MorphoSys AG

XETRA:MOR

Earnings Call Transcript 2020-Q1

[Operator]

Ladies and gentlemen, welcome to MorphoSys First Quarter 2020 Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] Now I would like to turn the conference over to Dr. Julia Neugebauer. Please go ahead.

[Julia Neugebauer]

Good afternoon, good morning, and welcome to our Q1 2020 results conference call and webcast. My name is Julia Neugebauer, Director, Corporate Communicate and Investor Relations at MorphoSys. With me on the call today are Jean-Paul Kress, our Chief Executive Officer; Jens Holstein, our Chief Financial Officer; and Malte Peters, our Chief Research and Development Officer. Please note that due to the COVID-19 pandemic, we're dialing in from different locations. So I would like to apologize for any disruptions this might cause. Before we start, I would like to remind you that during this conference call, we will present and discuss certain forward-looking statements concerning the development of MorphoSys' core technologies, the progress of its current research and development programs, our transition to a fully integrated commercial pharmaceutical company and the initiation of additional programs. Should actual conditions differ from the company's assumptions, actual results and actions may differ from those anticipated, you are therefore cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. You can find the agenda for today's call on Slide 3. Jean-Paul will start with his opening remarks and will give you an overview on our Q1 2020 highlights. He will then hand over to Jens, who will review the financial results for the first quarter of 2020. Jean-Paul then will close with an outlook for the rest of the year. After the presentation, we will all be available for your questions. You will find the slide deck for this call on our corporate website. I would now like to hand over to Jean-Paul.

[Jean-Paul Kress]

Thank you, Julia, and good morning, and good afternoon, everyone. First, I want to acknowledge that this has been an extraordinary quarter for all of us. Global pandemic, economic disruption, like none of us have seen before and, of course, financial volatility. I hope that all of you and your families are safe and healthy, and thank you for joining the call in this circumstances. The safety of our employees and patients are top priorities. As outlined in our press release last month, we activated our business continuity plans to minimize disruption and ensure the health and safety of our teams. With these measures in place, we have been able to move full speed ahead with getting ready for a successful launch of tafasitamab, if approved by the FDA. In a few minutes, I will share an update on the status of our launch preparations. But first, I will start with key highlights from a very positive first quarter. We got off to an excellent start in 2020, and I am happy to report on the progress we have made. Early this year, we signed a global licensing agreement with Incyte of tafasitamab. We have been working closely together for 2 months now, and it is going very well. Incyte established global hematology/oncology presence and their track record in commercializing important new medicines are highly complementary to our strength, including our antibody and drug development expertise. Since the official closing of the deal, we have been aligning on launch activities and development plans. Together, we will maximize the full potential of tafasitamab. We plan to share more details on this later this year. Also during the first quarter, our BLA for tafasitamab was granted priority review by the FDA and given the PDUFA date of August 30. The FDA has indicated that currently no advisory committee meeting is planned. While waiting for the FDA decision on the BLA filing, we also wanted to provide access to tafasitamab to patients who have no other treatment options. Therefore, we initiated an expanded access program in the U.S. in February. This EAP allows us to make tafasitamab available to eligible patients with relapsed or refractory diffuse large B-cell lymphoma, who are not eligible for available clinical trials and do not have other treatment options. One of my goals has been to strengthen the executive team, and I am very pleased to welcome Roland Wandeler as our new Chief Commercial Officer. Roland brings a wealth of leadership experience, a clear focus on customer and patient needs and a track record of exceptional execution, both in the U.S. and internationally. Roland will lead our global commercial operations, and will oversee our planned U.S. launch for tafasitamab. Roland just started this week, and I look forward to introducing him to you during a future call. Turning now to our development activities highlights. I already mentioned the acceptance of the BLA for tafasitamab. All ongoing tafasitamab trials currently continue, and we have not experienced any major disruptions from COVID-19 in those trials. In general, we see positive signals from sites and investigators, and we see high interest in the ongoing trials. First-MIND, our trial in frontline DLBCL patients, is proceeding well and will be the basis for our pivotal trial that we plan to start next year. We are also finalizing our plans to develop tafasitamab in additional indications and with different combination partners. For instance, we noticed encouraging clinical data in CLL for the combination of T-cell depleting antibodies with PI3 kinase inhibitors, and we plan to look into such combinations as well. As seen with many compounds in development in immunology and inflammation, the recruitment of patients was proactively paused for MOR202 in autoimmune indications, and for Otilimab, which is in Phase III development for RA by GSK. However, for some countries, especially in Europe, we see that the situation is improving and some restrictions are being lifted. So we continue to watch the situation carefully and are fully prepared to restart our trial as soon as circumstances permit. For the development of MOR202 in oncology, we were very pleased to see that our partner I-Mab dosed the first patient in Mainland, China in the ongoing Phase III trial in multiple myeloma. I-Mab is highly committed to bringing MOR202 to patients needing new treatment options. Back to Otilimab, GSK listed yesterday the intention to investigate Otilimab in patients with severe pulmonary COVID-19-related disease on clinicaltrials.gov. According to the registry, the trial is planned to enroll about 800 patients and has a primary completion date of December 2020. We obviously are very pleased to see that GSK intends to test Otilimab in COVID-19 patients.Lastly, we have decided to not exercise our exclusive option to license Vivoryon's small molecule inhibitor of the CD47-SIRP alpha interaction in the field of oncology. This decision was based on a thorough analysis of data from various preclinical validation studies that we performed internally. However, we continue to actively evaluate potential in-licensing opportunities in order to diversify our pipeline and portfolio. Our strong financial situation brings us into a very good position for that, and we will share an update in due course. Moving now to our tafasitamab U.S. launch operations. Our activities continue to ramp up, as we prepare for the anticipated approval in launch of tafa in the coming months. We've made significant progress, and we have adapted our approach successfully to the very special circumstances we are currently encountering with the pandemic. We are using a variety of virtual tools to onboard team members and to initiate, maintain and even grow our connections with our key stakeholders. We are using multiple technology, so we can quickly and easily connect with our key customers upon approval. We are able to provide more choices and control to our health care providers on when and how they want to interact with us. We also innovated with some of the best digital marketing practices. Our sales organization is now fully staffed with some of the best oncology sales talents in the industry. They know the hematology/oncology market and the key stakeholders very well. In addition, we are leveraging Incyte's existing relationships with respect to customer access building on the network they have established with Jakafi. We are implementing industry best practices, and all our sales reps are working with remote capabilities for compliance virtual engagements. We have conducted comprehensive market research to better understand our key customer needs and to segment our markets. We've developed a strong positioning and messaging based on the profile of the tafa/len combination in r/r DLBCL. Our market access team has been engaging with the relevant players and has a deep understanding of the landscape, leveraging their previous experience. We've also performed a diligent pricing research leading to a pricing strategy, reflecting the value proposition of the tafa/len combination. We are establishing a compelling patient support program and market access strategy to ensure that all the appropriate patients will have access to tafasitamab. Our medical affairs team is continuously engaging with KOLs using virtual platforms, supporting scientific exchanges and sponsoring CMA programs. They are also participating in virtual symposia, lectures and clinical trial engagements. Our MSLs have achieved around 1,800 engagements with HCPs to date, and we are well on track to meet and even exceed our target of 2,000 interactions by launch. The robustness of our data for tafasitamab continued to generate a lot of interest from clinicians and we will be very well represented at upcoming virtual scientific or medical conferences like ASH or EHA and ASCO. In addition to all of these activities, we are strengthening our partnership with Incyte and have completed cross-training and deployment of our field medical teams. With Incyte's strong presence and expertise in the hem/onco field, we are significantly increasing our share of voice. And last but not least, our supply chain is on track to ensure timely delivery of product upon FDA approval. We've made great progress towards our launch despite the special circumstances. We have hired an amazing team with great experience in network. I've outlined some of the actions we've taken to commercialize virtually. Our organization has the business agility to adapt to new and changing circumstances to achieve our growth. And we have a very competitive share of voice together with Incyte. I will now hand over to Jens, who will provide you with an update on the 2020 Q1 results. Jens, please.

[Jens H. Holstein, CFO & Member of the Management Board]

Thank you, Jean-Paul. Let me start the financial review by reiterating that we are indeed very pleased with the company's development and financial performance in the first quarter of the year. Q1 2020 was a record quarter for us. MorphoSys has never been financially stronger to pursue its goals. Revenues in the first quarter were at a record high of EUR 251.2 million, and our cash position exceeded the EUR 1 billion mark. Let's now take a closer look at the most important financial figures of MorphoSys for the first quarter 2020 that have been significantly impacted by the successful closure of the company's collaboration and licensing agreement with Incyte. I would like to start with a summary of the agreement with Incyte that we signed in January and finally closed on March. On January 13, 2020, MorphoSys and Incyte announced that both companies had signed a collaboration and licensing agreement for the future global development and commercialization of MorphoSys' proprietary anti-CD19 antibody, tafasitamab. Under the terms of the agreement, MorphoSys received an upfront payment of USD 750 million. In addition, Incyte invested USD 150 million in new American Depositary Shares of MorphoSys listed at NASDAQ. MorphoSys increased its share capital by issuing new ordinary shares to facilitate Incyte's purchase of approximately 3.6 million ADSs. Each ADS represents 1/4 of 1 MorphoSys ordinary share. Incyte purchased the new ADS at a price of USD 41.32 per ADS, including a premium of 20% on the volume weighted average ADS price 30 days prior to the signing of the collaboration and licensing agreement. The new ADSs represent 2.6 -- 2.76% of the registered share capital of MorphoSys following the capital increase. Depending on the achievement of certain development, regulatory and commercial milestones, MorphoSys is eligible to receive milestone payments up to USD 1.1 billion. MorphoSys will also receive tiered royalties on ex U.S. net sales of tafasitamab in the mid-teens to mid-20s percentage range. In the U.S., MorphoSys and Incyte will co-commercialize tafasitamab, with MorphoSys recording all revenues generated from tafasitamab sales. Incyte and MorphoSys will equally share profits and losses 50-50. MorphoSys and Incyte will also share the development costs for the worldwide and U.S.-specific clinical trials at a ratio of 55% covered by Incyte to 45% covered by MorphoSys. Incyte will also assume 100% of the future development costs for clinical trials in countries outside the U.S.Let's now move to our P&L statement on Slide 10. Group revenues for the first quarter of 2020 rose to EUR 251.2 million compared to EUR 13.5 million in the first quarter of 2019. The increase was primarily driven by the upfront payment received under our agreement with Incyte for the commercialization of tafasitamab outside the U.S. As stated in our year-end call, a certain part of the upfront payment of USD 750 million and of the premium of USD 58 million was accounted for as revenues in Q1. The remainder is represented on the balance sheet of the company. Revenues for the first quarter of 2020 includes success-based payments of EUR 10.3 million, primarily from Janssen. As in previous quarters, the contractual royalty reporting from Janssen for Tremfya has not been received yet. Tremfya royalties booked for Q1 2020 were estimated based on a public announcement made by Janssen, J&J. Looking at expenses. Our total operating expenses increased to EUR 47.7 million compared to EUR 37.3 million in the first quarter of the previous year. The increase is mainly caused by the ramp-up of our launch preparation in the U.S. Cost of sales for the first 3 months of 2020 amounted to EUR 3.3 million compared to EUR 5 million in the first quarter of 2019. This item consists of manufacturing costs for the expected market supply of tafasitamab and expenses related to services provided to customers. The expenses for research and development amounted to EUR 21.5 million compared to EUR 24.7 million in the previous year. Expenses in the area were largely driven by expense for external laboratory services and personnel expenses. Selling expenses increased to EUR 12.8 million as compared to EUR 1.7 million the year before. General and administrative expenses increased to EUR 10.1 million versus EUR 5.9 million in Q1 2019. Both increases are primarily the result of higher personnel expenses and expenses for external services, and again, largely driven by our increased commercialization efforts. In the first 3 months of 2020, other income amounted to EUR 10.3 million, up from EUR 0.2 million in the same period of the previous year. The increase mainly resulted from foreign exchange gains in connection with the Incyte collaboration. Earnings before interest and taxes amounted to EUR 213.6 million in comparison to minus EUR 23.6 million in the first quarter of 2019. This is mainly driven by the collaboration and licensing agreement with Incyte. Finance income of EUR 10.6 million mainly included foreign exchange gains from the financial liability from collaborations and gain from changes in the fair value of financial assets. Finance expense of EUR 9.3 million comprised mainly losses from financial derivatives and foreign exchange losses from the financial assets from operations. Our consolidated net profit after taxes amounted to EUR 195.5 million in Q1 2020 compared to a net loss after taxes of EUR 22.7 million in Q1 of the previous year. The diluted earnings per share for Q1 2020 reached EUR 6.11 after minus EUR 0.72 in Q1 of the previous year. On Slide 11, you'll see a summary of our segment reporting for Q1 2020. In our Proprietary Development segment, in which we focus on the research and clinical development of our own drug candidates, we recorded revenues of EUR 240.4 million in the first quarter of 2020 as compared to EUR 5.8 million in Q1 of 2019. As mentioned earlier, this increase was driven by the agreement with Incyte. Operating expenses amounted to EUR 39 million as compared to EUR 30.8 million in Q1 2019. The main reason for this increase is our increasing investment for development of our proprietary programs. The EBIT of our Proprietary Development segment was EUR 210.8 million compared to minus EUR 25 million for the first quarter of the previous year.In our Partnered Discovery segment, we apply our proprietary technology to discover new antibodies for third parties and benefit from our parties' development advancements through R&D funding, license fees, success-based milestone payments and royalties. In the first quarter of 2020, revenues increased to EUR 10.8 million as compared to EUR 7.8 million in Q1 2019. The EBIT in our Partnered Discovery segment amounted to EUR 8.5 million as compared to EUR 5.5 million in Q1 2019. Moving on to the balance sheet on Slide 12. As of March 31, 2020, we recorded total assets of EUR 1.3 billion, up from EUR 496.4 million. On March 31, 2020, our liquidity position amounted to EUR 1.13 billion compared to EUR 357.4 million as of December 31, 2019. On the balance sheet, this cash position is reported under the following items: cash and cash equivalents; financial assets at fair value through profit and loss and current and noncurrent other financial assets at amortized costs. The numbers of shares issued totaled 32,890,046 at the end of Q1 2020. For comparison at the year-end 2019, the number of shares was 31,957,958. Before I conclude my section, I would like to reaffirm our financial guidance for the full year 2020, which was first communicated in March in connection with the presentation of our 2019 annual report. We continue to expect group revenues in the range of EUR 280 million to EUR 290 million. Total R&D expenses for 2020 are anticipated in the corridor of EUR 130 million to EUR 140 million. And we expect an EBIT in the range of minus EUR 15 million to plus EUR 5 million for 2020. This guidance is based on constant currency exchange rate and does not include any contributions from tafasitamab revenues and any effect from potential in-licensing or co-development deals for new development candidates. The operational and financial guidance might potentially be impacted by the ongoing global COVID-19 crisis on MorphoSys' business operations including, but not limited to the company's supply chain, clinical trial conduct as well as time lines for regulatory and commercial execution. With this, I would like to end my part and would like to turn the call back to Jean-Paul for his closing remarks. Thank you.

[Jean-Paul Kress]

Let me close by reminding you of our key priorities. Our most important goal is the flawless U.S. launch of tafasitamab, assuming FDA approval. As I have discussed today, we are actively preparing and are confident that we are in excellent shape to launch despite the current circumstances. We have successfully built our commercial organization and hired a strong and experienced team across all functions. We have established a strong partnership with Incyte. And together, we will significantly increase our share of voice to make this launch a success. Beyond the U.S., we anticipate the submission of a European MAA mid this year with a potential launch in Europe in mid-2021. We are joining forces with Incyte for a broad clinical development of tafasitamab beyond r/r DLBCL to explore the full potential of the product. We are jointly working on optimizing the development plan, and we will provide you an update later this year. In addition to tafasitamab, we will continue to advance our other proprietary programs, and we are actively pursuing in-licensing opportunities to diversify our pipeline. Importantly, we are in a very strong financial position to effectively and fully execute on our strategic plans. In conclusion, I'm very pleased with our accomplishments to date and excited about our future. I look forward to updating you on our progress.

[Julia Neugebauer]

Thank you, Jens and Jean-Paul. We'd now like to open the call to your questions.

[Operator]

[Operator Instructions] And the first question is from Konstantinos Aprilakis, Deutsche Bank.

[Konstantinos Nikolaos Aprilakis, Research Analyst]

I've got one on the impending tafasitamab launch and then another on business development. So you mentioned in your prepared remarks, extensive interactions with key stakeholders in the DLBCL space ahead of tafasitamab's potential launch. Can you tell us what you're hearing from KOLs and the like regarding the demand and utilization for CAR-T cell therapy for DLBCL given the ongoing COVID-19 pandemic? And how you see this potentially reading through to tafasitamab demand assuming approval?

[Jean-Paul Kress]

Konstantinos, thanks for the question. Yes, we hear actually that the CAR-Ts are a bit of a challenge right now with the COVID context for obvious reasons. So we knew that they were complicated, I would say, to say the least, to administer. And sometimes you get the feedback of the high cost as well. But currently, there is a bit of a struggle with that. So yes. I mean, in some ways, I-Mab, which is convenient to use and administer, makes a lot of sense. That's what we're hearing from this space right now.

[Konstantinos Nikolaos Aprilakis, Research Analyst]

Okay. That's helpful. And then on the BD side, regarding your decision to not exercise the option to license the Vivoryon inhibitors, I was wondering if you could provide more detail on the rationale underpinning that decision, including what exactly you saw in the preclinical data that made you change course? And is there anything we should conclude more broadly regarding the MorphoSys BD strategy, especially with respect to early versus later stage additions to your portfolio?

[Jean-Paul Kress]

So I'll answer the second part of your question, and I'll let Jens comment on the decision. I mean this was an early-stage deal. And obviously, we had all the caveats that could -- that come with these kind of deals. And we conducted preliminary experiences, which led to the conclusion. In terms of our strategy, we're thinking pretty broad, but we will be very disciplined, and for 2 reasons. The first one is that now we have the bandwidth for the approaches. We're done with the partnership, which was very, I would say, resource consuming, and I think took a lot of our energy and focus over the last couple of months. That's behind us. And obviously, with this partnership comes resource and these resources now will allow us to have much more flexibility for potential moves. And we are, right now, looking at several possibilities, some of them beyond tafasitamab, some of them complementing tafasitamab. We get a lot of requests from the space for combination trials, and considering that tafasitamab is emerging more and more backbone for many, many new products. So it's actually more opportunities now than it was in the past. Jens, do you want to answer the first part of the question?

[Jens H. Holstein, CFO & Member of the Management Board]

Yes. Thank you, Jean-Paul. I mean we knew that this is a very early program. We still believe that the CD47 approach was actually an interesting one, also in combination with tafasitamab, in general. But we looked into the preclinical data that we have collected over time. And we just felt that what we have seen doesn't support the exercise of the option, and that's why we decided to not execute it. You remember, we basically have invested in the company. We haven't paid anything for this option other than getting a participation, and that is remaining with us for the time being. I also want to make clear here that there is no direct intention now here to sell that off because we got that question already. So I mean this is -- this got to be seen in the future what we do with it. So I think we've got to do some, and Jean-Paul made that statement. I mean we have done some deals of that kind in the past. And of course, you should be prepared with the similar sort of deals, early deals as well that run the risk that you have to make a call that is negative.

[Operator]

The next question is from Jason Butler, JMP Securities. Mr. Butler, your line is now open. We can't hear you at the moment.

[Douglas Royal Buchanan, Associate]

Can you guys hear me now?

[Operator]

Yes.

[Douglas Royal Buchanan, Associate]

Okay. It's Roy in for Jason. I guess the first one, I'll follow-up on the BD question a little bit. So for in-licensing targets, are you guys looking primarily in the oncology space? Are you looking in hem/onc? Or broader? And then I had a question, if you've been approached or thought about using your technology platform to develop therapies for the novel coronavirus? And more broadly, what you think about infectious disease?

[Jean-Paul Kress]

So this is Jean-Paul. It's difficult to be specific, as you know, for these things until we have something concrete to share with the stage. We're -- we've been, I would say, concentrating the approach. I mean we're trying really to leverage our, frankly, position with tafasitamab. And as I said, it's -- the game emerged as great and very important backbone in this space. So there are a lot of potentialities for combinations with future agents in hem/onc, probably, but also in oncology. So we are also considering possibilities to leverage our platforms and our technology. But there is a lot to do in hem/onc. But we're being agnostic. And if we see a good opportunity in solid tumors or even in inflammation, also, I mean, that's also a possibility. But we have a lot to do with tafasitamab plus something.

[Douglas Royal Buchanan, Associate]

Okay. Great. And then about the coronavirus. Have you guys thought about approaching that? And I guess, more broadly, any thoughts about infectious disease to ever consider that space. And I actually had one on that tafasitamab BLA. Any recent interactions from the FDA you can comment on those?

[Jean-Paul Kress]

Malte will address your question.

[Malte Peters]

Yes. Thank you. In terms of interacting -- in terms of looking into opportunities of utilizing our platform to potentially help patients with the coronavirus, we are collaborating with academic centers to investigate certain approaches, utilizing our platform to find possibilities that may lead to help in the future in patients suffering from this disease. Secondly, we are extremely pleased to read about GSK's activities utilizing Otilimab in patients suffering with acute respiratory distress syndrome in these patients. So I think these are the 2 areas that we follow. To your second question regarding the FDA. I can only say that the interactions with the FDA are extremely positive and encouraging. We are on track with respect to the PDUFA date of August 30. And so far, we are extremely pleased with the progress we are making, interacting with FDA.

[Operator]

The next question is from James Gordon, JPMorgan.

[James Daniel Gordon, Senior Analyst]

James Gordon from JPMorgan. A couple of questions, please. First question was just about Incyte accounting. Can you just remind me to, in the U.S., if I understand correctly, there's going to be a 50% pay-away to Incyte. I believe that won't go through the P&L under the reported EPS. So how are you thinking of disclosing that on a quarterly basis once tafa launches? Will there be some sort of core EPS metric that better reflects what the cash generation is each quarter, so encompassing this pay-away. Will be the first question. Second question was just Otilimab for COVID-19. Can you talk about the mechanistic logic for GM-CSF for pulmonary symptoms? It sounds somewhat similar to like an IL-6, like Actemra. Is that the right way to think about it? And why might it be better potentially? And then third and final question would be CD3, CD20 competition. So it looks like quite a promising mechanism from some competitors that's going for first-line DLBCL. So if that was successful in first line, and if Roche are also successful with Polivy, first line, what does that mean for tafa, as tafa getting into first line? Would it push tafa back to third line? How are you thinking about sequencing of the different therapies that could be coming along for first-line DLBCL, please?

[Jean-Paul Kress]

James, thanks for the good questions. Jens will take the first one on accounting. I -- Malte will take the second one on COVID. And I'll take the next, the last one on CD3, CD20.

[Jens H. Holstein, CFO & Member of the Management Board]

Yes. Thank you, Jean-Paul. Let me start with the accounting treatment and as well, you know this is a real challenging activity that will follow us for a while since this collaboration is a long-term collaboration. Having said this, so as you've seen, we have accounted for the part -- for the non-U.S. part in the revenues, and that is to also make that clear at this point in time is that the number that you will see for this year, there's no further number coming. We have not included in our guidance tafasitamab revenues and implications here. So nothing is in our guidance included in that respect. So certain implications that you are referring to James are, of course, not yet included. In terms of the accounting treatment and the implications on earnings per share going forward, we are in constant discussions with our auditors and assumed to reflect really all the revenues, all the cost of sales and all the commercial costs that both parties will account for. And that will reduce the implication that you're referring to, to a significant amount. There is basically not much left. In addition, you should be aware that, going forward, in each of the quarters, you will see changes in the financial result because the financial liability that we have reported, the part of the 70% of the upfront payment in the premium that haven't been revenues this quarter here, they will change going forward, influenced by multiple implications being at interest rates and foreign exchange rates. So this will be an ongoing thing, and it's probably the most sensible thing going forward than in each quarter until everything is basically accounting-wise clear to explain that step by step. Yes. That will be my answer to the first question, Jean-Paul. And...

[Malte Peters]

I'll take the second one on the mechanism of action that potentially underlies the Otilimab situation. So it's fairly well-studied now, James, that in patients with acute respiratory distress syndrome, in patients with COVID-19 infection, CD4 Th1 cells, which express GM-CSF and GM-CSF levels as well, are increased. So that's the sort of epidemiological data that exists to justify if the inhibition of this pro-inflammatory cytokine could lead to an amelioration of the acute inflammatory condition. And you are right that it obviously follows a bit the same logic as for IL-6, which also is a pro-inflammatory cytokine. But I think, it's always a good idea to try different branches of the pro-inflammatory chain.

[Jean-Paul Kress]

And so then I think the last question, James, was on the CD3, CD20 competitive position, I would say. So here, we're looking at the space, including the CD3, CD20 as at the same time competition, but also possible, I would say, partners or complements to tafasitamab. Because again, tafasitamab might become the drug backbone. It's pretty clear from the signal we get from other companies, who almost need our products to complete Phase II or Phase III. In terms of comparison, I mean, CD3, CD20 emerging, I mean the data are still limited. It's intriguing. It's promising. But tafasitamab compares very well with CD3, CD20. We have, in terms of efficacy, in terms of duration of response, in terms of safety, obviously, I mean we still have a question mark for the -- despite specifics on CRL (sic) [ CRS ], cytokine release syndrome. So I think that the name of the game will be to find -- to see what they -- how they improve their safety profile. So we see them as potential competition, but also potential partners. That's a bit more subtle than that. And it's also true for some other future competition. I think you also asked about sequencing versus CAR-Ts. That's also something we're looking at. The question on sequencing of tafa versus CAR-Ts come mostly from some KOLs. It's not a wide question we get from the community oncologists because they are being pragmatic and they already -- they don't -- they see really the value of our assets versus CAR-Ts. But obviously, we're exploring that. This is a question from the state. And we have a couple of studies going on, who will help progress knowledge on this topic.

[Operator]

The next question is from Geoffrey Porges with SVB Leerink.

[Geoffrey Craig Porges]

Just a few questions, if I may, all about tafa. First, could you just tell us where it's being made and confirm that the manufacturing site does not need inspection by the FDA? Secondly, could you talk or just give us some specificity for exactly the label you expect? What the base case is in terms of prior treatment history for patients? And then lastly, wondering if you could give us some color about the proportion of DLBCL patients in the U.S. that are treated outside transplant centers, because presumably, that will be sort of better segment of the market to you compared to the transplant centers where they're doing CAR-Ts. Sorry about all the questions.

[Jean-Paul Kress]

Geoff, good to hear your voice even if the line is pretty poor. The -- I'll start by the last question. The proportion of DLBCL patients treated outside of the academic centers, if I got the question properly, is actually higher than 80%. So our vein -- our main, I would say, target resides with the oncology -- the community oncologists. And obviously, tafasitamab makes a lot of sense of all these patients treated in this community oncology centers. Regarding the manufacturing question. We manufacture -- we have a partnership, a long-term partnership with Boehringer Ingelheim, it's in Germany, so it is -- they are close to our premises there. We know them extremely well, and it's going well. It's on track. The FDA inspections are ongoing in creative way, I would say. So we are very confident that we will get the supply we need for our launch with Incyte. And for the -- yes, sorry?

[Geoffrey Craig Porges]

Just the label question?

[Jean-Paul Kress]

The label?

[Geoffrey Craig Porges]

Yes. So could you give us the base case for the indication that you expect in the label for tafa?

[Jean-Paul Kress]

Yes. Malte, do you want take that?

[Malte Peters]

Yes. Sure. I mean the -- based on the patient population that we enrolled in our pivotal L-MIND study, our assumption, which is also the base case scenario is that we get a second and third-line label or higher than second line. Remember, we have -- half of our patients are second-line patients and half the patients are third line and higher. That's a very good distribution. And that's what we anticipate or hope for at this moment.

[Operator]

The next question is from Daniel Wendorff, Commerzbank.

[Daniel Wendorff, Team Head of Healthcare & Chemicals]

Three, if I may. And the first one is, can you potentially say what is the COVID-19 crisis impact on your originally planned SG&A and R&D cost lines in 2020, if any? I would assume that a virtual launch campaign might have a different cost structure than a real-life launch campaign? And my second question would be can you comment whether the corona crisis is impacting the progress of your B-MIND study at all? Any comment there would be appreciated. And maybe lastly, a financial confirmatory question, I would say. Is there still a milestone payment due from Incyte Pharmaceuticals in case tafasitamab gets the FDA approval? Or has this already been almost incorporated in the upfront payment?

[Jean-Paul Kress]

Thanks for the questions. We're not commenting on the milestone contract. So we can't answer this question. On the financial impact of the COVID-19 on the cost structure, Jens can answer part of the question. But I'll just say that, I mean shifting to virtual is actually a pretty big effort. We have hired our sales teams, Incyte is hiring their sales team and reallocating people from Jakafi. We need people behind the virtual interactions. So it doesn't drastically change the SG&A picture. However, there might be some adjustment, obviously, due to maybe travel or some shifts. And so Jens might complement this one. And for the past...

[Jens H. Holstein, CFO & Member of the Management Board]

Actually, I can't, really, Jean-Paul. I think you made it.

[Jean-Paul Kress]

Okay. Cool. Thanks. Do you mind -- Malte, do you mind to answer the question?

[Malte Peters]

Yes, sure. No, we are very pleased with the progress we're making in B-MIND. As of today, we are right on track with respect to our enrollment forecast. So that's a very, very positive situation for us, indicating that, of course, the lymphoma patients are very sick patients. They need urgent treatment, which we provide. And it also speaks to the determination that we see at the level of the sites and the doctors to provide good treatment to these patients. So we are very satisfied with the situation.

[Operator]

The next question is from Jameel Bakhsh, Barclays.

[Jameel Bakhsh, Research Analyst]

Jameel Bakhsh from Barclays. So first question, just building on a previous one for Polivy. I'd just like to know what we could interpret from tafasitamab -- sorry, for tafasitamab from the initial uptake that there's been for Polivy. And then second question, just on the cost side. I know you mentioned in your report that you further escalated the buildout of your U.S. commercial organization. I was wondering if you could provide any further quantification for that. How many people like did you recruit in the quarter? How many people are there now? And is there any more incremental spend on infrastructure or CapEx that we should anticipate there?

[Jean-Paul Kress]

Thanks for the question, Jameel. I'll start by the pola. We don't usually comment on competition. But obviously, there are here and are there. And as far as it's actually a very good benchmark to watch the behavior of the market for, I would say, more modern launch compared to the older therapies. We're very pleased with the progress because this is a great lead indicator for a high unmet need. I think there are almost 950 patients launched to date on pola in the U.S. with a restricted label. And I mean, we're pretty confident that we come with a better profile. So this is extremely encouraging. And as Malte commented, our label to show, so if the discussions with the FDA go well, make even more sense. So actually, a very good sign for us. On the U.S. spend, I'll let Jens answer the question.

[Jens H. Holstein, CFO & Member of the Management Board]

Yes. Jameel, thanks for the question. I mean, yes, you have seen, we have guided revenues for our standard business. We haven't guided any number for tafa. And that's an agreement with our partner, Incyte. Similarly, we have agreed with Incyte that we're not guiding on details in terms of the cost side for the exercise at this point in time. Of course, in the future, we'll get more clarity on this. But please bear with us at this point in time that we're not giving details on that to the public domain.

[Operator]

The next question is from Christian Ehmann, Frankfurt Main Research.

[Christian Ehmann, Equity Analyst]

I have only two left. Could you please reiterate on the indication space you're looking for tafasitamab. I noticed that in your previous presentation, you listed, for example, follicular lymphoma also as an indication, now it's only CLL. And for the second question, could you give us an update or news or some feedback on the expanded access program you received for tafasitamab in the U.S.

[Jean-Paul Kress]

Thanks, Christian. I'll take the first one, and Malte will comment on the EAP. No, we're going for more indications in CLL. I quoted CLL as possibility and showing that we are looking at the space, and I was referring to data that was released on some other products in the space, which inspire us together with Incyte to make a move with the potential combination. But no, we are, as Malte said, going well with the first line, I would say, pre-pivotal study. We are working on a follicular lymphoma study together with Incyte. And we'll have more news for you, as I mentioned, later this year as we are currently finalizing our alignment with Incyte to turbocharge in this one. Malte, you want to comment on the EAP?

[Malte Peters]

Yes, yes. For the EAP, we have received more than 10 requests for applications from physicians in the U.S. All of these requests are currently under evaluation by the FDA because we are still operating under the single R&D situation. We have submitted our protocol, which will move the EAP into a second phase, which makes it more easier for applying physicians to put a patient on an EAP. This is in close communication between MorphoSys and FDA, and we should be able to have this protocol in place, probably fairly soon, in the next 1 or 2 weeks, so that patients can get access even easier to tafasitamab.

[Operator]

This concludes today's Q&A session. So I will now hand back to Dr. Julia Neugebauer to wrap up today's call.

[Julia Neugebauer]

That concludes the call today. If any of you would like to follow up, we're available for the remainder of the day. We would like to thank you for your participation in the call and ongoing support. We look forward to an exciting rest of the year and updating you on our progress.

[Operator]

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