ASH '21 showed a reduction of megakaryocytes clustering in bone marrow and a correlation with clean volume reduction. Megakaryocytes are the cells in the bone marrow responsible for making platelets, and the clustering of these cells are one of the signs of myelofibrosis. This data suggests that pelabresib may have a potential in changing the course of myelofibrosis.

In summary, these latest data reaffirm our confidence in our second study, which is called Manifest-2, and is our ongoing Phase 3 study that is comparing the combination of ruxolitinib plus pelabresib versus ruxolitinib alone as first-line treatment for myelofibrosis. Let me provide some more details about this study. We have achieved a turnaround in the operational excellence for the execution of this study. Our measures such as the addition of additional CROs, improvement of the interaction with investigators, and the expansion of the number of countries and study sites start to pay off.

With all activities in place, enrollment is progressing well, and we expect to report top-line data from Manifest-2 in the first half of 2024. Now moving to tafasitamab. We are also making progress with the clinical development of tafasitamab. We have two pivotal Phase 3 studies ongoing, expanding the potential of this medicine into patients with first-line DLBCL and patients with relapsed/refractory indolent lymphoma.

The first-line DLBCL setting represents an area of significant unmet medical need. Our pivotal Phase 3 study, front mind is on track and enrolling at a good pace with significant interest from the medical community. Investigators are excited about this study, and we have added 40 additional sites in the United States to satisfy investigator and patient interest. Recently released data from competitor trials have reinforced the potential to enhance the current standard of care increased the confidence in our trial design that focuses on high-risk patients with an IPI score of three to five.

We also see great interest in the IN MIND study, our ongoing pivotal study in relapsed/refractory follicular lymphoma and marginal zone lymphoma, which is conducted by our partner insight. Shortly, we will also treat the first patients in our MINDA trial, a study that is investigating an optimized treatment schedule with a reduced number of administrations for patients with non-Hodgkin lymphoma. Optimizing the treatment schedule is particularly important for patients with follicular lymphoma and relapsed refractory DLBCL. In 2022, we expect several data readouts from our mid-stage assets, CPI-2029, and felzartamab.

We are encouraged by the progress of our CPI-0209 clinical trial and by the preliminary data we are observing, and we plan to report data at a medical conference in the second half of this year. This EZH2 inhibitor, which we believe has best-in-class potential is currently being assessed in a basket trial for several solid tumors as well as lymphoma. Felzartamab, our anti-CD38 antibody is being evaluated in two kidney autoimmune indications, namely autoimmune membranous nephropathy and IgA nephropathy, for which there are limited treatment options available. In 2021, we presented early proof-of-concept data demonstrating that felzartamab can rapidly and significantly reduce anti-PLA2R antibody titers in difficult-to-treat patients with anti-PLA2R antibody-positive membranous nephropathy.

Our two ongoing trials, in-place and new plays are fully enrolled and we expect to share more mature data, including data on proteinuria from this trial in the second half of this year. Also, our Phase 2 trial in IgA nephropathy called Ignaz is progressing well, and we will share data later this year. As you can see on Slide 13, we expect to deliver a steady flow of clinical data over the next several years which we believe has the potential to change the treatment paradigms of several types of cancers and autoimmune diseases. We are very excited about our progress and the potential of our pipeline.

With that, I now turn the call over to Sung for a review of the financials.

Sung Lee -- Chief Financial Officer

Thank you, Malte. We're pleased to share our financial results for the fourth quarter and full year of 2021. Moving to Slide 15. Monjuvi sales were $23.6 million in Q4 2021, reflecting a 39% year-over-year growth.

For the full year 2021, Monjuvi sales were $79.1 million. The fourth quarter benefited by approximately $2 million from inventory dynamics and clinical trial purchases, which will have an impact on the sequential change from Q4 to Q1. In the fourth quarter, we recorded EUR 0.6 million in royalty revenue for Monjuvi outside of the U.S. from our partner, Incyte.

For the full year 2021, we recorded EUR 0.7 million in royalty revenues from Incyte., with Minjuvi royalty revenue becoming a recurring and important item in our P&L going forward. It's important to note that MorphoSys provides the commercial and clinical supply for ex-U.S. utilization at an agreed-upon rate. The revenue from this supply is recorded in the licenses, milestones, and other category in our top line, and the exact same amount is subsequently recorded in cost of sales yielding a zero gross margin on Minjuvi supply sales.

Moving to Slide 16. Total revenues in 2021 were EUR 179.6 million, compared to EUR 327.7 million in 2020. The year-over-year decline was driven by the upfront payment from Incyte in 2020 for the out-licensing of tafasitamab outside of the U.S. Total cost of sales was EUR 32.2 million in 2021, compared to EUR 9.2 million in 2020.

The year-over-year increase was primarily driven by higher sales of Monjuvi in the U.S. Cost of sales specific to Monjuvi U.S. product sales was EUR 12.3 million in 2021. Turning to operating expenses.

R&D expenses in 2021 were EUR 225.2 million, compared to EUR 139.4 million in 2020. The growth primarily reflects the inclusion of R&D expenses from Constellation since July 15th, 2021 and increased investment to support the advancement of our clinical-stage programs. Selling expenses increased to EUR 121.5 million in 2021, compared to EUR 107.7 million in 2020. The year-over-year increase was primarily driven by the first full year of commercialization activities for Monjuvi compared to the ramp up of activities in 2020.

G&A expenses in 2021 were EUR 78.3 million, compared to EUR 51.4 million in 2020. This increase was driven by the inclusion of Constellation's G&A expenses, as well as transaction-related costs. In 2021, EUR 37.3 million of transaction-related expenses associated with the Constellation and Royalty Pharma transactions were recorded in operating expenses with the vast majority being recorded in G&A expenses. Separately, we recognized a noncash expense of EUR 230.7 million in the fourth quarter for an impairment charge on goodwill.

This is a direct result of the decision the company took in the fourth quarter to stop all U.S.-based laboratory activities of the former Constellation Pharmaceuticals and to focus our research efforts on the most advanced programs being worked on at our research hub in Planegg, Germany. For the full year of 2021, we reported a consolidated net loss of EUR 514.1 million, compared to a net profit of EUR 97.9 million in 2020. Turning to our balance sheet. We ended 2021 with cash and investments of EUR 976.9 million, compared to EUR 1.24 billion at the end of 2020.

As Jean-Paul mentioned earlier, this amount is sufficient to take us through the collaborative pivotal data readout, which is anticipated in the first half of 2024. As a reminder, we also have available to us development funding bonds from Royalty Pharma in the range of $150 million to $350 million. We will communicate the exact amount that is drawn later this year. Nonetheless, the amount drawn will only serve to extend our cash runway.

Turning to our guidance for 2022 on Slide 17. We are reiterating our guidance that was provided at the beginning of this year in January. All aspects of our guidance remain the same. Specific to Monjuvi U.S.

net product sales and the expected pace this year, we expect to see similar quarterly variations as we saw in 2021. And as such, we are anticipating a sequential decline in Q1, followed by a sequential increase in subsequent quarters. With that, we would like to open the call up for questions. Operator?

Questions & Answers:

Operator

[Operator instructions] We've received the first question. It's from James Quigley, Morgan Stanley. The line is now open for you.

James Quigley -- Morgan Stanley -- Analyst

Thanks for taking my questions. I've got a couple Monjuvi related. So you mentioned about the treatment duration being a matter of months and slightly ahead of what it is now in fact DLBCL and -- but thinking specifically about the second line and the patients you treated so far. Why are physicians not considering the data when they -- when they're treating patients.

So it seems fairly clear in terms of the PFS benefit, but what are the pushbacks you're getting and where are the aspects of the data that you think you need to really highlight most to physicians? And then secondly, we saw some good data at ASH for the CAR-T therapies in second-line DLBCL. Monjuvi is approved in the transplant-ineligible population. But to what extent could there be overlap between patients who can't receive a stem cell transplant and those who can receive CAR-T? And how are you factoring that into your peak sales assumptions for Monjuvi? Thank you.

Jean-Paul Kress -- Chief Executive Officer

OK. James, thank you for the questions. Joe will answer the first question and Malte for the second one. Joe, please.

Joe Horvat -- General Manager, US

When we look at the duration of treatment, James, physicians are used to using short-term duration chemotherapies. As we introduce Monjuvi, which is an immunotherapy, and as they understand how immunotherapy acts, they're beginning to see that they can extend the duration of treatment so that the patients can get the benefits. This is what we've seen in the solid tumor world, and now we're bringing those learnings to the oncologists in DLBCL. As it relates to CAR-T, you know, the data as it moves into the second line, we positioned Monjuvi as the outpatient immunotherapy.

Obviously, the CAR-T is the inpatient. It'll be -- we'll have to wait to see how the physicians will react as it relates to the transplant-eligible population, but I think we're well-positioned in the second line.

James Quigley -- Morgan Stanley -- Analyst

Great. Thank you. And if I could just have a very quick follow-up in terms of the NCCN guideline impact. I mean, to what extent do you think this could accelerate Monjuvi use, and was this included? Or was this impact potentially included in your peak sales guidance? And do you think this will help with the treatment duration point as well? Thank you.

Jean-Paul Kress -- Chief Executive Officer

Joe?

Joe Horvat -- General Manager, US

Hi, James. Yeah. We see this as a positive advancement. This is an additional endorsement and validation recognizing Monjuvi as the only preferred nonchemo-based immunotherapy for second-line patients.

As we continue to increase our penetration second line and create this behavior change with physicians, we do anticipate that the duration of treatment will continue to increase.

James Quigley -- Morgan Stanley -- Analyst

Got it. Thank you very much.

Operator

The next question is by Jason Butler, JMP Securities. The line is now open for you.

Unknown speaker

Hi. It's Ryan for Jason. Thanks for taking our questions. So just a follow-up on the last one about the NCCN guidelines.

I guess any thoughts that maybe this might point us toward the higher end of guidance for revenues for 2022? And then just a quick one. I thought you guys were going to start the combination trial with plamotamab this quarter. Is that still on track? Thanks.

Jean-Paul Kress -- Chief Executive Officer

Joe, please for the first question.

Joe Horvat -- General Manager, US

As it relates to the NCCN guidelines, again, we see it as a positive development. And we continue to be positive on the growth that we expect year-over-year growth and to end up within our guidance for this year.

Malte Peters -- Chief Research and Development Officer

Yeah. With respect to plamotamab situation, we are expecting actually to enroll the first patient in this combination study any moment. We have almost finished the interaction and clarification with FDA on the protocol. And we are encouraged actually by our capability of combining tafasitamab with additional agents, such as plamotamab, but also with the BMS agent.

And we are continuing to receive additional inbound requests for additional combination study of additional agents with tafasitamab. So we view this overall as a good sign, confirming our confidence that tafasitamab is a drug that can be very well combined with other agents.

Unknown speaker

OK. Thank you.

Operator

The next question is by James Gordon, J.P. Morgan. The line is now open for you.

James Gordon -- J.P. Morgan -- Analyst

James Gordon, J.P. Morgan. Thanks for taking the questions. First question was on the sequential decline mentioned in Q1 from JV.

Can you comment on the factors that are going to drive the decline in Q1 and then the increase in Q2? Is it just COVID or other factors recurring that we've seen that's caused some of the quarterly fluctuations in the previous year? And if we're looking at the January IQVIA data that shows a sequential decline, is that quite a good guide for what's actually going on in the market? Or should we be careful about interpreting that data? Also just on U.S. Monjuvi. Since you issued the '22 guidance on January 7th, have you grown more or less bullish on Monjuvi '22 sales because you had the NCCN, but also the -- maybe there's COVID and a bit worse and the data we're seeing doesn't look quite as good. So did you already anticipate the start to the year? Or have things been a little bit more challenging? And just the other question was the EZH2 inhibitor.

Just confidence is set to this Phase 2 asset and which tumor types you're most excited about, please?

Jean-Paul Kress -- Chief Executive Officer

OK. Let's start by the two Monjuvi questions, James. Thanks for that. Sung, maybe you can address the sequential.

Yes. Thank you.

Sung Lee -- Chief Financial Officer

Yeah. Thanks for your question, James. On your question about the sequential decline, I did mention in my prepared comments that we did benefit in Q4 about $2 million from inventory dynamics and also clinical trial purchases. So that's simply not going to recur in Q1.

So that would be a reason for a sequential decline. In addition, obviously, there was an omicron event in the U.S. in the latter part of Q4 and certainly in Q1. And we're still trying to understand the total impact of that to our Q1.

But I think it's fair to think that there is some impact, but the magnitude of which sometimes you really don't understand until this is well behind you as we get to see the growth in subsequent quarters, we can better measure the real impact to Q1 would be. On your question about IQVIA data, I think you have to take all the hazards when you're looking at these market share or external data because obviously, there's more than -- that goes into just script data or demand into a quarterly number, such as inventory, clinical trial purchases and other things that can impact the quarter. But I think directionally, when you look at this over time, it is a good barometer, but will it ever gets you to the exact place within a quarter? No. But I think directionally, they serve as a good tool to forecast the future.

Jean-Paul Kress -- Chief Executive Officer

And, Malte on EZH2.

Malte Peters -- Chief Research and Development Officer

Yes. The EZH2 study, James, we are making very good progress. As I said in my prepared remarks, the study consists of six different arms. Three arms are tumors that all have specific genetic mutation called ARID1A mutation.

And these tumors are ovarian cancer, endometrial cancer, and bladder cancer. Then we have an arm with various lymphoma types, including PTCL and also non-Hodgkin lymphoma. We have also a mesothelioma arm, which is almost fully enrolled and we are excited about the prostate cancer arm. So it's really a plethora of different indications in solid tumors.

And hematological tumors. Excitement is really, I would say, quite high for this trial so that we are preparing ourselves to share the first preliminary data in the second half of this year, as I said earlier.

Jean-Paul Kress -- Chief Executive Officer

Thanks, Malte. I realize we keep the NCCN guideline question. Sung?

Sung Lee -- Chief Financial Officer

Yes. So, James, on your question about was the NCCN guideline change factored into our guidance. We were certainly aware that this was a possibility. And yes, we did factor in a range of scenarios that did include the C-band.

Operator

The next question is by Suzanne van Voorthuizen, Kempen. The line is now open for you.

Suzanne van Voorthuizen -- Kemper and Company -- Analyst

Hi. Hi. Good afternoon. Thanks for taking my questions.

I have a couple. Let me start off by circling back to the time duration for Monjuvi. Can you provide an update as to what you see currently as average duration? I understood it was around three earlier in the year. So I'm just wondering where it stands today.

And do you see a trend in that duration is increasing since. Then on peak sales guidance, do you still stand by the EUR 500 million to EUR 750 million today considering the context of the shorter-than-expected duration? Or do you expect you may need to adjust this at some point? And the last one is just to clarify on the financial guidance for the coming year, you're not expecting significant milestones. Now if I'm not mistaken, you have not yet received milestone payments yet from the Incyte collaboration on Monjuvi, can you remind us of the amount that is outstanding and given that the Street has been wrong on this more than once, how should we be thinking of timing of those milestones. Thank you.

Jean-Paul Kress -- Chief Executive Officer

Thanks, Suzanne. Let's start with Joe for the first question, Joe, please?

Joe Horvat -- General Manager, US

Hi, Suzanne. Yeah. As it relates to the duration of treatment, you're certainly in the ballpark, and we do see our duration beginning to increase as we continue our penetration in the second line. And as prescribers see the benefit of using an immunotherapy versus those traditional short-term chemos that they've been using.

Sung Lee -- Chief Financial Officer

And, yes, Suzanne on your question on milestones with regard to the Incyte collaboration and guidance. So in our guidance, we mentioned that there are no cash accretive milestones anticipated of significance this year. Now we did recognize in the past in a relatively small milestone related to the Incyte collaboration. So that's reflected in the licenses milestones and other line in the couple of million euro range.

But in terms of the, I guess, you would say the larger milestones, I think those can reasonably be expected sometime near the end of 2023 and onwards could even be 2024 beginning and onwards. But as I mentioned in previous calls, because there's a lot of variables and what is that go into whether these milestones are realized or not. I would call these out in the year that we're in in terms of potential as part of our guidance.

Suzanne van Voorthuizen -- Kemper and Company -- Analyst

Got it. And maybe on the peak sales guidance?

Sung Lee -- Chief Financial Officer

Yes. Suzanne, peak sales with regard to Monjuvi. Certainly, our goal is still the range that we put out there before, the EUR 0.5 billion to EUR 750 million for second-line DLBCL in the U.S. That is the goal that remains the goal.

But obviously, with the start that we've had, especially last year with the COVID headwinds, we were a bit challenged and it's fair to think that the peak has been pushed out.

Jean-Paul Kress -- Chief Executive Officer

Yes. And Suzanne, I would -- I mean, it's probably too early for members, but I will also start to think about what first line would provide us. The trial is going well. And as you know, with the recent results on competition validate our approach, and it puts us probably in the preferred option probably for the future.

Suzanne van Voorthuizen -- Kemper and Company -- Analyst

Got it. Thank you.

Jean-Paul Kress -- Chief Executive Officer

Thank you.

Operator

[Operator instructions] Our next question is by Vineet Agrawal of Citi. The line is now open for you.

Unknown speaker

It's Emily Hutchinson from Citi on for Vineet. Just one question, please. I disclosed by inside the share of the tafasitamab R&D expenses was down more than 40% in 4Q. So could you possibly let us know what could be driving that given the key trials in frontline DLBCL and in Mineral for FL ongoing the decline looks a bit odd.

So just trying to marry up that.

Sung Lee -- Chief Financial Officer

I'm not sure I understood the question correctly, but you're asking about the R&D expense to collaboration with Incyte and what's driving the expense recall that we have a co-development arrangement where MorphoSys pays 45% of the development and Incyte our partner paid to balance 55%. There are two major pivotal studies ongoing right now, frontline, which MorphoSys drives that's in first-line DLBCL, and then in mind, which our partner Insight drives, and that's in follicular lymphoma and margin lymphoma. These studies were just ramping -- or they were initiated. The first patients were dosed in the spring of 2021.

So we haven't approached peak costs for both of these studies as we continue to enroll both. So it's fair to think that these two will continue to ramp. And hence, one of the major drivers of our year-over-year R&D expenses. You can see the guidance that we put out for R&D expenses between EUR 300 million to EUR 325 million.

If you normalize for transaction costs, some embedded in the 2021 actuals, we're likely to see somewhere around 45% year-over-year increase in R&D expense, excluding transaction costs in 2021. And that's taking the midpoint of our 2022 R&D guidance. And the major drivers of that, in addition to front line in mind, it's the ongoing Manifest-2 study for pelabresib. I hope I've answered your question.

Unknown speaker

Yes. Thank you.

Operator

The next question is by Rajan Sharma, Deutsche Bank. The line is now open for you.

Rajan Sharma -- Deutsche Bank -- Analyst

Hi, and thanks for the question. Just on Monjuvi, just to kind of push a little bit more on the 2022 guidance. Could you potentially just talk to the various moving parts that get you to the higher end of that guidance range relative to the lower end? And then just on the peak sales guidance, could you just help us understand the ramp from where we are currently based on '22 guidance and how we get to the EUR 500 million to EUR 750 million at peak. And then Finally, just a third one, if I can.

Just on the frontline trial. And obviously, you've talked to increased confidence in that based on competitor data, and I'm assuming that that's based on the Polarix trial. Could you just talk again to kind of your confidence in that trial and how confident you are that R-CHOP is the correct comparator on?

Jean-Paul Kress -- Chief Executive Officer

Thanks, Rajan. Sung, can you handle the two first questions.

Sung Lee -- Chief Financial Officer

Yes. Absolutely, Rajan. Thanks for the question. So on your question about the Monjuvi 2022 guidance and what would get you to the upper end versus the bottom end.

Well, regardless of the range, I think it always comes down to three variables, and how we think about it as patient persistence, patient starts, and then obviously, competitive dynamics or market share. So I don't think it's any secret. The biggest opportunity that we have in front of us is elongating the persistence. So that's a variable that Joe and the commercialization team here and frankly, all of the MorphoSys is really keenly focused on because we really have an opportunity there to change the standard of care, where right now, we are -- the duration of therapy is a few months largely based on past practice.

But as we work to change the behavior and educate the prescriber base out there, we really see an opportunity in the future to elongate that. It's not all going to happen in one year or a few quarters. So this is going to be ongoing work. So let's take one year at a time.

And that relates to your second question about the ramp to the peak. Obviously, we don't expect to peak in the next couple of years. There's a lot of work ahead of us and persistency still represents the biggest opportunity. So we'll take this one year at a time.

Jean-Paul Kress -- Chief Executive Officer

Malte Peters on the first line.

Malte Peters -- Chief Research and Development Officer

Yes. So let me just quickly reiterate what Jean-Paul has already alluded to in terms of the front-line design. Jean-Paul correctly mentioned that we are quite happy that we have limited our patient population to IPI three to five patients for which the unmet medical need is extremely high. We know from other studies such as robust and the ECORP-1412 study that lenalidomide is working in these high-risk patients.

And we also know that lenalidomide and tafasitamab are highly synergistic component. So we really feel that we have found maybe a very attractive treatment regimen in this patient population for which the medical need is extremely high. So I think this is in summary again of why we are confident about our study and the potential probability of success. To your second remark, related to the choice of R-CHOP in the comparator arm, we are enrolling really, really well, as Jean-Paul also alluded to.

We are hopeful that we will be either done with our enrollment or close to be done at the time of the Polarix potential approval. And please also remember, currently, the Polarix frontline regimen is not an approved agent. It's still under review by FDA. So it is currently not available for treatment in frontline DLBCL patients.

And the last comment I want to make is that currently, our frontline study is the only large randomized study in frontline DLBCL. So we have really a sweet spot here in terms of time of ensuring that we can maintain a high speed of enrollment.

Rajan Sharma -- Deutsche Bank -- Analyst

OK. Thank you.

Malte Peters -- Chief Research and Development Officer

You're welcome.

Operator

[Operator signoff]

Duration: 46 minutes

Call participants:

Julia Neugebauer -- Senior Director, Investor Relations

Jean-Paul Kress -- Chief Executive Officer

Malte Peters -- Chief Research and Development Officer

Sung Lee -- Chief Financial Officer

James Quigley -- Morgan Stanley -- Analyst

Joe Horvat -- General Manager, US

Unknown speaker

James Gordon -- J.P. Morgan -- Analyst

Suzanne van Voorthuizen -- Kemper and Company -- Analyst

Rajan Sharma -- Deutsche Bank -- Analyst

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