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MorphoSys AG (MOR) Q2 2019 Earnings Call Transcript

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MorphoSys AG (NASDAQ: MOR)
Q2 2019 Earnings Call
Aug. 7, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, welcome to the MorphoSys Q2 results 2019 conference call. Please note that for the duration of the presentation all participants will be listen only mode and the conference is being recorded. After the presentation there will be an opportunity to ask questions. Please note that we can only take your questions if you have registered by name. Should anyone need assistance during the conference call, they may signal this by pressing * and 0 on the telephone.

Now I would like to turn the conference over to Sarah Fakih. Please go ahead.

Sarah Fakih -- Head of Corporate Communications and Investor Relations

Thank you. Good afternoon, good morning, and welcome to our Q2 2019 conference call and webcast. My name is Sarah Fakih and I'm the Head of Corporate Communications and Investor Relations at MorphoSys. 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, and the initiation of additional programs. Should actual results differ from the company's assumptions, ensuing 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.

With my on the call today are Simon Moroney our Chief Executive Officer, Jens Holstein, our Chief Financial Officer, and Martle Peters our Chief Development Officer. In the presentation, Simon will start by giving you an operational review of the 2nd Quarter as well as an outlook for the rest of this year. After that, Jens will review the financial results of the 2nd Quarter and the first 6 months of 2019. The presentation will last about 30 minutes.


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

And with this, I would now like to handover to Simon Moroney.

Simon Moroney -- Chief Executive Officer

Thank you, Sarah. And also, from me, a warm welcome to our Q2 results corps. MorphoSys continued to make excellent progress on multiple fronts in the 2nd Quarter of 2019. As usually, we'll go through the advances that we've made during the quarter, as well as a couple of events that happened after the quarter ended.

The announcement of Jean-Paul Kress as my successor, effective September 1, 2019, we a decisive event for the company. We're delighted to have found such a strong, and we believe perfectly suited, candidate to take the helm at MorphoSys. Jean-Paul has over 20 years of experience in senior positions in the industry and a strong track record of success, especially in commercial and operational leadership. These were important criteria for us in the search.

Equally important was the fact that Jean-Paul has trans-Atlantic experience. The future of MorphoSys will increasingly be based on operating units in Europe and U.S., and with Jean-Paul we believe we've found the ideal person to secure that future. I'm convinced that he'll do an outstanding job for MorphoSys, especially regarding the critically important launch and commercialization of our lead program, Tafasitamab.

Turning now to the operational review, I'll start with our proprietary development segment. Tafasitamab is of course our most advanced proprietary program. During Q2 we unveiled a descriptor for the key technological feature of this antibody named the enforcer.

Enforcer stands for enhanced format for cancer irradiation and refers to the structural modification of the antibody which brings about better recruitment of effective cells and increased elimination of cancer cells.

As a reminder, we're currently running 3 clinical trials for this antibody in patients with relapsed or refractory diffuse large B cell lymphoma who are ineligible for high dose chemotherapy or autologous stem cell translation. Those trials are L-Mind and B-Mind. In relapsed or refractory CLL and SLL we're running the Phase 2 Cosmos study.

Strictly speaking, we should count 4 trials, the 4th being the synthetic control arm for L-Mind, which uses real world data from relapsed and refractory DLBCL patients who have been treated with lenalidomide only. This study is progressing well, and the data will be part of the filing package to the regulatory authorities.

During the quarter, we announced positive developments for both L-Mind and B-Mind. In May, L-Mind reached its primary completion, with a follow up of at least 1 year for all enrolled patients. The entire dataset included 80 patients and was presented at the 15th International Conference on Malignant Lymphoma and Lingala. Efficacy was also based on response rates assessed by an independent review committee. The objective response rate was 60% with a complete response rate of 43%. Median progression free survival was 12.1 month and responses were durable with a median duration of response of 21.7 months. Median overall survival was not reached. These outstanding results will go into our regulatory filings. We're delighted by the strength of the data from the primary analysis and were especially encouraged by the durable of the responses and the long overall survival we're seeing.

We've also made great progress with our plan to seek regulatory approval for tafasitamab in Europe based on L-Mind. We announced last night our intention to submit a marketing authorization application to the European's Medicine Agency, EMA, based on very constructive discussions we've had with them. Last month we sent EMA a letter announcing our intent to submit L-Mind and aim to complete the submission by mid-2020. Under the assumption that the submission is reviewed positively, we could expect earliest approval in Europe in 2021.

For the B-Mind trial, we've just disclosed the bio marker that was implemented in agreement with the FDA as an amendment in the 1st Quarter of this year. This bio market, which serves as a co-primary endpoint, is a low base line peripheral blood natural killer cell count. Pre-clinical data generated at MorphoSys suggests that tafasitamab has the ability to recruit effective cells, predominantly NK cells, may be of particular benefit for patients with a low NK cell count.

Altogether, we're excited about the progress of the tafasitamab program. Supported by the compelling primary analysis data, we are on track to complete our planned BLA submission of L-Mind to the USFDA by the end of 2019, which could, subject to FDA acceptance, allow for an approval in mid-2020.

Let me continue with an update on MOR106, our antibody directive against IL-17C for the treatment of inflammatory diseases, currently in clinical development for an atopic dermatitis. You will recall that we jointly discovered and developed the antibody with Galapagos before signing an exclusive license agreement with Novartis in July of last year. Since the effective date of the agreement, all research, development, manufacturing, and commercialization costs for MOR106 are born by Novartis.

There are currently three studies ongoing for MOR106. The newest study in this program is the Phase 2 Gecko trial, which was started in April of this year, to evaluate the combination of MOR106 with topical cortical steroids. Gecko serves as an IND opener with the FDA, as the combination with topical steroids needs to be shown to be safe for the treatment of atopic dermatitis.

The other studies are the Phase 2 Iguana trial in atopic dermatitis patients which we started together with Galapagos in May 2018. These asses the safety and efficacy of an intravenous application of MOR106 in patients with moderate to severe atopic dermatitis. And a Phase 1 bridging study that evaluates the safety and efficacy of a subcutaneous formulation of MOR106 in healthy volunteers and atopic dermatitis patients.

Turning to another program from our proprietary development segment, we received very good news in July for Otilimab, the new INN named from MOR103, a propriety antibody directed against GMCSF out licensed to GSK. GSK has now started a Phase 3 development program on rheumatoid arthritis called Contrast, which comprises 3 pivotal studies and one long-term extension study. Based on Phase 2B data, Otilimab seems to have a particularly strong effect on the pain experienced by patients with moderate to severe RA and could therefore offer an improvement in their quality of life. The program compares the antibody Otilimab to two different approved drugs, a jack inhibitor and an anti-IL6 antibody, and will enroll between 3,500 and 4,100 patients. We're delighted to see GSK's major commitment to the program.

The start of the Phase 3 program triggered a milestone payment of 22 million euros to us, which Jens will talk about in his presentation.

Let me now to turn to MOR202, now a proprietary anti-CD38 antibody. We have licensed rights to MOR202 in the Chinese region to I-Mab Biopharma. I-Mab is currently conducting 2 clinical studies of MOR202 in multiple myeloma, a Phase 2 study in third line, and a Phase 3 study in combination with lenalidomide and 2nd line. The Phase 3 trial was initiated in April and triggered a milestone payment of $3 million to us.

At MorphoSys we will shortly start clinical development of MOR202 in an inflammatory autoimmune disease of the kidneys called anti-PLA2R antibody positive membranous nephrography. This disease is mediated by auto antibodies against the polyphase receptor called PLA2R, which causes the deposition of immune complexes along the plenarily membrane and as a result disfunction of the kidneys. There are currently no approved treatments available and there is a high need for new treatment options. The study has a very clear endpoint and should provide a good conclusive concept for the use of MOR202 in autoimmune diseases.

Shortly after the course ended, we announced an option agreement with Vivoryon Therapeutics. This deal gives us access to a family of small molecule inhibitors of the Q2PCL enzyme, that is involved in CB47 serve alpha signaling in the field of oncology. The deal gives us sufficient time to evaluate the compounds before committing to an exclusive license. The price of the option is a 15-million-euro equity stake in Vivoryon, which will be taken up later this year.

The CD47 pathway, also known as the don't eat me signal, is used by cancer cells to evade the innate immune system. The small molecule inhibitors are a highly innovative and differentiated approach to interfering with this don't eat me signal. Blocking the QPCTL enzyme presents the formation of functional CD47 before it's even presented on the cancer cell's surface. This approach should therefore unmask and expose those cancer cells to the immune system.

The key to assess the potential of these compounds in combination with our antibodies first and foremost was tefacidomab. Phase 2A clinical safety data is already available for Vivoryon's lead compound PQ912, which should accelerate our own development. These compounds have potential wherever effective cells play a role in cancer treatment, and therefore could represent an extremely valuable addition to our proprietary portfolio.

I'll turn now to our partner discovery segment. Even though we're no longer actively seeking deals in this segment, it remains a substantial part of our overall value proposition and our balance financing model. The segment comprises more than 100 programs currently in R&D, 24 of which are in clinical development. Our royalty participation in these promising drug programs will continue to provide MorphoSys with a reliable revenue stream well into the future.

The most advanced product in this segment is Jensen's Tremfya, which in July 2017 became the first drug based on our antibody technology to reach the market. In June of this year Jensen reported that the 2 ongoing Phase 2 trials in psoriatic arthritis met their primary endpoint, the data are planned to be presented at medical conferences later this year.

According to Jensen, these data will serve as the basis for submissions to the USFDA and European EMA later this year, seeking approval for treatment of psoriatic arthritis. We're pleased by the broad clinical development in a variety of indications and are looking forward to clinical updates and presentations of data by Jensen.

To conclude the review, our pipeline currently comprises 119 programs, of which 1 is on the market, 5 are in registrational studies, and 24 are in other clinical trials.

Before handing over to Jens, I'll summarize what you can expect from us in the months ahead. Starting with our proprietary development segment, here we expect the following news flow. First up will probably be headline data from the lenalidomide only control for L-Mind. We plan to present data from the study at an appropriate medical conference toward the end of this year but will probably announce headline data by press release prior to the conference. A BLA submission to the FDA based on L-Mind is planned to be completed by the end of this year, enabling approval by mid-2020 assuming a positive FDA review. We remain OnTrack to achieve this important goal.

For B-Mind the event driven interim analysis is expected to occur in Q4 of this year, following a longer than expected duration of response in the overall patient population. Our preparations for the Phase 1B front line DLBCL study with tefacidomab are ongoing and we expect to start the trial in the 4th quarter of this year. The trial will evaluate safety and ensure signs of efficacy of a combination of tefacidomab plus alpha, or tefacidomab plus alcohol plus lenalidomide in previously untreated DLBCA patients. Depending on the outcome, we plan to start a pivotal Phase 2-3 study in mid-2020, from which we would expect to enroll about 650 patients. For Cosmos, we plan to present updated data at a medical conference toward the end of the year.

Turning to MOR106, we expect a number of milestones from the ongoing studies for the next 12 to 16 months. For Iguana, the primary completion is now scheduled for the 1st half of 2020, as the number of patients has been increased from 180 to 240, the recruitment will take a bit longer than initially expected. For Gecko we expect primary completion in mid-2020. The Phase 1 bridging study is currently scheduled to reach its primary completion in the 2nd half of 2020. In addition to the ongoing trials, Galapagos are preparing to start a Japanese hip no bridging study in the 2nd half of this year.

For MOR202, I-Mab will continue the ongoing trials in multiple myeloma. They've also announced plans to start clinical development in systemic glucose erythematosus. At MophoSys, we'll start a Phase 1-2 study of MOR202 an anti PL2R antibody positive membranous nephropathy as mentioned earlier in Q4 of this year.

Finally, we're conducting pre-clinical validation experiments on Vivoryan's family of QPCL inhibitors to inform our decision on whether or not to exercise our exclusive option. We expect to take up our equity stake in Vivoryan before year end.

Turing to the partner discovery segment, according to clincialtrial.gov, by the end of 2019 primary completion may be reached on up to 8 clinical trials in Phases 2 and 3 from our partners. This includes a potentially pivotal Phase 2B study by Mario Biopharma in osteogenesis imperfecta, brutal bone syndrome, [inaudible] antibody cetuximab, and further Phase 3 trials of Tremfya conducted by Jensen in psoriatic arthritis.

As mentioned earlier, we also await submission of the BLA for Tremfya in psoriatic arthritis later this year as communicated by Jensen. Moreover, Jensen plans the start of a Phase 1 trial of Guselkamab in Chinese healthy volunteers, a Phase 2 trial of Guselkamab in pseudorabies rhabdopleurids, a Phase 3 trial in ulcerative colitis, and a Phase 3 trial in palmoplantar nonpituitary psoriasis according to clinicaltrials.gov.

As a reminder we have no control over when and to what extent our partners will communicate news about any programs based on our technology. That concludes my part of the presentation. I'll now handover to Jens for his financial review.

Jens Holstein -- Chief Financial Officer

Thank you, Simon. Ladies and gentlemen, also from my side, a warm welcome to all of you. As Simon already pointed out, we're very pleased with developments and our performance in the 2nd Quarter of the year. Let's now have a closer look at the most important financial status of MorphoSys for the 2nd Quarter of 2019.

I would like to start with our P&L statement on Slide 17. Revenues in Q2 totaled 37.7 million euros, compared to revenues of 8.1 million euros in the 2nd Quarter of 2018. This increase was mainly driven by the milestone payment from GSK in the amount of 22 million euros due to the start of the clinical development program in rheumatoid arthritis, as mentioned by Simon before. Please note that this payment had to be recognized in the 2nd Quarter in accordance with our 15 on revenues from variable consideration.

In addition, increase is contributed to our increase in our group revenues. As in previous quarters, the contractual royalties reported from Jensen for Tremfya has not been received yet. Tremfya royalties booked for Q2 2019 were estimated based on the public announcement by Jensen J&J. Final numbers can still vary slightly on the basis of foreign exchange effect.

Looking at expenses, our total operating expense reached 40.3 million euros. The expenses for research and development amounted to 24.7 million euros, 25.8 million euros in Q2 2018. Expenses for proprietary R&D and technology development amounted to 22.5 million euros compared to 23.7 million euros in the previous year.

Selling expenses rose to 3.2 million euros as compared to 1.5 million the year before. General and administrative expenses increased to 7.5 million euros versus 5.5 million euros in Q2 2018. Cost of sales for the 2nd Quarter of 2019 amounted to 4.9 million euros. This item consists of expenses related to services provided to partner's and also manufacturing costs, for the expected market supply of deficit amount. In the 2nd Quarter of 2019, this cost item has not been reported.

Earnings before interest and taxes amounted to minus 5.7 million euros in Q2 2019 in comparison to minus 24.1 million euros in the 2nd Quarter of 2018. Our consolidated net loss after taxes amounts to 5.9 million euros in Q2 2019 compared to a net loss after taxes of 23.9 million euros in Q2 of the previous year.

The earnings per share in Q2 2019 reached minutes 19-euro cents after minus 76-euro cents in Q2 of the previous year.

And now on Slide 18, you'll see an overview of our segment reporting for Q2 2019. In our proprietary development segment, in which we focus on the research and clinical development of our own drug candidates, we recorded revenues of 25.9 million euros in the 2nd Quarter of 2019 as compared to 0.1 million euros in Q2 of 2018. As mentioned earlier, this increase was mainly driven by the milestone payment of 22 million euros from CFK.

Operating expenses in the 2nd amounted to 32.9 million euros as compared to 24.7 million euros in Q2 2018. The main reason for this increase is our increasing investment for the development of our proprietary programs. Consequently, the EBITA of our proprietary development segment came in at minus 7 million euros compared to minus 24.6 million euros in the previous year.

In our partner discovery segment, we applied our proprietary technology to discover new antibodies for 3rd parties, and benefit from our partner's development advancements to R&D funding, licensing, successful campaigns, and royalties.

In the 2nd Quarter of 2019, revenues amounted to 8.7 million euros as compared to 1.8 million euros in Q2 2018. Consequently, the EBITA in our partner discovery segment increased and amounted to 6.3 million euros as compared to 5.5 million euros in Q2 2018.

Looking at the balance sheet on Slide 19, as of June 30th, 2019, we recorded total assets of 556.8 million euros. This represents an increase of 18 million euros compared to year end 2018. The increase is a result of the application of a new IFA 16 standard, with respect to leases and higher results receivable and contract efforts related to the GSK amounts were offset. And the use of cash and cash equivalents for operations in the 1st half of 2019.

At the end of Q2 we had a cash position of 409.2 million euros compared to 454.7 million as of December 31, 2018. On the balance sheet this cash position is supported under the following items, cash, and cash equivalents, financial assets at fair value for profit and loss, and current and non-current other financial assets at agatized costs. The number of shares issued totaled 31,839,572 at the end of Q2 2019, which is the same number as of yearend 2018.

So to briefly sum up the key figures for the first half year, please turn to Slide 20. You see group revenues amounted to 38.2 million euros for the 1st half of 2019. In the first 6 months of 18, group revenues reached 10.9 million euros. Also revenues in the first 5 months of 2019, 43.3 million euros were success-based payments. The majority of the sum was made up by the milestone payment received from GSK, as well as Tremfya royalty income which amounted, in total, 13.7 million euros.

R&D expenses amounted to 49.3 million euros in the first 6 months, of which 45.1 million represent R&D expenses for the proprietary technology development. Hence the EBITA in the first half of 2019 came in at minus 29.3 million euros compared to minus 33.2 million euros for the first half of 2018. Consolidated net loss reached 28.5 million euros for the first 6 months of 2019.

Let's now move to our financial guidance. Today we would like to reaffirm our financial guidance for the full year 2019, which was updated in July in connection with the start of a Phase 3 development program. For 2019 we anticipate group revenues in the range of 65 to 72 million euros. Thereof we anticipate Tremfyr royalties to be in the range of 23 to 30 million euros at constant U.S. currency.

Given the book results for the first 6 months, we believe that the royalty income for mofophsis will come in at the upper end of the guidance. We expect an EBITA in the range of minus 105 to minus 150 million euros. Proprietary R&D expenses including technology development in 2019 are anticipated in the corridor of 95 to 105 million euros. This guidance includes the recently announced cost for the first preclinical activities on TQ912 that were recently unlicensed from Vivoryan.

Of note, the guidance stock prediction revenues from potential future partnerships or licensing agreements such as acetomab or any other compound that is in our proprietary of development. Effects from potential increasing of key development deals from new development candidates are also not included in the guidance.

Before I now conclude my section, let me take the opportunity to thank Simon, in the name of everyone in the company, for 27 years of services to MorphoSys as the founder and CEO. Today's call is Simon's last one as CEO, so it's a very special one for him. Simon I'm sure that everyone on this call wishes you all the best in the future, and I am convinced that you will stay close to the company in the years to come as you remain a shareholder going forward. Thank you, Simon, and again, all the best for your future.

Simon Moroney -- Chief Executive Officer

Thank you, Jens. Thank you very much.

Jens Holstein -- Chief Financial Officer

Ladies and gentlemen, this concludes my review for the 2nd Quarter of 2019. I'll hand back to Sarah.

Dr. Sarah Fakih -- Head of Corporate Communications and Investor Relations

Thank you, Jens. We will now open the call for your questions.

...

Questions and Answers:

Operator

Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press 0 and 1 on your telephone keypad now. You will be advised when to ask your question. If you change your mind and wish to withdraw your question, please press 0 and 2. Participants are requested to use only headsets when asking a question.

The first question is from James Gordon of JP Morgan. Please go ahead.

James Gordon -- JP Morgan Cazenove -- Analyst

Hello, thanks for taking the question. James Gordon from JP Morgan. A couple of questions on Taaffe if I call it that. One was on Europe and the L-Mind filing. So you said EU filing by mid-2020, which is almost a year away. What further work does the EU application require beyond the US file? And are you going to do all that work internally, or could you list any external assistance that might allow you to speed up that filing in Europe?

Other question in Europe would just be partnering. How advanced are discussions? Could we see a partnering announcement ahead of the B-Mind utility or a potential partner? Keen to get a clarity on the EU futures analysis first.

And then just on the US filing, where are we on preparing the application? Can you talk about what's already been done and what's still outstanding before you'd be in a position to file in the US please?

Simon Moroney -- Chief Executive Officer

Thanks, James. Let me just mention we're in a couple of different locations, so we'll try to orchestrate the answers to all your questions as well as possible. And I would ask Maltre Peters to take the questions on the L-Mind filing in the EU and the US filing first, and then I'll talk to the partnering question.

Maltre Peters -- Chief Development Officer

Yeah, thank you. James, if you could repeat your third question related to the US filing. I couldn't hear everything you said. Could you repeat the question please? The last question?

James Gordon -- JP Morgan Cazenove -- Analyst

Sure. Apologies, I think I had a bad line. So the third question was, for the US filing, just where are you in preparing the application on L-Mind? What have you already got done and what's still outstanding before you'd be in a position to submit the file please?

Maltre Peters -- Chief Development Officer

Okay. So let me start with that's a part we are well on track with preparation of our BLA dossier preparation. I am reviewing the first part often dossier as we speak. We have agreed with the FDA on the rolling submissions, so we will submit in two waves. The first wave will consist of the preclinical data and our PK data, which is already in good shape to be sent out and we will probably submit this portion of the file in the September, October time frame. Or the other data will go in at the end of December, so we are completely on track with our projected submission timeline in the US by the end of December of this year.

With respect to the European filing, we think having done this a couple of times in my previous life, the fastest way to submit a global submission is actually to start with one dossier, in this case, the US dossier, and then transcribe it for the European submission. And that's what we are going to do. The transcription of the US dossier into the European dossier will take us a couple of months. And that's why we said we would be ready to submit our EU dossier in the middle of 2020. That's much faster and also a lot easier than doing both activities basically from scratch. It's easier and better to start with one dossier and then basically transcribe it into the second dossier that's needed for the second geography. And that's why we do it this way.

Remember, in our previous calls, we were always assuming that it was better the European submission by 9 to 12 months. And we have moved this timeline up now because of the very encouraging feedback we received from the European authorities. So we believe that we can speed up the European submission by approximately, I would say roughly half.

And with the partners, Simon, you want to take this question?

Simon Moroney -- Chief Executive Officer

Yeah, let me handle that one. So, James, to your second question regarding partnering, please understand that as a standard policy we don't comment on the timing or the content of potential partnering. We're engaged in discussions with interested parties, potential partners, we're happy with the way those discussions are going. But we don't want at this stage to comment on the potential outcome or timing of partnering discussions.

Operator

The next question is from ShanShan Xu of Berenberg. Please go ahead.

ShanShan Xu -- Berenberg -- Analyst

Good morning and good afternoon. Congratulations, Simon, on your next chapter in life. Truly a bittersweet moment for you. So the first question from me, you mentioned that the interim analysis of B-Mind now is expected in Q4 '19 due to a lower event number. Could you please confirm that the below event number is seen in both active control arms or more in the active arm. And what kind of maturation of PSS events do you need for the interim analysis? And I have two follow ups.

Simon Moroney -- Chief Executive Officer

Maltre, do you want to take that?

Maltre Peters -- Chief Development Officer

Yeah, thanks, Simon. Thanks, ShanShan for the question. So for the interim analysis, we are blinded with respect to the arms. So we don't know from what arm the treatment effect comes. And we will also not know this until we become unblinded. The way the interim analysis works is that there's an independent data reduce committee who will look at the data, and they will recommend to us what to do. If we want to continue the study, if we want to stop the study for futility, they will recommend us what to do based on their analysis. But we are blinded with respect to the treatment arm.

So I cannot really comment to which arm the treatment effect is coming from. To what I'm referring to is actually the pooled data that consists of data from both arms.

ShanShan Xo -- Berenberg -- Analyst

Okay, that makes sense. Another technical question on B-Mind. Now you defined the PSS in the bio marker only patients as the coprimary endpoint. During the interim analysis in Q4 '19, if B-Mind fails to pass a futility analysis in all commers, but pass the futility test in the biomarker only patients, does that mean that you get to conserve all the effort to the PSS in biomarker only patients?

Maltre Peters -- Chief Development Officer

Yeah, so we have in the past avoided to give any details on our statistical analysis plans, and that involves also all the details with respect to the iso splitting. I can also say that the iso splitting and the iso situation has been very thoroughly discussed with FDA when we presented the amendment to FDA, and we have reached a very good agreement with FDA on the statistical details on the statistical analysis plan. So everything we do here is in complete accordance and support with the FDA. So I would leave it at that, maybe, ShanShan.

ShanShan Xo -- Berenberg -- Analyst

Thanks. So last question on science. There are a few compounds targeting the CD47 pathway in the clinic already. So what is the differentiation of this compound except that it is our compound? And how should we think about this logistic mechanism action between this compound and another and thank you?

Simon Moroney -- Chief Executive Officer

Maltre, do you want to handle that one?

Maltre Peters -- Chief Development Officer

Yeah, I can quickly speak to that. So, you are right, that there are other compounds in clinical development trails. More of these molecules, to the best of our knowledge, are antibodies directed in the CD47 pathway. Some of them come with a toxicity set related to the fact that CD427 is expressed on the red blood cells. And we are quite excited that the compound is just one molecule that may inhibit the pathway effectively. So we could have a small molecule available which is a completely different more of action targeting the same molecule. That's why we are really excited about this opportunity. We don't know if we will find out if there's a different toxicity profile. But the compound has been already used in the clinic, and so far, no hematological toxicity has occurred with this compound.

So that would be my answer and to sum up the presently available or the presently studied compounds are all antibodies, we have a small molecule and we're excited about targeting the same exciting pathway here with a different mode of action.

Simon Moroney -- Chief Executive Officer

And maybe, ShanShan, just to add one additional point to that. Of course, these compounds, this family of compounds, is covered by IP that is completely independent of the antibody IP of the compounds that Maltre talked about. So we have a totally independent IP state that is associated with this family of compounds.

Maltre Peters -- Chief Development Officer

Correct.

ShanShan Xu -- Berenberg

Very helpful. Thank you.

Operator

The next question is from Anastasia Karpova of Kempen. Please go ahead.

Anastasia Karpova -- Kempen & Co. -- Analyst

Hi. Three questions if I may. Can you, following on your discussions with the regulator, elaborate a little bit more, what would be the role of B-Mind in the upcoming L-Mind based filings in Europe in the US? Do you expect to use it as a confirmatory for any of the files?

Also, in your virtual control arm, do you see any significant deviations in terms of response rate and duration of response from the historical data and the ovicidal with lenalidomide.

And finally in regard to the biomarker and the clinical data that you saw, what is the magnitude of the difference, or the efficacy difference you observed in the clinical models? Are we talking several fold increases or something more minute? Thank you.

Simon Moroney -- Chief Executive Officer

Maltre, do you want to take those?

Maltre Peters -- Chief Development Officer

Yeah. Thank you. Thank you, Anastasia and thank you, Simon. So for the role of B-Minds, I think we can say the following. In both geographies, in the United States and in Europe, it is entirely possible that we will get full approval based on L-Mind and B-Mind. In this case, we may not need B-Minds for any further discussion. However, in the US for example, it is in the case, in the event, that we will get an accelerated approval, B-Mind may serve as the conservatory study. FDA is thinking about this but based on the discussion that we have I think that's a very realistic possibility.

In Europe, the discussions are a little bit less mature. So in Europe the situation is a little bit more in flux I would say. But it's also possible that if we get a conditioner approval in Europe that B-Mind could serve as the condemnatory study. Whether or not the approval will be a full approval or an accelerated or conditional approval in both geographies will be a review issue and will be communicated or discussed with the agency I would say within the first 6 months after submission.

For your second question, with respect to the B-Mind differences, or the differences between the virtual control arm and the historical, I think the agent's data, we don't know any details regarding this question yet because the data is still being collected. We are really quite happy with the data influx that we are seeing at the moment. And we have not made any formula statistical data between the historical data and the data that we are collecting currently in our virtual control arm. So it's a bit early to comment on that.

With respect to your last question, on the biomarker efficacy, related to the forward difference between the two I would say that the difference were several folds. The differences were quite strong, and that's why we are pretty encouraged by this data. And that was, as you can imagine, a big component in our decision of implementing the end state. So maybe I'll stop here and ask if my answer made sense to you.

Anastasia Karpova -- Kempen & Co. -- Analyst

Thank you so much for taking my questions. And congratulations, Simon, and good luck in your future endeavors.

Simon Moroney -- Chief Executive Answer

Thank you, Anastasia.

Operator

The next question is from Geoffrey Porges of Leerink. Your line is now open.

Andrew Berens -- Leerink -- Analyst

Hey, this is Andrew filling in for Geoff. So I have a follow up question regarding the EU filing. Can you give us a little bit more color on the EU filing or on your commercial strategy for access market?

Maltre Peters -- Chief Development Officer

The question was really -- the volume was very low. I couldn't hear well. Could you come closer to the microphone a little bit? Or could someone hear better?

Simon Moroney -- Chief Executive Officer

Yeah, Maltre, we've got it. It's fine. It's on whether the earlier EU filing alters our commercials strategy. And the answer is no. So you'll recall that our goal for partnering was we intend to retain US rights ourselves and to seek a partner for territories outside of the US and that strategy hasn't changed.

Andrew Berenes -- Leerink -- Analyst

All right. Thank you.

Operator

The next question is from Konstantinos Aprilakis of Deutsche Bank. Your line is now open.

Konstantinos Aprilakis -- Deutsche Bank -- Analyst

Thank you very much taking my questions. If I may, I also want to take a moment to thank Simon for his outstanding efforts as CEO of MorphoSys all these years. Thank you, Simon.

So jumping into my questions. I'd like to better understand the primary driving force behind the inclusion of the low-end K-cell biomarker in B-Mind. First, what caused you to implement this biomarker in the first place? There was an amendment to the trial in the 1st Quarter, but it's not currently, what triggered you to pursue it? And second, regarding mechanistic relational, is it that retainage is expected to perform poorly in these patients or that tafasitamab is expected to do particularly well given it's outstanding engineering. I know you mentioned it in the prepared remarkets, I'm just looking for the dominant driving force. And to help address the question empirically, have you gone back and preformed a retrospective analysis on L-Mind examining this biomarker? If I recall correctly, you measured in K-cells on that trial to further understand the mechanistic synergy.

Simon Moroney -- Chief Executive Officer

Malte, you want to take those?

Maltre Peters -- Chief Development Officer

Yep. I can take the questions. Let me start with the first question, Konstantinos, on the rationale of implementing the amendment and identifying the biomarker.

So the first data that really came out was actually coming from a clinical trial where they found that in K-Cell numbers actually had an influence with respect to treatment respects their PD20 antibody. And that data was presented, if I'm not mistake, at ASE 2018. And we saw that data, of course, and we asked ourselves if similar things or if this finding could have implications.

And that's why we had started our own experiment in our laboratory to understand if patients with low numbers of K-cells could respond differently. And interestingly we found that in cases where the K-cells numbers are very low, katasetomab has a higher effect against the tumor. So your second question -- the answer to your second question is clear, that in these situations where patients have low number of K-cells, one is an obvious better choice.

Konstantinos Aprilakis -- Deustche Bank -- Analyst

And then, regarding the 50% of the overall study population that seems to have this biomarker, was that by design? Does it sort of facilitate the valuation of the biomarker on a 1 to 1 basis? Or do you think it somehow reflects the epidemiology that you'd respect in a real-world setting?

Maltre Peters -- Chief Development Officer

That's just the reflection of the epidemiology of this particular patient population.

Konstantinos Aprilakis -- Deustche Bank -- Analyst

All right. Very helpful, thanks very much guys.

Maltre Peters -- Chief Development Officer

Okay. Thank you.

Operator

The next question is from Danielle Brill of Piper Jaffray. Your line is now open.

Danielle Brill -- Piper Jaffray -- Analyst

Thanks guys. Good morning. Thanks for taking my question. Regarding B-Mind, curious, what studies did you evaluate when you characterized the RSPFS as 3 to 5 months? How did the patients in those studies compare to those enrolled in B-Mind? And then, with the interim being pushed out again, is PFS for the total population now exceeding the high end of that historical range?

Maltre Peters -- Chief Development Officer

So we, of course, took into account the available data at the time of the study design. We were aware of the fact that there's quite some range in PFs numbers. We based our statistical model on a good average. And now, based on what we said today and earlier, we find we are on the upper end of that spectrum.

Danielle Brill -- Piper Jaffray -- Analyst

Got it. Thanks again for the questions and best of luck to you, Simon.

Simon Moroney -- Chief Executive Officer

Thank you, Danielle.

Maltre Peters -- Chief Development Officer

Thank you.

Operator

The last question is from Klaus. Your line is now open.

Klaus

Hi there. Sorry. I'm interested a little bit in the dynamics of Tourneyer. You reviled that in the 2nd Quarter, the sales contribution is estimated to be at 7.1 million. If I did my math correctly, that's half a million higher than the first quarter. What kind of dynamics can we put underneath the development there? Is it going to be like that for the remainder of the year or what else shall we assume? Thank you very much.

Jens Holstein -- Chief Financial Officer

Thanks, Klaus, great question. I'm happy to take it. I mean, our expectation is that it will generate more royalties, higher royalties in the quarters to come. And that's driven by the fact that more and more countries are now taking it on their reimbursement list. That Jensen is developing their compound in various additional indications. We talked about arthritis for example. It's approved in Japan, but there will be additional geographies that will get tourneyer in this indication as well as multiple other indications. So we're absolutely convinced that we see an increasing figure in the revenues stream for the years to come.

Klaus

Thank you very much and thanks to you guys, Simon, particularly to you.

Simon Moroney -- Chief Executive Officer

Thank you.

Operator

Thank you, we have no further questions coming through so I will now hand it back to Dr. Simon Moroney to wrap up today's call.

Simon Moroney -- Chief Executive Officer

Yeah, to wrap up, we're well on track to achieving and receiving our goals for the year. Tefacidomab will file our BLA based on L-Mind by year end and in Europe will file by mid-2020. Our other programs are also making good progress and contribute to our broad clinical footprint.

Most recently our agreement with Vivoryon provides a potentially valuable addition to our proprietary portfolio. We're excited about the potential of these small molecule inhibitors in combination with our antibodies, first and foremost. Finally with our solid financial position MorphoSys is well equipped to execute its plans during the remainder of the year and beyond.

That brings to an end my 107th -- yes you head that right. 107th and last conference call with MorphoSys. Thank you all for your interest in and support for the company over the last 20 years. I've enjoyed all of our interactions. I plan to make an introductory tour with Jean-Paul in early September and looking forward to seeing as many of you as possible then.

Dr. Sarah Fakih -- Head of Corporate Communications and Investor Relations

That concludes the call. If any of you would like to follow up, we are in the office for the remainder of the day. Thank you for your participation on the call and goodbye.

Operator

Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.

Duration: 56 minutes

Call participants:

Dr. Sarah Fakih -- Head of Corporate Communications and Investor Relations

Simon Moroney -- Chief Executive Officer

Jens Holstein --Chief Financial Officer

Dr. Malte Peters -- Chief Development Officer

James Gordon -- JP Morgan Cazenove -- Analyst

ShanShan Xu -- Berenberg -- Analyst

Anastasia Karpova -- Kempen & Co. -- Analyst

Andrew Berens -- Leerink -- Analyst

Konstantinos Aprilakis -- Deutsche Bank -- Analyst

Danielle Brill -- Piper Jaffray -- Analyst

 

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