MorphoSys AG (MOR) Q1 2019 Earnings Call Transcript

MorphoSys AG (NASDAQ: MOR) Q1 2019 Earnings Call May 8, 2019, 2:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Sarah Fakih -- Head of Corporate Communications and Investor Relations

Good afternoon, good morning, and welcome to our Q1 2019 conference call and webcast. My name is Sarah Fakih and I'm the Head of Corporate Communications and Investor Relations at MorphoSys. With me on the call today are Simon Moroney, our Chief Executive Officer, and Jens Holstein, our Chief Financial Officer.

Before we start, I would like to remind you that during this conference call, we will present and discuss several 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 undo reliance on such forward-looking statements which speak only as of the date hereof.

In the presentation, Simon will start by giving you an operational review of the first quarter as well as an outlook for the rest of this year. After that, Jens will review the financial results of the first quarter of 2019. The presentation will last about 20 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. I would now like to hand over to Simon Moroney.

Simon Moroney -- Chief Executive Officer

Thank you, Sarah. Also, warm welcome to our Q1 call. We've made a very good start to the year 2019 with significant achievements in our proprietary as well as our partnered programs. I'll go through the highlights in both areas, starting with the clinical programs from our proprietary development segment. Our most advanced program is MOR208, the Fc-enhanced CD19 antibody in clinical development for B-cell malignancies.

I'll start with L-MIND, our most important and advanced trial in terms of market proximity. L-MIND is an open label single-arm Phase 2 trial evaluating MOR208 plus lenalidomide in 81 patients with relapsed or refractory DLBCL who are ineligible for high-dose chemotherapy and autologous stem cell transplantation. In December 2018, the last of the 81 patients enrolled in the study reached a 12th and last month of follow-up according to the protocol.

10 stocks we like better than MorphoSys AGWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and MorphoSys AG wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of March 1, 2019

We expect to have final results from the trial shortly and will present the data at the upcoming International Conference on Malignant Lymphoma in Lugano next month. We may publish headline data in advance as soon as it's available. In the meantime, we're on track with our plan to seek US regulatory approval on the basis of the L-MIND study. Our submission to the FDA should be complete by year end, which could, subject to a review, allow for an approval in mid-2020.

In Europe, we're encouraged by discussions we've had with regulatory authorities on a potential path to approval in this region also based on L-MIND. We've had positive discussions with two European national authorities to assess the general level of acceptance of L-MIND and are currently seeking advice from the European Medicines Agency, EMA, on whether L-MIND can be used for a European submission.

A successful outcome here could result in MOR208 being on the market in Europe earlier than previously assumed. On the basis of our current EMA interaction, we expect to have a clearer picture of the way forward later in 2019 and will provide an update on this important topic as soon as we have clarity.

Independently of L-MIND, the Phase 3 B-MIND trial of MOR208 is also ongoing. The study looks at MOR208 plus bendamustine versus rituximab plus bendamustine in patients with relapsed or refractory DLBCL who are ineligible for high-dose chemotherapy and autologous stem cell transplantation.

In early March, we announced an amendment of B-MIND that had been agreed with the FDA, namely the introduction of a biomarker-based co-primary endpoint. The scientific rationale for the amendment is based on our own pre-clinical data as well as published literature, which indicate that MOR208 might be particularly active in DLBCL patients who can be characterized by the presence of a certain biomarker that is present in roughly half the patient population addressed in this trial.

We're filing patent applications on the biomarker and will disclose information about it when it's completed. The pre-planned, event-driven interim analysis of B-MIND should take place in the second half of 2019. This interim analysis will inform our decision whether to continue with the original all comers trial of 330 patients or whether to add a further 120 patients and focus on the biomarker-based co-primary endpoint. In the first case, the study should be completed in the first quarter of 2020, in the second case, the first quarter of 2021.

Discussions with the FDA regarding the assay validation procedures are expected to take place in the middle of this year. The B-MIND biomarker amendment gives us an additional chance of a successful outcome to B-MIND without compromising the trial's original design. Given the interim analysis could lead to the paths forward I have just outlined, we will announce outcome and continuation of B-MIND as soon as the interim analysis has been done.

The third ongoing MOR208 trial is COSMOS. This exploratory study is looking at the safety of MOR208 in combination with either idelalisib or venetoclax in patients with CLL or SLL who have failed or become intolerant to prior treatment with ibrutinib. The treatment and observation of patients continued during Q1 of 2019 and we plan to present updated data at a medical conference toward the end of the year.

We've had a lot of inbound interest in our planned frontline DLBCL study of MOR208 and preparations are currently ongoing for the announced Phase 1b trial which will start later this year. Depending on the Phase 1b data, the next step would be a pivotal Phase 2/3 trial with roughly 800 to 900 patients commencing in mid-2020.

As we move forward with our regulatory submission to the FDA of MOR208, we continue to build our commercial organization in the US. We've recruited all the main senior positions in support of our President, David Trexler, and are delighted with the excellent quality of management and high level of experience we've been able to attract.

The key part of the US organization is the medical affairs department. This currently comprises ten people, many of whom have been engaging for several months with oncologists across the US. Overall, we are well on track to having the commercial team fully operational for an anticipated launch in mid-2020.

Lastly, I'm very pleased to announce that MOR208 now has an international non-proprietary name, so-called INN. The name is tafasitamab and we will transition our usage away from MOR208 to this name. Having an INN name is an important step in our current commercialization preparations.

I'll continue with MOR106, the antibody directed against IL17C that is currently in clinical development for atopic dermatitis. Just to remind you, 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 were assumed by Novartis.

There are currently three studies ongoing for MOR106 and I'd like to briefly update you on their status. First, our ongoing Phase 2 IGUANA trial in atopic dermatitis patients, which we started together with Galapagos in May 2018 is continuing patient enrollment and we expect completion of enrollment around the end of this year.

Second, we started a Phase 1 bridging study in the third quarter of last year to evaluate the safety and efficacy of a subcutaneous formulation of MOR106 in healthy volunteers and atopic dermatitis patients and expect primary completion of this trial also by the end of this year.

Third, in April, we announced the start of the Phase 2 GECKO trial, which will enroll patients in the US and Canada to evaluate the combination of MOR106 with topical corticosteroids. This IND opening study extends the development program for MOR106 to the US and Canada, complementing the ongoing clinical trials in Europe. Further, the start of a Japanese ethno-bridging study together with Galapagos is planned for the second half of this year.

We see great potential for MOR106, which is to the best of our knowledge, the first program against IL17C in clinical development. While our initial focus is on atopic dermatitis, which is an area of enormous unmet medical need, under the terms of the agreement, Novartis will explore the potential of MOR106 in additional indications other than atopic dermatitis.

Let me turn now to MOR202, our proprietary anti-CD38 antibody with opportunities in oncology and autoimmune diseases. In the first quarter of 2019, our partner, I-Mab Biopharma initiated two pivotal clinical trials of MOR202 in second and third line multiple myeloma in the Chinese region.

Each of these trials, one of Phase 2 and one Phase 3, could lead to a biologics license application in China. In the meantime, we continue preparations for a trial of MOR202 in a selected but as yet nondisclosed autoimmune disease. We're on track to start this trial in Q3 of this year, at which time we will disclose the indication.

I'll turn now to our partner discovery segment. Even though we're no longer actively seeking deals in this segment, it is still a substantial part of our overall value proposition. 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 serve MorphoSys long into the future. The most advanced product in the segment is Janssen's Tremfya, which in July 2017 became the first drug based on our antibody technology to reach the market. Sales of Tremfya in the first quarter of 2019 reached $217 million, confirming that our royalty guidance of 23 million to 30 million euros is well within reach. Tremfya is clearly an important asset for Janssen and has been given the appropriate attention, both in commercialization and in further development.

Janssen started clinical development in two additional indications in Q1 of 2019, namely a Phase 2a proof of concept study in ulcerative colitis and a Phase 1 trial in familial adenomatous polyposis, a genetically determined disease of the gut with a high prevalence to develop into colon cancer. These new indications add to the ongoing ones, which include several forms of psoriasis, psoriatic arthritis, Crohn's disease, and hidradenitis suppurativa.

We're delighted to see such a broad clinical development program and are optimistic that Tremfya can become a widely used drug, further supported by the recent FDA approval of the Tremfya One-Press device in February of this year. This device allows a self-administration at home, thereby offering a much more convenient administration for patients.

To conclude, at the end of the first quarter 2019, the MorphoSys pipeline comprised overall of 115 programs from discovery to the market. These include one program already on the market, namely Tremfya, and 29 programs in various stages of clinical development. We expect a substantial amount of additional clinical data from several programs between now and year end.

As always, we have no control over what our pharma partners communicate, but we're confident that there are quite a few positive results to come. We believe many of these programs have the potential to be major value drivers for MorphoSys and we look forward to updating you on many of them in the future.

That concludes my operational review. I'll now hand over to Jens for his wrap-up of the financials.

Jens Holstein -- Chief Financial Officer

Thank you, Simon. Ladies and gentlemen, from my side, a warm welcome to all of you. As Simon already pointed out, we're very pleased with the developments in our performance in the first quarter of the year. Let's now take a closer look at the most important financial figures of MorphoSys for the first quarter of 2019. I would like to start with our P&L statement on slide 12.

Group revenues totaled 13.5 million euros compared to revenues of 2.8 million euros in the first quarter of 2018. This increase was driven by an increase in Tremfya royalties as well as a milestone payment of $5 million for MOR202 from I-Mab Biopharma following the start of the Phase 2 clinical trial in March.

As in previous quarters, the contractual royalty reported from Janssen for Tremfya has not been received yet. The Tremfya royalties booked for Q1 2019 were estimated based on public announcements made by Janssen J&J. Final numbers can still vary slightly on the basis of foreign exchange.

Looking at expenses, our total operating expenses reached 37.3 million euros. The expenses for research and development amounted to 24.7 million euros. There were also expenses for proprietary R&D and technology development that amounted to 22.6 million euros compared to 15.5 million euros in the previous year. Selling expenses rose to 1.7 million euros compared to 0.8 million the year before. General and administrative expenses increased to 5.9 million euros versus 3.9 million euros in Q1 2018.

Cost of sales for the first three months of 2019 amounted to 5 million euros. This item consists of expenses related to services provided to partners such as Novartis or I-Mab. Those costs also include manufacturing costs for the expected market supply of MOR-208, tafasitamab, as the antibody is called from now on. In case of an approval, this material should be partly used as drug product in 2020.

In the first quarter of 2019, this cost item has not been used. Earnings before interest and taxes amounted to minus 23.6 million euros in Q1 2019 in comparison to minus 90 million euros in the first quarter of 2018. Our consolidated net loss after taxes amounted to 22.7 million euros in Q1 2019 compared to net loss after taxes of 19.5 million euros in Q1 of the previous year. The earnings per share for Q1 of 2019 reached minus 0.72 euros after minus 0.67 euros in Q1 of the previous year.

I'm now on slide 13 to give you an overview of our segment reporting for Q1 2019. As you know, in our proprietary development segment in which we focus on the research and clinical development of our own drug candidate, we recorded revenues of 5.8 million euros in the first quarter of 2019 as compared to 2 million euros as compared to 0.2 million euros in Q1 2018. As mentioned earlier, this increase was mainly driven by a milestone payment of $5 million from I-Mab for the start of a clinical trial of MOR202.

Operating expenses amounted to 30.8 million euros as compared to 16.1 million euros in Q1 2018. The main reason for this increase is our increasing investment for the development of our proprietary programs. Consequently, the EBIT of our proprietary development segment came in at minus 25 million euros compared to minus 15.9 million euros in the previous year.

Now, part of the discovery segment, we apply our proprietary technology to discover new antibodies for third parties and benefit from our partner development advancements for R&D funding license fees, success-based milestone payments and royalties.

In the first quarter of 2019, revenues amounted to 7.8 million euros as compared to 2.6 million euros in Q1 2018. Consequently, the EBIT in our partner discovery segment increased and amounted to 5.5 million euros as compared to 0.6 million euros in Q1 2018.

Moving on to the balance sheet on slide 14 as of March 31st, 2019, we recorded total assets of 556.3 million euros. This represents an increase of 17.5 million euros compared to year end 2018. The increase is a result of the implication of the new IFRS 16 standard with respect to leases offset by the use of cash and cash equivalents of operations in the first quarter of 2019.

At the end of Q1, we had a cash position of 431.2 million euros compared to 454.7 million euros as of December 31st, 2018. On the balance sheet, this position is reported on the following items, cash and cash equivalence, financial assets of fair value for profit and loss, and current and non-current financial assets with amortized costs. The number of shares issued totaled 31,839,572 at the end of Q1 2019, which is the same number as of year end in 2018.

Before I conclude my session, I would like to reaffirm our financial guidance for the full year 2019, which was first communicated in March in connection with the presentation of our 2018 report. For 2019, we anticipate total group revenues in the range of 43 million euros to 50 million euros. We estimate Tremfya royalties to be in the range of 23 million to 30 million euros at constant US currency.

We expect an EBIT in the range of minus 127 million euros to minus 137 million euros. Proprietary R&D expenses including technology developments in 2019 are anticipated in the corridor of 95 million euros to 105 million euros. Of note, the guidance does not include the potential origin or milestone payment for the start of Phase 3 clinical trials for MOR103, GSK3196265 that could occur in the course of 2019 and could therefore improve.

The guidance also does not include revenues from potential future partnerships or licensing agreements for MOR208 or any other compound that is in our proprietary development. Effects from potential licensing or co-development deals for new development candidates are also not included in this guidance.

Ladies and gentlemen, this concludes my review for the first quarter of 2019. I'll now hand back to Sarah for the Q&A session.

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

The first question is from James Gordon, JP Morgan. Your line is now open.

James Gordon -- JP Morgan -- Analyst

Thanks for taking the questions. A couple of questions -- one was on MOR208 and where we are in the EU. I noted the comments about encourage discussions for potential EU filing on L-MINE, but since you last provided an update in March, could you clarify what side of the discussions have taken place. Have you actually had discussions with essential EU regulators or just discussions with individual countries about whether you can file on L-MIND and when do you expect to get clarity on whether you can file in Europe with L-MIND? That's the first question.

The second question -- MOR208 and frontline study plans, the frontline opportunities are the biggest indication of the pipeline, but in terms of framing the opportunity, should we assume that the Phase 1b and the subsequent Phase 2 and Phase 3 studies are going to be stratified by this biomarker you're looking at or might they just enroll biomarker plus the patients and when do you decide that?

The other question for frontline, when you're developing the product, do we think about this as being an essentially multi-year maintenance therapy or a shorter treatment duration therapy like Rituxan in frontline DLBCL? How should we build that? Thanks.

Simon Moroney -- Chief Executive Officer

Thanks, James. First of all, regarding the regulatory interaction with the EU, what has happened is that earlier this year, we had discussions with two national bodies to get a feeling for how they viewed the possibility of a submission based on L-MIND.

Those discussions were, I would say, better than we had hoped for, hence the use of the word encouraging. They're by no means decisive, of course, as you know, but they certainly encouraged us to continue those discussions. So, what we're now doing is we're seeking scientific advance from EMA, from the central European regulator.

We expect that interaction to take place in the summer and as soon as we have meaningful feedback, feedback that we think could be relied upon as to whether we could file on the basis of L-MIND or not, then we would of course share that with you. So, we can't give you a precise date on when that would be, but I would estimate sometime in the second half of the summer, probably.

Then regarding the frontline study of MOR208 and the potential for using a biomarker, we're not at this stage planning to do that. We do note that there are a couple of studies, frontline studies that will produce data shortly. One is the ROBUST study of Celgene, which including lenalidomide on top of R-CHOP.

We believe that will be reported at one of the June conferences. There's also a second Phase 2 study in a similar setting. One of those studies used a biomarker cell of origin and one of them didn't. So, we'll certainly be looking closely at those results, but at this stage, we don't plan to stratify by any biomarker, either cell of origin or the one that we're using.

And then your last question, if I understood it correctly, in terms of the strategy behind that frontline study, it's simply an attempt to see whether adding MOR208 on top of R-CHOP makes a difference for patients. So, since R-CHOP is a very firmly established gold standard right now, what we're looking to do is to see whether we can improve outcomes by adding MOR208 to that and/or in the presence of lenalidomide. That's something we hope the Phase 1b study will guide us on, whether we need to add lenalidomide or not, but the intention is essentially to see if we can improve outcomes by adding MOR208 to that established frontline therapy.

Operator

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

Danielle Brill -- Piper Jaffray -- Analyst

Good morning. Thanks for the questions. Simon, you previously said that B-MIND wasn't a topic of discussion during interactions with the FDA. I'm curious if that has changed at all or if you're thinking of the importance of B-MIND in the US has evolved. Then I have a couple follow-ups on the protocol modification.

Simon Moroney -- Chief Executive Officer

Thanks, Danielle. So, it is as we had previously said, that these are really two different independent trials. All of the interactions we're having with the FDA on L-MIND are concentrated on L-MIND. There's no overlap from that perspective between the two trials. We anticipate submitting the L-MIND data. Nothing has changed there and we don't anticipate the B-MIND trial has any bearing on how the FDA is looking at that and will look at that L-MIND data package. I hope that's clear.

Danielle Brill -- Piper Jaffray -- Analyst

Then for the modification to the protocol, I'm just curious what the genesis was for including the biomarker and was there something in the blinding data set that caused you to hedge?

Simon Moroney -- Chief Executive Officer

No. This was a kind of idea of our scientist. There is some stuff in the literature which is relevant to this. I don't want to go into that without giving too much away. It was an idea that our scientists had that they tested pre-clinically to the number of experiments here that supported the hypothesis. We took that data set, that pre-clinical data set to the FDA and said, "Look, we have a hypothesis here that this biomarker may have a bearing on outcomes," without having any clinical data to support that. The FDA said, "That pre-clinical argument makes sense to us. If you want to amend the trial, fee free to do so."

So, this is not based on any clinical data. It's based purely on pre-clinical data. It gives us essentially a backup, if you like, or an insurance policy for the B-MIND trial all comers -- if this should turn out, which we don't expect and certainly don't hope that the all comers trial should not be successful, we now have a second crack, if you like, with this coprimary biomarker endpoint.

Operator

The next question is from Shanshan Xu of Berenberg Capital Partners. Your line is now open. Please go ahead.

Shanshan Xu -- Berenberg Capital Markets -- Analyst

Thank you for the questions. Good morning and good afternoon. I have two questions, if I may. So, the first one is I understand that you will conduct a pre-planned interim analysis of B-MIND in the second half of 2019. Based on the results, you will consider whether to extend the study in biomarker-only populations.

So, in that sense, during the interim analysis of B-MIND, you'll probably take a look at the PFS in the all comer population and the PFS in the population with this mysterious biomarker. Can you please tell us how much of our spending you will allocate during this interim analysis and are you going to allocate to both all comer and the biomarker-specific population?

Simon Moroney -- Chief Executive Officer

So, many thanks. Let me explain how it works. The interim analysis will look at all comers based on the initial design of the trial and will look at outcomes based on the presence of the biomarker. So, essentially, we have three potential outcomes. Either the study is futile or the study could succeed under the original all comers design or the study could succeed based on the biomarker. In the latter case, we would add a further 120 patients which takes the total to 450 and that adds essentially one year to the total duration of the trial.

The way that those 120 patients would be added is non-selectively. In other words, the recruitment criteria for those additional 120 patients will be exactly the same for the all-comers under the original design. So, therefore, there's no jeopardizing of alpha in the amended trial. We're simply going to look at the biomarker carriers in a bigger pool of patients, all of whom have been recruited according to the same criteria. I hope that answers your question.

Shanshan Xu -- Berenberg Capital Markets -- Analyst

That's very helpful. Thank you. My second question will be without disclosing the nature of the biomarker, can you at least let us know whether or not the patients that are already enrolled in B-MIND prior to your biomarker announcement have been tested with this biomarker? Is this something pathologists or physicians have routinely tested? Also, since you are in discussion with the regulators regarding the validation of this biomarker assay, can you at least let us know whether or not patients in the pre-existing enrollment and the patients in the future enrollment will be evaluated with the same biomarker assay? Thank you.

Simon Moroney -- Chief Executive Officer

So, the answer to whether they have been recruited based on the presence or absence of the biomarker is no, they haven't. We didn't look at the presence or absence of that in the recruitment process. It's certainly not a criteria for recruitment. As to how we may choose to use it future studies, that's really a different question and we haven't decided on that yet. As I said, the B-MIND trial, however it continues will be completed non-selectively for the biomarker, if that's clear.

Shanshan Xu -- Berenberg Capital Markets -- Analyst

Thank you.

Operator

The next question is from Gunnar Romer of Deutsche Bank. Your line is now open.

Gunnar Romer -- Deutsche Bank -- Analyst

Thanks for taking my questions. Simon, just a quick one on whether you have an update on partnering discussions around MOR208, specifically I would be interested if you have taken a decision internally to maintain all US rights or whether this is still debated also internally. My understanding was you're primarily looking at partnering ex-US rights. Secondly, on the buildup of the commercial organization in the US, I'm pleased to hear about the progress you're making. I'm curious if you can share more about next steps and what has gone better or worse so far.

Then for Jens -- regarding the COS, that was a 5 million number in the first quarter. How should we think about the development from here for the remainder of the year? Secondly, Tremfya royalties came in nicely and I think pretty consistently with what J&J reported in terms of sequential increase here. You've recorded 6.6 million based on your estimate, but I would guess the final number is not too different. That would already bring you well in line with your guidance for the year. I'm curious whether at some point you'd be prepared to also upgrade that guidance corridor for us. Thank you.

Simon Moroney -- Chief Executive Officer

Thanks, Gunnar. Let me start with the first two. Regarding the partnering discussions for MOR208, we're really reluctant to give you an update on where things stand with that. We're happy with the way they're proceeding, but as always, we don't want to give guidance on with whom and by when and this kind of stuff.

The answer to the question about are we looking to retain all US rights is kind of related to your second question, I guess. The reason we're building up a commercial organization in the US is that we intend to retain US rights and commercialize ourselves there. Does that mean that we absolutely categorically rule out some kind of deal which would share some kind of US rights? I wouldn't categorically rule that out, but we have a clear preference that we would retain sole US rights.

In terms of the commercial organization in the US whose job it will be to do that selling in the US, we're really happy with how that's going. You'll recall that we had a bit of a hiccup there last year getting started there, but since then, it's gone extremely well. I think it's fair to say the quality of the people we've been able to attract has really exceed our expectations and honestly, I think that's driven by the quality of the asset.

This is a really attractive proposition for people to have the chance to launch and commercialize an asset like MOR208 in the US market. I think that's helping us in recruiting a great team over there. So far, so good, and absolutely well on track.

Jens Holstein -- Chief Financial Officer

Okay. I'll take the next two questions. As you mentioned, we have cost of sales reported in the amount of 5 million euros for the first quarter. You should expect we have some additional money that we spent because that amount consists of some costs that are related to our relationship with Novartis for the MOR106 program and also with I-Mab for the MOR202 program where there will be some costs.

For a great extent, these are costs that are for the market supply of MOR208 going forward. I wouldn't assume that you have to take this number times four to have a total number in terms of COS, but it will be certainly be a double-digit number. So, we'll be between 10 million and 20 million you should definitely expect for the full year of 2019.

In terms of the other question, the Tremfya royalties, we're very excited about the 6.6 million that we could record and I think it's a fair assumption that somehow the figures shouldn't be too far off of the final figure we expect to receive from Janssen in the near future.

Going forward, looking at the guidance, we felt a little bit -- we don't feel that after the first quarter we should adapt our guidance on the Tremfya royalties. That's maybe a touch too early, but then looking at the second quarter, at latest in the third quarter, we certainly would adapt in case the figures should run in the direction that we currently hope for and we have a good indication for the first quarter that this could actually come out better than we anticipated.

You should also take into account that we just gave out our guidance in March. We also have a potential milestone payment that could come in the course of the year for MOR103. Besides the Tremfya royalties, there is another item that could influence our guidance significantly and that is something to not lose sight of as well.

Operator

The next question is from Graig Suvannavejh of Goldman Sachs. Your line is open.

Graig Suvannavejh -- Goldman Sachs -- Analyst

Thanks very much for taking my questions. With respect to the decision to announce the final results of L-MIND, I believe there's a place holder on the Lugano conference for the data to be presented on June 22nd at 8:30 in the morning. I'm trying to figure out what will determine whether you decide to press topline press releases or just have it presented at the conference. That's my first question. My second question just has to do with -- give us a little bit background on your new Head of US Commercial or the head of the US subsidiary, David Trexler, it would be helpful to know what he's been involved with in the past.

For Jens, as we think about your buildup of your commercial organization, is there a way that you can ballpark for us the magnitude of spend you were thinking in terms of having that fully burdened commercial organization and then lastly, just from a housekeeping perspective, can you remind me what, if anything, you've said around the potential milestone associated with the Phase 3 start for the GSK program? Thank you.

Simon Moroney -- Chief Executive Officer

Thanks, Graig. Let me start with the first two of those. We fully intend to present the final L-MIND data at Lugano. I think the slot that you mentioned is probably the slot we've been assigned. We haven't yet reached the final decision whether we should announce the headline data in advance. I think it's fair to say that given the interest in this topic, we're leaning toward publishing that as soon as we have the headline data, but a final decision hasn't been made yet.

Regarding the US, our President over there is David Trexler. He joined us at the beginning of this year. He comes with a great pedigree in commercialization of oncology products in the US. He was previously at Merck, German Merck, and was involved in building up their US oncology commercial activities.

He joined Merck a few years ago from Eisai, where he worked in a similar capacity in oncology drug commercialization in the US. He brings many years of experience of the US oncology market and we think he's a great addition to the team. That's been born out by his ability to higher his senior management team, which as I said before, has gone extremely well so far. So, really happy with the way that's panning out.

Jens Holstein -- Chief Financial Officer

In terms of the costs, the guidance that we have given out in terms of spend for the commercial organization for the years '18, '19, and '20, we mentioned in the F1 document that we filed with the listing in April of last year, we iterated the amount of spend overall in the range of $90 million to $100 million for those three years in total, you've got to expect that the spend is somehow split between selling expenses and G&A because you have seen certainly a G&A increase for Q1 that will increase further.

So, I think the biggest chunk of the spend will take place in '20, but with a build up of the people now in the further quarters of this year, you certainly also will see an increase. So, that's sort of ballpark $90 million to $100 million for the three years in total is the amount of money that you should expect that we spend.

Then in terms of the magnitude of the milestone payment that we expect for the Phase 3 start for the 103 compound with GSK, unfortunately, I'm not allow to say that as our friends from GSK are not so happy that we tell details on those terms, but it has certainly a magnitude that is definitely relevant for the guidance. Unfortunately, I can't be very precise here following the contractual agreement that we have with GSK.

Operator

Your next question is from Gary Waanders for Bryan Garnier & Co. Your line is now open. Please go ahead.

Gary Waanders -- Bryan Garnier & Co. -- Managing Director

Thanks for taking the questions. Just on the commercialization ex-US and the regulatory discussions that you're having in Europe, would the potential partners that you're talking to at the moment be able to act quickly enough if you got the sort of more optimistic route through the regulatory pathways in Europe? That's the first one.

Secondly, do you have any intentions to expand the product offering that the US commercial might be able to sell once 208 is on the market, assuming that's the case? Finally, with the mature L-MIND data coming in in June, is there any additional follow-up that you expect on those patients and might that be important for the NDA completion? Thank you.

Simon Moroney -- Chief Executive Officer

Thanks Gary. Regarding the commercialization outside of the US and timing, let's assume that we do get the green light to submit L-MIND in Europe. We would in any case still be later with the launch in Europe than the mid next year anticipated launch in the US. So, from a timing point of view, we have more time to prepare both ourselves and a partner for a launch in Europe than we have in the US. So, from that perspective, we don't see that as being a limiting factor at this point.

Regarding expanding the US product offering, you're referring, of course, to the fact that they're going to have one product in their bag initially. We're well aware of that. We are, as always, actually, looking for additional products or product candidates to bring in. That's something that's an ongoing activity here internally. Of course, we can't give any guidance as to what that might be or when we might be able to add something. It is certainly a priority to be able to strengthen our proprietary product portfolio overall through some kind of transaction.

Then regarding the follow-up -- for the submission for the FDA, the data that you'll see at Lugano in June will be it. We don't require any additional follow-up data for that submission, but we will continue to follow-up patients and we'll keep updating the data as new data comes in, but at least for the submission, we don't need additional follow-up data.

Operator

The next question is from Zoe Karamanoli for RBC. Your line is now open. Please go ahead.

Zoe Karamanoli -- RBC Capital Markets -- Analyst

On the topic of the biomarker, as I understand, current acceptance of the biomarker by the FDA is based on pre-clinical data. I'm wondering if you're planning to test respectively the biomarker hypothesis in patients from the L-MIND study that have responded well.

Simon Moroney -- Chief Executive Officer

That's not something that's contemplated in the protocol. I'm not sure if a decision has been made whether we would analyze samples from L-MIND patients for the biomarker or not. I have to say I can't give you a clear answer on that at this stage. It was not contemplated in the protocol for L-MIND.

Zoe Karamanoli -- RBC Capital Markets -- Analyst

Thank you. I understand. It was more whether you would want to support the FDA filing with that data. My second question -- can you help us understand a little bit better how you think the potential label for MOR208? From previous comments, I understand that in the interim analysis of the B-MIND study with the biomarker, that would be irrelevant with the filing for the L-MIND study. Is that correct?

Simon Moroney -- Chief Executive Officer

I think the default assumption is the likely label for L-MIND is based on the L-MIND study. The patient population in which that study has been done, nothing to do with biomarkers at all, which is not part of the L-MIND study. That's kind of a default assumption. As I just mentioned in an answer to another question, the biomarker is not a topic at all with the FDA in relation to the L-MIND study. It's something completely separate at this point. At the least, we're looking at the label for 208, which is based purely simply on patients that have been treated in that particular study.

Zoe Karamanoli -- RBC Capital Markets -- Analyst

So, you don't expect the B-MIND to have an impact on the labels and the filing?

Simon Moroney -- Chief Executive Officer

No, not of L-MIND.

Operator

Your next question is from Victoria English of Evernow Publishing Ltd. Your line is now open.

Victoria English -- Evernow Publishing Ltd -- Analyst

There have been a couple of stunning reports from AstraZeneca and GSK about early results in antibody drug conjugates. I'm wondering whether any of this has had any impact on your thinking about the development of your proprietary portfolio.

Simon Moroney -- Chief Executive Officer

Thanks, Victoria. Of course, we follow everything that's going on in this field -- antibody drug conjugates, biospecifics, CAR Ts, you name it. We track that very closely. We haven't seen anything, certainly nothing as close to market as we are, that has produced as compelling a data set as the data that we have seen from the most recent cut of the L-MIND study, which was June of last year.

We feel that from a competitive perspective, if that's your question, we feel actually in a really good place because we have a product that's close to market, just over a year away from market if all goes well, with really a great data set of what we've seen so far, in our opinion, and we feel a very manageable safety profile, again, based on what we've seen.

So, we think that we have something very competitive for a patient population that is currently not at all well-served. So, we will continue to monitor those competing programs, competing technologies and so on, but we really feel that we've got something a bit special here with MOR208.

Victoria English -- Evernow Publishing Ltd -- Analyst

Thank you.

Operator

We currently have no further questions coming through. So, as a reminder, if you would like to ask a question, please press zero and 1 on your telephone keypad now. The next question is from Steve McGarry of HSBC. Your line is now open. Please go ahead.

Steve McGarry -- HSBC -- Analyst

Good afternoon, folks. A couple of questions -- first, on MOR208, I don't think you disclosed that, but could tell us who your contract manufacturer is and what is the manufacturing capacity they have available for the product and also whether they're going to need regulatory inspections specifically for 208 ahead of the approval for next year?

Then secondly, on the B-MIND study, although you're not going to need any additional spend for the interim analysis depending on which route you decide to take, could you let us know what the alpha is for filing that product? Thanks.

Simon Moroney -- Chief Executive Officer

Thanks, Steve. So, regarding MOR208 manufacturing, we haven't disclosed who the manufacturer is. We're working with a very big, very reputable, well-established contract manufacturer. We're working at commercial scale, have been for some time. We have a robust, stable process that we're very happy with.

There will be inspections, of course, pre-approval inspections by the FDA, likely in the end of first quarter of next year we're expecting that. So far, over multiple runs that we've done at scale, it's all gone well. So, we feel we're in very good hands there and don't have any concerns from a manufacturing perspective. They certainly have capacity to be able to make the material that we need.

Regarding B-MIND, we haven't actually talked about the statistical analysis plan at all for B-MIND and we prefer to keep it that way for the moment, at least.

Operator

The next question is from Jason Butler for JMP Securities. Your line is now open. Please go ahead.

Roy -- JMP Securities -- Analyst

Hi, it's Roy on for Jason. Thanks for taking the question. I had a few. For the biomarker for 208, when do you expect to release more details on the nature of the biomarker, possibly with the interim in the second half, will there be anything on that at the Lugano meeting? Then for MOR202 in multiple myeloma in the Chinese region, has I-Mab said anything or can you guys say anything about the timelines for those trials? Then lastly, how do you think about biospecifics and how does your platform technology align to potential biospecifics? Thank you.

Simon Moroney -- Chief Executive Officer

So, when are we going to disclose the biomarker? Relatively soon is all I can say. I think we mentioned that we want to make sure that we've got IP filing done and secured before we disclose it. That should be done soon. So, I would hope within the next couple of months, we could talk about it, probably not at Lugano, but not too far off.

Regarding 202, the communication on the timing for that in China, we haven't agreed with our friends at I-Mab to talk about when those trials could be completed or when approvals could be expected. So, in the absence of such an agreement with them to disclose that, all we can tell you at this stage that is what you know, which is that we just started these two pivotal trials over there, or at least I-Mab has. So, sorry that I can't help you with that, but we just don't have an agreement with I-Mab to disclose that.

And then regarding biospecifics, yeah, we have some biospecific activities in here that we're very excited about. One of our more advanced pre-clinical programs is a biospecific antibody that we like a lot. We have some proprietary formats that we're developing as well. So, this is an area that we have activities in, that we have significant investment in. We're hopeful that biospecifcs will play a significant part of our future product portfolio.

Operator

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

Simon Moroney -- Chief Executive Officer

Thank you. To wrap up, we're well on track to achieving or receiving our goals for this year. With 208 or tafacitimab, as it's now called, or tafa, as I call it, based on all the data we've seen so far, we strongly believe we have a remarkable drug candidate. We'll report final data from the L-MIND trial within the next several weeks and are well on track to complete our regulatory filing activities in the US by year-end as planned.

Build up of the US commercial organization also progresses according to our plan to be ready and fully operational for launch in 2020. We look forward to keeping you apprised of our progress for this important expansion. Our other proprietary programs including MOR106 and MOR202 are also making good progress. With our solid financial position, MorphoSys is well-equipped to execute its plans as outlined during the remainder of the year and beyond.

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 good bye.

Duration: 54 minutes

Call participants:

Sarah Fakih -- Head of Corporate Communications and Investor Relations

Simon Moroney -- Chief Executive Officer

Jens Holstein -- Chief Financial Officer

James Gordon -- JP Morgan -- Analyst

Danielle Brill -- Piper Jaffray -- Analyst

Shanshan Xu -- Berenberg Capital Markets -- Analyst

Gunnar Romer -- Deutsche Bank -- Analyst

Graig Suvannavejh -- Goldman Sachs -- Analyst

Gary Waanders -- Bryan Garnier & Co. -- Managing Director

Zoe Karamanoli -- RBC Capital Markets -- Analyst

Victoria English -- Evernow Publishing Ltd -- Analyst

Steve McGarry -- HSBC -- Analyst

Roy -- JMP Securities -- Analyst

More MOR analysis

All earnings call transcripts

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

10 stocks we like better than MorphoSys AGWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and MorphoSys AG wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of March 1, 2019

Motley Fool Transcription has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.