MorphoSys AG

XETRA:MOR

Earnings Call Transcript 2020-Q2

[Operator]

Ladies and gentlemen, welcome to the MorphoSys Half Year Report 2020 Conference Call. [Operator Instructions] and the conference is being recorded. [Operator Instructions] Now I would like to turn the conference over to Anja Pomrehn. Please go ahead.

[Anja Pomrehn, Senior Vice President]

Thank you. Ladies and gentlemen, good afternoon or good morning. My name is Anja Pomrehn, Head of Investor Relations at MorphoSys. It's my pleasure to welcome you to our Q2 2020 results conference call and webcast. With me on the call today are Jean-Paul Kress, Chief Executive Officer; Jens Holstein, Chief Financial Officer; Malte Peters, Chief Research and Development Officer; and Roland Wandeler, Chief Operating Officer. Before we start, I would like to remind you that some of the statements made during the call today are forward-looking statements, including statements regarding our expectations for the commercialization of our products and our development plans, the impact of COVID-19 on our business and expectations for the compounds in our pipeline as well as the development plans of our collaboration partners. These forward-looking statements are subject to a number of risks and uncertainties that may cause our actual results to differ material, including those described in MorphoSys 20-F and annual report, all for the year ended December 31, 2019, and from time to time in other SEC documents of MorphoSys. It is important to keep in mind that our statements on this webcast speak as of today. Readers and listeners are requested to refer to Slide 2. You will find the agenda of today's call on Slide 3. Jean-Paul will provide an overview of the highlights in the second quarter 2020; Jens then will talk you through the financial results of both the second and the first half of 2020 before Jean-Paul will close with a summary. After the presentation, we will be available for your questions. The presentation as well as the media release announcing the Q2 and H1 2020 results are available on MorphoSys' corporate website, morphosys.com. I'll now hand over to Jean-Paul.

[Jean-Paul Kress]

Thank you, Anja. Good morning or good afternoon, everyone. I would like to take the opportunity to introduce Roland Wandeler, our new Chief Operating Officer. Roland was appointed to the MorphoSys management board and has joined the company 3 months ago. He leads our global commercial organization, including our U.S. operations. Roland will be available for the Q&A session after the presentation. Please move to Slide 5 for the most recent and exciting highlight.As many of you will know, just a few days ago, on July 31, the FDA-approved Monjuvi as a combination therapy with lenalidomide for patients with relapsed or refractory diffuse large B-cell lymphoma or DLBCL. We are very excited with the accelerated approval of Monjuvi by the FDA, which we believe emphasizes the high unmet need for these patients. This approval is a very important milestone, not only for MorphoSys but also for patients battling this very aggressive disease as it is the first FDA-approved second-line therapy for adult patients with relapsed or refractory DLBCL. The clinical data in the FDA prescribing information demonstrate that in the L-MIND study, Monjuvi, in combination with lenalidomide, shows durable efficacy and sound safety and tolerability data with an objective response rate of 55%, a complete response rate of 37% and median duration of response of 21.7 months. Subsequent analysis with longer observation times, as recently shown at EHA, confirmed the durability of responses. Monjuvi is the first antibody developed by MorphoSys that we bring to the market. Over the past month, we at MorphoSys, together with our partner, have been working hard to ensure a very well-prepared and successful launch in the U.S. I'm also very pleased to inform you that Monjuvi is already commercially available in the U.S. as of today. The approval and launch marked an important milestone for patients battling relapsed or refractory DLBCL. Now moving to Slide 6 for the highlights of the second quarter.We are very pleased that the submitted European marketing authorization application for tafasitamab was recently validated by the European authorities. This could lead to an approval in 2021, and our partner will be responsible for the commercialization outside of the U.S. We look forward to the potential approval, which would be another important milestone for us. In addition, long-term data on tafasitamab were presented at the virtual annual meeting of EHA. The data show an unprecedented durability with a median duration of response of 34.6 months and median overall survival of 31.6 months. These 2-year follow-up data of the ongoing L-MIND study are very encouraging and confirm the previously reported results from the primary analysis. Moreover, these 2-year follow-up data are part of the MAA dossier. If we look at the news flow of our other pipeline programs in the second quarter, we're also very pleased with the progress. Turning to MOR202. MOR202 now has the international nonproprietary name, felzartamab, to which we will refer to going forward. For M-PLACE, our study of felzartamab in autoimmune membranous nephropathy, we have resumed screening and enrollment of patients. As you might recall, we had proactively paused screening and enrollment during the past month due to the COVID-19 pandemic as it was and still is a priority to us to ensure the safety of patients and as well as to safeguard their data integrity. Moving on to Otilimab. GSK has resumed the enrollment of patients into the ContRAst program after this had also been proactively paused due to the COVID-19 pandemic. Just to remind you, ContRAst is a Phase III program, evaluating Otilimab in patients with moderate to severe rheumatoid arthritis in 3 pivotal studies. As to Tremfya, you will recall that this 3 -- that 3 weeks ago, Janssen announced the approval of Tremfya by the FDA for the treatment of adult patients with active psoriatic arthritis. Active psoriatic arthritis is a chronic progressive disease, characterized by painful joints and skin inflammation and is a high burden for these patients. We are, therefore, very pleased to see the commitment of Janssen to further develop Tremfya more broadly, not only in RA, but also in other indications. Moving to Slide 7 for further update on our R&D. As already mentioned earlier, the approval and commercialization of Monjuvi in the U.S. marks an important milestone and represents the first step of our commitment to further broaden and advance the development of tafasitamab. Patients with frontline DLBCL and high risk score have a high unmet need to improve the efficacy of R-CHOP as a significant number of patients are not cured and progressed. In our first MIND study, the Phase Ib study in newly diagnosed DLBCL patients, the target sample size of 60 patients has been reached 1 month ahead of the forecast despite the COVID-19 pandemic. This shows the high interest of the community for tafasitamab as a potential therapeutic option in untreated patients with DLBCL. In this study, we evaluate the safety and preliminary efficacy of tafasitamab with or without lenalidomide in combination with R-CHOP. The first MIND data will support the planned pivotal program in frontline DLBCL, which we intend to initiate early 2021. We have agreed with the FDA to use a randomized Phase III clinical trial in DLBCL with tafasitamab and lenalidomide as confirmatory trial, and a study like our planned pivotal frontline study would meet the post-marketing requirements. The FDA was pleased with the synergy of tafasitamab and lenalidomide and considered our frontline study as the best option for a confirmatory trial. I hope this provides you with some insights of the opportunities in DLBCL and gives you confidence that we are preparing for further leveraging our asset for long-term growth. We'll obviously keep you informed on our progress. Furthermore, we are finalizing our plans to develop tafasitamab in additional indications and in different combinations. For multiple B-cell malignancies, we plan to develop tafasitamab in combination with parsaclisib, the PI3 kinase delta inhibitor from Incyte. We are targeting the initiation of a study assessing this combination before the end of 2020. We intend to hold the KOL call in the fall on our plans for additional development and will provide a more comprehensive update on tafasitamab later in the year. We'll inform you in due time. Now turning to our development progression of our other pipeline projects. Regarding the development of MOR202 or felzartamab, in oncology this time, our partner, I-Mab, has dosed the first patient in Mainland China at the end of April this year in the ongoing Phase III trial in multiple myeloma. I-Mab is highly committed to bringing felzartamab to patients who need new treatment options. To give you a further update on Otilimab, GSK has started a clinical trial called OSCAR to evaluate the efficacy and safety of Otilimab in patients with severe pulmonary COVID-19-associated disease. It is expected that up to 800 patients will be enrolled in the study, and it is anticipated that the data will be available in Q1 2021. We are, of course, very pleased to see that GSK has decided to investigate Otilimab in COVID-19 patients, and we hope that it will successfully contribute to the fight against this disease. Before I hand the call over to Jens, I'd like to provide you with a brief summary on where we stand with our U.S. launch preparation or execution, to be precise. Please move to Slide 8. Over the past month, we at MorphoSys and also with our partner have been gearing up for a successful Monjuvi launch in the U.S. with our fully staffed field force and access plan in place. During these pandemic times, we're using a combination of virtual engagement tools to address customer needs and to initiate, maintain and grow connectivity with customers. The overall feedback received from engagements with physicians and lymphoma experts is that Monjuvi provides a unique value proposition to address a significant unmet need. We prepare for an anticipated early approval and a subsequent fast launch. Since earlier this week, we have engaged and informed all government, commercial payers. And our medical team has submitted our clinical dossier to the NCCN Guideline committee. Since yesterday, Monjuvi is listed within the FDA NDC Directory. The first vials of Monjuvi were shipped last night to our network of specialty distributors so customers can order as of this morning. Finally, our sales team is completing their training and certification and will begin engaging with HCP today. And as I mentioned earlier, Monjuvi is commercially available in the U.S. as we speak, and we are excited to bring this much needed therapy to patients with relapsed or refractory DLBCL. With that, I hand the call over to Jens, who will discuss the results for the first half and second quarter of 2020. Jens, please?

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

Thank you, Jean-Paul. And also for me, a warm welcome to all of you on the call. Let me reiterate that we are really very excited with the accelerated approval of Monjuvi by the FDA. MorphoSys is well prepared for its next step as a fully integrated biopharmaceutical company given our strong financial position. Let me start my section now on the financials on Slide 10. As you can see, group revenues in the second quarter of 2020 amounted to EUR 18.4 million. Revenues include success-based payments of EUR 12.8 million, primarily from Janssen. As in previous quarters, the contractual royalty reporting from Janssen for Tremfya has not been received yet. So Tremfya royalties booked in Q2 2020 were estimated based on a public announcement made by Janssen/J&J. And final numbers can still slightly vary due to the foreign exchange rate effects. However, the overall decrease in revenues is due to the effect of a milestone payment of EUR 22 million from GSK for Otilimab, which was recorded in the second quarter of last year. Looking at expenses, our total operating expenses in the second quarter of 2020 increased to EUR 66.8 million. The increase mainly derives from the expenditures in relation to preparations of the anticipated tafasitamab U.S. commercialization as well as the further expansion of the MorphoSys U.S. Inc. Due to a reversal of impairment, the cost of sales for the second quarter of 2020 resulted in a net income of plus EUR 7.2 million. The expenses for research and development rose to EUR 30.9 million, largely driven by expenses for external laboratory services and personnel. Selling expenses increased to EUR 29.3 million and general and administrative expenses to EUR 13.8 million, both driven by higher personnel expenses and expenses for external services in association with the preparation of the Monjuvi launch. Selling expenses also comprised expenses for services rendered by Incyte in connection with the joint U.S. activities. Earnings before interest and taxes, therefore, amounted to minus EUR 50.1 million as a result of the higher expenses in the R&D and SG&A section. Net finance expenses of EUR 7.6 million mainly resulted from gains and losses in relation to financial assets and liabilities from collaborations and also from gains and losses from investments of liquid funds. Our consolidated net loss after taxes amounted to minus EUR 53.1 million in the second quarter of 2020. Earnings per share were minus EUR 1.62. On Slide 11, you see a summary of our segment reporting now for Q2 2020. In our Proprietary Development segment, MorphoSys reaches and develops its own drug candidates focusing on cancer inflammation. In Q2 2020, this segment recorded revenues of EUR 5 million versus EUR 25.9 million in the previous year. The decline primarily reflects the already mentioned EUR 22 million milestone payment from GlaxoSmithKline, which was recorded in the same time period of 2019. Operating expenses in the Proprietary Development segment amounted to EUR 56.3 million as compared to EUR 32.9 million in Q2 of last year. The elevated expenses derived from our higher investments for the development of our proprietary programs, and hence, the EBIT of our Proprietary Development segment was minus EUR 51.3 million. In the Partner Discovery segment, MorphoSys applies its propriety technology to discover new drug candidates for pharmaceutical companies, and thus participates in its partner's development advancements through research and development funding, license fees, success-based milestone payments and royalties. Revenues in the Partner Discovery segment climbed to EUR 13.4 million in Q2 2020 from EUR 8.7 million in Q2 2019. EBIT in our Partner Discovery segment rose to EUR 11.1 million from EUR 6.3 million. Please move to Slide 12 for the key financials for the first half of 2020. Group revenues soared to EUR 269.7 million from EUR 48.2 million in the first half of last year. The increase was mainly driven by the collaboration and licensing agreement with Incyte in the first quarter of this year to further develop and commercialize tafasitamab globally. Part of the USD 750 million upfront payment and of the USD 58 million premium was accounted for as revenue in Q1 2020. The remainder is represented on the balance sheet. Research and development expenses amounted to EUR 52.4 million versus EUR 49.3 million in the same time period last year. The EBIT, therefore, surged to EUR 163.5 million compared to minus EUR 29.3 million in the first half of 2019. Now let's move to the balance sheet on Slide 13. As you can see, as of June 30, 2020, we recorded total assets of approximately EUR 1.4 billion versus EUR 496.4 million at the end of 2019. Our liquidity position amounted to EUR 1.06 billion compared to EUR 357.4 million as of December 31, 2019. This liquidity position is reported on the balance sheet under the items: cash and cash equivalents, financial assets at fair value for profit or loss, and current and noncurrent other financial assets at amortized costs. For the financial guidance for the full year 2020, please now move to Slide 14. For the full year 2020, we confirm our financial guidance. We continue to expect group revenues in the range of EUR 280 million to EUR 290 million; total R&D expenses of EUR 130 million to EUR 140 million; and an EBIT in the range of minus EUR 15 million to plus EUR 5 million. This guidance is based on constant currency exchange rate and does not include any contributions from Monjuvi revenues and any effects 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' operations, including, but not limited to the company's supply chain clinical trial conduct as well as time lines for regulatory and commercial execution. And with this, I would like to turn the call back to Jean-Paul.

[Jean-Paul Kress]

Thanks, Jens. Let me summarize our first half 2020, as seen on Slide 16. First, the FDA approval of Monjuvi in the U.S. is a major milestone achievement, demonstrating the advancement in our journey to improve the lives of patients suffering from serious diseases. Two, Monjuvi is already commercially available in the U.S. as of today, as we prepare for a fast launch in the U.S. in order to bring this new, much needed therapy to patients as quickly as possible. Three, we are committed to unlocking tafasitamab's full potential with our partner while also focusing on the other proprietary programs in our pipeline. And four, in conclusion, a great performance since the beginning of the year, delivering on what we have promised and reconfirming our full year 2020 guidance. We will now open the line for questions. Operator, please.

[Operator]

[Operator Instructions] The first question is from Jason Butler at JMP Securities.

[Jason Nicholas Butler]

Congrats on the progress. Just first one on MOR202. Can you just talk about any protocol amendments that you have put in place for the membranous nephropathy study to manage through COVID and ensure both the efficient enrollment and patient safety? And then secondly, as you look forward to, obviously, building commercial success with Monjuvi, how are you thinking about the proprietary pipeline and advancing that? What are your priorities there? What are the kind of programs that you'll prioritize?

[Malte Peters]

Let me take the first question, Jason, it's Malte. So with respect to MOR202, we did not provide any specific amendment in the ongoing study, reflecting specific safety aspects for COVID-19. The protocol had already, I would say, a fairly robust inclusion and exclusion parameters that were considered to be very diligent by the investigators with respect to, for example, baseline immunoglobulin levels. So there was no need for us to be extra careful or to provide any additional safety measures in this study. And of course, we spoke about it. Jean-Paul made the remark. We are very pleased that the interest in the study is -- continues to be really high. We actually received calls from countries like Italy and France and other countries in Europe to encourage us to open the study again. And now we are happy that the first patients have resumed enrollment.

[Jean-Paul Kress]

Thanks, Malte. And for the second part of your question, Jason. Basically, the Monjuvi launch in our, I would say, beachhead indication r/r DLBCL is a fantastic opportunity for us to establish a leadership position, attracting great talent in all components of the value chain, actually in development, but also in commercial. And basically, that's also -- will be the case when we'll have more indications with tafasitamab because the same sales force or the same workforce will handle future indications. And we also intend with our pipeline, as I described earlier, to be able to expand and leverage this first footprint with potentially new franchises. Hopefully, autoimmune franchise, which is still operating in the specialty care space, not many field people needed to reach the customers. And at the same time, we'll also see what BD will provide us in the future.

[Operator]

The next question is from Geoffrey Porges, SVB Leerink.

[Geoffrey Craig Porges]

Congratulations again on the milestone as the company's first product. It's very well coming. So perhaps a couple of questions for Roland. Could you give us some sense of what you expect the gross to net to be in the U.S. market? Secondly, could you perhaps just give us a sense of what proportion of patients who expect to get Monjuvi in the second and third lines? And then perhaps for Jens, would it be appropriate given your guidance to expect to break even next year on Monjuvi? And should we expect that the company will achieve sustained profitability? Or is this likely to be something where you continue to invest capital into expanded R&D and business development, and therefore, we shouldn't be modeling the profitability flowing to the bottom line?

[Jean-Paul Kress]

So Roland first.

[Roland Wandeler, COO & Member of Management Board]

.Yes, Geoffrey, thank you for the questions. On gross to net, as you know, we released our price when we had the call on Monday. And obviously, there will be -- for part of the government programs, discounts and rebates that will be coming off that. At this point, however, we do not provide yet any specific guidance on gross to net. Regarding the second question that you asked regarding proportion of second-line and third-line patients. As you have seen in our launch release, we said that we expect the number of eligible patients from Monjuvi, overall, to be 10,000 patients in the U.S. per year. And just to give you a little bit more color around that, if you look at DLBCL in the U.S., there's an incidence of new diagnosis of about 30,000 patients per year. There's unfortunately one of 3 of these patients who will relapse or be refractory to the treatment. And therefore, about 10,000 patients have entered the second line, half of which about will be eligible or may be eligible for an autologous stem cell transplant, which leaves about 5,000 patients in second-line where Monjuvi is the first approved treatment by the FDA for these patients. And then there's about 5,000 additional patients in third-line and beyond where there is several therapy options available. So if you look at the 10,000 patients that we talked about, the split of second-line and third and later lines is about 50-50.

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

And then, Geoff, to your question regarding the short-term and mid-term profitability of Monjuvi and how we think about investments in R&D. I mean, in general, I mean, as pointed out before, we're super excited that we have been able to get that label, which is very special. And we feel that this is a very good start for us now for our commercial activities. Of course, with the compound that we have now in hand and with the -- what we have seen in terms of efficacy and durability of response, we intend to invest more money in the further development of Monjuvi in other indications, maybe other combination partners. And having said this, this, of course, requires financial resources. And it would be not a wise move to not take that money into our hands and invest in broadening the potential of Monjuvi and instead showing profitability. So short term, the short-term view should be that the company intends to further really invest in that compound and the broadening of that compound. And therefore, I would not expect, short term, the company being profitable. We should take the money that we have in our hands to really create more value with the assets that we have.

[Operator]

The next question is from Mr. Darout at Guggenheim Securities.

[Paul Jeng, Equity Research Associate]

This is Paul on for Etzer. So looking ahead for opportunities for Monjuvi in first-line DLBCL, what are you sort of hearing from physicians on the level of response they'd like to see in the first line of the sort of bar? And also wondering if you're able to provide any additional details at this time on the design of the study?

[Malte Peters]

So we are hearing, of course, a great desire of physicians to come and to find more efficacious treatments for frontline patients who have a high risk of relapsing or being refractory. And this is typically measured by the so-called IPI Score, which ranges from 0 to 5, and we are concentrating on IPI Score 3, 4, 5 patients for which the need is still very high. And the market and the investigators and the physicians is craving for better treatments in these patients. And one very strong signal of this situation is our successful enrollment of our First-MIND study, which we finished 1 month ahead of time. So you can estimate how strong the interest was in putting patients on this study. So I think we have done a good job in writing the protocol in a way to concentrate on those patients with a very high unmet medical need. The scientific and clinical community really needs better treatment options for these patients.

[Paul Jeng, Equity Research Associate]

Great. Design of the registrational study?

[Malte Peters]

The design of the registrational study, we have not shared so far. We have an upcoming external event in the fall, where we plan to do this. And I can only say that the study has been discussed with FDA and also with EMA. Both regulatory agencies have endorsed our strategy. So we are basically in full swing of our study startup activities for that study, and we will share more details on the trial design, on the time lines, et cetera, in a separate event in the fall.

[Operator]

The next question is from Christian Ehmann, FMR Research.

[Christian Ehmann, Equity Analyst]

I have 2, if I may, regarding gantenerumab. What are your expectations? And could you please remind me of the time line regarding especially the filing for aducanumab from Biogen? And could you give me a little bit flavor on what is the rationale for using Otilimab in treatment of COVID-19? Is it regarded to the possible cytokine storm? Or do you have any prior data?

[Malte Peters]

So let me start with the gantenerumab question. The Phase III studies in early prodromal to mild Alzheimer's disease are ongoing. There are 2 studies conducted by Roche. Each study will enroll up to 1,000 patients. And the readout as much as we can say, is on track for 2022. And your Otilimab question, again, was what?

[Christian Ehmann, Equity Analyst]

Rationale for COVID.

[Malte Peters]

Oh, the rationale for COVID. So there are several publications now in patients with severe respiratory distress syndromes originating from COVID-19 infection, showing that, particularly in the lung, there's a high concentration of pro-inflammatory cytokines. And these include IL-6, for example, these include GM-CSF. And that's why treatments directed against these pro-inflammatory cytokines are considered to be, yes, a very good or possible rationale to fight this devastating pulmonary form of this disease. So that's the basis for this. And we are, of course, really excited and also happy, I would say, that MorphoSys has some form of involvement in the worldwide efforts to potentially come up with a treatment against COVID-19.

[Operator]

The next question is from Graig Suvannavejh of Goldman Sachs.

[Unknown Analyst]

This is [ Martin ] on for Graig. I have 2, if I may, please. Firstly, on Monjuvi, what's the current status of reimbursement and market access in the U.S.? And what will be the key milestones and achievements for MorphoSys in the next 6 to 12 months with regard to that? And then secondly, on felzartamab. I was just wondering whether you could tell us a little more about felzartamab and the opportunity that you see in autoimmune membranous nephropathy. And following on from that, I guess, when do you think we might be able to see the first data? And ideally, in your view, what would good results look like?

[Jean-Paul Kress]

So Roland will take the first part of your question and then Malte for 202.

[Roland Wandeler, COO & Member of Management Board]

Yes. We notified already all payers on our launch and approval of Monjuvi. We're working with them to establish coverage, and we establish -- we expect that we will have a robust coverage, both in commercial as well as for Medicare patients across the U.S. So we feel that we will be in a very good position for patient access.

[Malte Peters]

So for MOR202, as I still call it, we have selected indications for which the mode of action is generated by the presence of autoantibodies directed against certain structures in the human body. And plasma cells are the generating machine of the autoantibodies and an antibody directed against CD38, which is expressed on plasma cells eliminates these plasma cells that are the source of these autoantibodies. So that's kind of the scientific rationale. What we would consider a significant finding is an early and strong decrease in the serum concentration of these autoantibodies, which in the case of membranous nephropathy, are called PLA2R antibodies. So that's just the designation of these antibodies. And of course, what I just said is not only true for this one particular indication, but it's also true for indications like lupus nephritis or IgA nephritis. So these are all indications which are caused by autoantibodies attacking own physiological structures of the human body. So we think that if we see a signal here, maybe towards the end of this year, beginning of next year, that this could have a big -- that this could open the door to develop this product in other autoimmune indications.

[Operator]

[Operator Instructions] And the next question is from Marcus Wieprecht, MainFirst Bank.

[Marcus Wieprecht, Managing Director]

I have 3 questions, if I may. Apologies if I may have missed it in the beginning, but when will you provide first sales guidance for Monjuvi in the U.S., please? Second question would relate, a bit more technical, to the Xencor royalties you have to pay, right? If I remember, that was somewhere in the high-single, low double-digit range of global net sales. Okay, U.S. is a profit-sharing deal. But outside the U.S., who pays those royalties, if you receive, let's assume 20% royalties from Incyte? And on top on that, you currently, give or take, 10% royalty to Xencor. So how is the split between you, yourself and Incyte in the ex U.S. territory? And what was the last one? The cash pile, very comfortable situation. What are your plans there? Is there some opportunities for in-licensing or M&A? And if so, which areas you would be interested in?

[Jean-Paul Kress]

So thanks for the questions, Marcus. I'll take the last question on the cash position and what's our capital allocation strategy. Jens alluded to the need to obviously fuel our internal pipeline. And especially now we are out of the gate with Monjuvi in our first beachhead indication, we really want to develop our backbone approach. We think that tafasitamab or Monjuvi has backbone potential or which could establish in several indications in [ hemo onco ] with potential existing or new therapies. So that's something which, obviously, we will deploy cash against. But at the same time, we're looking at complementing our pipeline with potential external innovation opportunities. And here, we are looking -- we've been actually beefing up our efforts over the last couple of months, especially approaching the final stage with tafasitamab, but also thanks to the cash that we now have, I mean, more than $1 billion, which put us in a favorable position. But we will stay disciplined. We will look at what resonates or makes sense with our franchises and our existing TAs as well our competencies and skills. But also, we have to see what's coming up on the market, and we will update you in due time. Now on question 1 and 2. I'll pass on to Jens.

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

Yes. Thanks, Jean-Paul. Marcus, thanks for the question. So regarding sales guidance, when do we go out with some sales guidance, I think let me just reiterate that it is common practice to not go out with the sales guidance when you just launch a product. I think that's an accepted sort of procedure in the industry, and therefore, we haven't done that right now. And at this point in time, I would like not to allude some expectation when we go out with some sales guidance. But of course, at a certain point in time in the future, we will do that as everyone else normally is also doing this. So you've got to bear with us a little bit on that end. In terms of royalties, you had the question on the Xencor royalties, and you phrased it correctly. The Xencor royalties are in the high single-digit to low double-digit area. And for Europe, that means as we are not responsible for the commercialization in Europe, we're actually not paying those royalties. We receive the royalties -- the royalty arrangement of the mid-single -- mid-teens to the mid-20s from our partner Incyte. And in that case, it's their business, not ours.

[Operator]

We have no further questions coming through, so I will now hand back over to Anja Pomrehn to wrap up today's call.

[Anja Pomrehn, Senior Vice President]

Thank you. Ladies and gentlemen, that concludes today's conference call. Should you have any further questions later, the Investor Relations team of MorphoSys is, of course, available. So once again, thank you for joining our call. Have a good day and bye-bye.

[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.