AbbVie (ABBV) Q2 2022 Earnings Call Transcript | The Motley Fool

MorphoSys AG (MOR) Q2 2022 Earnings Call Transcript | The Motley Fool

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MorphoSys AG (MOR 0.35%)
Q2 2022 Earnings Call
Aug 04, 2022, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the MorphoSys Q2 2022 financial results conference call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Julia Neugebauer. Please go ahead.

Julia NeugebauerHead of Investor Relations

Ladies and gentlemen, good afternoon or good morning. My name is Julia Neugebauer, head of investor relations at MorphoSys, and it is my pleasure to welcome you to our half year 2022 financial results conference call. With me on the call today are Jean-Paul Kress, chief executive officer; Sung Lee, chief financial officer; Malte Peters, chief research and development officer; and Joe Horvat, U.S. general manager.

Before we begin, I’d like to remind you on Slide 2 that some of our 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 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 materially, including those described in MorphoSys’ 20-F and annual report, all for the year ended December 31, 2021, and from time to time in other SEC documents of MorphoSys. It is important to keep in mind that our statements in this webcast speak as of today. On Slide 3, you’ll find the agenda for today’s call.

Jean-Paul will begin with an overview and will give an outlook. Joe then will provide a commercial update and Malte will provide an update on our development pipeline before turning the call to Sung for a summary of our second quarter 2022 financial results. Following these prepared remarks, we will open the call for your questions. With that, I now hand the call over to Jean-Paul.

Jean-Paul KressChief Executive Officer

Thank you, Julia. Welcome, everyone, and thank you for joining us today. In the second quarter, we made progress on our strategy and commitment in becoming a leader in hematology/oncology and making a meaningful difference in the lives of cancer patients. Starting with Monjuvi, our commercial cancer immunotherapy.

We are pleased with the bounce back in sales in the second quarter in an environment that is becoming increasingly more competitive. Joe will provide more details shortly. We are encouraged by what we are seeing in the trends related to duration of therapy. However, we also recognize the competitive landscape has increased, including recent approvals of additional second-line treatment options.

As such, we lowered our expectations for growth in the second half of 2022, which is reflected in our revised sales guidance range for Monjuvi. We continue to drive second line growth and work closely with healthcare professionals on the importance of duration of treatment to ensure the best outcome for the appropriate patients. Turning now to our late-stage pipeline. We are encouraged with the pace of enrollment for our pelabresib and Monjuvi pivotal Phase 3 studies.

We continue to work in a focused manner to transform the treatment paradigm for difficult-to-treat hem-onc diseases and to have a positive impact for patients. Pelabresib is being studied in first-line myelofibrosis in combination with ruxolitinib. If approved, this regimen could change the standard of care for patients and generate more than $1 billion in peak sales. We’re excited about Pelabresib’s potential disease-modifying dynamics, where the data continues to mature.

We recently presented positive data at EHA and continue to receive excellent KOL feedback, which Malte will talk to later. For Monjuvi, the largest opportunity is in the first-line DLBCL setting, where there remains a large unmet need. There is significant interest from the medical community in the frontline study that is having a positive effect on enrollment. The study focuses on high-risk patients with an IPI score of three to five, which we believe distinguishes this study from others.

We also have a mid-stage asset with CPI-0209, which is our EZH2 inhibitor, and we will be providing data later this year. Looking now at business development. We were excited to enter into an equity participation and license agreement with HiBio for felzartamab and MOR210. The HiBio team are very experienced drug developers and scientific experts in autoimmune diseases and are exceptionally well positioned to successfully advance felzartamab and MOR210 into new medicines for patients who are in desperate need of better treatment options.

This agreement allows us to focus our resources on hematology-oncology. The benefits of the deal are also reflected in our updated R&D guidance. Separately, we entered a clinical trial collaboration with Pfizer as they look to combine Monjuvi with their CD47 candidate called TTI-622 in r/r DLBCL. We also continue to be encouraged about the progress within our partner pipeline.

We expect pivotal data readouts from Roche, for gantenerumab in Alzheimer’s disease and from GSK for otilimab in RA by the end of this year. As mentioned in our Q1 earnings call, with ianalumab, abelacimab and setrusumab, the next wave of partner programs has reached late-stage clinical development. We remain focused on executing commercially and advancing our late-stage pipeline. The field teams are driving Monjuvi awareness and education.

And as I previously mentioned, we are very encouraged with the pace of enrollment of our pivotal studies, which represent potential large value-creating opportunities over the mid to long term. We have a strong balance sheet and cash runway. We have further strengthened this as we exercised our option to draw on $300 million via development funding bonds has per our agreement with Royalty Pharma. Thank you.

And with that, I will turn the call now over to Joe for a financial update. Joe, please. We seem to have a technical issue. So we will go to Malte for the development update.

Malte, please.

Malte PetersChief Research and Development Officer

Thank you, Jean-Paul. Good morning, and good afternoon, everybody. We have a very strong pipeline, and we are very pleased with the progress we are making in advancing our clinical trials. First, let me start with our three pivotal Phase 3 studies.

For pelabresib, patient enrollment in our Manifest 2 study in first-line myelofibrosis is progressing very well. For tafasitamab, patient enrollment in frontMIND, our study in first-line DLBCL; and inMIND, our study in relapsed or refractory follicular or marginal zone lymphoma that is being executed by Incyte, is also progressing very well. This quarter, we also progressed and entered new partnerships to further investigate tafasitamab in combination with other novel therapies as a treatment for DLBCL. We entered a clinical trial collaboration with Pfizer and Incyte to investigate the immunotherapeutic combination of Pfizer’s TTI-622, a novel fusion protein targeting the CD47 pathway; and tafasitamab plus lenalidomide in patients with relapsed or refractory DLBCL who are not eligible for autologous stem cell transplantation.

In addition, Xencor initiated a study investigating the combination of tafasitamab, lenalidomide and plamotamab, Xencor’s CD20xCD3 bispecific antibody in patients with relapsed or refractory DLBCL. We believe that the addition of novel immunotherapies to the combination of tafasitamab and lenalidomide may have the potential to provide new chemo-free combination treatment options to these patients. This quarter, we also released new findings highlighting the potential of pelabresib as a first-line myelofibrosis treatment. In June, at the European Hematology Association Congress, we presented the latest clinical and translational research from the Phase 2 Manifest trial.

The data showed that pelabresib has the potential to normalize cellular defects seen in myelofibrosis, and thereby getting at the root cause of the disease, correlated with clinical response. We analyzed cells deriving from the blood of patients who enrolled in the Manifest trial and from healthy volunteers. The findings indicated that pelabresib alone or in combination with the JAK inhibitor, ruxolitinib, may have the potential to improve the typical imbalance in the two white blood cell populations, the myeloid and the lymphoid cells, and help restore normal blood cell development. These improvements concurred with decreases in megakaryocyte clustering in bone marrow and correlated with decreases in spleen volume.

Megakaryocytes are the cells in the bone marrow responsible for making platelets, and the clustering of these cells are one of the signs of myelofibrosis. Additionally, pelabresib alone or in combination decreased pro-inflammatory and profibrotic signaling in monocytes, suggesting a potential attenuation of disease process. These findings suggest that pelabresib may help improve outcomes for patients with myelofibrosis and reaffirms our confidence in the Phase 3 Manifest-2 study. We continue to evaluate the data from the Manifest study and are excited to present more mature data on the durability of spleen volume reduction and total symptoms for a — reduction later this year.

We also expect to release new data on tafasitamab and our second-generation EZH2 inhibitor, CPI-0209, later this year. For tafasitamab, we will present updated longer-term follow-up data of patients enrolled in the inMIND study who responded to treatment, including patients who have been treated for more than 5 years. These data further suggest a curative treatment potential of the tafasitamab-lenalidomide combination for patients with DLBCL, as patients are experiencing durable remissions and longer-term responses with treatment. Also later this year, we will present updated data from firstMIND, our Phase Ib study in first-line DLBCL.

These data reaffirm our assumption of the synergistic effect of tafasitamab and lenalidomide in patients with first-line DLBCL. We are excited to study this effect in our ongoing pivotal Phase 3 study frontMIND and the potential to provide these patients with a more effective treatment option. Now our EZH2 inhibitor, CPI-0209, is currently being assessed in a bucket trial for several solid tumors as well as lymphoma. We are encouraged by the preliminary efficacy data we are observing in multiple indications, which we will also release during a medical conference in the second half of this year.

As you can see, we expect to deliver a steady flow of clinical data over the next several years. We have made a lot of great progress, and we are excited about our pipeline potential. With that, I will now turn the call over to Sung for a review of the financials.

Julia NeugebauerHead of Investor Relations

Yes. Ladies and gentlemen, apologies for this small technical glitch. We should have Joe back with us now. So — and I would like to ask Joe to cover the commercial results now.

Joe? If that’s not working, then maybe Jean-Paul, you would have to jump in and go over the commercial results. Thanks.

Jean-Paul KressChief Executive Officer

Yes. We’re turning now to our Monjuvi commercial results. Monjuvi net sales in the second quarter were $23.3 million, representing 29% year-over-year growth. On a sequential basis, we saw a positive 25% increase.

Underlying demand was notably the highest since launch, which further underscores Monjuvi as an important treatment for patients. Our sales teams are now in person, with customers for 90% of their total visits educating on Monjuvi’s value proposition. This is important as it allows our teams the opportunity to conduct a complete office call and ensure a broad understanding of Monjuvi to all key staff that interact with patients. Through the second quarter, we continue to maintain leading market share in second line new patient starts.

We expanded our reach with more than 1,250 sites of care ordering Monjuvi since launch and having approximately 80% of sites repeating their orders. Greater than 70% of orders came from the community setting, where we continue to have good traction, and the balance from the academic setting. Our share of voice remains high, ensuring an increasing level of awareness for Monjuvi. This provides us with an opportunity to continue expanding its use for a greater number of patients.

As I outlined in our updated guidance, the treatment landscape is evolving and became more competitive over the past few months due to new entrants into the market. However, we will continue to deliver Monjuvi’s differentiated profile as the only immunotherapy option in second line that can be administered at the physician’s practice and allows patients to remain in their communities and local practice as they receive treatment. Our focus earlier this year, as you know, was educating healthcare providers on the optimal duration of therapy and the benefits of keeping patients on our immunotherapy treatment longer. We are actually seeing some positive trends in persistence and are committed to working with physicians to increase the treatment duration so that appropriate patients have the best and most durable outcomes possible.

To date, we have seen a number of patients continue on treatment for more than a year. We believe there is a continued opportunity ahead of Monjuvi, and we look forward to updating you further. With that, I will turn the call over to Sung for a financial update. Sung, please.

Sung LeeChief Financial Officer

Thank you, Jean-Paul. We’re pleased to share our financial results for the second quarter and first half of 2022. Moving to Slide 14. As Jean-Paul stated earlier, Monjuvi sales were $23.3 million in the second quarter of 2022, growing 25% sequentially and 29% year over year.

We also recorded EUR 0.7 million in royalty revenue for Monjuvi sales outside of the U.S. from our partner, Incyte, in the second quarter of this year. As our partner Incyte has recently stated, sales thus far have been mostly from Germany, and the royalties are reflective of that. We expect royalties to grow as Monjuvi achieves pricing and reimbursement in other countries in Europe.

On Slide 15. Total revenues in the second quarter of 2022 were EUR 59.4 million compared to EUR 38.2 million in the same period a year ago. Total cost of sales was EUR 17.2 million in the second quarter, compared to EUR 10.1 million a year ago. The year-over-year increase was primarily driven by higher Monjuvi sales in the U.S.

and Monjuvi supplied outside of the U.S. Recall that MorphoSys provides Incyte with Monjuvi supply for ex-U.S. sales. This supply is recorded as revenue and reflected in the licenses, milestones and other category under revenue; and an equal amount is recorded in cost of sales, yielding a 0 gross margin.

Cost of sales specific to Monjuvi U.S. product sales was EUR 4.3 million in the second quarter of 2022. Turning to operating expenses. R&D expenses in the second quarter of 2022 were EUR 60.9 million, compared to EUR 40.5 million for the second quarter of 2021.

The year-over-year growth primarily reflects the inclusion of Constellation and increased investments to support the advancement of our clinical stage programs. Selling expenses decreased to EUR 24 million in the second quarter of 2022, compared to EUR 28.5 million for the same period in 2021. The year-over-year decline was driven by the additional investments made in 2021 to support the first full year of the Monjuvi launch. G&A expenses in the second quarter of 2022 were EUR 12.4 million, compared to EUR 30.5 million in the second quarter of 2021.

The second quarter of 2021 included EUR 18.8 million in transaction costs related to the acquisition of Constellation and agreement with Royalty Pharma. For the second quarter of 2022, we reported a consolidated net loss of EUR 235 million compared to a net profit of EUR 20.9 million for the same period a year ago. Recall that the profit in the second quarter of 2021 was driven by the recognition of noncash finance income due to a decrease in the financial liabilities from the collaboration with Incyte. Turning to our balance sheet.

We ended the second quarter of 2022 with cash and investments of EUR 754.3 million, compared to EUR 976.9 million at the end of 2021. We recently notified Royalty Pharma that we intend to draw $300 million from the development funding bond and anticipate receiving the proceeds in September of this year. The funds will be used to advance our pivotal studies and prepare for future product launches. With our existing cash and investments on hand and the future proceeds from the development funding bond, we’re well capitalized to fund operations through several important clinical milestones.

Turning to our guidance for 2022 on Slide 16. As we previously communicated on July 26, several components of our financial guidance for 2022 were updated, which I’ll summarize. Monjuvi U.S. net product sales are expected to be in the range of $90 million to $110 million, compared to the previous range of $110 million to $135 million.

Gross margin for Monjuvi U.S. net product sales remains unchanged and is anticipated to be in the range of 75% to 80%. R&D expenses are expected to be in the range of EUR 275 million to EUR 300 million compared to the previous range of EUR 300 million to EUR 325 million. The significant reduction in the R&D guidance range was achieved by partnering up out felzartamab to HiBio.

SG&A expenses are anticipated to be in the range of EUR 150 million to EUR 165 million. The previous range was EUR 155 million to EUR 170 million. With that, I would like to hand the call back to Jean-Paul.

Jean-Paul KressChief Executive Officer

Before we go into Q&A, I’d like to conclude with a few words. We are intensively focusing on enrolling our pivotal studies of pelabresib and tafasitamab, and we are making great progress on this front. We remain motivated and committed to driving the uptake of Monjuvi with a potential flagship indication in first-line DLBCL yet to come. We believe the successful execution on the late-stage pipeline over the next three years has the potential to create significant value for patients and all stakeholders.

With that, we’d like to open the call for questions. Operator?

Questions & Answers:

Operator

[Operator instructions] And we’ll go ahead and take our first question from Jason Butler with JMP Securities.

Jason ButlerJMP Securities — Analyst

First one on Monjuvi. Can you just talk a little bit more about the competitive dynamics you’re seeing in the quarter and what you’re doing to either reinforce or refine the messaging to prescribers? And then when you look at your share in second-line patient starts, has that — what’s the trend been throughout the quarter? Can you give us any more color there as to what the share was at the beginning versus the end of the quarter?

Jean-Paul KressChief Executive Officer

Thanks, Jason. Look, regarding the competitive environment, yes, it’s not a secret that DLBCL has been pretty competitive lately. And increasingly, we’ve seen some new entrants. And obviously, we’ve reflected that in our guidance update recently.

But again, let me tell you why we are very excited with Monjuvi. But the bottom line is that we are the best-suited option for a community setting. We basically allow patients to stay in their homes with long-term outcomes. I mentioned earlier that we have now patients with almost two years of treatment in real life.

So that’s actually a very impressive outcome and with curative potential. So some of the options out there don’t have this possibility to keep the patients at home, and ultimately, that’s what they want. So we’re very proud with our growth here over year. And we’ll keep, obviously, a close eye on competition, but we believe we are extremely well placed for, this community setting patients.

And on your questions on the second-line patient start, I mean, the market share, we’ve communicated in the past that we’re basically capturing between one out of three to two out of three new patients in second line. And that fluctuates quarter-to-quarter and there are low ends in our data. But yes, the second quarter we were probably more close to one out of three patients. And we’re hopeful, obviously, that we’ll go back to higher numbers.

Jason ButlerJMP Securities — Analyst

Great. And then just my last question is on pelabresib. Can you talk about the feedback you’ve been getting from KOLs? And specifically physicians enrolling in Manifest-2, what the feedback was on the disease-modifying data that you presented at EHA?

Jean-Paul KressChief Executive Officer

Thanks, Jason. And Malte will address your question.

Malte PetersChief Research and Development Officer

Thanks, Jason. So we had a really very successful meeting at EHA. We hosted a Manifest-2 investigator meeting. I think in my career, I have never seen a meeting with so many participants and so much excitement in the room.

The common denominator we are hearing is that pelabresib is the best unapproved treatment option for patients with myelofibrosis. That’s pretty much the bottom line that we are hearing from everybody. And I can give you maybe one or two anecdotes that is sort of speaking into this direction. One is, after we acquired the trial — after we adopted the trial, so after the Constellation acquisition, we have seen really a tremendous turnaround and increase in excitement in putting patients on the study.

So after having a slow start, the study is now enrolling really at an unprecedented speed. And I’m super happy with the progress we are making. The second quick anecdote I can give you is we are currently doing a roadshow, all the senior R&D hosts at MorphoSys are basically going and visit key sites in Asia, in the U.S. and in Europe.

And the feedback we are hearing is really very positive. And we are seeing this again as reflected by a boost in enrollment. So I can be only super positive, Jason. And I hope the study continues to enroll as well as it is doing right now.

And we are super excited, obviously, to see the data as soon as we can.

Operator

And we’ll go ahead and take our next question from James Gordon with J.P. Morgan.

James GordonJ.P. Morgan — Analyst

James Gordon from J.P. Morgan. Three questions, please. The first one was on Monjuvi.

So you’ve called out some more competition in the second half of this year, but you aren’t anticipating a slowdown. But looking beyond, you’ve got a bit more CAR-T competition and maybe the start of CD3, CD20 competition. So next year, do you think sort of you maintain the current pace, you accelerate, or you decelerate? How should we think about the moving parts there, please? That’s the first question. Second question was on opex and a similar question.

I think SG&A on a clean basis will be down about 20% this year on your updated guidance. Are you done in terms of the ability to take that cost and might we need to ramp up spend to deal with more competition? Or are you still seeing many areas you can cut back on cost as we go into subsequent years? And then that sort of leads to the third question, which is profitability. So what is the latest thinking on when you could reach profitability on an operating basis and what the cash runway is? I think you said that you’ll have passed through key milestones. So is that saying that you’d have money to — cash to sustain you through kind of reporting in ’24, and that’s when you then might need to raise some more money?

Jean-Paul KressChief Executive Officer

Thanks, James. We will start by question two and three with Sung. And then we’ll go back to the commercial questions with Joe.

Sung LeeChief Financial Officer

Yes. So, James, you had a couple of questions around SG&A generally opex, cash runway and profitability. So let me address your question about SG&A. So we did fine-tune our SG&A guidance coming down EUR 5 million on the bottom and top end of the range.

But, keep in mind, that we are facing some — as well as other companies, some major FX headwinds. And of course, the vast majority, 95% plus, of our commercial expense, is incurred in the U.S. where we co-promote Monjuvi with Incyte. So I think you would have seen a further reduction in the SG&A guidance were it not for the FX headwinds.

And generally, for the entire year, total opex, we’re facing about a negative 7% FX headwind because the majority of our expenses are incurred in the U.S., especially with the acquisition of Constellation. So I think that needs to be factored in, that there was room in SG&A for further trim, but we suffered from the FX headwinds. And obviously, that impacts R&D expenses as well. But when we look to the future, we’re constantly looking at our cost structure.

We’re constantly fine-tuning this and that will not stop. Of course, when we started this year, we took a major action with our research organization, consolidating that in Germany. So that was able to help us in terms of cost reduction. So we’ll continue to be very vigilant on looking at ways to optimize our cost structure.

And then your question on profitability. I think what I’ve said before following the Constellation acquisition is, our goal is to be profitable and cash flow positive in 2026. That’s the year we would anticipate having the first full year of pelabresib revenues in the U.S. But let me kind of change the question to something else, and I don’t know if you were alluding to this.

If you’re just looking at the Monjuvi co-commercialization in terms of when can that be profitable between us and Incyte. And of course, it’s a sort of a skinning-down P&L, just having the co-comm components. We don’t think we’re that far away. If we generate Monjuvi sales in the upper 20 million, low 30 million per quarter, that gets us to profitable scenarios.

And we think that’s well within reach in the next 12 months. And then in terms of cash runway. We said this many times, with our organic cash, the EUR 754 million, this will take us to mid-2024. And obviously, the $300 million proceeds from the development funding bonds from Royalty Pharma, that will increase our flexibility.

And we’re in a good spot in terms of being able to fund our pivotal programs. So I’ll leave it at that. And I think I’ll hand it over to Joe with regard to the question on Monjuvi second half competition.

Joe HorvatU.S. General Manager

Thanks, Sung, and hopefully everyone can hear me. And thank you for the question, James. The DLBCL space has been competitive since we entered it, and it evolves every year with new current entrants to the market and additional upcoming competition. We’re aware of this dynamic competitive environment as it’s also reflected in our updated guidance.

With that said, I’d like to come back to our Q2 results, where we saw the strongest demand from Monjuvi sales since launch. We continue to have leading share in second line with our attractive off-the-shelf value proposition, which is based on a strong safety profile of efficacy, safety and convenience, being the only in practice outpatient immunotherapy that allows patients to stay in their homes, in their communities and with their local teams. And looking forward, we would just like to point you to the new full year guidance we provided which would give you a good idea of the growth we see ahead in the second half.

James GordonJ.P. Morgan — Analyst

I don’t know if you can hear me, but that’s very helpful. The question was, even looking beyond this year, do you think — is Monjuvi accelerating as we go into next year? Or do you hope to maintain in the face of more competition? Or could things slow? How are you thinking about sort of the exit rate for the year?

Jean-Paul KressChief Executive Officer

Joe.

Joe HorvatU.S. General Manager

Absolutely.

Jean-Paul KressChief Executive Officer

Yes. Just I wanted to ask Sung to comment on the longer term.

Sung LeeChief Financial Officer

Yes. So, James, obviously, these are recent competitive dynamics we’re highlighting with the entrants of a couple more treatment options in second line. I think we’d like to get a few quarters of experience here under this new dynamic to make the call more longer term. Obviously, making a call on the longer term has implications for us in our — in terms of financial liability.

So we want to be very measured and cautious in terms of putting out any statements with regard to the long term of Monjuvi. But our optimism is still there. Look, the question is about peak sales. Nothing beyond this year fundamentally has changed in terms of how we’re thinking about the long-term opportunity for Monjuvi.

This will be an education process. But we’re seeing improvement on the persistence side, and we just need a few more quarters of experience to see what impact, if any, the changing — the recent changing competitive dynamics have on the long term.

Jean-Paul KressChief Executive Officer

And I would add that the first-line opportunity obviously builds up significantly in the profile of — and the perspective for Monjuvi. This is a very large untapped opportunity for us.

Operator

We’ll go ahead and move on to our next question with Xian Deng with Berenberg.

Xian DengBerenberg Capital Markets — Analyst

I have two, please. The first one is more of a sort of a general question. Regarding the new guidance, just very generally, just wondering what are your assumptions for the general macroeconomic condition? What are your thoughts on — you kind of already explained a bit on FX, but how about the strengthening of the U.S. dollar and the inflation, interest rate hikes? Just wondering what are your assumptions for the updated guidance.

That would be great. And the second question is probably a bit more on the Monjuvi, if that’s all right. So I mean, in your presentation, you said very high usage in community setting, leading share in the second line. It all sounds very positive.

But at the same time, you lowered the full year guidance. I was just wondering, in terms of competition, because we felt that the bispecifics are not coming probably until next year. I’m just wondering if you could elaborate a bit more on — in terms of near-term competition, whether it’s Polivy or even CAR-T. Yes.

Any comment, that would be great.

Jean-Paul KressChief Executive Officer

Thank you for the questions. I’ll start by the commercial question as some of us have already answered it, but I’ll come back to the fact that these new labels for some competitors, especially the CAR-Ts, this is pretty recent. And that doesn’t really change the fundamentals here, which is that we basically are the most suitable option for community patients. Again, we enable patients to stay at their homes, and that’s very important.

And it is how we get the most traction and continue to work on that and engage and educate on that. You combine that with the duration of treatment, which I mentioned. We have some patients in real life who already have almost two years of treatment, which is absolutely fantastic. And this is with the curative potential.

So yes, this is a very dynamic market. We’re aware of the competitive landscape evolving. There will be new competitors, but we are very competitive and we’ll continue to educate and engage on the benefits of our drug in the current indication and in the first-line indication and other indications to come. On the other question, I’ll pass to Sung.

Sung LeeChief Financial Officer

Yes, Xian, so thank you for your questions. And you were basically asking about the macroeconomic effects on our guidance with regard to inflation, interest rates, FX. I think the guidance range that we’ve said, we’ve factored in all these macroeconomic events. And the range can account for some variation in FX, although basically, we’re assuming current rates in the second half.

But if there is a slight strengthening of the U.S. dollar, then certainly, there’s some — the range can absorb some fluctuation, but not extreme fluctuations. Inflation is something that we have to keep an eye on, as do all companies. So I think that’s an ongoing topic that will continue to be monitored.

Now with regard to interest rates, I think this is a very interesting variable and somewhat of a wildcard. A lot of our businesses in the U.S., and our business is tied to interest rates in the U.S. And of course, the U.S. Federal Reserve has been very aggressive in hiking interest rates.

When interest rates increase, this can have a negative impact on the weighted average cost of capital for companies. Now what does this mean for MorphoSys? There is a risk that further rises in interest rates could decrease the carrying value of goodwill, which in turn would cause a noncash impairment charge. Our guidance ranges for SG&A and R&D exclude any potential impairment charges. So I think that’s something very important to keep in mind.

Operator

We’ll go ahead and take our next question from Pippa Pritchard with Morgan Stanley.

Philippa PritchardMorgan Stanley — Analyst

Just a few for me. Firstly, would you be able to take us through the dynamics of accounting for the interest on — and the cash flows around the repayment of the development bonds? Is interest paid on a quarterly basis? Or does it roll up over time? And then what is the time frame to repayment and what are the options for refinancing in the future? A second one on Monjuvi. You highlighted in the report that competition has increased in the second-line DLBCL setting, which seems to refer to the CD19 CAR-T assets you mentioned earlier. You’ve already commented on the competitive dynamics, but I was wondering if there were any concerns mentioned around sequencing of CD19-directed therapies, i.e., do doctors want to use the CAR-T first followed by Monjuvi or the other way around? And then a very quick third one for me.

Is there an interim analysis planned on pelabresib?

Jean-Paul KressChief Executive Officer

Great. Thanks for your questions, Pippa. We’ll start by Sung, then Joe for the competitive question. And then Malte on the third question on pelabresib.

Sung LeeChief Financial Officer

Great. Thanks, Jean-Paul. So with regard to the Royalty Pharma developing funding bond, the $300 million that we’re going to be taking, the basic terms are, the first repayment will start in Q3 of 2024. So that’s two years away.

And the first four quarterly payments will be $9.7 million each. The next 32 quarterly payments will be $19.4 million each. So basically, you’re looking at 36 quarters of repayments on this bond starting in Q3 of 2024.

Jean-Paul KressChief Executive Officer

Yes. So, Joe, and Malte actually on the CD19 sequencing.

Joe HorvatU.S. General Manager

Absolutely. Thank you Jean-Paul, and thanks for the question, Pippa. From a competitive perspective, obviously, there are some physicians that question whether or not you can use Monjuvi-LEN or sequence CD19 as we’ve seen them sequence CD20. We’ve not had — we’ve not seen any issues to date when physicians have used tafa-len prior to CAR-T.

But obviously, I’ll turn that over to Malte to talk about the clinical dynamics there. But it has come up in some accounts, and then that’s been handled by our medical team.

Malte PetersChief Research and Development Officer

Thanks, Joe. A couple of remarks from my end. So to date, we have not seen any evidence that the CD19 expression goes down significantly after the tougher lenalidomide combination treatment. We have actually published quite a number of publications to this point.

We have also seen a number of patients who have been moved from tafasitamab-lenalidomide combination treatment to CAR-T cell treatment with good outcomes upon the CAR-T cell treatment. And the last comment I wanted to make is that knowing or understanding that this is an important topic for investigators, we are actually going to host together with our colleagues at Incyte, a whole symposium on the CD19 expression pattern at ASH. So we are going to compile all available data and present it in one session at the upcoming ASH meeting. But to date, there’s absolutely no evidence that a patient would not respond to a CAR-T cell treatment after the patient has been treated with tafasitamab-lenalidomide combination.

Jean-Paul KressChief Executive Officer

To you on the or a —

Joe HorvatU.S. General Manager

Take the —

Jean-Paul KressChief Executive Officer

Sorry. You should handle the pela interim question. Thanks, Malte.

Malte PetersChief Research and Development Officer

OK. Yes, sorry. So for the interim analysis, it’s a question we actually frequently receive. And we have consistently said that our preference is not to give any details on our statistical analysis plan, and that includes whether or not we are going to conduct an interim analysis.

And I give you a very short reason of why that is. So FDA strongly advises companies not to disclose any details on the statistical analysis processes and that includes interim analyses. And the reason is very simple. Once you have spoken about whether or not you have plans to do an interim analysis, this could potentially change the enrollment pattern in a clinical trial, introducing bias in the clinical trial.

And that’s something regulators don’t like. And that’s why the strong recommendation from regulators is not to speak about it, and we are following this. But I want to come back to my prepared remarks and say how happy and satisfied we are with the extreme high interest in the enrollment of the Manifest-2 trial and how fast enrollment goes. So apologies for not giving you more color here, but better safe than sorry, and stay tuned, and the study is progressing well.

Operator

We’ll take our next question from Vineet Agarwal with Citi. And due to no response —

Jean-Paul KressChief Executive Officer

Operator. Yes. Let’s move on to the next.

Operator

Due to no response, we’ll move on to our next question from Victor Floc’h with Stifel.

Victor Floc’hStifel Financial Corp. — Analyst

I have two. So first of all, I was wondering if you have any update on treatment duration. If I remember correctly, you mentioned a three-months figure during the last conference call. So wondering if you have seen any improvements since then.

And my second question is about the ex U.S. sales momentum, which seems quite challenging. So I was wondering if you could provide any updates on your commercial efforts in Europe as well as the reimbursement process there.

Jean-Paul KressChief Executive Officer

Thanks, Victor. Joe will answer your question.

Joe HorvatU.S. General Manager

Excellent. Thank you, Victor. So as it relates to duration of treatment, we are encouraged with the progress that we’re seeing on duration of treatment. As you mentioned, previously, we stated that duration of treatment was roughly around three months.

But we are now seeing this start to trend toward four months. Keeping in mind that this elongation of duration of treatment will take time, we’re committed to continuing to educate physicians about the nuances of using immunotherapy. As it relates to ex U.S. performance, we continue to see good progress by our partners, Incyte, who are commercializing Monjuvi outside of the U.S.

Based off of the pricing reimbursement plan that they laid out for Europe, they’re progressing quite well. We’re quite happy and pleased with what we see. And we continue to — they continue to work with the health authorities to make sure that they are getting Monjuvi into the markets as quickly as possible.

Jean-Paul KressChief Executive Officer

And I would add, Joe, they are making good commercial progress already in Germany, where they have launched. And they have an ATU — [Inaudible] ATU in France where they make progress, but they don’t report sales.

Operator

And with that, that does conclude our question-and-answer session for today. I would now like to hand the call back over to Julia for any additional or closing remarks.

Julia NeugebauerHead of Investor Relations

Ladies and gentlemen, this concludes today’s conference call. If any of you would like to follow up, the Investor Relations team of MorphoSys is available for the remainder of the day. Once again, thank you for joining our call. Have a good day, and goodbye.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Julia NeugebauerHead of Investor Relations

Jean-Paul KressChief Executive Officer

Malte PetersChief Research and Development Officer

Sung LeeChief Financial Officer

Jason ButlerJMP Securities — Analyst

James GordonJ.P. Morgan — Analyst

Joe HorvatU.S. General Manager

Xian DengBerenberg Capital Markets — Analyst

Philippa PritchardMorgan Stanley — Analyst

Victor Floc’hStifel Financial Corp. — Analyst

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