On March 13, 2024 MorphoSys AG (FSE: MOR; NASDAQ: MOR) reported results for the fourth quarter and the full year 2023 (Press release, , MAR 13, 2024, View Source [SID1234641128]).
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"In 2023, we demonstrated the potential for pelabresib to shift the myelofibrosis treatment paradigm, as results from our Phase 3 MANIFEST-2 study showed that all four disease hallmarks were improved with the pelabresib and ruxolitinib combination therapy over standard of care," said Jean-Paul Kress, M.D., Chief Executive Officer of MorphoSys. "Now, in 2024, we are pleased that Novartis is committing to the future of our promising pipeline. With its ample resources, additional scientific expertise and global footprint, Novartis can help accelerate pelabresib’s potential worldwide. The acquisition process is progressing steadily, and we expect to close the proposed transaction in the first half of the year."
Novartis’ Public Takeover Offer:
On February 5, 2024, MorphoSys announced the company entered into a Business Combination Agreement with Novartis BidCo AG (formerly known as Novartis data42 AG) and Novartis AG (hereinafter collectively referred to as "Novartis") based on Novartis’ intention to submit a voluntary public takeover offer for all outstanding MorphoSys no-par value bearer shares at an offer price of € 68.00 per share in cash. The offer price corresponds to a premium of 94% and 142% on the volume-weighted average price during the last month and three months, as of the unaffected January 25, 2024, close, respectively. As part of the Business Combination Agreement with Novartis, Novartis seeks to obtain exclusive, worldwide rights to develop and commercialize pelabresib, an investigational BET inhibitor, and tulmimetostat, an investigational next-generation dual inhibitor of EZH2 and EZH1, across all indications.
The offer will contain customary closing conditions, in particular a minimum acceptance threshold of 65% of MorphoSys’ share capital and antitrust clearances. MorphoSys and Novartis have received antitrust clearance in Germany and Austria. The companies have also made antitrust filings in the U.S. under the HSR Act and continue to expect the closing to take place in the first half of 2024.
Pelabresib Highlights:
On December 10, 2023, comprehensive results from the Phase 3 MANIFEST-2 study at 24 weeks were presented during an oral presentation at the 65th American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting and Exposition. In MANIFEST-2, the combination of pelabresib and the JAK inhibitor ruxolitinib improved all four disease hallmarks of myelofibrosis, including a significant reduction in spleen size with a response rate nearly double that of placebo plus ruxolitinib. The combination therapy showed a strong positive trend in reducing symptom burden and improvements in measures of anemia and bone marrow fibrosis, and demonstrated safety results in line with assessments from prior clinical trials.
Monjuvi/Minjuvi Highlights:
Monjuvi (tafasitamab-cxix) U.S. net product sales of US$ 24.1 million (€ 22.4 million) for the fourth quarter 2023 (Q4 2022: US$ 25.3 million (€ 24.7 million)) and US$ 92.0 million (€ 85.0 million) for the full year of 2023 (2022: US$ 89.4 million (€ 84.9 million)). Minjuvi royalty revenue of € 1.3 million for sales outside of the U.S. in the fourth quarter 2023 (Q4 2022: € 0.7 million) and € 5.4 million for the full year of 2023 (2022: € 3.0 million).
On February 5, 2024, MorphoSys also announced it entered into a Purchase Agreement to sell and transfer all rights worldwide related to tafasitamab to Incyte Corporation ("Incyte"). Under the terms of MorphoSys’ Purchase Agreement with Incyte, Incyte will obtain exclusive rights worldwide, assume full responsibility and cover all costs going forward for the development and commercialization of tafasitamab for a purchase price of US$ 25 million.
Corporate Developments:
On December 14, 2023, MorphoSys announced the completion of a share capital increase from € 34,231,943 by € 3,423,194 to € 37,655,137 through a full utilization of its authorized capital 2023-II, resulting in gross proceeds of € 102.7 million.
Financial Results for the Fourth Quarter of 2023 (IFRS):
Total revenues for the fourth quarter 2023 were € 59.0 million compared to € 81.6 million for the same period in 2022. The decrease resulted first and foremost from prior year revenues stemming from the execution of an out-licensing agreement with Novartis.
in € million*
Q4 2023
Q3 2023
Q4 2022
Q-Q Δ
Y-Y Δ
Total revenues
59.0
63.8
81.6
(8)%
(28)%
Monjuvi product sales
22.4
21.5
24.7
4%
(9)%
Royalties
34.0
34.0
29.1
0%
17%
Licenses, milestones and other
2.6
8.3
27.9
(69)%
(91)%
* Differences due to rounding.
Cost of Sales: In the fourth quarter of 2023, cost of sales was € 14.6 million compared to € 15.4 million for the comparable period in 2022.
Research and Development (R&D) Expenses: In the fourth quarter 2023, R&D expenses were € 80.3 million compared to € 94.0 million for the same period in 2022. The decrease mainly resulted from lower expenses for external services.
Selling, General and Administrative (SG&A) Expenses: Selling expenses in the fourth quarter 2023 were € 22.6 million compared to € 23.0 million for the same period in 2022. General and administrative (G&A) expenses amounted to € 22.9 million compared to € 17.5 million for the same period in 2022.
Operating Loss: Operating loss amounted to € 81.4 million in the fourth quarter 2023 compared to € 68.4 million for the same period in 2022.
Consolidated Net Loss: For the fourth quarter 2023, consolidated net loss was € 48.3 million compared to € 329.4 million for the same period in 2022.
Financial Results for the Full Year 2023 (IFRS):
Total Revenues for the full year 2023 were € 238.3 million compared to € 278.3 million in 2022. The decrease resulted first and foremost from prior year revenues stemming from the execution of out-licensing agreements with HI-Bio and Novartis. Royalties in 2023 include € 5.4 million from the sale of Minjuvi outside of the U.S. by our partner Incyte and € 111.0 million from Tremfya sales which is fully passed on to Royalty Pharma.
in € million*
2023
2022
Y-Y Δ
Total revenues
238.3
278.3
(14)%
Monjuvi product sales
85.0
84.9
0%
Royalties
116.4
99.9
17%
Licenses, milestones and other
36.9
93.5
(61)%
* Differences due to rounding.
Cost of Sales: For the full year 2023, cost of sales were € 58.4 million compared to € 48.6 million in 2022. The increase compared to the previous year is mainly due to one-off effects from write-downs on inventories in the amount of € 11.9 million recognized in 2023.
R&D Expenses: For the full year 2023, R&D expenses were € 283.6 million compared to € 297.8 million in 2022. The decrease of R&D expenses reflects our current clinical study progress as well as prioritization activities relating to our R&D portfolio.
SG&A Expenses: Selling expenses for the full year 2023 were € 81.4 million compared to € 92.4 million in 2022. The decrease is mainly due to the ongoing measures to streamline and focus sales efforts. G&A expenses amounted to € 65.8 million for 2023 compared to € 60.1 million in 2022. The increase was mainly driven by the increase in share-based payment expenses.
Operating Loss: Operating loss amounted to € 252.5 million for the full year 2023 compared to a loss of € 220.7 million in 2022.
Consolidated Net Loss: For the full year 2023, consolidated net loss was € 189.7 million compared to a net loss of € 151.1 million in 2022.
Cash and Other Financial Assets: As of December 31, 2023, the Company had cash and other financial assets of € 680.5 million compared to € 907.2 million on December 31, 2022. The liquid funds are predominantly required to advance the development of the proprietary portfolio to key clinical and regulatory milestones. The Management Board believes that the cash and other financial assets, which also incorporates the additional cash impacts from the sale of tafasitamab to Incyte as announced on February 5, 2024, will be sufficient to fund the operating activities and other cash requirements until early 2026 including the repayment of the convertible bonds. Any potential cashflows resulting from the Novartis Business Combination Agreement as announced on February 5, 2024, were not considered in the recent corporate planning.
Under the Business Combination Agreement, Novartis agreed to use all such efforts which are from the perspective of a prudent business person reasonable and appropriate to provide MorphoSys with the financial resources required following completion of the Novartis Takeover Offer to enable MorphoSys to pay any obligations of MorphoSys arising from the implementation of the Novartis Takeover Offer as and when due, for example, but not limited to the obligation from the convertible bonds and the obligations arising from the long-term incentive plans, each to the extent triggered by the completion of the Novartis Takeover Offer.
For the unlikely case that the proposed transaction with Novartis is not consummated, and MorphoSys consequently would remain a stand-alone company, management would need to assess different financing options to ensure the going-concern assumption beyond the said timeframe according to regulatory requirements. Management would then consider both anti-dilutive financing options, such as out-licensing of (pre-) clinical assets or the sale of potential future royalties, but also consider accessing the capital markets by way of issuance of new shares or share instruments (ADSs) and/ or issuance or refinancing of convertible debt.
Number of Shares: The number of shares issued totaled 37,655,137 on December 31, 2023.
Financial Guidance 2024:
As a consequence of the sale and transfer of tafasitamab to Incyte on February 5, 2024, MorphoSys’ 2024 financial guidance published on January 30, 2024, cannot be maintained and therefore was revoked. For the time being, MorphoSys will no longer make a forecast for revenues from product sales, as no such revenues will be realized.
For 2024, the Group expects R&D expenses of € 170 million to € 185 million. R&D expenses mainly represent our investments in the development of pelabresib and tulmimetostat. Selling, administrative and general expenses are expected to be between € 90 million and € 105 million. Any effects from the implementation of the Novartis takeover offer are not included in this forecast.
The overall forecast is subject to a number of uncertainties, including inflation and foreign currency effects.
Operational Outlook:
The following activity is planned for 2024:
Submit a New Drug Application for pelabresib in combination with ruxolitinib in myelofibrosis to the U.S. Food and Drug Administration (FDA) and a Marketing Authorization Application to the European Medicines Agency in the middle of 2024.
MorphoSys Group Key Figures (IFRS, end of financial year: December 31, 2023)
in € million
Q4 2023
Q4 2022
Δ
2023
2022
Δ
Revenues
59.0
81.6
(28)%
238.3
278.3
(14)%
Product Sales
22.4
24.7
(9)%
85.0
84.9
0%
Royalties
34.0
29.1
17%
116.4
99.9
17%
Licenses, Milestones and Other
2.6
27.9
(91)%
36.9
93.5
(61)%
Cost of Sales
(14.6)
(15.4)
(5)%
(58.4)
(48.6)
20%
Gross Profit
44.4
66.2
(33)%
179.9
229.6
(22)%
Total Operating Expenses
(125.8)
(134.6)
(7)%
(432.4)
(450.4)
(4)%
Research and Development
(80.3)
(94.0)
(15)%
(283.6)
(297.8)
(5)%
Selling
(22.6)
(23.0)
(2)%
(81.4)
(92.4)
(12)%
General and Administrative
(22.9)
(17.5)
31%
(65.8)
(60.1)
9%
Impairment of Goodwill
(1.6)
—
n/a
(1.6)
—
n/a
Operating Profit / (Loss)
(81.4)
(68.4)
19%
(252.5)
(220.7)
14%
Other Income
0.1
(7.8)
>(100)%
5.0
12.0
(58)%
Other Expenses
(3.9)
7.4
>(100)%
(7.1)
(15.6)
(54)%
Finance Income
174.3
325.0
(46)%
213.4
412.1
(48)%
Finance Expenses
(40.8)
249.5
>(100)%
(142.0)
(165.9)
(14)%
Income from Reversals of Impairment Losses / (Impairment Losses) on Financial Assets
(0.1)
0.4
>(100)%
0.5
—
n/a
Share of Loss of Associates accounted for using the Equity Method
(1.6)
(4.0)
(60)%
(8.2)
(4.3)
91%
Income Tax Benefit / (Expenses)
1.6
(172.7)
>(100)%
1.2
(168.6)
>(100)%
Consolidated Net Profit / (Loss)
48.3
329.4
(85)%
(189.7)
(151.1)
26%
Earnings per Share, Basic and Diluted (in €)
—
—
n/a
(5.53)
(4.42)
25%
Earnings per Share, Basic (in €)
1.28
9.64
(87)%
—
—
n/a
Earnings per Share, Diluted (in €)
1.22
8.93
(86)%
—
—
n/a
Cash and other financial assets (end of period)
680.5
907.2
(25)%
680.5
907.2
(25)%
MorphoSys will hold its conference call and webcast tomorrow, March 14, 2024, at 1:00 pm CET (12:00 pm GMT/8:00 am EDT) to present the results for the fourth quarter and the full year 2023.
Participants for the call may pre-register and will receive dedicated dial-in details to easily and quickly access the call:
View Source;linkSecurityString=637b0c07e
Please dial in 10 minutes before the beginning of the conference.
The live webcast (audio and presentation) can be directly accessed via View Source or via the Investors section under "Events & Conferences" on the MorphoSys website, www.morphosys.com; after the call, a slide-synchronized audio replay of the conference call will be available at the same location.
Consolidated Financial Statements 2023 (IFRS) are available for download at: View Source