12/31/11
12/31/10
12/31/09
12/31/08
12/31/07
12/31/06
12/31/05
12/31/04
12/31/03
program / partner
indication
discovery
preclinic
phase 1
phase 2
phase 3
Market
Financial Calendar
March 1, 2012
Publication of 2011 Year End Results
May 4, 2012
Publication of 2012 Three Months’ Report
May 31, 2012
2012 Annual Shareholders’ Meeting in Munich
August 2, 2012
Publication of 2012 Six Months’ Report
November 7, 2012 Publication of 2012 Nine Months’ Report
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ExplorE... Annual Report 2011
Product Pipeline
M o R p h o S y S’ S p R o d u c t p i p e l i n e A S o f d e c e M b e R 31, 2011
Rheumatoid arthritis
Multiple sclerosis
Multiple myeloma
Chronic lymphocytic
leukemia
MOR103
MOR202
MOR208
Early-stage Programs
MorphoSys/Novartis
CNTO888/Janssen Biotech
Cancer
Idiopathic pulmonary fibrosis
CNTO1959/Janssen Biotech
Psoriasis
Novartis
BHQ880/Novartis
BYM338/Novartis
not. discl.
Cancer
Musculoskeletal
Gantenerumab/Roche
Alzheimer’s disease
BAY94-9343/Bayer
Boehringer Ingelheim
Cancer
not. discl.
CNTO3157/Janssen Biotech
Asthma
Janssen Biotech
Novartis
Novartis
OMP-18R5/Oncomed
OMP-59R5/Oncomed
Pfizer
24 Partnered Programs
28 Partnered Programs
Inflammation
Ophthalmology
Inflammation
Cancer
Cancer
Cancer
6 proprietary programs
2 pre-development programs
68 partnered programs
Key Figures (IFRS)*
M o R p h o S y S G R o u p (in € million, if not stated otherwise)
(Excluding Stock-based Compensation)
18.1
10.8
Results
Revenues
Cost of Goods Sold
R&D Expenses
S, G&A Expenses
Personnel Expenses
Capital Expenditure
Depreciation
EBITDA
EBIT
Net Profit/(Loss)
Bal ance shee t
Total Assets
Intangible Assets
Total Liabilities
Stockholders' Equity
Equity Ratio (in%)
MoRphosys shaRe
Amortization of Intangible Assets
Profit/(Loss) from Operations
Cash, Cash Equivalents and
Available-for-sale Financial Assets
Earnings/(Loss) per Share, Diluted (in €)
Dividend (in €)
Share Price (in €)
peRsonnel Data
Total Group Employees (Number)
Germany (Number)
Other Countries (Number)
100.8
7.0
57.5
24.6
35.3
3.6
2.4
4.3
12.2
18.0
11.1
8.2
134.4
66.0
31.32)
197.1
86%
0.36
-
17.53
446
352
94
87.0
7.3
46.9
23.2
29.6
13.8
2.1
4.0
9.8
19.2
13.1
9.2
81.0
6.7
39.0
23.9
26.1
3.8
1.6
3.8
11.4
18.1
12.8
9.0
71.6
7.1
27.6
20.5
21.5
3.8
1.5
4.8
16.4
21.9
16.5
13.2
62.0
7.9
22.2
24.8
18.8
12.0
1.5
3.7
7.0
13.3
8.3
11.5
53.0
8.0
17.5
21.4
4.0
1.5
3.4
6.2
10.3
5.4
6.0
108.4
69.2
23.92)
185.9
89%
135.1
17.4
32.2
173.9
84%
137.9
19.7
41.3
162.0
80%
106.9
22.3
39.2
145.5
79%
66.0
14.8
27.8
100.1
78%
464
370
94
404
301
103
334
236
98
295
192
103
279
183
96
33.5
2.5
14.0
10.8
0.7
0.9
2.7
6.2
8.6
5.3
4.7
53.6
12.4
16.1
64.0
80%
0.28
-
172
145
27
22.0
0.91)
11.41)
7.51)
9,1
1,7
0,7
2,0
0,6
3,2
0,5
0,3
37.2
12.8
16.4
39.4
71%
-
-
132
132
15.3
-
9.01)
7.21)
7.5
0.7
0.5
1.5
(3.1)
(0.4)
(2.5)
(3.1)
23.2
14.5
15.6
27.3
64%
-
3.71
95
95
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Number of Shares Issued
23,112,167 22,890,252 22,660,557 22,478,787 22,160,259 20,145,966 18,077,589 16,316,556 14,703,996
0.40
-
0.40
-
0.59
-
0.53
-
0.31
-
0.02
(0.24)
18.53
17.04
18.75
16.10
18.12
13.77
12.70
228.42)
209.82)
206.1
203.3
184.7
127.8
80.1
55.8
42.9
* MorphoSys is publishing its consolidated financial statements in accordance with IFRS since 2003. In earlier periods, the Company reported according to US GAAP.
1) Excluding stock-based compensation
2) In 2011, a deferred tax asset in the amount of € 2.3 million has been offset with a deferred tax liability for better transparency. Both deferred tax asset and deferred tax liability
relate to income taxes levied by the same tax authority on the same taxable entity. To provide comparative information, prior year’s deferred tax asset and deferred tax liability
(€ 2.8 million) – and thus total assets as well as total liabilities and stockholders’ equity – have been adjusted accordingly.
MorphoSys AG
Lena-Christ-Str. 48
82152 Martinsried / Planegg
Germany
Phone: +49-89-89927- 0
Fax:
+49-89-89927-222
www.morphosys.com
12/31/11
12/31/10
12/31/09
12/31/08
12/31/07
12/31/06
12/31/05
12/31/04
12/31/03
program / partner
indication
discovery
preclinic
phase 1
phase 2
phase 3
Market
Product Pipeline
M o R p h o S y S’ S p R o d u c t p i p e l i n e A S o f d e c e M b e R 31, 2011
Financial Calendar
March 1, 2012
Publication of 2011 Year End Results
May 4, 2012
Publication of 2012 Three Months’ Report
May 31, 2012
2012 Annual Shareholders’ Meeting in Munich
August 2, 2012
Publication of 2012 Six Months’ Report
November 7, 2012 Publication of 2012 Nine Months’ Report
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Expl orE... Annual Report 2011
Rheumatoid arthritis
Multiple sclerosis
Multiple myeloma
Chronic lymphocytic
leukemia
MOR103
MOR202
MOR208
Early-stage Programs
MorphoSys/Novartis
CNTO888/Janssen Biotech
Cancer
Idiopathic pulmonary fibrosis
CNTO1959/Janssen Biotech
Psoriasis
Novartis
BHQ880/Novartis
BYM338/Novartis
not. discl.
Cancer
Musculoskeletal
Gantenerumab/Roche
Alzheimer’s disease
BAY94-9343/Bayer
Boehringer Ingelheim
Cancer
not. discl.
CNTO3157/Janssen Biotech
Asthma
Janssen Biotech
Novartis
Novartis
OMP-18R5/Oncomed
OMP-59R5/Oncomed
Pfizer
24 Partnered Programs
28 Partnered Programs
Inflammation
Ophthalmology
Inflammation
Cancer
Cancer
Cancer
6 proprietary programs
2 pre-development programs
68 partnered programs
Key Figures (IFRS)*
M o R p h o S y S G R o u p (in € million, if not stated otherwise)
(Excluding Stock-based Compensation)
18.1
10.8
Results
Revenues
Cost of Goods Sold
R&D Expenses
S, G&A Expenses
Personnel Expenses
Capital Expenditure
Depreciation
EBITDA
EBIT
Net Profit/(Loss)
Bal ance shee t
Total Assets
Intangible Assets
Total Liabilities
Stockholders' Equity
Equity Ratio (in%)
MoRphosys shaRe
Amortization of Intangible Assets
Profit/(Loss) from Operations
Cash, Cash Equivalents and
Available-for-sale Financial Assets
Earnings/(Loss) per Share, Diluted (in €)
Dividend (in €)
Share Price (in €)
peRsonnel Data
Total Group Employees (Number)
Germany (Number)
Other Countries (Number)
100.8
7.0
57.5
24.6
35.3
3.6
2.4
4.3
12.2
18.0
11.1
8.2
134.4
66.0
31.32)
197.1
86%
0.36
-
17.53
446
352
94
87.0
7.3
46.9
23.2
29.6
13.8
2.1
4.0
9.8
19.2
13.1
9.2
81.0
6.7
39.0
23.9
26.1
3.8
1.6
3.8
11.4
18.1
12.8
9.0
71.6
7.1
27.6
20.5
21.5
3.8
1.5
4.8
16.4
21.9
16.5
13.2
62.0
7.9
22.2
24.8
18.8
12.0
1.5
3.7
7.0
13.3
8.3
11.5
53.0
8.0
17.5
21.4
4.0
1.5
3.4
6.2
10.3
5.4
6.0
108.4
69.2
23.92)
185.9
89%
135.1
17.4
32.2
173.9
84%
137.9
19.7
41.3
162.0
80%
106.9
22.3
39.2
145.5
79%
66.0
14.8
27.8
100.1
78%
464
370
94
404
301
103
334
236
98
295
192
103
279
183
96
33.5
2.5
14.0
10.8
0.7
0.9
2.7
6.2
8.6
5.3
4.7
53.6
12.4
16.1
64.0
80%
0.28
-
172
145
27
22.0
0.91)
11.41)
7.51)
9,1
1,7
0,7
2,0
0,6
3,2
0,5
0,3
37.2
12.8
16.4
39.4
71%
-
-
132
132
15.3
-
9.01)
7.21)
7.5
0.7
0.5
1.5
(3.1)
(0.4)
(2.5)
(3.1)
23.2
14.5
15.6
27.3
64%
-
3.71
95
95
-
Number of Shares Issued
23,112,167 22,890,252 22,660,557 22,478,787 22,160,259 20,145,966 18,077,589 16,316,556 14,703,996
0.40
-
0.40
-
0.59
-
0.53
-
0.31
-
0.02
(0.24)
18.53
17.04
18.75
16.10
18.12
13.77
12.70
228.42)
209.82)
206.1
203.3
184.7
127.8
80.1
55.8
42.9
* MorphoSys is publishing its consolidated financial statements in accordance with IFRS since 2003. In earlier periods, the Company reported according to US GAAP.
1) Excluding stock-based compensation
2) In 2011, a deferred tax asset in the amount of € 2.3 million has been offset with a deferred tax liability for better transparency. Both deferred tax asset and deferred tax liability
relate to income taxes levied by the same tax authority on the same taxable entity. To provide comparative information, prior year’s deferred tax asset and deferred tax liability
(€ 2.8 million) – and thus total assets as well as total liabilities and stockholders’ equity – have been adjusted accordingly.
MorphoSys AG
Lena-Christ-Str. 48
82152 Martinsried / Planegg
Germany
Phone: +49-89-89927- 0
Fax:
+49-89-89927-222
www.morphosys.com
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ExplorE...
As a biopharmaceutical company, MorphoSys is constantly exploring new therapeu-
tic concepts to fight severe diseases, together with partners and on its own ac-
count. The way we do this is by developing superior technological solutions to gener-
ate antibodies, a central component of the human immune system. This approach
has enabled us to build one of the broadest antibody drug pipelines in our industry,
with some 70 ongoing programs and 20 candidates in clinical development.
Exploring the possibilities of antibodies beyond their therapeutic use is the key task
of our AbD Serotec business unit. AbD Serotec is working with some 20 diagnostic
customers to establish novel diagnostic tests based on HuCAL antibodies. In 2011, the
first HuCAL-based diagnostic product entered the market and MorphoSys expects
this trend to continue in the coming years.
Driven by pioneers, both scientists and entrepreneurs, with a remarkable exploratory
spirit, antibodies have developed from unknown territory to a rich, flourishing hub
in the pharmaceutical landscape. MorphoSys is committed to continue discovering
new and better ways to generate these molecules and to turn them into successful
products. Our Company has introduced a series of innovative antibody technologies,
most recently Slonomics, arYla and our novel Ylanthia library. The latter will, we be-
lieve, set new standards for antibody generation in our industry over the next decade
and beyond.
And the exploration continues…
02
Contents
t h E c o M p a n y
0 4 m a n a g e m e n t b o a r d o f m o r p h o s y s a g
0 5 l e t t e r t o t h e s h a r e h o l d e r s
0 8 t h e m o r p h o s y s s h a r e
a n t i b o d y M a g a z i n E
1 3 c h o o s e t h e ta r g e t
1 9 s e l e c t t h e a n t i b o dy
2 2 b u i l d r e s e a r c h n e t w o r k s
2 7 e va l u at e t h e c o n c e p t
3 1 d e v e l o p t h e c o m p o u n d
3 4 f o r g e a l l i a n c e s
g r o u p M a n a g E M E n t r E p o r t
3 7 c o n t e n t s g r o u p m a n a g e m e n t r e p o r t
3 9 o p e r at i o n s a n d b u s i n e s s e n v i r o n m e n t
5 9 r e s u lt s o f o p e r at i o n s , f i n a n c i a l s i t u at i o n
a n d b a l a n c e s h e e t
6 6 s u s ta i n a b i l i t y r e p o r t
7 2 r i s k s a n d o p p o r t u n i t i e s
7 7 s u b s e q u e n t e v e n t s
7 7 o u t l o o k a n d f o r e c a s t
8 1 c o r p o r at e g o v e r n a n c e r e p o r t
Contents
03
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a d d i t i o n a l i n f o r M a t i o n
1 45 s u p e r v i s o r y b o a r d r e p o r t
1 4 8 s u p e r v i s o r y b o a r d o f m o r p h o s y s a g
1 5 0 s e n i o r m a n a g e m e n t g r o u p o f m o r p h o s y s a g
1 5 2 g l o s s a r y
1 5 4 i n d e x
1 5 5 l i s t o f f i g u r e s a n d ta b l e s
1 5 6 i m p r i n t
f i n a n c i a l s t a t E M E n t s
9 5 c o n t e n t s c o n s o l i d at e d f i n a n c i a l s tat e m e n t s
9 6 c o n s o l i d at e d i n c o m e s tat e m e n t (i f r s)
9 7 c o n s o l i d at e d s tat e m e n t o f c o m p r e h e n s i v e i n c o m e (i f r s)
9 8 c o n s o l i d at e d b a l a n c e s h e e t (i f r s)
1 0 0 c o n s o l i d at e d s tat e m e n t o f c h a n g e s i n
s t o c k h o l d e r s ’ e q u i t y (i f r s)
1 0 2 c o n s o l i d at e d s tat e m e n t o f c a s h f l o w s (i f r s)
1 0 4 n o t e s
1 4 2 r e s p o n s i b i l i t y s tat e m e n t
1 4 4 a u d i t o r ’s r e p o r t
l E g E n d
c r o s s - r E f E r E n c E
s e e pa g e 8 0
a d d i t i o n a l i n f o r M at i o n
w w w. m o r p h o s y s . c o m
s E E g l o s s a r y
s e e pa g e 1 5 2
04
t h E c o M p a n y
Management Board of MorphoSys AG
J E n s h o l s t E i n
Chief Financial Officer
d r . M a r l i E s s p r o l l
Chief Scientific Officer
d r . s i M o n E . M o r o n E y
Chief Executive Officer
d r . a r n d t s c h o t t E l i u s
Chief Development Officer
Management Board of MorphoSys AG / Letter to the Shareholders 05
Letter to the Shareholders
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In 2011, MorphoSys made exceptional progress in its key business activities. Our pipeline of therapeutic
antibodies matured significantly into one of the richest and deepest in the industry. We have made major
additions to our technology platform, and introduced a novel and superior antibody library called Ylanthia.
Our solid financial performance once again illustrates the advantages of our business model.
Three programs, MOR103, MOR202 and MOR208, are currently the key assets in our Proprietary Develop-
ment segment. Investment in these programs is our top priority, as they provide our best opportunity to
generate substantial value for the Company. Across the three programs, we now have five clinical trials
ongoing; a considerable expansion from the two studies at the beginning of 2011.
We continued the active phase 1b/2a trial with our lead candidate MOR103 in rheumatoid arthritis and are on
track to report final data this year. The results will form the basis for partnering discussions to secure the
subsequent development of the program. Multiple sclerosis became the second indication for the clinical devel-
opment of MOR103 when we initiated a phase 1b study in December 2011. We also started a clinical trial
evaluating the subcutaneous administration of MOR103. Both studies, the new indication and the subcutane-
ous administration option, could substantially increase the program’s value for pharmaceutical partners.
MOR208, our most advanced proprietary cancer program, is on track to report data from the ongoing phase 1
study in patients with CLL in the second half of the year. And MOR202, our HuCAL antibody for multiple
myeloma, entered a phase 1/2a trial in 2011 and thus became our third fully owned antibody in the clinic.
Our Partnered Discovery segment continues to mature as more and more programs advance. Two new pro-
grams entered the clinic during 2011 and two partnered programs advanced from phase 1 into phase 2 trials.
As the pipeline matures, the amount of data from individual programs that is publicly available increases.
06
t h E c o M p a n y
As a result, investors have more visibility on our pipeline’s prospects and its inherent value than ever before.
By way of example, our partner Roche published data from the phase 1 trials of the HuCAL antibody gan-
tenerumab. The data clearly illustrates the promise of this novel treatment for the huge unmet medical need
that is Alzheimer’s disease.
With regard to technology, 2011 was a truly remarkable year for MorphoSys. Our success today is based on
the company’s HuCAL antibody platform and our ability to build productive relationships around it. The full
installation of HuCAL at the premises of Novartis in Basel in early 2011 was another significant milestone
in the life cycle of this technology. With 19 programs in the clinic at the time of writing, HuCAL is the most
successful antibody library technology in the industry.
Technology development, however, does not stand still. We believe that with new technology, even better anti-
body drugs can be developed. This is why we initiated an internal technology program with a dedicated
team in 2008 to develop a next-generation antibody platform. The acquisition of Sloning BioTechnology in
December 2010 catalyzed this process and paved the way for our novel technology platform, Ylanthia. We
expect Ylanthia to set new standards for therapeutic antibody generation over the next decade and beyond.
Commercial application will commence in 2012.
The transformation of our third segment, AbD Serotec, into a business unit increasingly focused on the diag-
nostic market is ongoing. The first HuCAL-based diagnostic tests entered the market in 2011, with more to
come. Additionally, new deals based on our Slonomics platform for protein engineering, such as the agreement
with Novozymes in industrial biotechnology, provide an attractive new revenue component in AbD Serotec’s
sales mix. In 2011, these positive developments compensated somewhat for a difficult market on the research
reagent side of AbD’s business, where the effects of a challenging economic environment were felt. In 2012,
we expect AbD Serotec to increase its penetration of the diagnostic market, and the rollout of a new e-com-
merce platform to bring improvements in the research reagent business.
Letter to the Shareholders 07
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“Investors have more visibility on our pipeline’s prospects
and its inherent value than ever before.”
The MorphoSys Group’s financial performance was substantially influenced in 2011 by the technology mile-
stone we reached in the Novartis alliance, resulting in a record level of success-based payments of € 32.7 mil-
lion. Total revenues of € 100.8 million represented a strong double-digit growth rate compared to the previous
year. Despite a 36 % increase in proprietary R&D investment to approximately € 37 million, we recorded an
operating profit of € 12.2 million. Our balance sheet – our cash position increased to € 134.4 million – is one
of the Company’s greatest strengths, especially in the current poor financing environment. This strong cash
position makes additional strategic transactions possible, such as the 2010 Sloning acquisition, which has
already generated a significant return on investment through four new license agreements.
All in all, 2011 was a successful year for MorphoSys and 2012 promises to be even more exciting. We are
eagerly awaiting clinical data from our lead program, MOR103. Positive data could provide the basis for a
lucrative out-licensing deal. In addition, we await clinical proof of concept data for up to five partnered pro-
grams during the course of the year.
Our progress would not be possible without the hard work, dedication and creativity of our employees, to
whom I am extremely grateful. Thanks also to you, our shareholders, for your continued support. I am sure
you will join me in wishing the Company a successful 2012.
Dr. Simon E. Moroney
Chief Executive Officer
08
t h E c o M p a n y
The MorphoSys Share
During the 2011 fiscal year, MorphoSys’s stock price showed a 5 % de-
crease, while the German TecDAX index decreased by 19 %. The NASDAQ
biotechnology index rose by 11 % in 2011.
t h E M o r p h o s y s s h a r E (January 1, 2011 = 100 %)
130
120
110
100
90
80
70
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
m o r p h o s y s
n a s d a q b i o t e c h n o l o g y i n d e x
t e c d a x
K E y d ata f o r t h E M o r p h o s y s s h a r E (as of December 31 of each year)
in € million (if not stated otherwise)
2011
2010
2009
2008
2007
Total Stockholders’ Equity
197.1
185.9
173.9
162.0
145.5
Number of Shares Issued (Total)
23,112,167
22,890,252
22,660,557
22,478,787
22,160,259
Market Capitalization
Closing Price (Xetra)
Average Daily Trading Volume
in €
405
17.53
1.8
424
18.53
1.1
386
17.04
1.3
421
18.75
1.9
357
16.10
2.5
The MorphoSys Share
09
s h a r E h o l d E r s t r u c t u r E
Shareholdings by Investor Type (in %)
Geographic Split of Institutional Holdings (in %)
Institutional Investors
46.0
Retail Investors
22.0
Novartis
Management and
Supervisory Boards
Treasury Stock
6.4
1.9
0.7
Unidentified Investors
23.0
UK
Scandinavia
Switzerland
Benelux
Germany
France
Other Countries
USA
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7
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4
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The economic turbulence on the European market put pressure
on the share price development of most companies. The per-
formance of MorphoSys’s stock was also influenced by the ex-
tremely volatile market situation.
its position based on market capitalization to 14 th place (year-
end 2010: rank 16) and its position based on trading volume to
20 th place (year-end 2010: rank 23).
l iQuidi t y and indEx MEMbErship
The average daily trading volume of MorphoSys’s stock increased
to € 1.8 million per day, compared to an average trading vol-
ume of € 1.1 million per day in the previous year. MorphoSys
further strengthened its position in the TecDAX index, which
includes the 30 largest technology stocks on the Frankfurt Stock
Exchange. At the end of 2011, the Company was able to improve
s t ocKhol dEr basE
The free float according to Deutsche Börse AG, which is generally
taken into account in the weighting of MorphoSys’s stock in
stock indices, was 88 % of the share capital at year-end 2011.
Please visit our website for the most recent information on
investor relations.
s E E g l o s s a r y
s e e pa g e 1 5 2
s E E g l o s s a r y
s e e pa g e 1 5 2
a d d i t i o n a l i n f o r M at i o n
w w w. m o r p h o s y s . c o m
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A n t i b o d y M A g A z i n e
expl oring
of
t he
p o t en t iAl
An t ibodies
S u c c e S S f u l d r u g d e v e l o p m e n t t o d a y i S a c o m p l e x u n d e r ta k i n g i n -
v o lv i n g d i f f e r e n t o r g a n i z at i o n S a n d c o m p a n i e S . i t r e q u i r e S S u b -
S ta n t i a l f i n a n c i a l i n v e S t m e n t. b u t e v e n m o r e S o , i t r e q u i r e S t h e
c r e at i v i t y, p e r S i S t e n c e a n d l o n g -t e r m c o m m i t m e n t o f p e o p l e r e a d y
t o e x p l o r e n e w a v e n u e S i n S c i e n c e a n d m e d i c i n e . m o r p h o S y S’ S l e a d
a n t i b o d y p r o g r a m m o r10 3 , w h i c h i S i n c l i n i c a l d e v e l o p m e n t f o r
r h e u m at o i d a r t h r i t i S a n d m u lt i p l e S c l e r o S i S , i S a p r i m e e x a m p l e
o f t h i S d e v e l o p m e n t p r o c e S S .
11
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f o r g e A l l i A n c e s
Build partnerships to bring the drug to market
d e v e l o p t h e c o M p o u n d
Advance the compound into the clinic
e v A l u At e t h e c o n c e p t
Validate the concept in preclinical studies
b u i l d r e s e A r c h n e t w o r k s
Strengthen the scientific and commercial basis
s e l e c t t h e A n t i b o d y
Screen for antibody candidates
c h o o s e t he tArge t
Understand the target biology
12
A n t i b o d y M A g A z i n e
MorphoSys employees from different depart-
ments analyze the target biology of GM-CSF,
the basis of the Company’s MOR103 program.
Choose the target
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t he tArge t
a n t i b o d y d r u g d e v e l o p m e n t S ta r t S w i t h q u e S t i o n S w h i c h S o u n d
f a i r ly S i m p l e , b u t w h i c h a r e c r i t i c a l f o r t h e l at e r S u c c e S S o f
a d r u g p r o g r a m : w h i c h m o l e c u l e i n t h e h u m a n b o d y S h o u l d b e
ta r g e t e d w i t h a n a n t i b o d y ? a n d , h o w w i l l t h i S c h a n g e t h e
c o u r S e o f a g i v e n d i S e a S e f o r t h e b e t t e r ?
MOR103 is a fully human HuCAL antibody directed against
the target molecule granulocyte macrophage colony-stimulating
factor, or GM-CSF for short. GM-CSF acts as a messenger be-
tween different parts of the human immune system. MorphoSys
initiated the MOR103 program based on internal target scout-
ing work and the scientific data generated by researchers around
the world. GM-CSF was initially described as a growth factor
for white blood cells. Professor John Hamilton from the Univer-
sity of Melbourne was the first to suggest that GM-CSF may
promote inflammation as it acted on macrophages, a key cell
type in chronic inflammation, to produce an enzyme which
can damage tissues.
14
A n t i b o d y M A g A z i n e
“we felt that blocking gm-cSf with an antibody
could lead to a new treatment option for inflam-
matory diseases.”
Professor John Hamilton, University of Melbourne
“My rather new hypothesis was that GM-CSF could indeed
be important in inflammation in an additional way,” Professor
Hamilton recalls. “Macrophages are almost certainly a key
producer of inflammatory cytokines such as IL-1 or TNF-alpha.
These cytokines in turn seem to stimulate other cells in in-
flamed tissues to produce GM-CSF, which again acts on macro-
phages as a survival and activating factor. In the end, what
you get is a sort of positive feedback loop worsening the inflam-
matory condition. We felt that blocking GM-CSF with an anti-
body could interrupt this vicious cycle, if you like, and lead to
a new treatment option for inflammatory diseases.” The sub-
sequent research led by Professor Hamilton and Professor Gary
Anderson provided direct evidence, using this approach in
animal models, that GM-CSF was a central mediator of inflam-
matory diseases. Consequently, in 2000 the University of
Melbourne filed a US patent application covering the use of
GM-CSF inhibitors for the treatment of inflammatory disorders.
“Interestingly, this new interpretation of the molecule’s biology
has been rather overlooked by the industry,” Hamilton con-
cludes. The background information offered a significant devel-
opment opportunity for MorphoSys, and only a few other com-
panies are pursuing projects against the same target.
Choose the target
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“It is our prime goal to explore and develop innovative and
effective treatment regimes for patients. As a biotech company,
you sometimes have to strike a balance between choosing a
pathway and target that are validated to some degree, because you
can’t spend your limited resources on things that represent
entirely unknown territory, but where the competitive landscape
is still attractive, still manageable,” says Dr. Arndt Schottelius,
Chief Development Officer of MorphoSys AG. Schottelius joined
MorphoSys as Chief Development Officer from Genentech in
December 2008, when MOR103 was already moving towards the
clinic in rheumatoid arthritis, or RA for short. One of his first
tasks at MorphoSys was to carry out a full proprietary portfolio
review in order to further strengthen the Company’s develop-
ment focus. “When I first looked at the MOR103 program, I was
intrigued by the target biology and sound scientific rationale
for GM-CSF as a novel and promising approach to tackling in-
flammation and autoimmune disorders,” Schottelius recalls.
“when i first looked at the mor103 program, i was
intrigued by the target biology and sound scien-
tific rationale for gm-cSf as a novel and promising
approach to tackling inflammation and autoim-
mune disorders.”
Dr. Arndt Schottelius, Chief Development Officer of MorphoSys AG
16
A n t i b o d y M A g A z i n e
8
gM-csf
Mor103
gM-csf-receptor
7
6
2
5
1
3
2
4
h o w m o r10 3 i S S u p p o S e d
t o i n t e r f e r e w i t h t h e
p r o -i n f l a m m at o r y c y t o k i n e
n e t w o r k i n r a
3 Macrophages
GM-CSF activates macrophages and
leads to proliferation of this cell type.
Since macrophages produce other
pro-inflammatory cytokines, an inflam-
matory cascade begins.
1 t cells
Support the activation of macro-
phages by producing cytokines includ-
ing GM-CSF.
2 gM-csf
Pro-inflammatory cytokine, which
supports the recruitment of immune
cells from the bone marrow, including
neutrophils and macrophages, acti-
vates them and acts as a survival fac-
tor for these cell types.
4 osteoclasts
Osteoclasts are specialized cells that
resorb bone material. In RA, these
cells are overly activate, resulting in
lesions and holes in the bone, which
is subsequently infiltrated by cell
layers resulting from the aggressive
proliferation of synovial fibroblasts.
5 synovial fibroblasts
The synovial membrane in RA patients
is inflamed and consists of multiple
layers of synovial fibroblasts, as well
as macrophages, which multiply at
an abnormal rate. The resulting tissue,
called pannus, infiltrates bone and
cartilage tissue. As the disease prog-
resses, the aggressive expansion of
the pannus is a main reason for the
joint becoming deformed.
6 neutrophils
Being a part of the innate immune
system, neutrophils’ main function is
to internalize and destroy microorgan-
isms. In RA, they produce and release
substances that attack cartilage tis-
sue in the diseased joints.
7 chondrocytes
Under the influence of certain cyto-
kines, chondrocytes switch to degrad-
ing the cartilage matrix.
8 Mor103
The MorphoSys antibody MOR103
binds its target molecule GM-CSF,
and thus inhibits the activation and
proliferation of inflammatory macro-
phages and neutrophils in the dis-
eased joint. Using this approach sev-
eral pathogenic processes could be
prevented early on.
Choose the target
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Joint cartilage
synovial Membrane
Swollen due to influx of
inflammatory cells
synovial fibroblasts
These form the inflammatory
pannus, which sprawls into
the joint, covers the cartilage
and infiltrates bone lesions
resulting from osteoclasts’
bone absorbing activity
Many types of immune cells accumulate in a diseased joint. The cell types which
are activated by the cytokine GM-CSF play a key role in the development of the
disease. Along with disease progression, bone and cartilage tissue is increasingly
affected.
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A n t i b o d y M A g A z i n e
“when used as a drug, the high affinity of mor103
is expected to lead to a beneficial dosing regimen
and cost of goods advantage.”
Dr. Stefan Steidl, Director Pharmacology at MorphoSys
Select the Antibody
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An t ibod y
a f t e r t h e d e c i S i o n w a S m a d e t o i n i t i at e a t h e r a p e u t i c p r o j e c t
a g a i n S t g m - c S f, t h e n e x t c h a l l e n g e f o r m o r p h o S y S’ S S c i e n t i S t S
w a S t o i d e n t i f y t h e b e S t a n t i b o d y c a n d i d at e f r o m i t S p r o p r i e ta r y
a n t i b o d y l i b r a r y.
20
A n t i b o d y M A g A z i n e
The MOR103 antibody, like almost all of MorphoSys’s pipeline
projects today, was sourced from the Company’s HuCAL anti-
body platform. HuCAL, which stands for Human Combinatorial
Antibody Library, uses a unique concept to isolate a target-
specific antibody from the entire human antibody repertoire
and optimize the molecule for therapeutic applications, if
needed. “Using our unique optimization routine, we were able
to achieve a 5,000-fold increase in binding strength and a
2,000-fold increase in potency compared to the first selected
Select the Antibody
21
The MOR103 antibody was isolated from the HuCAL antibody library
according to different criteria such as binding strength, specificity,
stability and solubility.
antibody we got out of the library,” says Dr. Stefan Steidl,
Director Pharmacology at MorphoSys and one of the Company’s
scientists who worked on the MOR103 program from the very
beginning. “This antibody is still one of the best candidates in
terms of binding strength we have ever isolated from our li-
brary and it represents, to the best of our knowledge, the first
anti-GM-CSF agent with a subpicomolar affinity for its target,”
Steidl comments. “When used as a drug, the high affinity of
MOR103 is expected to lead to a beneficial dosing regimen and
cost of goods advantage.”
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Mor103
MorphoSys scientists isolate and characterize
drug candidates from the Company’s antibody
library for both its proprietary as well as for
partnered programs.
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A n t i b o d y M A g A z i n e
s t ep 3
buil d
reseArch
ne t work s
r e S e a r c h e r S at t h e u n i v e r S i t y o f m e l b o u r n e h a v e p l ay e d a l e a d i n g
r o l e i n c h a r a c t e r i z i n g t h e f u n c t i o n o f g m - c S f a S a c e n t r a l m e d i a -
t o r o f i n f l a m m at o r y d i S e a S e S . i n 2 0 0 7, m o r p h o S y S S i g n e d a n a g r e e-
m e n t w i t h t h e u n i v e r S i t y, p r o v i d i n g t h e c o m p a n y w i t h a n e x c l u S i v e
l i c e n S e f o r a k e y p at e n t f a m i ly.
“While we initiated the project completely on our own, ideas to
forge a scientific partnership with the University of Melbourne
existed quite early on,” says Dr. Marlies Sproll, Chief Scientific
Officer of MorphoSys. A key reason for this consideration was
a US patent application covering the use of inhibitors of GM-CSF
which the University of Melbourne had filed in 2000. This pat-
ent offered the prospect of market exclusivity in the USA for a
company with an anti-GM-CSF therapeutic antibody for the
treatment of diseases such as rheumatoid arthritis.
Build research networks
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“the uS market is currently by far the largest for
ra drugs, with an estimated patient population of
more than one million.”
Dr. Marlies Sproll, Chief Scientific Officer of MorphoSys AG
24
A N T I(cid:35) (cid:48) (cid:37) (cid:58) (cid:1) (cid:46) (cid:34) (cid:40) (cid:34) (cid:59) (cid:42) (cid:47) (cid:38)
(cid:1)
(cid:52)(cid:68)(cid:74)(cid:70)(cid:79)(cid:85)(cid:74)(cid:71)(cid:74)(cid:68)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:69)(cid:70)(cid:87)(cid:70)(cid:77)(cid:80)(cid:81)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:85)(cid:70)(cid:66)(cid:78)(cid:84)(cid:1)(cid:74)(cid:79)(cid:85)(cid:70)(cid:83)(cid:66)(cid:68)(cid:85)(cid:1)(cid:1)
(cid:66)(cid:85)(cid:1)(cid:70)(cid:87)(cid:70)(cid:83)(cid:90)(cid:1)(cid:77)(cid:70)(cid:87)(cid:70)(cid:77)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:69)(cid:70)(cid:87)(cid:70)(cid:77)(cid:80)(cid:81)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:81)(cid:83)(cid:80)(cid:68)(cid:70)(cid:84)(cid:84)(cid:15)
Build research networks
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“The US market is currently by far the largest for RA drugs,
with an estimated patient population of more than one million.
We felt that gaining access to such a patent could be a very
attractive addition to the MOR103 package, bearing in mind
that we would most likely partner it at some stage further
down the road,” adds Sproll, who also supervises the intellec-
tual property department of the Company.
In 2006, when this patent application was yet to be granted by
the US patent office, MorphoSys approached the University of
Melbourne seeking to exclusively license it. A face-to-face mee-
ting was organized in late 2006 between MorphoSys execu-
tives and the University’s inventors. MorphoSys’s plans for the
GM-CSF program, the very potent fully human anti-GM-CSF
antibody with high affinity for its target and the Company’s
financial strength were key assets in these discussions. Finally,
a license agreement was announced in January 2008. Signing
the license was, however, just the start of this fruitful relation-
ship. Both parties continued to work together closely and the
University’s patent was successfully granted by the US patent
office in late 2008, a significant milestone for the relationship.
In July 2009, the parties further expanded their relationship to
investigate new therapeutic applications for MorphoSys’s
MOR103 program.
MorphoSys scientists use various in vitro as-
says to validate drug candidates for subsequent
development steps.
26
A n t i b o d y M A g A z i n e
MorphoSys is able to produce antibody mate-
rial sufficient for initial studies at its premises
in Martinsried near Munich.
Evaluate the concept
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evAl uAt e
the concep t
b e f o r e a d r u g c a n d i d at e c a n b e t e S t e d i n h e a lt h y v o l u n t e e r S a n d
p at i e n t S , t h e u n d e r ly i n g h y p o t h e S i S h a S t o b e e v a l u at e d i n p r e-
c l i n i c a l S t u d i e S , w h i c h m e a n S i n l a b o r at o r y a S S a y S a n d , S u b S e -
q u e n t ly, i n a n i m a l m o d e l S .
MorphoSys used an established arthritis model in rats to gen-
erate the preclinical data for MOR103, which was presented at
a scientific conference in late 2008. The antibody was admin-
istered in a range of concentrations and brought about signifi-
cant reduction of knee joint swelling and improvement in joint
histopathology in a dose-dependent manner. In addition, signifi-
cantly reduced cytokine levels and white blood cell influx, both
typical for RA, were observed in the tissue surrounding the
joints.
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A n t i b o d y M A g A z i n e
“These findings supported our understanding of the target biol-
ogy of GM-CSF,” comments Dr. Ulrich Moebius, Head of Pre-
clinical Development and Project Management at MorphoSys,
who joined the Company in 2008. “When a program has ad-
vanced into clinical trials, preclinical development usually
continues, and that was no different with MOR103.” In the
meantime, MorphoSys has generated additional preclinical
data in rheumatoid arthritis as well as in multiple sclerosis,
which became the second indication the drug is now pursued
in. “Given the target biology of GM-CSF, it was pretty clear to
us that the compound has therapeutic potential in other indi-
cations within the inflammatory disease spectrum,” Moebius
adds.
“given the target biology of gm-cSf, it was pretty
clear to us that the compound has therapeutic
potential in other indications within the inflam-
matory disease spectrum.”
Dr. Ulrich Moebius, Head of Preclinical Development and Project Management
Evaluate the concept
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Neuronal
damage
Myelin
Multiple sclerosis
normal
asthmatic
Asthma
pain
gM-csf
osteoarthritis
copd
rheumatoid Arthritis
The cytokine GM-CSF plays a central role in the inflammatory immune response
cascade. Abnormal functioning of this cascade, and increased GM-CSF levels
in particular, have been associated with a number of autoimmune and inflam-
matory diseases, including severe asthma, chronic obstructive pulmonary dis-
ease (COPD), rheumatoid arthritis, multiple sclerosis and others. This breadth
of activity makes GM-CSF an attractive therapeutic target to treat a variety of
inflammatory diseases.
30
A n t i b o d y M A g A z i n e
MorphoSys has established a strong network of
clinical research organizations and clinical in-
vestigators to evaluate the MOR103 antibody in
patients.
Develop the compound
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devel op t he
coMp ound
f o l l o w i n g p r e c l i n i c a l v a l i d at i o n , a n e w d r u g c a n d i d at e h a S t o
p a S S t h r o u g h t h r e e S ta g e S o f c l i n i c a l d e v e l o p m e n t b e f o r e m a r k e t
a p p r o v a l c a n b e g a i n e d . S i g n i f i c a n t i n v e S t m e n t a n d S e v e r a l y e a r S
o f d e v e l o p m e n t a r e n e c e S S a r y t o b r i n g a d r u g t o m a r k e t.
The clinical development of the compound commenced in
2008 with the start of a phase 1 clinical study in healthy vol-
unteers in the Netherlands. Evaluating a new compound in
healthy volunteers first is a common practice in the pharma-
ceutical industry for anti-inflammatory compounds. Having
established a solid safety profile, the program was cleared by
regulatory bodies and ethic committees to be evaluated in
a subsequent Phase 1b/2a clinical trial in several European
countries and in January 2010, the first RA-patient received
the MOR103 antibody. While the primary goal is to evaluate
the safety of MOR103 in patients, the Company hopes to de-
tect first hints of efficacy as well.
“With incorporating magnetic resonance imaging, or MRI
for short, we are using the most sensitive imaging technique
to detect inflammatory changes in the joints,” explains Dr.
Schottelius. “We know that the natural progression of the dis-
ease starts with inflammation and swelling of the soft tissue
and then spreads to bone and cartilage. Synovitis, the inflam-
mation and swelling of the tissues lining the joints and bone
edema, which basically represents an influx of cells and water
into the bone, are what we call pre-erosive lesions. These pre-
cursors to the actual bone erosions that, typically, occur later
at the same locations, can only be seen using MRI and are not
detected by X-ray. Another important goal in our development
program is to explore accompanying biomarkers for MOR103,
32
A n t i b o d y M A g A z i n e
Rheumatoid arthritis can affect any joint in
the human body. Wrists, fingers, knees, feet
and ankles are the most commonly affected.
Develop the compound
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MorphoSys applies magnetic resonance imaging
(MRI) in its ongoing RA-trial, an imaging tech-
nique that is more sensitive than X-ray analysis.
which should help before the initiation of therapy to identify
those patients, who will benefit most from a treatment with
the antibody. Enabling a more personalized therapeutic inter-
vention through the discovery and development of such bio-
markers is increasingly important for the pharmaceutical in-
dustry.“
During 2011, the trial was advanced significantly, which will
enable MorphoSys to present data in 2012 and form the basis
for partnering discussions.
“we know that the natural progression of the dis-
ease starts with inflammation and swelling of the
soft tissue and then spreads to bone and cartilage.”
Dr. Arndt Schottelius, Chief Development Officer of MorphoSys AG
34
A n t i b o d y M A g A z i n e
s t ep 6
f orge
Al l iAnces
m o r p h o S y S i S d e v e l o p i n g a p r o p r i e ta r y p o r t f o l i o o f i n n o v at i v e
t h e r a p e u t i c a n t i b o d i e S t o t r e at c a n c e r a n d i n f l a m m at o r y d i S -
e a S e S . t h e c o m p a n y p l a n S t o d e v e l o p t h e S e c o m p o u n d S t o c l i n i c a l
p r o o f o f c o n c e p t b e f o r e p a r t n e r i n g .
Late-stage clinical development is very cost-intensive, especially
in large indications such as rheumatoid arthritis. A study pro-
tocol for a phase 3 trial in this indication could easily involve
more than a thousand patients to achieve statistical relevance.
Thus, MorphoSys intends to partner the MOR103 program based
on positive clinical results before entering the later stages of
clinical development. Licensing deals today are a common prac-
tice in the pharmaceutical arena, since big pharma’s need to
replenish their pipelines is often met by the strengths of biophar-
maceutical companies to provide innovative new drug candi-
dates. The search for new alliances is handled by MorphoSys’s
Business Development unit. “Through our multiple drug discov-
ery alliances, MorphoSys has gained many years of deal making
and alliance management expertise,“ comments Dr. Barbara
Krebs-Pohl, Head of Business Development at MorphoSys. ”We
can tap this established network of pharma relationships to
create awareness for our proprietary compounds. Our MOR103
program is already on the radar screens of several potential
partners, which is not unusual as such but clearly represents
significant interest in our program. There is strong interest
in our industry for anti-inflammatory compounds with a novel
mechanism of action”.
Forge alliances
35
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With its scientific foundations initially explored in the early
90’s, the MOR103 program has already come a long way. The
compound is now well on its way to be further developed as a
novel and promising therapy for the treatment of different in-
flammatory diseases.
“our mor103 program is already on the radar screens
of several potential partners. there is strong in-
terest in our industry for anti-inflammatory com-
pounds with a novel mechanism of action.”
Dr. Barbara Krebs-Pohl, Head of Business Development at MorphoSys
r h e u m at o i d a r t h r i t i S a f f e c t S a b o u t 1 % o f t h e w o r l d ’ S p o p u l at io n .
S t i l l , m a n y p at i e n t S d o n o t r e c e i v e a d e q u at e t r e at m e n t.
growing Market
unmet need
sales of biological rA treatments (in billion uSd)
In 2010, biological treatments against rheuma-
toid arthritis achieved sales of $11bn in the
seven major markets. Market growth is esti-
mated to reach $16bn by 2015, with a com-
pound annual growth rate (CAGR) of 7 %, and the
need for innovative therapies remains high.
11.3
13.1
14.3
15.0
15.7
16.0
2010
2011
2012
2013
2014
2015
Source: Datamonitor
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Group ManaGe-Ment report 37
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5 9 r e s u lt s o f o p e r at i o n s , f i n a n c i a l s i t u at i o n
a n d b a l a n c e s h e e t
6 6 s u s ta i n a b i l i t y r e p o r t
7 2 r i s ks a n d o p p o r t u n i t i e s
7 7 s u b s e q u e n t e v e n t s
7 7 o u t l o o k a n d f o r e c a s t
8 1 c o r p o r at e g o v e r n a n c e r e p o r t
38
g r o u p M a n a g E M E n t r E p o r t
Group Management Report
2011 was a year of solid progress for MorphoSys. The product pipeline, the
Company’s main long-term value driver, advanced well and comprised 20 clini-
cal programs and 76 programs in total at year-end. Despite external head-
winds caused by the European sovereign debt crisis combined with a global
economic instability, the Company was able to sustain strong investment
in technology and product development, and achieved a solid financial profit.
The Proprietary Development segment made outstanding progress and three
new clinical trials were initiated. MorphoSys’s Partnered Discovery segment
recorded significant milestone payments throughout the year, and with the
publication of first clinical data, the success of its programs became increas-
ingly visible. The performance of this segment, together with the results of
the research and diagnostic antibodies segment AbD Serotec, created a stable
financial foundation for MorphoSys. The Company’s ability to invest in pro-
prietary research and development while remaining profitable continues to be
an important component of its business model.
Operations and Business Environment
39
Operations and Business
Environment
Organizational Structure
is to develop innovative therapeutic antibodies and to take these
proprietary drug candidates to clinical proof of concept before
partnering. MorphoSys’s third operating segment, AbD Serotec,
maintains successful business relations with the research and
diagnostics market, supplying public and industrial research in-
stitutions with premium antibodies.
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organizat ion and gl obal prEsEncE of t hE
Morphosy s group
MorphoSys AG and its subsidiaries develop and commercialize
high-quality antibodies for therapeutic as well as for research
and diagnostic applications based on the Company’s industry-lead-
ing proprietary technologies. MorphoSys operates in three busi-
ness segments. Partnered Discovery generates significant value
for the Company by developing drug candidates for commercial
partners. This segment handles various therapeutic development
programs in alliances with renowned biotechnology and pharma-
ceutical companies. The second segment, Proprietary Development,
also operates in the therapeutic market. The goal of this segment
The MorphoSys Group has five locations worldwide and is repre-
sented in the important international biotechnology markets of
Europe and the USA. MorphoSys AG, as the holding company of the
MorphoSys Group, oversees central group functions including
accounting, controlling, human resources, legal, intellectual prop-
erty, corporate communications and investor relations. The man-
agement of these corporate functions is centralized at MorphoSys’s
headquarters in Martinsried near Munich, Germany. The Com-
pany’s own R&D facilities are located there too, as well as at sites
in Puchheim near Munich and Kidlington near Oxford, United
Kingdom. MorphoSys’s international sales are handled by its offices
in Germany, the United Kingdom and in Raleigh, North Carolina,
United States.
f i g . 1: o r g a n i z at i o n a l s t r u c t u r E o f t h E M o r p h o s y s g r o u p
Morphosys ag
Segments
partnered discovery
proprietary development
abd serotec
Fields of Use
therapeutic antibodies
research and diagnostics
40
g r o u p M a n a g E M E n t r E p o r t
f i g . 2: W o r l d W i d E l o c at i o n s o f t h E M o r p h o s y s g r o u p
düsseldorf
oxford
Martinsried
puchheim
raleigh
r & d
g & a
M a n u f a c t u r i n g
s a l E s
W a r E h o u s E
MorphoSys carefully considers locational advantages such as good
infrastructure, a qualified workforce, political support for biotech-
nology and life sciences, synergies resulting from cooperation with
regional research institutes, and a broadly based environment of
suppliers in order to support its future growth objectives.
l Egal s t ruc t urE of t hE Morphosy s group
GROUP MANAGEMENT AND SUPERVISION
MorphoSys AG, a German stock corporation listed in the Prime
Standard segment on the Frankfurt Stock Exchange, heads the
MorphoSys Group. In accordance with the German Stock Corpora-
tion Act, MorphoSys AG has a dual-board structure. The Company
is managed by a Management Board whose four members are ap-
pointed and directed by the Supervisory Board. For more infor-
mation regarding management and supervision as well as corpo-
rate governance in general, please see the Corporate Governance
Report on page 81. The Senior Management Group, composed of
13 people, represents the different MorphoSys departments and
completes the MorphoSys management team. In the year under
review, there have been no changes to the legal structure of the
MorphoSys Group or its entities compared to the year before.
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41
MORPHOSYS IN THE THER APEUTIC MARKE T
MorphoSys is a leading provider of superior antibody technologies
in the therapeutic market, above all through HuCAL, one of the
most successful antibody libraries in the industry. The Company
addresses the market through alliances with pharmaceutical and
biotechnology companies, as well as through proprietary develop-
ment activities. As a biopharmaceutical company, MorphoSys has
an outstanding profile as it is able to finance all proprietary R&D
activities through its own cash flows while recording solid operat-
ing profits.
C OMPE TITIVE L ANDSCAPE
The market for therapeutic antibodies is still one of the most valu-
able and fastest-growing in human healthcare. Driven by acqui-
sitions, there has been a rising concentration on a small number of
key technology providers over the past few years. Pharmaceutical
and biotechnology companies are striving to gain access to new
pipeline opportunities through M&A and in-licensing activities.
This need for innovative product replenishment offers great pros-
pects for companies like MorphoSys which are able to develop
progressive antibody technology platforms. A major challenge how-
ever, especially for smaller biotechnology developers in this field,
are the limited financial capacities.
According to research company Datamonitor, more than 300 mono-
clonal antibody candidates are in clinical development, with an
equal number of programs (around 140 each) in phase 1 and phase 2
clinical development, 37 candidates in late-stage (phase 3) clini-
cal development, and 3 candidates in preregistration. Oncology
accounts for the highest number of programs in clinical develop-
ment, with around half of all programs of the development process.
After oncology, the second-largest therapy area includes autoim-
mune and inflammatory diseases, with a total of 70 monoclonal
antibodies in clinical development. The third-best represented
therapy area is infectious diseases with a total of 26 programs in
phase 1 clinical trials.
NE W MEMBER OF THE MANAGEME NT BOARD
In the first quarter of 2011, MorphoSys announced a change to its
Management Board, with Jens Holstein joining the Company from
Fresenius Kabi. He succeeded Dave Lemus both as Chief Financial
Officer of MorphoSys AG and as a member of the Management
Board (Vorstand). Jens Holstein took up his position on May 1, 2011.
businEss ac t iVi t iEs
MORPHOSYS TECHNOLOGIES
MorphoSys’s protein engineering capabilities are the foundation
of its success. The Company’s most successful technology to date
is the HuCAL platform, a collection of several billion distinct, fully
human antibodies for the in vitro generation of highly specific
antibodies. This recombinant antibody technology has enabled the
generation of therapeutic and diagnostic antibodies, including
those binding to difficult antigens, for over ten years now. The re-
sulting product pipeline is one of the industry’s broadest and is
continuously progressing. Currently, 76 therapeutic HuCAL-derived
programs are in development, with several antibodies thereof be-
ing studied in multiple indications.
Through the acquisition of Sloning BioTechnology GmbH in Octo-
ber 2010, MorphoSys has become the sole source of Slonomics, a
technology which dramatically improves the assembly and quality
of protein libraries. The fully automated genetic engineering plat-
form utilizes sets of double-stranded DNA triplets for the controlled
fabrication of highly diverse combinatorial gene libraries. This
combinatorial technology enables researchers to increase the suc-
cess rate of their screening for new and optimized therapeutic anti-
bodies, proteins or industrial enzymes.
In December 2011, MorphoSys unveiled the next-generation anti-
body technology, Ylanthia. Being one of the industry’s largest anti-
body libraries to date, it uses a novel concept for the in vitro gen-
eration of highly specific and fully human antibodies. The unique
Ylanthia technology was specifically conceived and designed to
overcome current limitations in therapeutic antibody development,
such as poor biophysical properties or limited diversity. If required,
antibodies from the Ylanthia library can be additionally optimized
using Slonomics technology. This feature distinguishes Ylanthia
from the HuCAL platform, which relies on a modular gene design
and preformed cassettes for antibody optimization.
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From a commercial point of view, the market for monoclonal anti-
body drugs is extremely lucrative, amounting to US$ 41 billion in
2010 for 30 marketed antibody drugs, with the top five products
alone generating revenues of around US$ 31 billion and a projected
compound annual growth rate of 8.2 % until 2016.
The dominant position of the five leading products is likely to be
weakened over the next few years by promising new therapies such
as Amgen’s Prolia®/Xgeva® (denosumab) franchise, Bristol-Myers
Squibb’s Yervoy® (ipilimumab), and Human Genome Sciences’s and
GlaxoSmithKline’s Benlysta® (belimumab), which are expected
to account for additional market sales growth. Also, emerging tech-
nologies such as antibody-drug conjugates (ADCs), bispecific and
trifunctional antibodies, domain antibodies, nanobodies and Fc-en-
gineered antibodies will foster diversity in the antibody market.
Broken down into the most active companies in terms of clinical
programs worldwide, Roche and its subsidiary Genentech are lead-
ing the monoclonal antibody sector today. However, companies
such as Amgen, Bristol-Myers Squibb or Novartis are expected to
play an equally important role in the mid to long term. In the
markets addressed, the need for improved therapies and innovative
treatments for patients not responding to traditional methods is
high and still growing. Companies like MorphoSys have realized
this trend and consequently focus their R&D activities on highly
innovative technologies and programs promising to generate better
and safer drugs.
ta b . 1: t o p 5 M o n o c l o n a l a n t i b o d y d r u g s
generic name
brand®
company
indications (FDA/EMA approved)
revenues in
us$ billion (2010)
Infliximab
Remicade
J&J, Merck,
Mitsubishi Tanabe
Rheumatoid Arthritis, Ulcerative Colitis,
Crohn’s Disease, Psoriasis, Psoriatic
Arthritis, Ankylosing Spondylitis
Rituximab
Rituxan
Roche
Bevacizumab
Avastin
Roche
Adalimumab
Humira
Abbott
Non-Hodgkin Lymphoma, Chronic
Lymphocytic Leukemia, Rheumatoid
Arthritis
Colon Cancer, Non-small Cell Lung
Cancer, Renal Cell Carcinoma
Rheumatoid Arthritis, Psoriasis, Juvenile
Idiopathic Arthritis, Crohn’s Disease,
Psoriatic Arthritis, Ankylosing Spondylitis
Trastuzumab
Herceptin
Roche
Breast Cancer, Gastric Cancer
6.6
6.6
6.2
6.1
5.2
Source: Datamonitor
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ta b . 2: p a r t n E r E d d i s c o V E r y s E g M E n t ’ s s h a r E o f t o ta l r E V E n u E s*
in € million
Revenues Partnered Discovery
% of total revenues
2011
79.3
79 %
2010
2009
2008
2007
66.3
76 %
61.7
76 %
54.3
76 %
–
–
* The Partnered Discovery and Proprietary Development segments were introduced in 2009.
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MorphoSys’s Partnered Discovery segment applies the Compa-
ny’s proprietary technologies for the research, development and
optimization of therapeutic antibody drug candidates in exten-
sive partnerships with pharmaceutical and biotechnology compa-
nies. While the development costs are borne by the respective
partner, MorphoSys profits from successful programs in the form
of milestone payments and potential royalties on product sales.
The Company’s largest alliance is the one forged with Novartis in
2007, a pharmaceutical partner with a steadily growing biologics
pipeline. This cooperation alone has safeguarded MorphoSys reve-
nues through funded research and license fees totaling more than
€ 40 million per year until 2017, plus potential milestone payments
and royalties on marketed products.
MorphoSys’s partnered programs target major indications with
huge market potential. The partnered pipeline is continuously
advancing and promising data from clinical trials is strengthening
confidence in the Company’s technologies and scientific abilities.
PROPRIE TARY DE VELOPME NT
MorphoSys is committed to generating value above and beyond its
Partnered Discovery segment by developing innovative proprie-
tary antibody products. The focus is on indications such as inflam-
matory and autoimmune diseases, as well as infectious diseases
and oncology. The first clinical trial data supports the great poten-
tial of MorphoSys’s proprietary drugs. A solid patent position
around the programs and technologies adds to the Company’s
standing in the biotechnology market.
INFL AMMATORY AND AU TO IMM U NE DISE ASES
Chronic inflammatory and autoimmune disorders are a substantial
social and economic burden, affecting millions of people worldwide.
According to BCC Research, the global market for autoimmune
treatments reached a total size of around US$ 38 billion by the end
of 2011 and is expected to grow even further. MorphoSys’s most
advanced program, MOR103, targets GM-CSF, a key player in the
pathophysiology of inflammatory diseases. The drug is currently
undergoing a clinical phase 1b/2a trial for rheumatoid arthritis (RA),
and a second trial for multiple sclerosis (MS) was started in 2011.
The RA market bears great commercial opportunities; more than
80 % of the arthritis drug market already consists of biologic thera-
pies and the overall market is constantly growing, with a total value
of around US$ 12 billion in 2010. A large number of patients are
still not receiving adequate treatment, however, and the unmet
medical need is high.
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ta b . 3 : M a r K E t d ata o n s E l E c t E d p a r t n E r E d p r o g r a M s i n c l i n i c a l p h a s E 2
program name
Morphosys partner
indication
Market potential
Gantenerumab
Roche
Alzheimer’s Disease (AD)
– High unmet medical need due to lack of disease-
modifying drugs
– High potential market growth rate due to aging population,
earlier and improved diagnosis and the emergence of
accompanying immunotherapies that will be prescribed
in addition to existing treatments
– Expected CAGR over the next few years: 10.7 %, with a
total market size of around US$ 11.8 billion in 2018
BHQ 880
Novartis
Multiple Myeloma (MM)
– Most frequent cancer affecting the skeleton
CNTO888
Janssen Biotech
Idiopathic Pulmonary
Fibrosis (IPF)
– Reversing bone destruction is a major issue in myeloma
treatment – BHQ880 could help restore bone formation
– Market will be increasingly saturated with effective
treatments; development opportunities lie in improve-
ment of survival rates and reduced toxicities
– Market size will nearly double over the next few years
to around US$ 5.3 billion in 2018
– Most common interstitial lung disease, with 100,000
patients and more than 30,000 new cases per year in
the USA alone
– Significant unmet medical need: IPF is still a uniformly
fatal disease, with an estimated median survival time of
two to five years
– Only one approved drug (Esbriet) for IPF so far
– Market is expected to grow extremely strongly – at a
CAGR of 50.2 % over the next few years to reach a total
size of around US$ 1.9 billion in 2018
Source: Datamonitor, GlobalData, The Pharma Letter
MOR103 has the potential to be first in class among anti-GM-CSF
antibodies. Other advanced programs in development are MedIm-
mune’s mavrilimumab (CAM-3001), a human monoclonal antibody
targeting the GM-CSF receptor, which is currently being evaluated
in a phase 2 clinical trial, and Micromet’s MT203, another human
antibody against GM-CSF. MedImmune is part of pharmaceutical
company AstraZeneca, and Micromet’s MT203 is already partnered
with Takeda. Clinical data generated with mavrilimumab, which
was published in 2011, provided clinical validation of the targeted
pathway. Several transactions in the RA area in recent years un-
derline the interest of pharmaceutical companies in novel biological
treatments.
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Regarding the MS market, many disease-modifying treatments
are quite cost-intensive. Biologics already represent the largest
class of disease-modifying therapies, both by sales and by number
of approved therapies. The current top-selling MS drugs generate
combined annual sales of about US$ 11 billion and the market is
expected to grow. Following a period in which biologics trans-
formed the MS market, the small molecules segment, which cur-
rently makes up more than 30 % of the market, is expected to see
a renaissance in the next three to four years. However, differences
in course and severity of MS result in a large segmentation with
various subtypes, i.e. relapsing/remitting forms, primary and sec-
ondary progressive forms, etc., which offers different entry routes
for new therapeutic agents.
Over the next couple of years, a new class of oral drugs, known as
JAK inhibitors, is expected to contribute significantly to the anti-
inflammatory market. JAK inhibitors block the action of proteins
called Janus-associated kinases which are involved in cell-signal-
ing. The first JAK inhibitor for rheumatoid arthritis, Pfizer’s tofaci-
tinib, is expected to gain approval by the FDA in 2012.
INFEC TIO US DISE ASES
MorphoSys initiated an early infectious disease program against
drug-resistant MRSA (methicillin-resistant S. aureus) infections in
2010. As part of this initiative, MorphoSys signed a license and
collaboration agreement with UK-based Absynth Biologics, provid-
ing access to novel target molecules associated with Staphylococ
cus aureus infections, including MRSA. MorphoSys generated anti-
bodies using its proprietary HuCAL PLATINUM antibody library.
These antibodies are currently being further validated. MorphoSys
will be solely responsible for the development and partnering of
the resulting compounds.
Hospital-acquired or nosocomial infections are a growing public
health concern and are associated with increasing levels of mortal-
ity. The Centers for Disease Control and Prevention estimates that,
in the United States alone, about 1.7 million nosocomial infections
and 99,000 associated deaths occur each year. These infections
are caused by microorganisms including drug-resistant MRSA. In
the United Kingdom, S. aureus accounts for almost half of all hos-
pital-acquired infections.
ON C OLO GY
The ability of monoclonal antibodies to bind to specific antigens
has led to their dominant position in the area of targeted cancer
therapies, and the global market for innovative biological therapies
in cancer treatment is constantly growing at a very high speed.
More precisely, the biotherapy segment is forecast to almost double
in size by 2014, eventually exceeding US$ 50 billion in the next
five to ten years, according to BCC Research.
MorphoSys has advanced two proprietary cancer programs, namely
MOR202 and MOR208, into clinical development in the last two
years. MorphoSys’s antibody MOR208 is currently undergoing a
clinical phase 1 study against chronic lymphocytic leukemia
(CLL). Its immunotherapeutic target, CD19, is of particular interest
for many B-cell-derived cancers. The therapeutic market for B-cell
malignancies is about US$ 4 – 5 billion according to research firm
Decision Resources. Existing biologics therapies against B-cell
malignancies, including the blockbuster product Rituxan®, target
the cell marker CD20. Due to the target molecule being expressed
on a broader range of B-cell subsets – compared to CD20 – anti-
CD19 antibodies are considered to be potentially more effective.
In addition, MOR208 is also improved by a modification of the con-
stant Fc-part of the antibody, leading to increased cellular cyto-
toxicity (ADCC).
From a commercial perspective, the market for B-cell cancer
therapies is promising due to the need for alternative and more
effective treatment options. The current competitive landscape
in this area is marked by efforts towards technological improve-
ments, and better efficacy and safety profiles. The most advanced
competitive anti-CD19 antibody is Micromet’s BiTE antibody blina-
tumomab (MT103), which is currently being evaluated in phase 2
studies in acute lymphoblastic leukemia (ALL). Other clinical pro-
grams against the same target are pursued by, among others,
AstraZeneca/MedImmune and Sanofi/Immunogen.
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MORPHOSYS IN THE RESE ARCH AND DIAGNOSTIC S MARKE T
In its third operating segment, MorphoSys provides antibodies un-
der the AbD Serotec brand for life science research and modern
clinical diagnostics. AbD Serotec’s sales model is based on a com-
prehensive catalog business with currently more than 15,000
immediately available products and is complemented by the pro-
duction of antibodies in larger quantities on behalf of diagnostic
customers.
C OMPE TITIVE L ANDSCAPE
Driven by technological advancements, the market for in vitro diag-
nostics (IVD) in particular, has experienced significant growth
in recent years. The demand for biomarker-based tests is making
up a large part of this development, and molecular diagnostics
are seen as the fastest-growing segment. The total IVD market,
mainly dominated by North America, Europe and Japan, was
worth US$ 44 billion in 2010 and is estimated to grow by around
18 % until 2013.
AbD Serotec currently has relationships with more than 20 diag-
nostic companies. The first diagnostic test kits using HuCAL anti-
bodies as a key component entered the market in 2011.
INFLUENCING FAC TORS
The sector for research and diagnostic antibodies also faces chal-
lenges in the form of legislative decisions on healthcare infrastruc-
ture in general, and depends to a large extent on public research
funding through grants. As a result, the highest growth potential
for IVD products is currently being seen in countries like Brazil,
Russia, India and China, where public health is strongly supported
by government initiatives.
Being driven by positive developments in technology and innovation
means that the market is influenced by success stories, although
not to the same extent as in the therapeutic sector.
MorphoSys’s antibody MOR202 is being developed against multi-
ple myeloma (MM), targeting CD38. Despite being a relatively
small oncology indication in terms of incidence, the MM market
has logged impressive sales in recent years. Significant achieve-
ments in clinical practice and the launches of efficacious premium-
priced drugs have driven market expansion, but untapped market
potential remains for treatments that can improve the survival rate
and reduce side effects compared to currently available agents.
Despite major improvements in terms of survival, the disease is
only rarely curable and the majority of patients relapse. As a re-
sult, alternative treatments like those targeting surface antigen
CD38 are especially sought-after. Besides MOR202, other de-
velopment programs targeting CD38 are Genmab’s daratumumab
(HUMAX-CD38), a human monoclonal antibody currently involved
in a phase 1/2 study and SAR650984, a humanized antibody in a
phase 1 clinical trial. The latter antibody has been developed in
a research alliance between ImmunoGen and Sanofi, another suc-
cessful example of the commercialization opportunities for biologi-
cal agents.
INFLUENCING FAC TORS
The healthcare sector in general is faced with serious cost-cutting
measures worldwide due to the economic turbulence. Although
medical treatment will always be needed and the demand for new
therapeutic regimens is constantly growing, financial cuts can
slow down the progress of the sector, especially regarding drug
pipeline growth which requires extensive and costly research
and development activities. As a result of their economic rescue
plans, governments throughout Europe and the USA are also
tightening controls of healthcare provisions, carefully reviewing
the general reimbursement of drugs.
As is already the case with small-molecule drugs, generic com-
petition due to expiring drug patents is now also increasingly
challenging the biopharmaceutical industry. The technological
barriers to copying biological drugs, however, will remain high.
Still, many drug developers, mainly from Europe and Asia, are en-
tering this market now, thereby increasing the pressure on tra-
ditional biotechnology companies. According to a market analysis
from Datamonitor, the worldwide market for biosimilars will grow
from just US$ 243 million in 2010 to US$ 3.7 billion by 2015.
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Strategy and Performance
Management
s t rat Egy
MorphoSys pursues a business model which has proven to be highly
successful. Based on the commercial success of its alliances with
pharmaceutical and biotechnological companies, the Company has
the financial strength to reinvest a large part of its profits into
proprietary research and development, fostering the ever-growing
product pipeline while maintaining profitability. This strategy of
building a broad pipeline of innovative products promises substan-
tial long-term value for the Company’s shareholders.
MorphoSys is committed to engineering the medicines of tomorrow
by developing proprietary antibody technologies and applying these
to generate innovative products. Commercial agreements relating
to its unique HuCAL library build the foundation of MorphoSys’s
leading position in the antibody industry, and technology devel-
opment remains at the forefront of the Company’s strategy, as illus-
trated by the acquisition of Sloning BioTechnology GmbH in October
of 2010, and the launch of its latest antibody platform, Ylanthia, in
December 2011.
With the help of MorphoSys’s proprietary technologies, promising
new antibody therapeutics as well as research and diagnostic anti-
bodies are being developed. In order to reduce development-inher-
ent risks, MorphoSys pursues a two-fold strategy in the therapeutic
market. The Partnered Discovery segment generates optimized
therapeutic antibodies for pharmaceutical partners. In 2011, the
list of product candidates developed by the Company’s partners
grew to 68 programs, forming one of the broadest antibody pipe-
lines in the industry. The Proprietary Development segment uses
the same technology platform for the Company’s own account, the
objective being to realize an even greater financial upside than is
possible with partnered programs. In this segment, drug candidates
will be taken to clinical proof of concept before out-licensing them
to a pharmaceutical or biotechnology company for late-stage devel-
opment and marketing.
signif ic an t corp orat E dEVEl opMEn t ac t iVi t iEs in 2011
In 2011, several events had a major impact on the Company’s
business performance:
MorphoSys completed the installation of its HuCAL antibody
platform at the Novartis Institutes for BioMedical Research in
Basel, Switzerland; this triggered a significant technology mile-
stone payment to MorphoSys.
The therapeutic antibody pipeline containing partnered and pro-
prietary products advanced further and comprised 20 clinical
programs and 76 programs in total at year-end. The Proprietary
Development segment in particular recorded significant prog-
ress in terms of its most advanced programs MOR103 in RA and
MOR208 in CLL and two further proprietary programs, MOR202
in multiple myeloma and MOR103 in multiple sclerosis, started
clinical development. MorphoSys now has four proprietary anti-
body programs in the clinic. In order to increase the focus on the
most promising programs, several early stage programs were
suspended. Regarding the partnered side of the business, two
partners, namely OncoMed Pharmaceuticals and Bayer Health-
Care Pharmaceuticals, each initiated a new phase 1 clinical trial
with a HuCAL-derived antibody, triggering milestone payments
to MorphoSys. One other phase 1 program under a license from
MorphoSys was stopped by Bayer HealthCare during the course
of 2011, but Bayer HealthCare kept the exclusive license for the
respective target.
The integration of Sloning BioTechnology GmbH into the
MorphoSys Group was successfully completed early in the year,
both regarding the implementation of the technologies and the
integration of Sloning’s workforce.
Following a commercial license agreement with Proteomika,
the first diagnostic kits containing HuCAL antibodies entered
the market.
At the end of the year, MorphoSys launched its latest antibody
technology, Ylanthia, a library with more than 100 billion prese-
lected, high-quality human antibodies, which is expected to set
new standards for therapeutic antibody generation in the pharma-
ceutical industry. Its commercial application will commence in
2012.
For detailed information about the progress of MorphoSys’s busi-
ness activities in the year under review, see the Research & Devel-
opment section on page 53 as well as Commercial Development on
page 56.
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48
g r o u p M a n a g E M E n t r E p o r t
pErf orMancE ManagEMEn t
The declared goal of MorphoSys is to increase shareholder value
through innovative technologies, sustainable pipeline growth and
ongoing profitability, the latter protecting the Company from be-
ing dependent on external funding. The Company uses a defined
set of financial and non-financial indicators to monitor the trans-
lation of its strategic decisions into business operations and to ini-
tiate appropriate countermeasures if necessary.
FINANCIAL PERFORMANCE INDICATORS
Regarding financial measurement criteria, the operational business
performance of MorphoSys is mainly evaluated using key perfor-
mance drivers such as revenues and profit from operations. Perfor-
mance is tracked on a monthly basis for every segment; budget
planning for the current fiscal year is reviewed and updated quar-
terly. Once a year, a long-term plan covering the next three years
is prepared. A thorough cost analysis measuring the Company’s
performance in line with its financial targets and in comparison
to prior periods is carried out on an ongoing basis. S, G&A and R&D
expenses are particularly carefully evaluated.
Furthermore, MorphoSys’s financial performance is impacted
by factors like milestone and license payments, cost of goods sold
(COGS), operational cash flow, liquidity and working capital. Those
indicators are also regularly evaluated and compared, focusing on
cash management, exposure to foreign exchange effects and in-
vestment opportunities. The value of investments is calculated with
the use of discounted cash flow models.
Regarding the financial rationale behind this strategy, MorphoSys
receives secured payments from its partners in the form of tech-
nology license fees and R&D funding plus success-based milestones
and royalties on product sales. The cash flows generated by the
Partnered Discovery segment are reinvested to a large extent in
proprietary drug development activities. Thanks to its successful
development and commercialization strategy throughout the past
few years, MorphoSys has the financial strength to remain inde-
pendent from the capital markets. Backed by a very healthy cash
position of € 134.4 million, MorphoSys, unlike most other biotech-
nology companies, does not have to look for strategic financing al-
ternatives. Although proprietary development requires substantial
investments, MorphoSys is adhering to its intention of remaining
profitable. The combination of flourishing product alliances and
selected in-house development activities together with a stringent
cost-controlling process builds the basis for the Company’s future
success, thereby increasing the long-term value for MorphoSys’s
shareholders.
In order to fully exploit the potential of its antibody technologies
and products, MorphoSys not only serves the therapeutic market
but also the market for research and diagnostic antibodies, through
its AbD Serotec segment. In particular, the unit’s growing pene-
tration of the diagnostics market positions MorphoSys to benefit
from the burgeoning importance of diagnostics in human health-
care. Several research and development alliances with world-class
research institutes throughout 2011 have proven the leading posi-
tion of MorphoSys in this market. Despite economic headwinds in
the industry and negative currency effects, AbD Serotec achieved
a slightly higher profit margin than was expected at the beginning
of the year.
In 2011, the Company concentrated on strengthening its corporate
development internally, and no decisions on external opportu-
nities were taken. With regards to future business development,
MorphoSys is closely monitoring the biotechnology in dustry in
order to secure sustainable growth through potential technology
acquisitions and in-licensing activities.
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NON - FINANCIAL PERFORMANCE INDICATORS
In an emerging industry like biotechnology, purely financial infor-
mation shows an incomplete picture of a company’s value-cre-
ation activities and may appear to be unrelated to its stock price.
MorphoSys is committed to growing the Company’s value by
maintaining its position as a provider of industry-leading antibody
technologies and by expanding and advancing its pipeline of thera-
peutic drug candidates. The Company’s success in executing this
strategy is most clearly seen in the development of its product
pipeline, especially in respect of the number of programs in clini-
cal trials.
Technological advancements are another indicator of MorphoSys’s
success. The recent launches of unique platforms, each of them
setting new quality standards in the industry, illustrate the inno-
vative potential of the Company.
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ta b . 4 : d E V E l o p M E n t o f f i n a n c i a l p E r f o r M a n c E i n d i c at o r s
in million €
2011
2010
2009
2008
2007
MorphoSyS G roup
Group revenues
Group profit from operations
partnered diSc overy*
Segment revenues
Segment result
proprie tary de velopMent*
Segment revenues
Segment result
abd Serotec
Segment revenues
Segment result
100.8
12.2
79.3
55.7
2.4
(32.2)
19.3
1.0
87.0
9.8
66.3
42.7
1.8
(24.5)
20.2
1.2
81.0
11.4
61.7
39.6
1.0
(18.3)
19.3
1.0
71.6
16.4
54.3
34.4
0
(8.9)
18.2
0.4
62.0
7.0
–
–
–
–
19.6
(0.6)
* The Partnered Discovery and Proprietary Development segments were introduced in 2009.
f i g . 3 : c l i n i c a l p i p E l i n E at y E a r - E n d
2007
2008
2009
2010
2011
4
4
4
11
12
4
1
4
5
8
6
8
17
20
0
2
4
6
8
10
12
14
16
18
20
p h a s e 1
p h a s e 2
50
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f i g . 4 : o V E r V i E W o f M o r p h o s y s ’ s l at E s t t E c h n o l o g i E s
hucal platinuM
MorphoSys’s HuCAL (Human Combinatorial Antibody
Library) PLATINUM technology is a collection of several
billion distinct fully human antibodies allowing the rapid
selection of antibodies with high affinity and specificity.
The recombinant antibody technology of HuCAL en-
ables the generation of therapeutic and diagnostic anti-
bodies, including those binding to difficult antigens.
aryla
arYla is Slonomics applied to antibodies. arYla offers an
individualized maturation solution for antibodies. With
the arYla technology, MorphoSys combines more than
15 years of experience in design and selection of thera-
peutic antibodies with the unique library synthesis ca-
pabilities of Slonomics.
2008
2010
2009
2011
slonomics
In October 2010, MorphoSys acquired Sloning BioTech-
nology GmbH. This transaction made MorphoSys the
sole source of Sloning’s state-of-the-art Slonomics
technology. Slonomics is a proprietary, fully automated
genetic engineering platform that utilizes sets of double
stranded DNA triplets in the controlled fabrication of
highly diverse combinatorial gene libraries. Slonomics
enables researchers to increase the success rate of
their screening for new and optimized therapeutic anti-
bodies, proteins or industrial enzymes.
ylanthia
Ylanthia is MorphoSys’s next-generation antibody tech-
nology and was presented in December 2011. Ylanthia
uses a unique and innovative concept for the in vitro gen-
eration of highly specific and fully human antibodies.
MorphoSys expects its novel antibody library to set new
standards for therapeutic antibody generation in the phar-
maceutical industry over the next decade and beyond.
In 2011, the first diagnostic kit to be based on HuCAL antibodies
made at AbD Serotec, MorphoSys’s business unit for research and
diagnostic antibodies, was brought to the market by Proteomika.
The development of diagnostic products based on MorphoSys’s
technologies is an important driver of the future success of this
segment.
A more detailed description of the Company’s progress is given in
the R&D activities section on page 53. The stable development
is also reflected in the workforce numbers (see section on Human
Resources on page 57). Several additional key elements translate
MorphoSys’s sustainability strategy into operational performance.
They are described in more detail in the Sustainability Report
starting on page 66.
E ARLY INDICATORS
In addition to this, MorphoSys monitors early indicators relating
to both the Company and the macroeconomic environment on a
monthly basis. At Company level, this means scientific and eco-
nomic data relating to the progress of each program for the
therapeutic side of the business as well as sales volume statistics
for AbD Serotec. Regarding early macroeconomic indicators,
MorphoSys examines general market data derived from external
economic and financial studies, in particular with regards to
industry transactions, changes of regulatory parameters and the
availability of research grants.
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dEVEl opMEn t Wi t hin t hE pharMacEu t ic al and
bio t Echnol ogy sEc t ors
According to IMS Health, the global pharmaceutical industry grew
by between 5 and 7 % in 2011, representing sales of approximately
US$ 880 billion. The US market, which is expected to remain the
single-largest pharma market, is slated to grow by between 3 and
5 % from US$ 320 billion to US$ 330 billion. As far as other devel-
oped markets are concerned, Japan is expected to grow by between
5 and 7 % in 2011. Major European markets like the UK, Germany,
France, Italy and Spain are expected to deliver combined growth of
3 %. Emerging pharmaceutical markets, consisting of 17 countries,
are slated to grow in the range of 15 % to 17 % in 2011, representing
sales of between US$ 170 billion and US$ 180 billion. China, which
is now the third-largest market in the world, is expected to grow by
between 25 and 27 % to more than US$ 50 billion in 2011.
The pharmaceutical industry continues to face significant chal-
lenges due to top-selling products losing patent protection and
facing generic competition. The term “patent cliff” is used to de-
scribe the cumulative patent expirations of blockbuster pharma-
ceutical drugs from 2009 to 2015 and the effect of this on the phar-
maceutical industry. The patent cliff peaked in 2011 with the patent
expiry of the antipsychotic medication Zyprexa® and the cholesterol
lowering prescription drug Lipitor®, among others. Drugs with
sales of more than US$ 30 billion had to face generic competition
in 2011, with Lipitor® accounting for US$ 11 billion alone. In total,
blockbusters with combined annual sales of around US$ 170 billion
will go off-patent by 2015. At the same time, many pharmaceutical
companies have struggled with R&D productivity, unable to fill the
resulting holes in their pipelines.
While historically generic competition mainly affected chemically-
derived drugs, generic versions of biopharmaceuticals, so-called
biosimilars, are starting to pick up. In the USA, Obama’s deficit-
reduction plan released late September included a proposal to re-
duce the market exclusivity offered to brand-name biologics drugs
to seven years, down from the 12 years set out in the 2010 federal
healthcare legislation. The government is looking to bring this pro-
posal into effect from 2012. Due to the complexity of biopharma-
ceuticals – including antibodies – regulatory requirements and
market entry barriers are considered much higher than for ge-
neric versions of small molecule drugs.
Development of the Business
Environment
In 2011, the European sovereign debt crisis took center stage. Sev-
eral nations, most notably Greece, but also Italy, Spain, Portugal,
Ireland and France, came under political and economic pressure.
A package of measures designed to prevent the collapse of mem-
ber economies was implemented. This included the enlargement of
the European Financial Stability Facility (EFSF), a special-purpose
vehicle financed by members of the euro zone to combat the crisis.
The economy of the nations who had adopted the euro grew on av-
erage by approximately 1.6 % in 2011, according to OECD estimates.
Although the focus was on Europe, the United States has a grow-
ing budget deficit too. In August 2011, the USA experienced a
downgrade of their AAA credit rating by Standard & Poor’s for the
first time in history. The US economy grew approximately 1.6 %
in 2011. Japan suffered from an earthquake, the resulting tsunami
and the Fukushima nuclear disaster early in the year. Japan’s
economy shrank approximately 0.5 % in 2011. The emerging mar-
kets, including China, India, Brazil and Russia, maintained solid
growth in 2011.
currEnc y ExchangE fac t ors
MorphoSys’s revenues are predominantly generated in US dollars,
euros and British pounds, while its cost base is predominantly re-
alized in euros and British pounds. The turbulence in Europe led
to very high volatility in exchange rates. During 2011, MorphoSys’s
top-line results were significantly influenced by foreign exchange
effects. A detailed description of the impact on the Company’s top
line can be found in the Financial Analysis on page 59.
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Despite these challenges, the pharmaceutical industry today is still
well funded. The three largest companies in the USA, Johnson &
Johnson, Pfizer and Merck, currently have more than US$ 50 bil-
lion in cash and cash equivalents. According to the annual state-
ments of the world’s largest pharmaceutical companies, which pro-
vide the lion’s share of the world’s research budgets, the top ten
players saw a collective jump of more than 10 % in R&D investment
despite considerable cuts in a number of R&D operations in 2011.
Venture capital investment in the US life science sector slightly
increased to total more than US$ 4.7 billion in the USA according
to the National Venture Capital Association and Pricewater-
houseCoopers, and decreased to € 856 million in Europe according
to Dow Jones VentureSource. The largest investment round in
2011, a € 100 million placement, was secured by Danish antibody
company Symphogen.
The academic research sector predominantly depends on govern-
ment funding. Public research budgets remained by and large
solid in 2011. Funding for the National Institutes of Health (NIH)
in the USA continued to be positively influenced by the 2009
American Recovery and Reinvestment Act, under which the NIH
received US$ 10.4 billion in one-time spending on top of its
roughly US$ 30 billion annual budget. With regard to the emerging
research markets, China announced plans to invest heavily in sci-
ence and technology, with a focus on biotechnology.
dEVEl opMEn t Wi t hin t hE an t ibod y sEc t or
At the end of 2011, the number of therapeutic antibodies on the
market increased to 30. During the course of the year, the FDA
approved Benlysta® (belimumab) to treat patients with systemic
lupus erythematosus, Yervoy® (ipilimumab) to treat patients with
late-stage (metastatic) melanoma and Adcetris® (brentuximab
vedotin), an antibody-drug conjugate, to treat Hodgkin lymphoma
and a rare lymphoma known as systemic anaplastic large-cell
lymphoma. Total revenues generated by monoclonal antibody sales
in 2011 amounted to approximately US$ 45 billion, according to
research company Datamonitor.
Deals comprising antibody technologies and products remained
high on the agenda of the pharmaceutical industry and included
agreements from companies such as Biotest, Wilex and Micromet.
Following the approval of Adcetris® and positive clinical trial re-
sults with similar compounds known as antibody-drug conjugates
(ADCs), this product class has attracted significant interest from
pharmaceutical companies. MorphoSys’s antibody libraries can de-
liver the antibody component for this class of drugs – a portion of
partner programs today are already ADCs – and thus the Company
could benefit from increased demand in this area.
Additionally, antibodies continue to expand into new indications,
such as cholesterol management, where Sanofi/Regeneron and
Amgen are currently pursuing later-stage antibody drug candidates
for lowering harmful cholesterol, potentially reducing the risk of
heart attacks.
rEgul at ory EnVironMEn t
The healthcare sector is highly regulated in terms of market access,
pricing and reimbursement. The US Food and Drug Administra-
tion (FDA) approved 35 novel medicines in the 2011fiscal year –
slightly up from last year’s number. Almost half of the 35 new
drugs approved in 2011 were done so under priority review. Under
this program, the FDA aims to complete its review of safety and
effectiveness in six months.
The agency has also shown flexibility regarding clinical trials.
Clinical requirements for many of the newly approved drugs were
streamlined to permit smaller, shorter, or fewer studies than
previously required. According to FDA Commissioner Margaret
Hamburg, the agency approved several drugs on the basis of
single-arm studies or studies with very small patient populations.
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In Germany, a new law regulating the reimbursement of drugs
within the national health care system called AMNOG (Arznei
mittelneuordnungsgesetz) came into force. The new legislation rep-
resents a major change for the local pharmaceutical market since
the former system gave companies a lot of freedom in prescription
drug pricing. Following marketing authorization, the drugmaker
will now determine the price for new and innovative medicines for
the first year after launch. Following an assessment on whether
the product offers an additional benefit or not, the price of the new
medicine will be negotiated between the Federal Association of
Health Insurance Funds and the company in the case of an addi-
tional benefit. In the event that no additional benefit can be deter-
mined, the new medicine will be part of the lower fixed-price sys-
tem (“Festbetragssystem”). AMNOG is likely to favor innovative
drugmakers, and place more emphasis on evidence-based medicine.
Research and Development
Research and development is essential to MorphoSys’s business
success. The Company’s expertise in antibody technology and drug
development has attracted a significant number of commercial
partners, both in the pharmaceutical and the diagnostic industries.
In 2011, the Company invested roughly 36 % of its revenues, or
€ 36.7 million, in proprietary R&D, up from 32 %, or € 28.1 million,
in 2010. Roughly three quarters of MorphoSys personnel were
dedicated to research and development on behalf of partners and
for the Company’s own account. MorphoSys considers innovation
to be a key component of sustainability because it can reduce the
amounts of materials and resources used. MorphoSys strives to
embed this and other sustainability concepts into its R&D processes
for a more responsible innovation culture. More details can be found
in the Sustainability Report on page 66.
rEsEarch and dEVEl opMEn t Wi t h par t nErs
MorphoSys’s R&D activities on behalf of partners are focused on
the generation and characterization of high-quality antibody
drug candidates. Through these activities, MorphoSys has estab-
lished a therapeutic antibody pipeline with a range of partners.
During the 2011 fiscal year, this partnered pipeline increased
from 65 to 68 active antibody development programs in total, of
which 16 programs are currently in clinical development, 24 in
preclinical development, and 28 in research (not including two co-
development candidates with Novartis). The net increase of three
programs in total resulted from nine new program starts and six
programs terminated during the course of 2011.
In line with the Company’s expectations for 2011, two new pro-
grams with partners entered phase 1 clinical trials, triggering
clinical milestone payments to MorphoSys.
In April 2011, MorphoSys announced that it received a milestone
payment from OncoMed Pharmaceuticals in connection with the
FDA’s approval of a clinical trial application for a HuCAL-derived
antibody. The antibody, OMP-18R5, which targets the Wnt signal-
ing pathway, will be evaluated in a phase 1 trial in the USA in pa-
tients with advanced solid tumors. OMP-18R5 is part of OncoMed’s
collaboration with Bayer HealthCare Pharmaceuticals.
In September 2011, Bayer HealthCare Pharmaceuticals initiated
a phase 1 clinical trial with the HuCAL-derived antibody-drug
conjugate BAY 94-9343 in the therapeutic area of oncology. The
program BAY 94-9343 is directed against the target molecule
mesothelin. Mesothelin is highly expressed on mesotheliomas and
on ovarian and pancreatic tumors.
One clinical program, more precisely the antibody-drug conju-
gate BAY 79-4620, was stopped during the course of 2011. This
conjugate was in clinical development at Bayer HealthCare under
a license from MorphoSys. Bayer HealthCare intends to keep the
exclusive license for antibodies against the respective target, since
the associated antibody may be used in other programs. As a re-
sult, MorphoSys reclassified the license-related research and devel-
opment activities as preclinical.
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Two partners advanced programs from phase 1 to phase 2 clinical
trials. Novartis, with the program BYM338, a HuCAL-based anti-
body to treat musculoskeletal diseases, and Janssen Biotech, with
CNTO1959, a HuCAL-based antibody to treat psoriasis, each ad-
vanced drugs into phase 2 clinical trials. In addition, several stud-
ies were initiated with HuCAL-antibodies that had entered clinical
development in previous years, bringing the total number of clinical
trials, either running or completed, with HuCAL-based antibodies
up to 30.
In terms of clinical results emerging from HuCAL-based thera-
peutics, 2011 saw the first of what the Company expects to be an in-
creasing number of events. MorphoSys’s partner Roche published
the first amyloid imaging data from the HuCAL-based Alzheimer’s
disease program gantenerumab. The data, published in the Ar-
chives of Neurology, demonstrated a dose-dependent reduction of
amyloid beta in the brains of patients treated with the monoclonal
antibody, while amyloid load increased in patients on placebo. The
program is currently being evaluated in phase 2 clinical trials.
Preclinical data for the antibody program CNTO888, developed by
MorphoSys’s partner Janssen Biotech (formerly Centocor Ortho
Biotech), was published in Nature. The data presented in this paper
links multiple prometastatic processes in breast cancer to the
production of the chemokine CCL2, the underlying target of the
CNTO888 program, in tumor cells. According to the authors, the
findings could aid the development of new therapeutics to prevent
breast cancer metastasis, the main cause of breast cancer mor-
tality in Western women, and could point to a new indication for
CNTO888. The program is currently being evaluated in phase 2
clinical trials.
propriE tary r&d ac t iVi t iEs – produc t dEVEl opMEn t
MorphoSys’s product-related proprietary R&D activities are focused
on evaluating and developing antibody drug candidates to a stage
where lucrative out-licensing deals with pharmaceutical partners
can be signed.
The clinical compounds and main value drivers in MorphoSys’s
current proprietary portfolio are:
MOR103 – a fully human monoclonal HuCAL antibody being de-
veloped in rheumatoid arthritis (RA) and multiple sclerosis (MS);
MOR208 – a humanized, Fc-optimized monoclonal antibody be-
ing developed in chronic lymphocytic leukemia; and
MOR202 – a fully human monoclonal HuCAL antibody being de-
veloped in multiple myeloma.
In 2011, MorphoSys consolidated its clinical development portfolio,
advancing one new proprietary program into clinical trials, namely
the anti-cancer compound MOR202, and initiating two additional
clinical trials for its anti-inflammatory compound MOR103.
Regarding the clinical development of MOR103 in the first indica-
tion, RA, MorphoSys remained on track to report trial results from
the phase 1b/2a clinical trial in 2012. In June 2011, MorphoSys
amended the clinical trial design for this study. The amended trial
design aimed to recruit approximately 92 patients (from the pre-
vious number of 135). As is the case with many RA trials, recruit-
ment was slower than originally anticipated. Based on feedback
from its investigators, the Company identified ways to optimize
enrollment by improving the study plan without changing the va-
lidity or statistical basis of the study. Assuming a positive outcome
of the trial, MorphoSys intends to initiate out-licensing discussions
in 2012.
With regard to the clinical development of MOR103 in the second
indication, MS, MorphoSys initiated a phase 1b safety study at the
end of 2011. The randomized, multicenter, multi-dose study will
evaluate the safety of MOR103 in patients with multiple sclerosis.
The trial will enroll approximately 30 patients in clinical centers
in Germany, Poland and the United Kingdom. Data for this trial is
expected to be available in 2013.
s E E g l o s s a r y
s e e pa g e 1 5 2
In addition to a second indication, a subcutaneous formulation of
MOR103 is also being developed to increase its commercial poten-
tial. To this end, MorphoSys initiated a bioavailability study to
evaluate a subcutaneous formulation of MOR103 as an alternate
administration route. Enrollment for this trial is expected to be
completed in 2012.
The clinical development of MOR208, an antibody program in-li-
censed from Xencor Inc. in 2010, remained on track. The program
was evaluated in an open-label, multi-dose, single-arm, phase 1
dose-escalation study in the USA during the course of 2011. The
estimated primary completion date of this trial is in H1 2012.
In early September, MorphoSys announced that the first patient in
a phase 1/2a clinical trial of its cancer antibody, MOR202, had
been dosed. The open-label, multicenter, dose-escalation study will
evaluate the safety and preliminary efficacy of MOR202 in pa-
tients with relapsed or refractory multiple myeloma. Patients are
being treated with different doses of the HuCAL-derived antibody.
There are also plans to evaluate the safety of MOR202 in combina-
tion with approved therapy. Preclinical studies presented at the
2011 Annual Meeting of the American Society of Clinical Oncology
(ASCO) demonstrated enhanced cytotoxic activity of MOR202 in
combination with either Velcade® (bortezomib) or Revlimid® (le-
nalidomide), supporting the clinical trial design.
The clinical trial is anticipated to include up to 82 patients and
will be conducted in several centers in Germany and Austria. The
primary endpoints of the trial are to determine the safety and
tolerability of multiple doses of MOR202 in patients. Secondary out-
come measures will evaluate pharmacokinetics and the prelimi-
nary efficacy of this antibody.
Operations and Business Environment
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MorphoSys is committed to a strategy of building value by devel-
oping proprietary therapeutic products. Currently, the three clini-
cal programs, MOR103, MOR208 and MOR202 are the main focus
of attention. Behind these, several promising programs are pro-
gressing, and in order to increase the resources put behind these
newer programs, in 2011, several other early stage programs
were suspended. MorphoSys is very fortunate to be able to pursue
a portfolio of proprietary programs, support its broad partnered
pipeline, and still remain profitable.
propriE tary r&d ac t iVi t iEs – t Echnol ogy dEVEl opMEn t
MorphoSys’s proprietary R&D in technology is focused on en-
abling the generation of even better antibody products, faster than
is currently possible. Technologically, the full implementation of
the Slonomics platform, which was acquired in Q4 2010, and work
on a new antibody library called Ylanthia took center stage in
2011. The Slonomics platform is now fully integrated into internal
R&D processes to develop therapeutic and diagnostic antibodies
for partners and on MorphoSys’s own behalf. When used in an anti-
body context and combined with HuCAL, MorphoSys’s other tech-
nology platform in this field, Slonomics, becomes arYla.
In December 2011, MorphoSys presented its latest antibody library,
called Ylanthia, at a key scientific conference. The Ylanthia anti-
body library is based on a completely new concept for generating
and optimizing human antibodies. The technology’s uniqueness
derives from its incorporation of Slonomics. In contrast to HuCAL,
Ylanthia is not restricted to predefined antibody gene cassettes
and discards the principle of optimization through modularity in
favor of a de novo generation of antibody sub-libraries. MorphoSys
expects the Ylanthia library to have significant advantages over
HuCAL, resulting in therapeutic and diagnostic antibodies which
are superior in many respects to those which derive from extant
technologies.
rEsEarch and dEVEl opMEn t in t hE abd sEro t Ec sEgMEn t
Research activities at MorphoSys’s AbD Serotec business unit are
aimed at gaining access to new products in core research markets,
such as veterinary research, innate immunity, neuroscience and
stem cell antibodies. More details on the individual research alli-
ances can be found on the Company’s website.
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In July 2011, AbD Serotec entered into a research and supply
agreement with the Department of Cancer Immunology and AIDS
at the Dana-Farber Cancer Institute in Boston. Dana-Farber is
engaged in research activities as part of a project funded by the
Defense Advanced Research Projects Agency (DARPA) of the
United States Department of Defense to develop transient immu-
nity against life-threatening viral infections. AbD Serotec will
provide research tools using MorphoSys’s proprietary Slonomics
technology platform. AbD Serotec will receive financial compen-
sation and has preferred access to commercialization rights for
products generated during the collaboration.
In October 2011, AbD Serotec entered into an agreement with the
Moredun Research Institute and the Roslin Institute at The Univer-
sity of Edinburgh to establish a broad range of research reagents
in the veterinary research arena. The project is funded through an
Industrial Partnership Award from the Biotechnology and Biologi-
cal Sciences Research Council (BBSRC) as part of a joint initiative
with the Scottish government’s Rural and Environment Science
and Analytical Services Division (RESAS). Over the three-year term
of the grant, the Moredun Research Institute and the Roslin Insti-
tute combined will receive funding of nearly £ 1 million.
Commercial Development
propriE tary dEVEl opMEn t
In March 2011, MorphoSys and Boehringer Ingelheim announced
a biopharmaceutical manufacturing agreement for therapeutic
antibodies. The agreement covers the process development and
manufactur ing of additional clinical material for MorphoSys’s
proprietary MOR208 program and other drug candidates. By add-
ing an additional supplier to the proprietary development setup,
MorphoSys aims to prevent any bottlenecks in clinical trial supply
in the years ahead, an important part of the Company’s sustain-
able production policy. Additionally, establishing a commercial
manufactur ing process with Boehringer Ingelheim early in the
development of MOR208 is expected to increase the value of this
program.
par t nErEd discoVEry
In February 2011, MorphoSys announced the receipt of a technology
milestone payment from Novartis in connection with the comple-
tion of the installation of its HuCAL antibody platform at Novartis
Institutes for BioMedical Research in Basel, Switzerland. The
milestone arose in connection with an option for Novartis in the
2004 agreement to internalize the HuCAL technology and com-
prises a double-digit, million-euro payment to MorphoSys. The col-
laboration between the companies is otherwise unaffected by the
achievement of the milestone, and the number of active programs
to be pursued by Novartis, as well as the number of MorphoSys
employees working on Novartis’s projects, remains unchanged. The
milestone had a significant effect on MorphoSys’s 2011 revenues.
In April 2011, MorphoSys announced the formation of a new alli-
ance with US-based biotechnology company, ContraFect, in the
discovery and development of therapeutic antibodies for infectious
diseases. Under the terms of the five-year agreement, ContraFect
receives access to the HuCAL PLATINUM antibody library and to
AutoCAL at its facility in New York. Payments under the agree-
ment include committed annual license fees in addition to success-
based development milestones. MorphoSys also stands to receive
royalties on sales of marketed drug products emerging from the
collaboration.
The therapeutic antibody collaboration with Daiichi Sankyo,
signed in March 2006, was concluded in the first quarter of 2011.
The infectious disease collaboration between the two companies
was concluded in May 2011. The license agreement with Schering-
Plough, which was acquired by Merck & Co. in 2009, was also
concluded in 2011.
abd sEro t Ec
In May 2011, Proteomika, a Spanish biotechnology company spe-
cializing in biomarker discovery and a subsidiary of the Progenika
Group, signed a commercial license agreement for seven diagnos-
tic HuCAL antibodies from MorphoSys’s AbD Serotec business unit.
To generate these antibodies, AbD Serotec applies MorphoSys’s
HuCAL GOLD and HuCAL PLATINUM antibody technologies. Pro-
teomika will implement these antibodies in their PROMONITOR®
kits. AbD Serotec will receive royalties on product sales. Proteomika
launched the first PROMONITOR® kits containing HuCAL anti-
bodies for use in the routine clinical monitoring of biological ther-
apies in the second quarter of 2011.
Operations and Business Environment
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AbD Serotec continues to have commercial relationships with a
number of pharmaceutical companies that have worked with HuCAL
in the past. In these relationships, HuCAL is used as a research
tool rather than as a source of therapeutic antibody candidates. The
collaborations are run by the Company’s AbD Serotec business
unit and revenues are recorded in this segment.
In August 2011, MorphoSys amended its existing license agree-
ment with Merck & Co., Inc. to include the use of its HuCAL GOLD
technology in the field of vaccines. Under the terms of the agree-
ment, Merck has been granted access to HuCAL GOLD for research
purposes, with the option to upgrade to MorphoSys’s latest propri-
etary antibody library HuCAL PLATINUM. MorphoSys’s research
and diagnostic antibody segment, AbD Serotec, will receive an-
nual user fees from Merck for access to the HuCAL technology and
license fees for clinical monitoring reagents.
In November 2011, MorphoSys announced that it had expanded
its license agreement with Shionogi & Co., Ltd. The expanded agree-
ment covers the use of MorphoSys’s HuCAL antibody technology
and additional proprietary technology modules for research in drug
discovery for three additional years. Under the terms of the agree-
ment, Shionogi will continue to have the right to use MorphoSys’s
patented antibody library, HuCAL PLATINUM, for research pur-
poses at one of its research sites. MorphoSys receives annual user
fees from Shionogi for access to the technologies.
In December 2011, Novozymes A/S, the world leader in bio-inno-
vation and industrial enzymes, signed a multi-year licensing
and technology transfer agreement with MorphoSys. The agree-
ment provided Novozymes with a non-exclusive license to use
MorphoSys’s proprietary Slonomics technology to develop novel,
predominantly enzymatic products within the industrial biotech-
nology sector. Novozymes became the first industrial biotechnology
company to have access to the Slonomics technology.
Human Resources
group hEadcoun t dEVEl opMEn t
The source of MorphoSys’s success is its creative workforce,
which shows a rich variety of skills and capabilities. On Decem-
ber 31, 2011, 446 people were working for the Company world-
wide (December 31, 2010: 464), of which 147 held a PhD (Decem-
ber 31, 2010: 148). On average, the MorphoSys Group employed
459 people in 2011 (2010: 435).
The Company offers competitive salaries based on a yearly
benchmark ing process relating to the biotechnology sector and
other industries. Additionally, MorphoSys’s employees are com-
pensated through a performance-related bonus system based on
their achievement of individual and Company goals. Equity-
based and profit-participation programs involve the employees
in the operational and financial development of the Company.
A detailed look at the workforce development and the Company’s
focus on attracting and maintaining its employees can be found
in the Sustainability Report on page 66.
changE in ManagEMEn t board coMp osi t ion
On February 24, 2011, MorphoSys announced that Jens Holstein
will succeed Dave Lemus both as Chief Financial Officer of
MorphoSys AG and as a member of the Management Board (Vor-
stand). Dave Lemus stepped down from his position as CFO with
the Company in March 2011 to pursue other opportunities. Jens
Holstein was appointed as Chief Financial Officer as of May 1,
2011, and joined MorphoSys from Fresenius Kabi AG, where he
most recently served as Regional CFO for Europe/Middle East
and as Managing Director of Fresenius Kabi Deutschland GmbH.
Over nearly 16 years at Fresenius, he held a variety of financial
and general management positions. Before that, he had spent sev-
eral years in the consulting industry working in Frankfurt and
London.
s E E g l o s s a r y
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g r o u p M a n a g E M E n t r E p o r t
f i g . 5 : t o ta l h E a d c o u n t o f t h E M o r p h o s y s g r o u p
2007
2008
2009
2010
2011
295
334
404
464
446
0
50
100
150
200
250
300
350
400
450
500
ta b . 5 : E M p l o y E E s b y r E g i o n
Germany
United Kingdom
USA
total he ad c ount aS of deceMber 31
ta b . 6 : E M p l o y E E s b y s E g M E n t * a n d f u n c t i o n
total eMployeeS
Proprietary Development segment
Partnered Discovery segment
AbD Serotec segment
Employees in R&D
Employees in S, G&A
* Remainder of total headcount is not allocated to a specific operating segment.
2011
2010
352
74
20
446
370
78
16
464
2011
2010
446
67
199
140
301
145
464
100
183
142
309
155
Operations and Business Environment / Results of Operations, Financial Situation and Balance Sheet
59
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Results of Operations,
Financial Situation and
Balance Sheet
Revenues
Compared to the same period in the previous year, Group reve-
nues increased by 16 % to € 100.8 million (2010: € 87.0 million). This
increase was mainly a result of higher levels of success-based
fees, namely a technology milestone payment from Novartis in
connection with completing the installation of the HuCAL anti-
body platform at Novartis Institutes for BioMedical Research in
Basel, Switzerland. As expected, funded research and licensing
fees in the Partnered Discovery segment decreased compared to
the same period in the previous year, as did revenues in the AbD
Serotec segment.
Revenues arising from the Partnered Discovery and Proprietary
Development segments, before elimination of inter-segment ef-
fects, accounted for 81 % or € 81.7 million (2010: 78 % or € 68.0 mil-
lion) of total revenues, while the AbD Serotec segment generated
19 % or € 19.3 million of the total segment revenues (2010: 23 % or
€ 20.2 million).
Geographically, 12 % or € 12.4 million of MorphoSys’s commercial
revenues were generated with biotechnology and pharmaceutical
companies and non-profit organizations located in North America
and 88 % or € 88.4 million with companies mainly located in Eu-
rope and Asia. This compares to 19 % and 81 %, respectively, in the
same period of the prior year. The relatively higher contribution
of European revenues to Group revenues mainly reflects the con-
tribution from MorphoSys’s largest customer Novartis.
par t nErEd discoVEry and propriE tary dEVEl opMEn t
sEgMEn t s
Segment revenues arising from the Partnered Discovery segment
comprised € 46.6 million in funded research and licensing fees
(2010: € 57.2 million) plus € 32.7 million in success-based payments
(2010: € 9.1 million). These success-based payments represent 40 %
of total Partnered Discovery and Proprietary Development revenues.
Funded research and licensing fees decreased due to the fact that
most of MorphoSys’s collaborations were concluded as planned and
contractually agreed. The main reason for the strong increase of
success-based payments was a one-time technology milestone from
Novartis for the installation of the HuCAL technology.
Segment revenues from the Proprietary Development segment
included € 2.4 million in funded research (2010: € 1.8 million).
Approximately 94 % of Partnered Discovery and Proprietary Devel-
opment revenues and 76 % of total revenues arose from the Com-
pany’s three largest alliances with Novartis, Daiichi Sankyo and
Pfizer (2010: Novartis, Daiichi Sankyo and Pfizer, 87 % and 68 %,
respectively).
Assuming constant foreign exchange rates at the average rate of
2010, segment revenues in the Partnered Discovery and Proprietary
Development segments would have amounted to € 82.4 million.
abd sEro t Ec sEgMEn t
Compared to the same period of the previous year, AbD Serotec’s
segment revenues decreased by 4 %, or € 0.9 million, to € 19.3 mil-
lion in 2011 (2010: € 20.2 million). The unfavorable comparison
with the prior year’s revenues is mainly due to a large OEM order
which had been placed in Q1 2010. Assuming constant foreign
exchange rates at the average rate of 2010, revenues in the AbD
Serotec segment would have amounted to € 19.8 million.
As of December 31, 2011, orders in the amount of € 0.8 million
were classified as back orders in the segment (2010: € 0.7 million).
60
g r o u p M a n a g E M E n t r E p o r t
Operating Expenses
cos t of goods sol d
Total operating expenses in 2011 increased by approximately
15 % over the previous year, to € 89.1 million (2010: € 77.4 million).
The change in operating expenses of € 11.7 million was due to
research and development (R&D) expenses increasing by 23 % or
€ 10.6 million and sales, general and administrative (S, G&A) ex-
penses increasing by 6 % to € 24.6 million while COGS decreased
from € 7.3 million to € 7.0 million. Total purchase price allocation
(PPA) effects on operating profit amounted to € 1.4 million (2010:
€ 0.8 million) and increased by 75 % due to the full-year inclusion
of the amortization of technology from the acquisition of Sloning
BioTechnology GmbH in October 2010.
Operating expenses remained almost unchanged at € 23.7 mil-
lion (2010: € 23.6 million) in the Partnered Discovery segment and
increased by 32 % to € 35.0 million (2010: € 26.5 million) in the
Proprietary Development segment. In the AbD Serotec segment,
operating expenses decreased by 3 % to € 18.4 million (2010:
€ 18.9 million) and would have amounted to € 18.6 million assum-
ing constant foreign exchange rates at the average rate of 2010.
Stock-based compensation expenses are embedded in COGS, S,
G&A and R&D expense amounts. Stock-based compensation in
2011 amounted to € 1.5 million (2010: € 2.1 million) and is a non-
cash charge.
COGS is composed of the AbD Serotec segment’s cost of goods sold
in 2011 and – compared to the same period of the prior year – de-
creased by 4 % from € 7.3 million to € 7.0 million. The gross margin
for the segment remained unchanged at 64 % in comparison to 2010.
rEsEarch and dEVEl opMEn t ExpEnsEs
In 2011, expenses for research and development increased by
€ 10.6 million to € 57.5 million (2010: € 46.9 million). This was
mainly due to increased costs for external laboratory funding
(2011: € 18.3 million; 2010: € 13.3 million), higher personnel costs
(2011: € 21.4 million; 2010: € 17.9 million), as well as higher costs
for intangibles (2011: € 6.3 million; 2010: € 5.1 million).
In 2011, the Company incurred costs for proprietary product devel-
opment in the amount of € 35.0 million, including segment alloca-
tions for technology development in the amount of € 1.1 million
(2010: € 26.5 million, including segment allocations for technology
development in the amount of € 0.6 million). The total costs for tech-
nology development amounted to € 2.9 million (2010: € 2.1 million).
sal Es, gEnEral and adMinis t rat iVE ExpEnsEs
Compared to the same period of the previous year, sales, general
and administrative expenses increased by 6 %, or € 1.4 million,
to € 24.6 million (2010: € 23.2 million) mainly due to an increase in
personnel costs of € 1.6 million compared to 2010.
Results of Operations, Financial Situation and Balance Sheet
61
ta b . 7: s p l i t o f r & d E x p E n s E s
in million €
2011
2010
2009
2008
2007
R&D Expenses on behalf of partners
Proprietary Development Expenses
Technology Development Expenses
total r&d
20.7
33.9
2.9
57.5
18.9
25.9
2.1
46.9
19.2
19.1
0.7
39.0
27.1
–
0.5
27.6
21.0
–
1.2
22.2
Other Operating Income
Non-operating Items
Other operating income increased by € 0.3 million to € 0.5 million
in 2011 and comprised grant income from governmental agencies.
Operating Profit
Group operating profit in 2011 amounted to € 12.2 million (2010:
€ 9.8 million). Earnings before interest and taxes (EBIT) amounted
to € 11.1 million (2010: € 13.1 million). The Partnered Discovery
and Proprietary Development segments showed an operating profit
of € 55.7 million (2010: € 42.7 million) and an operating loss of
€ 32.2 million (2010: operating loss of € 24.5 million), respectively.
In the AbD Serotec segment, operating profit amounted to € 1.0
million (2010: € 1.2 million) and would have amounted to€ 1.2 mil-
lion assuming constant foreign exchange rates at the average rate
of 2010.
In 2011, non-operating items included other expenses of € 2.2 mil-
lion (2010: € 1.2 million), which predominantly resulted from
foreign exchange losses, and finance income of € 1.4 million (2010:
€ 4.1 million), mainly comprising realized gains on marketable
securities sold in the period. Compared to 2011, more marketable
securities had been sold in 2010 for the financing of the in-licens-
ing of a compound from Xencor in June 2010 and the acquisition of
Sloning BioTechnology GmbH in October 2010, resulting in higher
gains on marketable securities.
Taxes
For 2011, the Company reported income tax expense in the amount
of € 3.2 million (2010: € 4.0 million). This line item mainly included
current tax expense from Group entities.
Net Profit
A net profit after taxes of € 8.2 million was achieved in 2011, com-
pared to a net profit after taxes of € 9.2 million in 2010.
62
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Multiple-Year Overview – Results of Operations
ta b . 8 : M u lt i p l E-y E a r o V E r V i E W – r E s u lt s o f o p E r at i o n s
in million €
Revenues
COGS
Gross Profit
Research and Development Expenses
Sales, General and
Administrative Expenses
Other Operating Income
Profit from Operations
Non-operating Income/(Expenses)
Profit before Taxes
Income Tax Benefit/(Expense)
Net Profit
2011
100.8
7.0
93.8
57.5
24.6
0.5
12.2
(0.7)
11.4
(3.2)
8.2
2010
2009
2008
2007
87.0
7.3
79.7
46.9
23.2
0.2
9.8
3.4
13.2
(4.0)
9.2
81.0
6.7
74.3
39.0
23.9
0.1
11.4
1.6
13.0
(4.1)
9.0
71.6
7.1
64.5
27.6
20.5
–
16.4
1.6
18.0
(4.8)
13.2
62.0
7.9
54.1
22.2
24.8
–
7.0
2.2
9.2
2.3
11.5
Financial Situation
f inanc ial ManagEMEn t princ ipl Es
The most important objective of financial management at
MorphoSys is to provide at all times sufficient liquidity reserves
for industry-specific fluctuations and for the Group’s continued
growth. The most important sources of liquidity are the operating
business activities of the individual Group companies and the re-
sulting cash inflows. Scenarios and cash-flow planning are used
to establish liquidity requirements.
c ash fl oWs
Net cash inflow from operations in 2011 amounted to € 27.1 million
(2010: cash inflow of € 1.9 million). Investing activities resulted in
a cash outflow of € 18.1 million (2010: cash outflow of € 2.0 million),
whereas financing activities resulted in a cash inflow of € 1.3 mil-
lion (2010: cash inflow of € 2.9 million).
c api tal ExpEndi t urE
MorphoSys’s investment in property, plant and equipment focused
mainly on laboratory equipment and amounted to € 2.3 million
in 2011 (2010: € 2.3 million). Depreciation of property, plant and
equipment in 2011 accounted for € 2.4 million compared to € 2.1
million in 2010.
In 2011, the Company invested € 1.3 million in intangible assets
(2010: € 11.5 million). The investment in 2010 had mainly included
the in-licensing of a compound from Xencor. Amortization of in-
tangibles amounted to € 4.3 million in 2011 (2010: € 4.0 million).
l iQuidi t y
As of December 31, 2011, the Company held € 134.4 million in
cash, cash equivalents and available-for-sale financial assets, com-
pared to a year-end 2010 balance of € 108.4 million.
Results of Operations, Financial Situation and Balance Sheet
63
Multiple-Year Overview – Financial Situation
ta b . 9 : M u lt i p l E-y E a r o V E r V i E W – f i n a n c i a l s i t u at i o n
in million €
2011
2010
2009
2008
2007
Net Cash Provided by/(Used in)
Operating Activities*
Net Cash Provided by/(Used in)
Investing Activities
Net Cash Provided by/(Used in)
Financing Activities*
Cash and Cash Equivalents
(as of December 31)
Available-for-sale Financial Assets
27.1
(18.1)
1.3
54.6
79.8
1.9
(2.0)
2.9
44.1
64.3
(1.0)
0.6
1.4
41.3
93.9
28.6
(39.3)
2.5
40.1
97.8
17.1
(5.2)
32.6
48.4
58.5
* In 2011, purchases of derivative financial instruments and proceeds from disposal of derivative financial instruments have been reclassified within the cash flow statement
from financing activities to operating activities. To provide comparative information for the prior year, the figures for the year 2010 have been adjusted accordingly.
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Balance Sheet
assE t s
Total assets increased by € 18.6 million to € 228.4 million as of
December 31, 2011, compared to € 209.8 million as of December 31,
2010. Current assets increased by € 22.2 million, mainly as a re-
sult of an increase by € 25.9 million in available-for-sale financial
assets and cash and cash equivalents generated in operations
(mainly driven by the payment received for the technology mile-
stone from Novartis). The increase in marketable securities as
well as cash and cash equivalents was partly offset by a decrease
in accounts receivable by € 2.8 million.
l iabil i t iEs
In 2011, current liabilities increased from € 21.4 million as of De-
cember 31, 2010, to € 23.8 million as of December 31, 2011, arising
mainly from an increase in accounts payable and accrued ex-
penses as well as tax liabilities by € 3.4 million and € 0.9 million,
respectively. Compared to 2010, accrued expenses for external
laboratory funding increased by € 3.0 million to € 6.6 million while
accrued expenses for personnel-related expenses increased by
€ 1.0 million to € 5.1 million. The increase in accounts payable and
accrued expenses as well as tax liabilities was partly offset by a
decrease in deferred revenue by € 1.8 million.
Compared to December 31, 2010, non-current assets decreased
by € 3.6 million, mainly as a consequence of the amortization of
licenses and patents.
Non-current liabilities increased by € 5.0 million to € 7.5 million in
2011, mainly due to an increase in non-current deferred revenue
linked to payments received in 2011 from a deal closed in Decem-
ber 2010.
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EQui t y
Financing
Total stockholders’ equity amounted to € 197.1 million as of Decem-
ber 31, 2011, compared to € 185.9 million as of December 31, 2010.
As of December 31, 2011, the equity ratio of the Company amounted
to 86 %, compared to an equity ratio of 89 % as of December 31,
2010. The Company is currently not financed via financial debt.
As of December 31, 2011, the total number of shares issued
amounted to 23,112,167 of which 22,948,252 were outstanding,
compared to 22,890,252 and 22,810,356 as of December 31,
2010, respectively.
The increase of shares outstanding by 137,896 arose from the net
effect of exercised options and convertible bonds issued to man-
agement and employees (221,915 shares) and a repurchase of the
Company’s own stock (84,019 shares).
In June 2011, the Company repurchased 84,019 MorphoSys shares
on the stock market and increased the amount of treasury stock
accordingly. The shares will be used to implement the Company’s
long-term incentive plan for management.
Off-Balance Sheet Financing
MorphoSys is not involved in any off-balance sheet financing in-
struments such as the sale of receivables, asset-backed securities,
sale and lease back transactions or contingent liabilities in rela-
tion to special purpose entities not consolidated.
Credit Rating
MorphoSys is currently not rated by any rating agencies.
Multiple-Year Overview – Balance Sheet Structure
ta b . 10 : M u lt i p l E-y E a r o V E r V i E W – b a l a n c E s h E E t s t r u c t u r E
in million €
2011
2010
2009
2008
2007
Assets
Current Assets
Non-current Assets
Total
Equity and Liabilities
Current Liabilities
Non-current Liabilities
Equity
Total
154.7
73.7
228.4
23.8
7.5
197.1
228.4
132.5
77.3
209.8
21.4
2.5
185.9
209.8
155.6
50.5
206.1
24.3
7.9
173.9
206.1
150.1
53.2
203.3
27.4
13.9
162.0
203.3
122.9
61.8
184.7
29.4
9.8
145.5
184.7
Results of Operations, Financial Situation and Balance Sheet
65
Comparison of the Actual Business
Results with Forecasts
During 2011, MorphoSys showed a solid financial performance.
Due to the volatility of exchange rates and the delay of several
milestone payments, the Group did not meet its revenue goal as
set at the beginning of the year and revised its guidance accord-
ingly in the fourth quarter. However, profit from operations was
not affected and the pipeline made good progress.
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Financials
Proprietary R&D
2011 goals
2011 achievements
Group revenues of € 105 –110 million
(revised in October to slightly below € 105 million)
AbD Serotec sales of € 22 – 23 million
(revised in October to approximately € 20 million)
Group revenues of € 100.8 million
AbD Serotec sales of € 19.3 million
Investment in proprietary R&D of € 40 –45 million
Investment in proprietary R&D of € 36.7 million
AbD Serotec profit margin of approximately 4 %
Profit margin of 5 %
Group operating profit of € 10 –13 million
Operating profit of € 12.2 million
MOR103:
− Advance program in rheumatoid arthritis
− Start clinical evaluation in multiple sclerosis
− Prepare clinical trial for subcutaneous administration
− Phase 1b/2a study on track to report final data in 2012
− Phase 1b study opened for enrollment in December 2011
− Bioavailability trial initiated early 2012
Start clinical evaluation of MOR202 in multiple myeloma
Phase 1/2a study initiated in September 2011
Technology announcements
New Ylanthia platform presented in December 2011
Partnered Pipeline
1–3 partnered INDs
2 partnered INDs
Clinical data from partnered programs
Clinical Pipeline
Further expansion of clinical pipeline
Roche presented first amyloid imaging data from the
HuCAL-based Alzheimer’s disease program gantenerumab
The number of partnered programs in phase 2 increased
from 5 in 2010 to 7 at the end of 2011.
The number of programs in clinical studies increased from
17 in 2010 to 20 at the end of 2011.
AbD Serotec
Further penetration of diagnostics market
First HuCAL-based diagnostic kits launched.
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g r o u p M a n a g E M E n t r E p o r t
The Management’s General Assess-
ment of Business Performance
In 2011, the Management Board once again saw a very solid per-
formance from the MorphoSys Group. The majority of its Company
goals have been met, with all business segments contributing to
this positive development. Group revenues increased strongly com-
pared to 2010 but remained slightly under initial expectations as
a result of foreign exchange effects and the shift of individual mile-
stone payments to 2012. In total, the MorphoSys Group showed
top-line growth of 16 % and remained profitable with an operating
profit of € 12.2 million. The financial situation of the Company re-
mains very stable in 2011, with an equity ratio amounting to 86 %,
a cash position of € 134.4 million and no financial debt.
The highest value was once again generated by the Company’s
Partnered Discovery segment, with a technology milestone in
MorphoSys’s Novartis alliance playing a central role. Based on
the positive financial performance of this business segment,
MorphoSys could continue to invest in its proprietary product and
technology activities, with an increase of R&D spending of 23 %
over the course of 2011. Despite increased investments in propri-
etary development, the Company showed solid operating profits.
MorphoSys’s product pipeline continued to grow and mature. With
two partnered INDs, one proprietary compound entering clinical
development and two partnered programs advancing into phase 2,
the pipeline has evolved successfully. In total, 20 programs are
currently in clinical evaluation. MorphoSys’s proprietary portfolio
advanced well and the achievements in 2011 paved the way for
first clinical data and the commencement of out-licensing discus-
sions in 2012.
AbD Serotec did not meet its growth expectations due to a challeng-
ing market environment and foreign exchange effects. In Europe
especially, the economic crisis continued to weaken demand. How-
ever, the segment continued its expansion into the diagnostic
sector, with the first diagnostic kits based on HuCAL antibodies
entering the market in 2011.
Judgments by Management
No accounting policies were applied and related options were exer-
cised in the consolidated financial statements that differ from those
in prior years and that, if applied or exercised differently, would
have had a material effect on the results of operations, financial situ-
ation, and balance sheet structure. Information on the effects of
the use of estimates, assumptions, and judgments by management
can be found in the notes to the consolidated financial statements.
Sustainability Report
For MorphoSys, economic success goes hand in hand with envi-
ronmentally and socially balanced activities. Consequently,
these three criteria are firmly established components of all busi-
ness processes. By relying on such a sustainability-based strategy,
MorphoSys takes responsibility for current and future generations
and at the same time ensures the Company’s long-term business
success. This Sustainability Report outlines MorphoSys’s perception
of ecological and social responsibility as well as resulting activi-
ties. Information on MorphoSys’s management structure and corpo-
rate governance practices can be found in the Corporate Gover-
nance Report on page 81.
Sustainable Corporate Management
at MorphoSys
Hardly any other industry is making such a direct contribution to
the well-being of society at large as the healthcare industry, includ-
ing the biotechnology sector. It is evident that successful therapeu-
tics and better applications for research and diagnostics are able
to offer a major social benefit. While biotechnological approaches
such as therapeutic antibodies are opening up new opportunities
for novel and improved drugs against severe diseases and for pro-
duction methods that are often more tolerable for the environment
than traditional pharmaceuticals, the industry remains a focus for
ethical debate.
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could have a significant impact on the net assets, financial posi-
tion and results of operations, as unlikely and no breach has been
reported so far.
The following report on the implementation of MorphoSys’s cor-
porate strategy and its sustainability performance is oriented
towards the recommendations of the German Sustainability Code
(Deutscher Nachhaltigkeitskodex), which was proposed by the
Council for Sustainable Development (Rat für nachhaltige Entwick-
lung) in October 2011. Furthermore, it is in line with the SD-KPI
standards of SD-M®.
Sustainable Performance at
MorphoSys
E t hic al s tandards and s taKEhol dEr dial oguE
As set out by MorphoSys’s Code of Conduct, the Company adheres
to the highest scientific and ethical principles, notably the World
Medical Association’s (WMA) Declaration of Helsinki, when con-
ducting human clinical trials or animal studies. Compliance with
existing national and international applicable regulatory require-
ments is obligatory for every employee at MorphoSys as well as for
involved third-party contractors.
Not having its own laboratories for this kind of research, the Com-
pany sources out all studies involving animals to contract research
organizations (CROs). In the course of its product development ac-
tivities, MorphoSys commissions animal studies according to the
principles of good animal welfare and human treatment as laid
down in national and European regulations. MorphoSys has imple-
mented, maintains and continuously improves a quality assur-
ance and quality control system with written Standard Operating
Procedures (SOPs) to ensure that animal studies are contracted
to CROs who respect local, national and international regulations.
Studies will generally only be conducted after approval by the
respective competent ethics committee and carried out under con-
tinuous veterinary surveillance.
As is outlined in the Corporate Governance Report on page 81, the
Management Board of MorphoSys clearly acknowledges the im-
portance of social and ecological factors for the Company’s future
success. It is pursuing a business model that aims for sustainable
growth, protecting the interests of its shareholders and creating
value for both them and all stakeholders. Internally, this is re-
flected in a long-term personnel policy as well as in the Company’s
forward-looking R&D activities: MorphoSys’s fully in vitro based
technologies represent a genuine, fast and cost-effective alternative
to animal-based methods and promise to return the greatest pos-
sible value to the Company’s investors. Although novel drugs de-
rived from biotechnological processes are still regarded as rather
expensive medicines today, they have the potential to lower total
healthcare costs in the long run; a crucial point in terms of meet-
ing the healthcare needs of an aging population. In the view of the
management, the MorphoSys business model does not contain
any aspects contradicting the interests of shareholders focusing
on sustainable investments.
In order to ensure that factors potentially endangering the sustain-
able performance of the Company are recognized at an early stage
and adequate countermeasures are taken, a comprehensive risk
management system has been implemented at the Company over
the last few years. MorphoSys generally only takes risks which
offer opportunities to increase the Company’s sustainable value
(read more details on risks and opportunities on page 72).
The Group-wide control of adherence to this strategy is the respon-
sibility of the whole Management Board led by the CEO. The sus-
tainability strategy is integrated into MorphoSys’s planning and
affects the whole value chain at all the Company’s sites. The way
this strategy translates into the daily business of every employee
at MorphoSys is written down in the Code of Ethics as part of the
Code of Conduct, which was introduced in a Company-wide rollout
in 2011. In order to ensure a corporate behavior that complies with
these regulations, MorphoSys provides for regular employee train-
ing courses on the Code of Conduct itself as well as on specific
risk areas like mobbing. Through the Code of Conduct Committee,
which consists of the Head of Global Human Resources (chair-
man) and three further members, every employee can seek advice
in compliance-related matters and, anonymously if desired, report
suspicions or breaches. Compliance violations are consequently pur-
sued and appropriate countermeasures taken. However, the Com-
pany regards serious violations by individual employees, which
c r o s s - r E f E r E n c E
s e e pa g e 7 2 a n d 8 1
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MorphoSys demonstrates its commitment to responsible animal
care and use by working with institutions which, in addition to
complying with the laws regulating animal research, have earned
Good Laboratory Practice (GLP) and/or AAALAC (Association for
Assessment and Accreditation of Laboratory Animal Care) accredi-
tation, whenever possible. Furthermore, the appropriateness of
the CRO’s testing facilities, the level of training and competence
of the personnel involved and the conditions for the animals are
looked at during an evaluation process prior to the contracting of
any study.
Regarding the treatment of healthy volunteers and patients in
clinical trials which are sponsored by MorphoSys, the Company
strictly adheres to the ethical principles that have their origin
in the Declaration of Helsinki mentioned above. In addition, trials
are conducted in compliance with applicable privacy and confi-
dentiality rules. Safeguarding the rights, safety and well-being of
all participants in clinical trials is a high priority for MorphoSys.
Clinical trials will only commence after approval by the applicable
independent ethics committee and/or institutional review board.
Prior to taking part in a clinical trial, every participant has to hand
in a voluntary informed consent form.
The aspiration behind MorphoSys’s business is to improve patients’
lives through its scientific work. The Company is only able to reach
this goal if its corporate actions are also socially acceptable. This re-
quires a continuous and open stakeholder dialogue in order to un-
derstand possible concerns regarding biotechnological approaches
and illustrate MorphoSys’s operations and their advantages. To
this end, MorphoSys engages in various activities, for example
it participates at public information events like the “Münchner
Wissenschaftstage 2011” and actively supports the “Communica-
tion and Public Relations” working group of BIO Deutschland e.V.
procurEMEn t
The procurement department at MorphoSys is in charge of prevent-
ing delivery bottlenecks or a dependency on certain suppliers,
especially when purchasing raw materials and equipment for the
Company’s R&D activities. It continuously monitors the interna-
tional markets with regard to safe, high-quality materials available
at favorable terms. Suppliers and transport service providers are
selected in accordance with economic criteria, but they are equally
expected to comply with human rights and internationally recog-
nized core labor standards. The Company’s supplies are systemati-
cally pooled wherever applicable and medium to long-term con-
tracts fixed with strategic suppliers.
EnVironMEn tal pro t Ec t ion and occupat ional saf E t y
MorphoSys currently has no system in place to actively quantify its
impact on the environment. However, the management closely
oversees the use and related costs of goods and services affecting
the environment. Through technical improvements, optimized
waste management and other activities the Company continuously
strives to reduce the amount of energy used. For example, in
2011, MorphoSys again participated in the Carbon Disclosure Proj-
ect, thereby monitoring its internal consumption and treatment of
existing resources. If necessary, the Company is able to implement
appropriate measures at an early stage in order to use existing
resources more efficiently, but, to date, no excessive demands or
unjustifiable costs have been recorded. Nevertheless, MorphoSys
took a first step towards preventing a further increase in green-
house gases and encouraged its German employees to follow an
initiative of a German health insurance company and the German
Cyclists Club (ADFC) to cycle to work. The outcome of this call was
the appointment of the Company as a “bicycle-friendly company”.
MorphoSys’s business activities in the R&D area involve only very
small amounts of hazardous materials or chemicals requiring
specific licenses and their use and disposal are continuously moni-
tored and evaluated. The Health & Safety department ensures
compliance with regulations in all areas of health and safety rel-
evant to business operations and provides specific training for all
employees involved. According to the specific needs of production
processes and regulatory changes, these guidelines and activi-
ties are subject to an ongoing optimization and adjustment process.
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Sustainability Report
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f i g . 6 : o c c u p at i o n a l s a f E t y at M o r p h o s y s a g
Qual i t y assurancE
use of lowest possible amount of hazardous
usE of l oWE s t p o ssibl E aMoun t of haz ard -
ous subs tanc E s
substances
only specially trained and senior employees are
allowed to work with toxic substances
pathogenic organisms are processed in laborato-
ries with particular safety standards
introduction of hazardous materials for r&d
purposes:
Dedicated Biosafety Team according to GenTSV (“Gentechnik-
Sicherheitsverordnung”) and safety professionals perform
internal audit to assess the risk involved
Specific safety and evacuation trainings for the employees
working with the substances
Assurance that all safety measures are implemented before
actual work commences
only certified companies are authorized by
only cEr t if iEd coMp aniE s arE au t hori zEd by
Morphosys to dispose chemical waste
Morpho s y s t o di sp o sE c hEMic al Wa s t E
Safety hazards can pose a major threat to the economic situation
of a biotechnology company. MorphoSys adheres to strict pro-
cesses and rules to ensure that the risks to patients are kept to a
minimum. An integrated quality management system covering
the principles of Good Manufacturing, Clinical and Laboratory Prac-
tice (GMP, GCP and GLP) has been implemented for MorphoSys’s
proprietary research and product development activities to control
and regulate these processes. With the support of the Manage-
ment Board of the Group, an independent quality assurance depart-
ment makes sure that all internal R&D activities comply with
applicable national and international laws, regulations and guide-
lines in order to maintain high quality standards, patient safety,
product quality and data integrity.
Regarding the conduct of clinical trials, the quality assurance de-
partment compiles an audit plan for each clinical trial as part of its
overall audit program. CROs, external providers and investigator
sites participating in the clinical trials are audited by the quality
assurance department using a risk-based approach.
For its proprietary development activities, MorphoSys holds a
manufacturing license for the release of clinical trial material and
has been certified by the responsible German authorities (Govern-
ment of Upper Bavaria) as being in compliance with the standards
and guidelines of Good Manufacturing Practice (GMP).
For its research and diagnostics businesses, AbD Serotec’s
manufactur ing site in the UK, MorphoSys UK Ltd., Oxford, is ac-
credited in accordance with the quality management standard
ISO (International Organization for Standardization) 9001:2008
and ISO 13485:2003. The US site of AbD Serotec in Raleigh is
also accredited in accordance with ISO 9000:2008. In 2011, the
Puchheim site near Munich also received the ISO 9001:2008 ac-
creditation.
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f i g . 7: Q u a l i t y M a n a g E M E n t s y s t E M s at M o r p h o s y s
Management
regulatory requirements
Quality Manage-
ment systems
corporate requirements /
department requirements
Training and
Qualification
Self Inspection /
Internal Audits
Documentation
System
Handling of Deviations,
Change Control, Comp-
laints, Out of Specifica-
tion (OOS) and Recalls
Batch Record
Review
SOP System
External Audits
(CMO, CTO, CRO,
clinical trial sites)
The Quality Assurance department is taking a central role within the Quality Management System at MorphoSys and reports directly to the Management
Board of MorphoSys AG. It takes into account all regulatory requirements as well as the department and corporate specific requirements and guides and
supervises all departments which are controlled by the quality system.
in t El l Ec t ual propEr t y
MorphoSys’s most valuable assets are its proprietary technologies
and the products derived therefrom. Therefore, the Company con-
tinues to consolidate and extend the strong patent position for its
development programs, MOR103, MOR208 and MOR202, and its ex-
panding technology portfolio. For partnered programs, MorphoSys’s
partners file patent applications for individual drugs in coopera-
tion with MorphoSys’s IP department. Partnered and proprietary
drug development programs have additional layers of protection
and the patent terms extend well beyond the term of the HuCAL
technology.
In 2011, the US Patent and Trademark Office (USPTO) granted a fur-
ther patent covering the Company’s most advanced proprietary
compound MOR103 against GM-CSF as well as pharmaceutical com-
positions comprising the same. The issued patent complemented
another US patent granted in 2008 covering clinical relevant med-
ical uses of antibodies against GM-CSF, to which MorphoSys has
exclusive access under a license agreement with the University of
Melbourne. In addition to recently filed additional patent applica-
tions, these two patent families provide strong intellectual property
protection for MorphoSys’s MOR103 program. The Company also
protected its recently announced technology development, the new
antibody platform Ylanthia, with patent applications.
Currently, the Company’s patent attorneys prosecute more than
40 different proprietary patent families worldwide, in addition to
numerous patent families the Company is pursuing in cooperation
with its partners.
During the last five years, no products were recalled and there
were neither fines nor settlement payments caused by litigation.
huMan rEsourcEs
MorphoSys supports its strategic goals with a forward-looking per-
sonnel policy and strives to be an attractive employer for skilled
workers from all over the world. The Company aims at employing
a broadly diverse workforce in order to keep innovative spirit
alive and to benefit from various skills and capabilities. Currently,
talented employees from twelve different nations are working for
MorphoSys. Innovation and commitment are encouraged and good
ideas are incentivized on a case-by-case basis.
Sustainability Report
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In 2011, MorphoSys concentrated on facilitating its internal pro-
cesses related to Human Resources and to making more efficient.
The two most significant measures were a new e-recruiting tool
and the decision to perform complete payroll process in-house.
These changes led to faster and more transparent high-quality
operations which saved administration costs for the Company.
The Company offers performance-related remuneration and compre-
hensive advanced education. In 2011, a long-term incentive plan
was rolled out for the Senior Management Group and the Manage-
ment Board of MorphoSys. It links the long-term remuneration
of the Company’s management with the achievement of Company
goals and the performance of the share price, thereby clearly
supporting the shareholders’ interests. The Company invests in
the careers of its employees in the form of specific training and
development opportunities. Employees from research and product
development as well as various administrative positions are
supported by a variety of internal and external training programs.
MorphoSys also actively contributes to the education of young
people by offering vocational training in-house. As of 31 December
2011, the Company had four trainees for the IT department and
four trainees as future biology laboratory technicians (31 Decem-
ber 2010: three IT trainees, two biology laboratory trainees).
MorphoSys has various measures in place to support its employ-
ees in harmonizing their opportunities for professional develop-
ment and their personal life planning, a factor which is becoming
increasingly important for companies wanting to recruit and
retain motivated employees. The management of MorphoSys had
already realized this trend years ago and offers its employees a
variety of possibilities in this regard, for example specific part-time
employment arrangements or home-working options, where ap-
propriate. Around 10 % of MorphoSys’s employees already benefit
from part-time working models that are tailored to their and the
Company’s needs. For employees with young families, MorphoSys
eases the return to working life and the coordination of professional
and family life with special solutions. MorphoSys is the co-founder
and a supporter of the “BioKids” day care center in Martinsried
and has special agreements with a German service provider offer-
ing additional services for working family members.
Transparent and open communication is part of MorphoSys’s cul-
ture, as set out in its ethical guidelines. This is illustrated by the
Company’s biweekly “general meeting”, where the Management
Board speaks to its employees to outline recent developments at the
Company, often highlighting special projects and the employees
involved but also providing frank answers to all questions that are
asked during the meeting or handed in before. Questions can also
be asked anonymously.
MorphoSys rates the protection of its employees against work-
related dangers and the preservation of their health by means of
preventive measures very highly. Accordingly, the number of
accidents at work is very low (8 in 2011; 7 in 2010); most of them
are minor injuries like cuts or bruises and are not related to the
kind of industry MorphoSys works in. With guidelines and train-
ing courses run by the Health & Safety department, but also by
offering regular medical checks, the Company strives to keep the
number of accidents this low and ensure the safety and well-being
of all employees at MorphoSys as much as possible. The successful
implementation of these measures is illustrated by the consistently
low absence rate at all of MorphoSys’s sites.
f i g . 8 W o r K f o r c E b y g E n d E r i n 2011 ( 2010 )
Male
33 % (33 %)
Female
67 % (67 %)
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in %
Germany
UK
USA
2011
2010
2009
2008
2007
2.7
1.7
1.2
1.7
1.7
1.7
2.0
1.7
1.1
1.3
1.5
1.2
1.0
1.3
1.7
Risks and Opportunities
Entrepreneurial success cannot be achieved without conscious
risks-taking. As a result of its worldwide activities, MorphoSys is
exposed to a variety of risks which are linked to the Company’s
business. The Company’s risk management system helps to over-
come the risks associated with the strategic objectives of the
business and to maximize its strategic potential. Regular strategy
reviews ensure that opportunities and risks are reasonably bal-
anced. MorphoSys only takes a certain risk if it is accompanied by
the opportunity to increase the Company’s value.
Risk Management
MorphoSys considers risk management the ongoing task of deter-
mining, analyzing and evaluating current and potential devel-
opments within the Company and its environment. Where appli-
cable, MorphoSys takes corrective measures. Therefore, the
implemented risk management system plays an important role in
the way the Company is managed. It enables the Management
Board to identify risks, which could threaten the growth or even
the existence of MorphoSys at an early stage and take action to
reduce their impact as far as possible. The Company continuously
reviews its risk management approach and adapts the system if
needed.
Opportunities Management
MorphoSys identifies opportunities based on comprehensive quan-
titative and qualitative analysis of market data, research projects
and general trends in the biotechnological environment. The close
cooperation between its departments allows MorphoSys to recog-
nize opportunities worldwide at an early stage. An overview of the
most important opportunities which the Company intends to
seize for the further development of the business can be found in
the chapter “Outlook and Forecast” on page 77.
Accounting-Related Internal
Control System
MorphoSys uses extensive internal controls, Group-wide report-
ing guidelines and additional measures, including employee
training and continuous education, with the intention to ensure ac-
curate bookkeeping and accounting as well as reliable financial
reporting in the consolidated financial statements and the Group
Management Report. This integral element of the consolidated ac-
counting process comprises preventive, monitoring and detective
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measures designed to ensure security and control in accounting
and operational functions. For more detailed information about the
internal control system regarding financial reporting, please see
the Corporate Governance Report on page 81.
f i g . 9 : M o r p h o s y s ’ s r i s K M a n a g E M E n t s y s t E M
( r M s )
corporate governance
supervisory board
Management board
Compliance
Management
Risk
Management
Internal
Control System
Define
Objectives
Assess
Risk
Implement
Measures
Monitor
System
internal audit
prEsEn tat ion of risK s at Morphosy s
MorphoSys has grouped its most important risks in the following
categories:
Financial risks (risks associated with any form of financing and
financial instruments, e.g. liquidity, currency, interest rates, tax,
receivables collection)
Operational risks (e.g. procurement/production, distribution/
logistics, customers, human resources)
Strategic risks (e.g. corporate image, superior competitor prod-
ucts)
External risks (risks beyond the company’s control, e.g. economic,
political, legal risks)
Organizational risks (e.g. IT, corporate governance, facility man-
agement, succession planning)
Compliance risks (e.g. data security, non-compliance with the
US Food and Drug Administration (FDA) regulations)
Risks
risK ManagEMEn t sy s t EM
The risk management system (RMS) is a key element of MorphoSys’s
activities in terms of complying with legal requirements and good
corporate governance practice.
MorphoSys has established a comprehensive system to identify,
assess, communicate and manage risks across all parts of the
organization. The RMS at MorphoSys identifies risks as early as
possible and provides appropriate measures in order to limit
losses and avoid risks that would threaten the Company’s exis-
tence. All mitigation measures have been clearly assigned to
responsible managers, predominantly to members of MorphoSys’s
Senior Management Group.
A systematic evaluation process has been put into place, taking
into account all major risks for MorphoSys’s different business
units as well as in terms of the Company as a whole. Risk evalua-
tions are carried out twice a year. Risks are evaluated by com-
paring their quantifiable impact on the MorphoSys Group and their
probability of occurring with and without having established any
mitigation processes. An overview of the current risk evaluation by
MorphoSys is shown in Fig. 9. The RMS is continuously discussed
in and among the Management Board and the Supervisory Board. It
is also revised on a regular basis by external consultants in order
to ensure that it can be adapted to possible changes.
During the last year, MorphoSys has further improved its RMS and
slightly amended the methodology applied. The twelve-month as-
sessment period has been supplemented with a mid-term view of
three years in order to include commitments reflecting long time-
lines in proprietary development. MorphoSys has already realized
a successful assessment cycle with this amended methodology.
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f i g . 10 : r i s K E V a l u at i o n b y M o r p h o s y s
risk description
financial riSkS
Risks resulting from not reaching revenues as expected, derived from existing business
with partners or from new product offerings
Risks resulting from missing development milestones in partnered projects,
preventing milestone payments
Risks resulting from treasury-related issues
oper ational riSkS
Risks inherent to proprietary drug discovery and development
Risks resulting from personnel-related issues
Str ateG ic riSkS
Risks resulting from missing opportunities
Risks resulting from losing technology leadership
e x ternal riSkS
Risks resulting from IP-related issues
orGaniz ational riSkS
Risks resulting from IT-related issues
Risks resulting from environment-related issues
c oMpliance riSkS
Risks resulting from quality-related issues
Risks resulting from non-compliance with legal standards
i m pa c t
l o w
m e d i u m
h i g h
v e r y h i g h
c ata s t r o p h i c
l i k e ly h o o d
v e r y u n l i k e ly
u n l i k e ly
m o d e r at e
l i k e ly
a l m o s t c e r ta i n
1-year Estimate
3-year Estimate
b
b
b
b
a
a
a
b
a
a
a
a
a
b
b
b
b
b
a
a
a
b
a
a
a
a
a l o w r i s k s
b a c c e p ta b l e r i s k s
c r i s k s t o b e m i t i g at e d
i m m e d i at e ly
FINANCIAL RISKS
The Company’s financial risk management strategy aims at limit-
ing financial risks and consciously aligning those risks with the
requirements of MorphoSys’s business activities.
financial crisis. In order to ensure the greatest possible investment
protection, the Company only invests in funds and products con-
sidered to be as secure as possible with banks that have consis-
tently high ratings and/or are backed by a very strong partner.
Financial risks arise from the volatility of exchange rates, espe-
cially regarding USD and GBP, which are mitigated by using appro-
priate hedging instruments. Additional financial risks such as po-
tential insolvencies of banks in which the Company placed its funds
are considered to be among the top risks in the light of the global
OPER ATIONAL RISKS
Operational risks inherent to proprietary drug discovery and devel-
opment can derive from the failure of clinical programs prior to
partnering as a result of data not showing the expected results or
showing unwanted side effects.
Risks and Opportunities
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While MorphoSys cannot ensure that data from its programs will
demonstrate positive results with respect to the tested indications
and treatments, the greatest care is taken when designing clinical
development plans. Therefore, programs in clinical trials have the
best chances of showing results that are significant and convincing
to regulatory bodies and potential partners. Besides the internal
knowledge, external experts also are consulted and special commit-
tees have been created to monitor the progress of clinical programs.
STR ATEGIC RISKS
Risks resulting from missing opportunities may occur due to not
having access to either attractive targets and compounds or inno-
vative technologies. These risks in turn are related to missing or
unsuccessful M&A transactions. In order to counter these risks,
a comprehensive opportunity-assessment process has been estab-
lished, improving the opportunity search itself as well as the as-
sociated processes and strategies. Following the successful acqui-
sition of Sloning BioTechnology GmbH in 2010, workshops have
been set up to discuss the lessons learned and to further optimize
future M&A transactions.
Another strategic risk may result from losing technology leadership
due to disruptive changes in technology and/or the market struc-
ture. In order to reduce these risks, MorphoSys is closely monitor-
ing the technological landscape as well as analyzing new tech-
nology trends and innovations. Equipped with profound skills and
scientific expertise, the Company’s R&D department is constantly
working on improving the existing proprietary technologies and de-
veloping new platforms in order to stay at the industry’s techno-
logical forefront.
E X TERNAL RISKS
External risks for MorphoSys are mainly related to the Company’s
intellectual property. The Intellectual Property for products based
on MorphoSys’s proprietary technologies is considered highly rel-
evant. In order to mitigate risks connected to this field, MorphoSys
is continuously looking for and analyzing published patents and
patent applications, monitoring relevant hits and developing design-
around strategies for potentially relevant patents before they are
issued.
Thus, the freedom to operate regarding its proprietary technology
platforms has been secured in the long term and MorphoSys prides
itself on the success this strategy has generated over the years.
MorphoSys consistently monitors its global market environment
regarding changes, for example in pricing policies due to healthcare
reforms, in order to be able to adapt its strategy early on. While
MorphoSys’s partners have been less affected by the financial crisis
than the general market, MorphoSys also assesses the risk of an
insolvency of its major customers and suppliers on a regular basis.
ORGANIZ ATIONAL RISKS
Organizational risks are those resulting either from IT-related or
environment-related issues. Regarding risks arising from the
Company’s use of IT, business operations might be at risk due to
failures of the IT infrastructure or a lack of data security. Those
risks are countered by multiple daily data backups and highly se-
cure firewall and virus-scan systems to enhance the safety and
reliability of the data. Furthermore, MorphoSys minimizes risks
relating to the availability, reliability, and efficiency of its IT sys-
tems through continuous checks (e.g. a simulated staggered hacker
attack, as conducted in 2011) and updates of its software and hard-
ware systems.
Risks resulting from environmental issues include failures of im-
portant operational instruments or facilities causing business inter-
ruptions, as well as incidents with hazardous or pollutive sub-
stances. Besides regular maintenance of equipment and facilities,
these risks are largely covered by insurance policies. Appropriate
storage of hazardous or pollutive substances is carefully monitored.
For further information regarding the operational environment of
MorphoSys, please see the Sustainability Report on page 66.
C OMPLIANCE RISKS
As stated in the Sustainability Report (page 66), MorphoSys is com-
mitted to fulfilling the highest quality standards regarding its
business operations. Low quality due to an inefficient quality-man-
agement system would pose a risk for the Company. In order to
counter these risks, the system is regularly reviewed by experts,
and recurrent internal audits are performed.
Another class of risks can arise if the Company does not comply
with legal standards. These risks can be related to the incorrect
implementation of accounting and financial standards (i.e. HGB,
IFRS, BilMoG) or an inefficient internal control system. Risks re-
lated to non-compliance with legal standards are reduced by regu-
lar review processes within the Company and ongoing discussions
and consultation with legal experts and advisors.
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t hE ManagEMEn t board’s gEnEral s tat EMEn t abou t t hE
Morphosy s group’s risK s
The Management Board considers the risks to be manageable and
the survival of the MorphoSys Group not to be endangered at
the time of the current report. This statement is true for all rele-
vant single entities and for the MorphoSys Group. As described,
MorphoSys regularly monitors its risks via an effective RMS which
is subject to continuous improvements. Assuming no further dete-
rioration in global business or the financial and regulatory environ-
ment, MorphoSys considers itself well prepared to meet all future
challenges.
Opportunities
Thanks to its leading antibody technologies, broad scientific ex-
pertise and international positioning MorphoSys has identified
numerous growth opportunities over the coming years. A substan-
tial number of pharmaceutical and biotechnology companies are
active in the antibody area and could be converted into future cus-
tomers and partners for the Company’s products and technolo-
gies. MorphoSys’s AbD Serotec segment strives to expand its share
of the research antibody market and is attracting a growing num-
ber of diagnostic customers.
MorphoSys’s antibody technologies offer key advantages for the
development and optimization of therapeutic antibody candidates,
which could translate into higher success rates in the drug-de-
velopment process. In the research and diagnostics markets, the
technologies also offer significant advantages in the development
of antibodies for use as research tools and components of diagnostic
assays.
gEnEral s tat EMEn t on opp or t uni t iEs
Increased life expectancy in the industrialized countries as well
as the changing economic situation and lifestyle in the emerging
markets – first and foremost in the BRIC states - are expected to
drive demand for additional and innovative treatment options and
enabling technologies. Scientific and medical progress has resulted
in a better understanding of the biology of several diseases, which
in turn paves the way for new therapeutic approaches. Innovative
therapies such as fully human antibodies have been launched in
recent years and have resulted in commercially successful medi-
cal products. In addition, therapeutic substances based on proteins,
also known as biologics, are considered to be less exposed to com-
petition from generics than chemical-derived molecules, mainly
because the manufacturing of biologics is much more complex.
Therefore, the demand for antibodies and the interest in this class
of drugs have increased sharply over the last 12 to 36 months, as
shown by several acquisitions and significant licensing agreements
in this field. The use of antibodies as therapeutics as well as for
research purposes and diagnostic applications represents sustain-
able growth opportunities for MorphoSys.
MarKE t opp or t uni t iEs
MorphoSys believes that its technology platforms including HuCAL,
Ylanthia, Slonomics and arYla can be applied to make products
that address significant unmet medical needs and could provide
access to superior research and diagnostic tools. Each of the Com-
pany’s three business segments is expected to benefit from these
technological advantages.
THER APEUTIC ANTIBODIES – PAR TNERE D DISC OVERY
By pursuing drug development with a variety of partners,
MorphoSys has effectively mitigated the inevitable development
risk. With 68 therapeutic antibody development programs currently
ongoing with partners, it is increasingly likely that MorphoSys
will participate financially in several marketed drugs in future.
MorphoSys will continue to expand its partnered antibody pipe-
line and may sign additional fee-for-service partnerships in the
area of infectious diseases, and partnerships on novel technology
platforms.
THER APEUTIC ANTIBODIES – PROPRIE TARY DE VELOPMENT
The pharmaceutical industry is likely to further increase its in-
licensing activities in order to refill pipelines and replace former
key drugs and revenue generators that have lost patent protec-
tion. With the Partnered Discovery segment providing a secure
cash flow over the coming years, MorphoSys will continue to
strengthen its proprietary portfolio. The Company will start addi-
tional clinical trials for its key drug candidates to evaluate, for
instance, new indications. MorphoSys plans to add additional pro-
grams to its portfolio and could use existing and future co-devel-
opment opportunities to achieve this. Furthermore, the Company
is looking for in-licensing opportunities for interesting drug can-
didates. The first out-licensing discussions based on clinical data
generated with the lead antibody program MOR103 in rheumatoid
arthritis could commence in 2012.
Risks and Opportunities / Subsequent Events / Outlook and Forecast
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Yla and Ylanthia technology platforms. MorphoSys may again use
an acquisition strategy to increase its market share, supplement
its existing technology platform and access patents and licenses
for novel proprietary technology and drug development.
Subsequent Events
As of February 14, 2012, there were no events requiring disclosure.
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Outlook and Forecast
The MorphoSys Group develops novel antibody technologies and
products for therapeutic, diagnostic and research applications.
The Group’s main focus continues to be on applying its technolo-
gies in rapidly growing, innovation-driven sectors of the health-
care market. The Company’s management also intends to further
intensify MorphoSys’s proprietary drug-development activities.
Moreover, MorphoSys seeks to enlarge its market share within the
research and, in particular, the diagnostics sector, as the latter
represents a largely untapped market for modern antibody tech-
nologies.
Overall Statement on Expected
Development
MorphoSys owns established and validated technologies. The Com-
pany’s strategy builds on these technologies to develop a broad and
sustainable pipeline of innovative antibody drug candidates, to-
gether with partners and for its own account. In the therapeutics
area, commercialization of these technologies provides secure
cash flows from long-term partnerships with large pharmaceutical
companies. Through its AbD Serotec segment, the Company ad-
dresses a wider customer base in the public and private research
sectors and the diagnostics industry. AbD Serotec is well posi-
tioned in the diagnostics market, providing innovative antibodies
as a key component of novel diagnostic products. The first diag-
nostic kits based on HuCAL antibodies entered the market in 2011.
ABD SEROTEC
Antibodies are important components of modern diagnostic practice
and a routine tool in scientific research. Industry trends such as
the personalized medicine approach will drive demand for innova-
tive diagnostic tools which are used to identify patient sub-popu-
lations that would benefit from treatment with a particular drug or
to monitor treatment success. In 2011, AbD Serotec significantly
advanced into this promising sector by signing several new supply
agreements with diagnostic companies. Additionally, the first di-
agnostic kits based on a HuCAL antibody have entered the market.
Furthermore, AbD Serotec has entered a new market by commer-
cializing the Slonomics protein-engineering platform in industrial
applications. MorphoSys will continue to look for selected opportu-
nities in this new complementary market.
t Echnol ogy dEVEl opMEn t
MorphoSys continues to invest in its existing technologies and in
new ones to remain at the forefront of technological leadership.
The Company’s most recent technology development activity led
to Ylanthia, a novel proprietary antibody platform, which will be-
come commercially available in 2012. Technological progress may
enable the Company to further expand its roster of partners and
to increase the speed and success rates of its partnered and propri-
etary drug-development programs. New technology modules could
also open up new disease markets, in which antibody-based treat-
ments are underrepresented today, by allowing the generation of
antibodies against novel classes of target molecules. MorphoSys is
constantly monitoring new technological approaches that could
improve therapeutic applications, such as modification of the anti-
body’s Fc part and glycosylation pattern or the generation of so-
called “armed” antibodies, i.e. immunoconjugates and radiolabeled
antibodies. To access these opportunities, the Company plans
to apply internal capabilities, i.e. focused technology development
teams, and tap external resources through in-licensing of intel-
lectual property and/or technologies.
acQuisi t ion opp or t uni t iEs
MorphoSys has demonstrated its ability to complete acquisitions
and use such transactions to accelerate its growth. In late 2010,
MorphoSys proved this point by acquiring Sloning BioTechnology
GmbH. The full integration of Sloning’s staff and technologies, in-
cluding Slonomics, led to the signing of three protein-engineering
alliances so far and was instrumental in establishing both the ar-
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The Group’s stable cash flows and strong cash position enable it
to further strengthen its business through investments in proprie-
tary drug and technology development. The Management Board
expects the following developments for MorphoSys in the relevant
markets:
MorphoSys continues to invest in technology development to
maintain a leading position in the antibody sector. The Com-
pany expects to sign new commercial agreements based on its
proprietary technologies.
The demand for antibodies as a new treatment modality remains
high, allowing the Company to expand its pipeline of therapeutic
antibodies within its partnerships.
The pharmaceutical industry continues to use the in-licensing of
compounds as a means to gain access to promising product candi-
dates. If clinical proof of concept of a proprietary drug candidate
can be demonstrated, lucrative deal terms could be agreed upon.
The AbD Serotec segment is increasingly focusing on diagnostic
applications using MorphoSys’s technologies. Modern technology
for antibody generation has had very little impact on the market
for diagnostic antibodies to date. The ability to make superior
antibodies for diagnostic applications could allow AbD Serotec to
attract more customers in this market segment. AbD Serotec’s
management is confident that existing research collaborations
with a number of leading diagnostics companies will translate
into additional marketed products.
AbD Serotec will further improve its services in the research
markets with a complete new e-commerce platform. This new
platform will attract new customers, increasing AbD Serotec’s
market share in the research market.
Strategic Outlook
Within its Proprietary Development segment, the Company is com-
mitted to developing therapeutic antibodies in the areas of inflam-
mation and oncology for its own account. In the near term, the plan
is to take proprietary drug candidates to clinical proof of concept
before seeking a commercial partner. At the end of 2011, the three
clinical-stage programs, MOR103, MOR202 and MOR208, repre-
sented the key assets in MorphoSys’s own portfolio. Investment in
these programs is anticipated to generate more value, faster at this
stage than in earlier programs, and MorphoSys has prioritized its
clinical portfolio accordingly. MorphoSys will continue to pursue
co-development projects within its alliance with Novartis and po-
tentially with other biotechnology or pharmaceutical companies.
The Partnered Discovery segment generates secured cash flows
from MorphoSys’s long-term alliances. For the foreseeable future,
MorphoSys will continue to invest the majority of these cash flows
into broadening and strengthening its Proprietary Development
segment and its proprietary technology platforms. Growth in this
area is expected as existing drug programs progress through
the clinic, through new fee-for-service partnerships in the area of
infectious diseases and through the commercialization of new
technologies, including those secured via acquisitions, such as
Slonomics.
The AbD Serotec segment strives to increase its market share
within the research and diagnostics sectors. AbD Serotec’s man-
agement intends to concentrate on high-value applications of the
HuCAL technology, especially in the area of diagnostics. In 2011,
AbD Serotec made its first inroads into the market for industrial
biotechnology applications using MorphoSys’s Slonomics technology
and the Company is looking for additional commercial opportuni-
ties in that area.
MorphoSys’s business model is built on its proprietary technolo-
gies, including the HuCAL and the more recently announced
Ylanthia antibody libraries, as well as the Slonomics and arYla
platforms.
The development of therapeutic antibodies within partnerships
will continue to be the mainstay of MorphoSys’s strategy. The
Company’s therapeutic pipeline is expected to mature over the com-
ing years, resulting in additional milestone payments. Thanks to
the breadth of the pipeline, a significant number of marketed thera-
peutic antibody products could emerge in the years ahead and,
as a result, financial participation will be secured through product
royalties.
Expected Economic Development
The global economic uncertainty is expected to continue in 2012.
In a preview of its economic report for 2011 early in December,
the United Nations said it expects the world economy to grow by
3.1 % in 2011 and 3.5 % in 2012. However, due to the ending of
numerous stimulus programs and the need to consolidate govern-
ment budgets, global economy is expected to further slow down
in 2012. Emerging economies will be the key driver, while the de-
veloped economies will deliver a GDP growth of only 1.5 % in 2012.
In 2012, the US economy is expected to show a similar growth rate
like to that in 2011. The eurozone is facing a sharp slowdown.
Outlook and Forecast
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The pharmaceutical and healthcare industries have historically
been relatively immune to economic downturns, due to a continu-
ously increasing demand for innovative treatments. Nevertheless,
pharmaceutical companies are facing challenges such as major
patent expiries, low R&D productivity, and budget cuts by govern-
ments.
Expected Development of the
Life Sciences Sector
The biotechnology sector is often seen as defensive, especially dur-
ing periods of economic uncertainty. The outlook for the biotech-
nology sector is favorable and is based on the following key drivers:
Aging societies are looking for innovative treatment options
Since its low in 2007, the number of annual product approvals is
increasing
A record number of products is in clinical trials
Increasing M&A and licensing activities
While many pharmaceutical companies suffer from healthcare cost-
cutting and patent expiries, biotechnology companies with inno-
vative technologies and products will benefit from this trend. In an
aging population, the need for innovative products to diagnose
and treat a broad variety of diseases such as cancer, autoimmune
and inflammatory conditions, central nervous system disorders,
cardiovascular diseases, diabetes, respiratory and infectious dis-
eases remains very high. Drug innovation continues to be re-
warded; though “me-toos” may be less successful than in the past.
Within the biotechnology industry, 2012 performance will remain
largely dependent on broader macroeconomic issues. During 2012,
plenty of value-driving clinical trial data are due, and M&A activi-
ties, partnering deals and licensing should gain speed over the
coming years.
Expected Commercial Development
With the Novartis deal ensuring a steady cash flow over the coming
years and new commercial opportunities arising from novel tech-
nology platforms such as Slonomics and arYla, MorphoSys will con-
tinue to concentrate on broadening its partnered pipeline and
increasing the value of its proprietary portfolio. Within the Part-
nered Discovery segment, the Company anticipates starting, on
average, approximately ten new partnered programs per annum
for the next several years.
With regard to MOR103, the most advanced development program
in MorphoSys’s proprietary portfolio, the Company expects clinical
data from the ongoing phase 1b/2a trial in 2012. Assuming the
clinical trial proceeds as planned and proof of concept can be dem-
onstrated, out-licensing discussions with potential partners will
commence this year. Out-licensing of other proprietary compounds
is not planned before 2013.
The AbD Serotec segment strives to return to growth and to out-
grow the market. Despite the global economic downturn, reve-
nue in the AbD Serotec segment is expected to increase by at least
a high single digit percentage rate in the coming years. The in-
vestments made in the business in the recent past as well as the
opportunities in the diagnostic business with HuCAL are driving
these expectations. It is expected that segment profit margins will
continue to improve.
Expected Personnel Development
MorphoSys will continue to create individual positions in its R&D
organization to strengthen its proprietary and partnered develop-
ment capabilities. The Group’s workforce is, however, expected to
remain roughly at the same level as in 2011.
Expected Research and Development
In 2012, the Company’s R&D budget for proprietary drug develop-
ment will decrease compared with the previous year. This is the re-
sult of costly clinical material production already having been per-
formed in 2011 and the fact, that the phase 1b/2a trial of MOR103
in RA will be completed in early 2012. In 2012, MorphoSys plans
to invest approximately between € 20 million and € 25 million in
proprietary product and technology development. The majority
of this investment will be channeled into clinical development of
the most advanced drug candidates and in the development of
new technologies. The R&D investment in 2013 will be driven by
the need of the programs and will depend on the Group’s revenue
development. Notwithstanding this, the Company is generally com-
mitted to remaining profitable.
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The Company’s proprietary pipeline activities in 2012 are pro-
jected to comprise:
Completion of the phase 1b/2a study for its lead compound,
MOR103, in rheumatoid arthritis patients and presentation of
clinical trial results
Continuation of the phase 1b safety study in multiple sclerosis
as a second indication for MOR103 and evaluation of a subcuta-
neous formulation
Continuation of a phase 1/2a study for MOR202 in multiple
myeloma
Completion of the phase 1 trial sponsored by Xencor for MOR208
in CLL/SLL patients. Initiation of clinical trials for MOR208 spon-
sored by MorphoSys in NHL and ALL
Continuation of co-development opportunities, e.g. within the
Novartis collaboration
Regarding AbD Serotec, profitable growth based on innovative
products and services is the central goal for the unit. The diagnos-
tic industry offers the most attractive opportunities for growth
and will therefore increasingly be the focus of the unit’s activities.
In 2011, several feasibility studies were conducted, which could
lead to the conclusion of larger collaborations in 2012 and 2013.
Expected Financial and Liquidity
Development
MorphoSys has a solid financial foundation and recurring reve-
nues, mainly from its collaboration with Novartis. On top of those
revenues, MorphoSys collects sales from its AbD Serotec seg-
ment and stands to receive success-based payments as partnered
compounds progress in development. For 2012, management an-
ticipates total Group revenue of between € 75 million and € 80 mil-
lion. The reason for the decrease in revenues compared to 2011
is the non-recurrence of a one-time technology milestone payment
received from Novartis in Q1 2011. There is, however, scope for
considerable out-performance of this revenue range if a proprietary
drug program can be partnered, which is not currently included
in the projections. In 2013, Group revenues are expected to grow at
least 10 %. One-off events such as the out-licensing of proprietary
products and larger milestone payments and royalties as partnered
HuCAL progress to the market will become more important factors
for the Group’s fiscal performance in the years to come and could
lead to significant out-performance. In the near-term, revenue
growth is dependent on the Company’s ability to sign additional
partnerships and/or to out-license proprietary compounds. In
the mid-term, royalties from marketed products will add to reve-
nue growth.
The Partnered Discovery segment is a highly profitable business
unit. Long-term alliances will provide the Company with secured
cash flows for at least the next six years. MorphoSys’s manage-
ment anticipates signing additional partnerships based on propri-
etary technologies such as Slonomics and Ylanthia.
Pending partnering of drug candidates, the Proprietary Develop-
ment segment will continue to show losses due to ongoing in-
vestment in preclinical and clinical development of the various
programs. Successful out-licensing of one or more proprietary
programs would result in large profits being achieved in this unit.
If one of MorphoSys’s proprietary development programs shows
convincing efficacy data in clinical trials, double-digit million up-
front payments, potentially even greater milestones, as well as
double-digit royalties could be achieved.
AbD Serotec is expected to return to sales growth in 2012. Despite
a challenging market environment, sales are projected to increase
to € 20 million to € 22 million in 2012 and grow by approximately
8 % in 2013, assuming constant currency rates. The AbD Serotec
segment is anticipated to contribute roughly a quarter of total rev-
enues in 2012. In future years the revenue split between the Com-
pany’s therapeutic antibodies segments and AbD Serotec should
shift towards the therapeutic side of the business due to the im-
pact of out-licensing deals, milestone payments and royalties.
On the basis of the Management Board’s current planning, total
Group operating expenses are expected to decrease in 2012. The
main reason for the decrease in expenses is lower investment
in proprietary research and development, as much of the costly pro-
duction of clinical material for current programs has already been
performed, and also because the phase 1b/2a trial of MOR103 in RA
will be completed in early 2012. S,G&A expenses will remain flat.
MorphoSys expects to remain profitable on an operating level in
2012 and 2013, with an EBIT for 2012 of between € 1 million and
€ 5 million. The AbD Serotec segment will contribute increasing
profits over the coming years, striving for an EBIT margin of 6 to
8 % in 2012 and a minimum of 12 % in 2013.
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At the end of the 2011 fiscal year, MorphoSys’s cash position
amounted to € 134.4 million (up from € 108.4 million at the end
of 2010). Despite the more difficult conditions resulting from the
global financial crisis, MorphoSys’s financing is solid. MorphoSys
sees its strong cash position as an asset which can be used to
accelerate future growth through strategic transactions. The in-
licensing of MOR208 and the acquisition of Sloning BioTechnol-
ogy GmbH are prime examples of this.
diVidEnds
MorphoSys AG’s German statutory accounts showed accumulated
earnings available for distribution. Nevertheless, in line with
standard practice in the biotechnology industry, MorphoSys does
not anticipate paying a dividend for the foreseeable future. Any
profit generated by the business shall be substantially reinvested
in the operation of its business, mainly in the area of proprietary
drug development, and in strategically interesting acquisitions in
order to create further shareholder value and growth opportuni-
ties. As was the case in 2011, the Company plans to purchase its
own shares from the market to support a new long-term incentive
program for management in 2012.
This outlook takes into account all factors known at the time of
the preparation of the financial statements which could affect our
business in 2012 and beyond, and is based on Management Board
assumptions. Future results may deviate from the expectations de-
scribed in the outlook section. Major risks are discussed in the
Risk Report.
Corporate Governance Report
Effective corporate governance is a central part of MorphoSys’s
sustainable corporate management, comprising value-based man-
agement and monitoring long-term success. It builds the frame-
work for the management and supervision of the Company, includ-
ing its organization, commercial principles and regulatory and
monitoring measures. MorphoSys’s internal guidelines are aligned
with the German Corporate Governance Code, which contains
internationally recognized standards for good and responsible gov-
ernance. The aim of such transparent and coherent management
principles is to ensure effective cooperation between the Manage-
ment Board and the Supervisory Board, a performance-based
compensation scheme for managers and employees, transparent and
early reporting and relations with shareholders based on trust.
With the following three exemptions, MorphoSys complies with
all recommendations of the German Corporate Governance Code
(Code) and the majority of the Code’s suggestions in the version
of May 26, 2010.
The stock option program for the Management Board does not
provide a cap for unforeseen developments within the meaning
of Code Section 4.2.3, since the reasonableness of the amount
of stock options for the Management Board has already been con-
sidered at the time of the grant. However, the stock incentive
program for the year 2011 and the following years incorporate
the concept of a cap.
With regard to Code Section 5.4.1, in its meeting of March 10,
2011, the Supervisory Board has decided to aim for an adequate
representation of women on the Supervisory Board that respec-
tive female candidates shall be proposed for election and that at
the beginning of the approval of potential candidates qualified
women shall be appropriately considered in the appointment pro-
cedure. A concrete quota for female members of the Supervisory
Board has not been defined since the individual qualification and
not the gender of candidates for election to the Supervisory
Board shall be the decisive criteria for its composition. With re-
gard to the election to the Supervisory Board that took place
in the Annual General Meeting 2011, the Supervisory Board de-
cided to propose the re-election of the male members Prof.
Dr. Drews and Dr. Blättler since their biotechnology know-how
is needed by the Company; for this reason their re-election was
in the prevailing interest of the Company.
Furthermore, Prof. Drews exceeds the age limit of 75 years de-
fined by the Supervisory Board in its rules of procedure. Insofar,
the Company used the possibility as foreseen in the rules of pro-
cedure to exceptionally propose an elder candidate for election;
the proposal to re-elect Prof. Drews to the Supervisory Board
for a further year was in the interest of the board to procure the
continuity of its performance.
The remuneration for the Supervisory Board as resolved in the
Annual General Meeting 2010 only provides for fixed remunera-
tion components and no longer for performance-related remu-
neration within the meaning of the Code Section 5.4.6. The Com-
pany’s practice is consistent with the view of an increasing
number of experts on supervisory board compensation, who re-
gard performance-related payments to board members as poten-
tially giving rise to a conflict of interests in a body whose duties
include setting and assessing objectives for the Company’s long-
term development.
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MorphoSys’s Management Board and Supervisory Board discussed
compliance with the Code’s recommendations. Based on these
deliberations, the boards approved an interim update of the Decla-
ration of Compliance as of March 10, 2011, and the annual Dec-
laration of Compliance as of December 8, 2011. Both documents are
posted on the Company’s website and will continue to be updated
as necessary.
Declaration about Corporate Manage-
ment in Accordance with Sec. 289a
HGB for the 2011 Business Year
A description of the principles of corporate management, the com-
position and collaboration of the Management Board, Supervisory
Board and committees as well as the Declaration of Compliance pur-
suant to section 161 of the German Stock Corporation Act (Aktien-
gesetz – AktG) can be found on MorphoSys’s corporate website.
Shareholders and the General Meeting
Transparency and an open dialog are important principles for
MorphoSys’s communication policy. The Company strictly adheres
to the concept of fair disclosure. Therefore, all communication
activities are aimed at providing all shareholders with the same
level of information at the same time. MorphoSys’s Management
Board and Supervisory Board attach great importance to transpar-
ent and timely information for all shareholders.
A central part of MorphoSys’s relations with its investors is fre-
quent meetings with analysts and investors at road shows and one-
on-one discussions. Conference calls accompany the publication
of the quarterly figures to enable immediate queries on the develop-
ment of the Company for analysts and investors. The Company’s
presentations at on-site events are accessible for any interested
party on the corporate website. Video and audio recordings of
key events can be replayed on the website and transcripts of the
quarterly conference calls are provided in English and German.
MorphoSys uses its corporate website as a central platform to
provide up-to-date information about the Company and its progress.
MorphoSys’s financial calendar lists the dates of all regular finan-
cial publications and the next Annual General Meeting well in ad-
vance.
annual gEnEral MEE t ing
The Annual General Meeting (AGM) took place in Munich on May
19, 2011. Approximately 31 % of total voting stock was represented
at the meeting, a decrease compared to the attendance in 2010
(approximately 35 %). MorphoSys assisted the shareholders in the
use of proxies and arranged the appointment of a representative
to exercise shareholders’ voting rights in accordance with instruc-
tions. This representative was also available until the end of the
general debate of the AGM. MorphoSys’s shareholders approved all
management proposals put to the vote at the meeting. Prof. Dr.
Jürgen Drews was re-appointed for another year as a member of the
Supervisory Board; Dr. Walter Blättler was re-appointed for an-
other three years as a member of the Supervisory Board.
MorphoSys provided an online webcast of the Management Board’s
presentation and published all documents in a timely manner on
the Company’s website.
Cooperation between the
Management Board and the
Supervisory Board
In order to guarantee good corporate governance, open and
comprehensive communication on a regular basis is a guiding
principle for the Management Board and the Supervisory Board
of MorphoSys AG. The underlying two-tier system required by
the German Stock Corporation Act explicitly differentiates be-
tween management and supervision. The responsibilities of both
boards are clearly defined by law, by the Articles of Association
and the Rules of Procedure. MorphoSys AG’s boards work together
closely and act and decide in the best interest of the Company;
their dedicated goal is to sustainably increase the Company’s value.
The most recent version of the German Corporate Governance
Code recommends that the Management Board and the Supervisory
Board should observe the principle of diversity and strive to in-
crease the number of women in management positions. MorphoSys
a d d i t i o n a l i n f o r M at i o n
w w w. m o r p h o s y s . c o m
a d d i t i o n a l i n f o r M at i o n
w w w. m o r p h o s y s . c o m
Corporate Governance Report
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E
t
a
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s
l
a
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n
a
n
i
f
has many women in leading positions, and the plans to increase
the proportion of women in management and key positions are
jointly pursued by both boards.
Jens Holstein, Chief Financial Officer, is responsible for account-
ing and controlling, corporate development, treasury and tech-
nical operations including IT, and the corporate legal function.
t hE ManagEMEn t board ( Vors tand )
The Management Board of MorphoSys AG consists of four mem-
bers and has one chairman. The Rules of Procedure define the
different areas of responsibility and cooperation within the Manage-
ment Board.
In 2011, Jens Holstein succeeded Dave Lemus both as Chief Finan-
cial Officer of MorphoSys AG and as a member of its Management
Board (Vorstand). More detailed information can be found in the
chapter entitled “Human Resources” on page 57.
Dr. Simon E. Moroney, Chief Executive Officer, is responsible for
the AbD Serotec business segment, business development, corpo-
rate communications and investor relations, human resources,
strategy and planning, and the coordination of the Management
Board reporting to the Supervisory Board.
Initial appointment: 1998 (co-founder)
End of current period of office: June 30, 2014
Initial appointment: 2011
End of current period of office: June 30, 2014
Dr. Arndt Schottelius, Chief Development Officer, is responsible
for the preclinical and clinical development of MorphoSys’s pro-
prietary development programs.
Initial appointment: 2008
End of current period of office: June 30, 2014
Dr. Marlies Sproll, Chief Scientific Officer, is responsible for anti-
body discovery and pre-development, technology development,
protein sciences, alliance management and intellectual property.
Initial appointment: 2005
End of current period of office: June 30, 2014
t hE supErVisory board (auf sich t srat )
As of December 31, 2011, MorphoSys’s Supervisory Board consists
of six independent members. The members of the Supervisory
Board are appointed by the Annual General Meeting on the basis of
their qualifications, work experience, independence and diversity.
ta b . 13 : c o M p o s i t i o n o f t h E s u p E r V i s o r y b o a r d
position
initial ap-
pointment
End of
current
period
audit
committee
remunera-
tion and
nomination
committee
science and
technology
committee
Dr. Gerald Möller
Prof. Dr. Jürgen Drews
Dr. Walter Blättler
Dr. Daniel Camus
Dr. Metin Colpan
Dr. Geoffrey Vernon
Chairman
Deputy
Chairman
Member
Member
Member
Member
1999
2012
1998
2007
2002
2004
1999
2012
2014
2012
2012
2012
i n d e p e n d e n t f i n a n c i a l e x p e r t
c h a i r m a n
m e m b e r
c r o s s - r E f E r E n c E
s e e pa g e 5 7
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The Supervisory Board examines the efficiency of its activities on
a regular basis, as recommended in the German Corporate Gover-
nance Code. To date, all such audits have led to the conclusion that
the Supervisory Board is organized efficiently and that the Man-
agement Board and the Supervisory Board cooperate very well.
dirEc t ors’ hol dings
The members of the Management Board and the Supervisory Board
own more than 1 % of the shares issued by the Company. For the
disclosure of Company stocks held or financial instruments relating
to them, please refer to section 29 (Related Parties) of the Notes
to the Consolidated Financial Statements. This list details all stocks,
stock options and convertible bonds held by each member of the
Management Board and the Supervisory Board.
dirEc t ors’ dEal ings
Under the German Securities Trading Act (Wertpapierhandels-
gesetz – WpHG), the members of MorphoSys AG’s Management
Board and Supervisory Board and persons who have a “close
relationship” with such members are obligated to disclose any trad-
ing in MorphoSys stock.
In the reporting year, MorphoSys received the following notifi-
cations pursuant to Sec. 15a of the WpHG. Each sale of shares
listed below was preceded directly by the exercising of convertible
bonds to purchase an identical number of shares. Sales of the
convertible bonds were made in conjunction with the scheduled
ex piration of these bonds in 2011.
ta b . 14 : d i r E c t o r s ’ d E a l i n g s 2011
function
date of trans-
action in 2011
type of
transaction
number of
stocks/
derivatives
average share
price in €*
transaction
Volume in €*
CDO
CDO
CFO
CFO
CSO
CSO
CSO
CEO
CEO
CEO
CEO
August 4
August 5
August 8
August 8
November 9
November 10
November 10
November 18
November 21
November 23
November 23
Purchase
Purchase
Purchase
Purchase
Sale
Sale
Purchase
Sale
Sale
Sale
Purchase
250
250
500
500
11,500
14,500
4,000
12,707
392
13,401
3,500
17.75
16.565
17.114
16.80
17.28
16.89
12.81*
16.76
16.72
16.13
12.81*
4,437.50
4,141.25
8,557.00
8,400.00
198,720.00
244,832.50
51,240.00
212,969.32
6,554.24
216,158.13
44,835.00
Member of the
Management
board
Dr. Arndt Schottelius
Dr. Arndt Schottelius
Jens Holstein
Jens Holstein
Dr. Marlies Sproll
Dr. Marlies Sproll
Dr. Marlies Sproll
Dr. Simon Moroney
Dr. Simon Moroney
Dr. Simon Moroney
Dr. Simon Moroney
* Strike price of convertible bonds
c r o s s - r E f E r E n c E
s e e pa g e 1 3 6
Corporate Governance Report
85
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prEVEn t ing confl ic t s of in t ErEs t
Members of both boards are obliged to avoid any actions that could
cause conflicts of interest with their functions at MorphoSys AG.
Such transactions or ancillary activities of the Management Board
have to be reported immediately to and approved by the Super-
visory Board. The Supervisory Board, which will in turn, inform
the Annual General Meeting of any conflicts of interest which
have occurred along with their solutions. In 2011, no conflicts of
interest occurred.
sharEhol dEr approVal of EQui t y coMpEnsat ion pl ans;
s t ocK rEpurchasEs
By resolution of the Annual General Meeting on May 19, 2011,
MorphoSys is authorized to acquire treasury stock totaling up to
10 % of the capital stock in accordance with Sec. 71 Para. 1 no. 8
of the German Stock Corporation Act (AktG). The authorization may
be exercised in whole or in part, once or several times, in pursuit
of one or several purposes by the Company or by third parties for
the account of the Company. At the discretion of the Management
Board, the buyback may be effected on the stock market or by means
of a public offer or a public invitation to tender.
In June 2011, MorphoSys repurchased 84,019 own shares based on
this authorization. The treasury shares will be used to implement
the Company’s long-term incentive program for management.
Information and Communication
MorphoSys uses ERP (enterprise resource planning) software to
make information available for processes and internal control pro-
cedures, and for reporting purposes. Furthermore, regular com-
munication takes place between the finance teams, local entities
and the finance headquarters.
Considering the relevance of its information systems, MorphoSys
has IT policies in place governing the use of information technology
and communication media in order to reduce any outside risk.
Furthermore, a communication policy has been put in place to de-
fine classifications for the distribution of internal documents and
make sure that any information is distributed to an appropriate au-
dience. Wherever applicable, the parameters of applications and
systems are set in such a way that the security of information is
enhanced.
Compliance System
f i g . 11: M o r p h o s y s ’ s c o M p l i a n c E s y s t E M
1
2
3
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c
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a
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r
e
v
o
g
e
t
a
r
o
p
r
o
c
declaration of compliance with dcgK
(sec. 161 aktg)
changes in management reporting
(sec. 289 hgb)
Statement on Corporate Governance
Report on accounting-related ICS + on risk
management
supervisory board and audit committee
Establishment of an audit committee
Occupation with independent financial experts
Specification of the monitoring tasks
Cooperation with the external auditor
specification of the monitoring tasks
primary tasks of the Supervisory board:
+ Monitoring of financial reporting
+ Monitoring the effectiveness
- of the Internal Control System
- of Risk Management System
- of Internal Audit
+ Monitoring the external audit, especially
- Independence of external auditor
- the additional services provided by him
tasks, that the Supervisory board may delegate (some or
all) to the audit committee (Sec. 107 (3) para. 2 aktG)
Supervisory board remains responsible for these tasks
86
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in t Ernal con t rol sy s t EM
audi t f unc t ion
MorphoSys updated its documentation regarding the internal con-
trol system that was established and used over the years for
maintaining adequate internal control over financial reporting. In
accordance with Sec. 289 (5) and Sec. 315 (2) Para. 5 HGB (Ger-
man Commercial Code), MorphoSys described the key characteris-
tics of its accounting-related internal control system, which en-
sures that all controls are in place to be able to report the financial
figures as precisely as possible. These internal controls over fi-
nancial reporting are documented and structured based on the most
commonly used COSO framework (“Internal Control – Integrated
Framework”), as defined by the Committee of Sponsoring Organiza-
tions of the Treadway Commission (COSO).
Due to its inherent limitations, internal control over financial re-
porting may not prevent or detect misstatements, and can only
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes, in accordance with IFRS (International Financial Report-
ing Standards) as adopted by the European Union.
Projections relating to future periods are not part of the internal
control system.
The internal audit function was implemented at MorphoSys during
2010 and its function is to assist MorphoSys AG in accomplishing
its objectives by bringing in a systematic and disciplined approach
to evaluate and improve the effectiveness of the organization’s
risk management, control and governance processes. KPMG was
appointed co-sourcing partner to support the internal control
group in conducting audits.
The internal auditing activity is founded on a risk-based internal
audit plan which is mainly derived from the last risk-management
results. In addition, audit requirements and suggestions from the
Management Board and the Supervisory Board’s Audit Committee
are considered in the risk-based internal audit plan.
The internal audit function regularly informs the Management
Board and the Head of Internal Audit Function reports (together
with the CEO) to the Audit Committee twice a year or immedi-
ately in case of suspicious facts.
During 2011, two audits were successfully conducted and deficien-
cies in processes that have been discovered will be cured by re-
spective countermeasures. The internal auditing activity will grow
significantly in 2012.
f i g . 12: r i s K- b a s E d i n t E r n a l a u d i t p l a n
m o r p h o s y s ( b a s e d
o n a u d i t p l a n )
support by auditors (KpMg)
I.
Risk analysis
and planning
of the annual
audit plan
II.
Risk analysis
with audit
area
III.
Definition of
the audit
objective
(process
analysis)
IV.
Risk analysis
and evalua-
tion for audit
objective
V.
Evaluation of
the ICS
VI.
Defining and
carrying out
the neces-
sary audit
steps
VII.
Documenta-
tion & com-
munication
of the results
VIII.
Follow-up
Quality Management
Corporate Governance Report
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risK ManagEMEn t
Remuneration Report
MorphoSys regards its risk management system as being directed
towards identifying, evaluating and mitigating risks (to an accept-
able level) by implementing appropriate countermeasures as well as
monitoring identified risks.
MorphoSys has a risk-identification and evaluation process in
place encompassing all business risks, in particular those which
may put the existence of the Company in jeopardy.
The Management Board ensures responsible risk handling at all
times and keeps the Supervisory Board informed about existing
risks and their development. Detailed information about the oppor-
tunities and risks at MorphoSys can be found on page 72 et seq.
of this report.
codE of conduc t
During 2011, MorphoSys implemented a Code of Conduct which
comprises the basic principles and rules for the conduct within the
Company and in relation to the public. It also provides the frame-
work of the Company’s ethical and legal responsibilities. The im-
plementation and monitoring of compliance with the Code of
Conduct is supervised by the Code of Conduct Committee. More
details are provided in the Sustainability Report.
financial statEMEnt audi t by pricEWatErhousEcoopErs
MorphoSys prepares its consolidated financial statements and
quarterly financial statements in accordance with the International
Financial Reporting Standards (IFRS). MorphoSys AG’s financial
statements are prepared in accordance with the German Commer-
cial Code (HGB). The Audit Committee of the Supervisory Board
proposes the selection of the Company’s external auditor. At the
2011 Annual Shareholders’ Meeting, PricewaterhouseCoopers AG
Wirtschaftsprüfungsgesellschaft was appointed auditor for the 2011
fiscal year. In order to ensure the auditor’s autonomy, the Audit
Committee obtained a declaration of independence from the auditor.
The Remuneration Report outlines the principles underlying the
compensation of the Management Board members of MorphoSys
AG. It also describes the compensation paid to the members of the
Supervisory Board. The Remuneration Report reflects the legal
provisions and the respective principles of the German Corporate
Governance Code and is part of the Management Report as well
as of the Corporate Governance Report.
rEMunErat ion of t hE ManagEMEn t board
The remuneration system for the Management Board is intended
to provide an incentive for successful and sustainable corporate
management. The aggregate annual compensation paid to Manage-
ment Board members consists of several components. These
include fixed compensation, a yearly cash bonus based on the
achievement of Company-related and individual goals (short-
term incentive – STI), a long-term incentivizing component in the
form of a share performance plan (long-term incentive – LTI) and
additional benefits. Each year, the structure and appropriateness of
the aggregate annual compensation packages are reviewed by
the Remuneration and Nomination Committee. The amount of com-
pensation payable to the Management Board members is depen-
dent in particular on the achievement of the duties and goals of
the individual Management Board member, and on the business
situation, success and prospects of the Company relative to its com-
petitive environment. The aggregate annual compensation pack-
ages are compared with the outcome of a comparative international
industry study performed in 2011 by an internationally acclaimed
consultant firm on the specific instruction of the Supervisory Board.
Adjustments to the aggregate annual compensation packages are
adopted by the plenum of the Supervisory Board. The last occasion
on which the salaries of the Management Board members were
adjusted was in July and December 2011.
OVERVIE W
In the 2011 fiscal year, the total compensation of the Management
Board amounted to € 3,917,374 (2010: € 3,267,924), an increase of
19.9 %, which is predominantly due to the change in Management
Board composition in 2011. Without the one-off payments due to
the change in the Management Board composition, the increase
would have amounted to 4.3 %.
c r o s s - r E f E r E n c E
s e e pa g e 7 2 e t s e q .
88
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Of this total amount, € 2,765,078 was attributable to cash compen-
sation, and € 1,152,296, or 29 % of the total, to share-based instru-
ments (long-term incentivizing compensation – LTI). Allocation of
shares from the LTI program occurs after a waiting period of four
years and depends on the achievement of Company goals. In addi-
tion, the Supervisory Board may decide to allocate no shares at all
after the four-year waiting period by applying a “company factor”.
The details of the LTI program are described below.
The table below shows a detailed breakdown of the compensation
paid to the members of the Management Board:
ta b . 15 a : c o M p E n s at i o n o f t h E M a n a g E M E n t b o a r d 2011
fixed compensation
compensation
short-term
incentive
long-term incentive
compensation
(target attainment depends on
achievement of company goals)
total
compensation
base salary
in €
other
compensatory
benefits
Variable
compensation
in €
in €
no. of
performance
shares
granted
fair Value at
the time of
the grant
in €
in €
Dr. Simon E.
Moroney
Dave Lemus*
Jens Holstein**
Dr. Arndt Schottelius
Dr. Marlies Sproll
386,862
132,119
167,500
256,000
262,259
total
1,204,740
135,1311
479,0092
181,5843
99,0464
94,5635
989,333
181,825
72,026
83,750
107,520
125,884
571,005
17,676
–
12,107
12,107
12,107
53,997
377,206
1,081,024
–
258,363
258,363
258,363
683,154
691,197
720,929
741,069
1,152,295
3,917,373
* Left the Management Board of MorphoSys AG on March 10, 2011
** Joined the Management Board of MorphoSys AG on May 1, 2011
1
2
3
4
5
Includes € 107,233 in annual contributions to a private pension fund and allowances for insurances
Includes € 35,629 in annual contributions to a private pension fund and allowances for insurances
Includes € 53,001 in annual contributions to a private pension fund and allowances for insurances
Includes € 73,613 in annual contributions to a private pension fund and allowances for insurances
Includes € 74,868 in annual contributions to a private pension fund and allowances for insurances
Corporate Governance Report
89
ta b . 15 b : c o M p E n s at i o n o f t h E M a n a g E M E n t b o a r d 2010
fixed compensation
compensation
short-term
incentive
long-term incentive
compensation
(target attainment depends on
share price performance)
total
compensation
s
t
n
E
M
E
t
a
t
s
l
a
i
c
n
a
n
i
f
base salary
in €
other
compensatory
benefits
Variable
compensation
in €
in €
no. of
convertible
bonds
granted
fair Value at
the time of
the grant
in €
Dr. Simon E.
Moroney
Dave Lemus*
Jens Holstein**
Dr. Arndt Schottelius
Dr. Marlies Sproll
368,498
259,157
–
231,000
249,623
total
1,108,278
130,1781
156,6392
–
90,1583
90,8794
467,854
208,570
152,902
–
132,594
146,778
640,844
* Left the Management Board of MorphoSys AG on March 10, 2011
** Joined the Management Board of MorphoSys AG on May 1, 2011
1
2
3
4
Includes € 103,844 in annual contributions to a private pension fund and allowances for insurances
Includes € 74,605 in annual contributions to a private pension fund and allowances for insurances
Includes € 68,837 in annual contributions to a private pension fund and allowances for insurances
Includes € 72,371 in annual contributions to a private pension fund and allowances for insurances
58,800
33,000
–
33,000
33,000
391,608
219,780
–
219,780
219,780
in €
1,098,854
788,478
–
673,532
707,060
157,800
1,050,948
3,267,924
During 2011, members of the Management Board exercised convert-
ible bonds, and subsequently sold the new shares. As required by
law, all transactions were reported and published in the Corporate
Governance Report and on the Company’s website.
FIXED C OMPENSATION
The fixed compensation consists of the base salary and other com-
pensatory benefits which primarily encompass the use of company
cars, allowances for health, social care and invalidity insurances
as well as special allowances and benefits received for working out-
side of the person’s home country. Furthermore, all members of
the Management Board participate in private pension funds or an-
other type of pension schemes (Altersversorgung). MorphoSys
pays the monthly contributions into these funds or other means of
pension schemes. These payments amount to a maximum of 10 %
of the annual fixed salary of each Management Board member plus
tax contributions and are included in the other compensatory ben-
efits component. In addition, all Management Board members par-
ticipate in a pension scheme which was established in cooperation
with Allianz Pensions-Management e.V. Allianz Pensions-Manage-
ment e.V. serves as an “Unterstützungskasse”, which means pen-
sion commitments have to be fulfilled by Allianz Pensions-Manage-
ment e.V.
SHOR T-TERM INCENTIVIZING C OMPE NSATION (STI)
Each Management Board member is eligible for performance-re-
lated compensation in the form of an annual cash bonus payment
of up to 60 % of his or her annual base salary at 100 % target attain-
ment. Such bonus payments are dependent on the achievement
of Company-related and individual goals, which are determined by
the Supervisory Board at the beginning of each fiscal year. The
Company-related goals account for up to two thirds of the bonus
payment and are based on the operating performance of the Com-
pany, as measured by revenues, operating profit and progress in the
partnered and proprietary pipeline. The individual goals account
c r o s s - r E f E r E n c E
s e e pa g e 8 1
a d d i t i o n a l i n f o r M at i o n
w w w. m o r p h o s y s . c o m
90
g r o u p M a n a g E M E n t r E p o r t
for up to one third of the payment and comprise operational objec-
tives for which the Management Board member is responsible.
At the end of the year, the Supervisory Board evaluates the level
of attainment of the Company-related and individual goals and
sets the bonus payment accordingly. The bonus is subject to a cap
of 125 % of the target amount. If goals are missed, the variable
component may not be paid at all. The bonus for the 2011 fiscal
year will be paid out in February 2012.
LONG -TERM INCENTIVIZING C OMPE NSATION (LTI)
In 2011, MorphoSys introduced a new long-term incentive program
for the Management Board as well as for the Senior Management
Group, called the performance share plan or long-term incentive
program (LTI). The beneficiaries of the LTI program will receive
MorphoSys shares after a four-year waiting period.
Each participant in the LTI program receives a defined allocation of
shares on the grant date. After a four-year waiting period, shares
will be allocated based on the achievement of the associated targets.
The goals comprise key performance indicators (KPIs) such as rev-
enue and profit targets, progress in the partnered and proprietary
pipeline, as well as other important milestones for the Company.
The number of allocated shares depends on the achievements of the
performance targets (KPI achievement in %) during the perfor-
mance period of four years, subject to the provisions of the perfor-
mance share plan. KPIs will be defined annually for every new
LTI tranche.
The performance share plan contains a hurdle and a cap, which
is between 50 % and 110 %. The program foresees an additional
“Company factor”. The Company factor generally amounts to “1”
and has to be determined by the Supervisory Board to adjust the
number of shares in case of unforeseeable Company development.
The Supervisory Board can decide on deviations from 0 to 2. If
necessary, the Supervisory Board could decide to allocate no shares
at all after the four-year waiting period.
Each year, the Supervisory Board decides on the number of perfor-
mance shares to be allocated to the Management Board members.
On June 1, 2011, 53,997 performance shares were granted to mem-
bers of the Management Board.
In the event of all goals being achieved by 100 %, the annual tar-
get amount for the fair value of the performance share awards
commitment will be € 377.206 for the CEO and € 258,363 for the
other members of the management. For further details see also
section 29 of the Notes to the Consolidated Financial Statements.
In 2011, members of the Management Board purchased MorphoSys
shares and exercised convertible bonds, which were subsequently
partly sold. As required by law, all transactions were reported and
published on the Company’s website.
CHANGE IN MANAGEMENT BOARD C OMP OSITION
On February 24, 2011, MorphoSys announced that Mr. Jens Holstein
was to succeed Mr. Dave Lemus both as Chief Financial Officer
of MorphoSys AG and as a member of the Management Board (Vor-
stand). Mr. Lemus stepped down from his position as CFO with
the Company in March 2011 to pursue other opportunities. He re-
ceived the contractually agreed compensation set out in his ser-
vice agreement until 30 June 2011. Further, he obtained his contrac-
tually agreed payment equal to his fixed gross annual salary in
the amount of € 264,238 plus his bonus, calculated as the average
bonus in the years 2009 and 2010, in the amount of € 144,053.
Additionally, Mr. Lemus’s unvested portion of outstanding stock
options granted for the years 2008 and 2009 was vested prema-
turely.
Mr. Jens Holstein was appointed Chief Financial Officer of
MorphoSys AG on May 1, 2011. His service agreement runs until
June 30, 2014. As an additional incentive for joining the Com-
pany, MorphoSys compensated Mr. Holstein for lost benefits from
his previous position with a non-recurring signing bonus in the
amount of € 100,000.
VARIA
No credit, loan or similar benefits were granted to members of
the Management Board. In the year under review, the Management
Board members received no benefits from third parties that were
either promised or granted in view of their position as members of
the Management Board.
c r o s s - r E f E r E n c E
s e e pa g e 1 3 6
a d d i t i o n a l i n f o r M at i o n
w w w. m o r p h o s y s . c o m
Corporate Governance Report
91
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In addition, the Supervisory Board members are reimbursed for
travel costs and for any value-added tax to be paid on their remu-
neration. The overall compensation package takes into account
the responsibilities and range of tasks of the Supervisory Board
members as well as the economic situation and performance of
the Company.
In the 2011 fiscal year, the members of the Supervisory Board re-
ceived a total of € 384,750 (2010: € 382,750), excluding reimburse-
ment of travel expenses. This amount consists of fixed remuneration
and variable compensation (attendance fees).
The Company did not provide loans to members of the Super-
visory Board.
The table below shows a detailed breakdown of the compensation
paid to the Supervisory Board:
NON - RE APP OINTMENT/NON - PROLONGATION
The service agreements of the Management Board members stipu-
late that in the event of a non-reappointment and non-prolongation
of the service agreement, each member of the Management Board
is entitled to receive a severance payment in the amount of one
year’s fixed salary. Such a severance payment will be offset against
any salary payments received in the event of a leave of absence of
a Management Board member. If the Management Board member’s
service contract is terminated by death, his/her spouse or life part-
ner is entitled to the monthly fixed salary for the month of death
and the following twelve months. In the event that (i) MorphoSys
transfers its assets or material parts of its assets to a non-affiliated
third party, (ii) MorphoSys is merged into a non-affiliated third
party or (iii) a shareholder holds more than 30 % of the voting rights
of MorphoSys, each member of the Management Board is allowed
to extraordinarily terminate his/her service agreement and may
demand the outstanding fixed salary for the remaining contractu-
ally provided term of contract or for two years, whichever is greater.
Furthermore, in such a case, all granted stock options, convert-
ible bonds and performance shares will be treated as immediately
vested.
rEMunErat ion of t hE supErVisory board
Compensation of the members of the Supervisory Board is based
on the provisions of the Articles of Association, the current ver-
sion of which was adopted by the stockholders at the Annual Gen-
eral Meeting on May 19, 2011, and the respective resolutions of
the stockholders at the Annual General Meetings regarding the re-
muneration of the members of the Supervisory Board. In 2011, the
members of the Supervisory Board received fixed compensation and
an attendance fee per board and committee meeting attended.
According to the current provisions, each Supervisory Board mem-
ber receives an annual board membership flat fee (€ 61,000 for
the Chairman, € 45,750 for the Deputy Chairman and € 30,500 for
the other Supervisory Board members). The Chairman receives
€ 3,000 per board meeting chaired and the other members receive
€ 1,500 per board meeting attended. For the work in the commit-
tees, the Chairman of a committee receives € 9,000, the other com-
mittee members € 6,000 each. In addition, committee members
receive € 1,000 per committee meeting attended. Compensation
becomes due in equal tranches on a quarterly basis.
92
g r o u p M a n a g E M E n t r E p o r t
ta b . 16 : c o M p E n s at i o n o f t h E s u p E r V i s o r y b o a r d
fixed compensation
attendance fees
total compensation
in €
2011
2010
2011
2010
2011
2010
Dr. Gerald Möller
70,000
70,000
26,000
22,000
96,000
92,000
Prof. Dr.
Jürgen Drews
Dr. Walter Blättler
Dr. Daniel Camus
Dr. Metin Colpan
Dr. Geoffrey
N. Vernon
total
57,750
39,500
36,500
36,500
57,750
39,500
36,500
36,500
17,500
13,500
19,000
8,500
15,000
18,000
19,000
10,000
75,250
53,000
55,500
45,000
72,750
57,500
55,500
46,500
39,500
279,750
39,500
279,750
20,500
105,000
19,000
103,000
60,000
384,750
58,500
382,750
Information Required under
Takeover Law
The following information is presented in accordance with Sec. 315
Para. 4 of the German Commercial Code (HGB).
coMp osi t ion of c api tal s t ocK
As of December 31, 2011, the Company’s share capital amounted
to € 23,112,167.00 and is divided into 23,112,167 no-par value
bearer shares. With the exception of 163,915 Company-held shares,
all shares issued are common shares with voting rights. The Man-
agement Board is not aware of any restrictions on the voting rights
or the right to transfer. This also applies to restrictions which may
result from shareholders’ agreements. The Company has not been
notified of direct or indirect shareholdings in its share capital
exceeding 10 % of the voting rights pursuant to Sec. 21 of the Ger-
man Securities Trading Act (WpHG). No shareholder has privi-
leged rights or other rights resulting in the right to control votes.
sharEhol dings ExcEEding 10 % of t hE Vo t ing righ t s
There is no direct or indirect shareholding in the Company which
exceeds 10 % of the voting rights.
app oin t MEn t and disMissal of ManagEMEn t board
MEMbErs, aMEndMEn t s t o t hE ar t icl Es of assoc iat ion
Pursuant to Sec. 6 of the Company’s Articles of Association, the
Management Board shall consist of at least two members, with
the Supervisory Board defining the number of Management Board
members. The Supervisory Board may appoint a Chief Executive
Officer and one or several representatives of the CEO. Pursuant to
Sec. 20 of the Articles of Association, amendments to the Articles
are subject to a majority of more than 50 % of the share capital rep-
resented in a shareholders’ meeting unless a different majority is
required by law.
au t horizat ion of t hE ManagEMEn t board t o issuE
sharEs
The shareholders have provided the Management Board with the
following authorizations to issue new shares or conversion rights,
or to purchase Company treasury shares:
a. Pursuant to Sec. 5 Para. 5 of the Articles of Association and
with the approval of the Supervisory Board, the Management
Board is authorized to increase the Company’s share capital
during the time period up to April 30, 2013, by the amount of
up to € 8,864,103.00 and by issuing 8,864,103 young bearer
shares with no-par value for contribution in cash and/or in kind
Corporate Governance Report
93
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on one or several occasions (Authorized Capital 2008-I). The
Management Board may, with the approval of the Supervisory
Board, exclude the preemptive rights of the shareholders un-
der the following conditions:
i.
in the case of a capital increase in cash to the extent that
such exclusion is necessary to avoid fractional shares; or
ii. in the case of a capital increase in kind to the extent that
the young shares are used for the acquisition of companies,
shareholdings in companies, patents, licenses or other in-
dustrial property rights, or of assets which constitute a busi-
ness in their entirety; or
iii. in the case of a capital increase in cash to the extent that
young shares are placed on a stock exchange in context with
a listing,
b. Pursuant to Sec. 5 Para. 6 of the Articles of Association and
with the approval of the Supervisory Board, the Management
Board is authorized to increase the Company’s share capital
during the time period up to April 30, 2013, by the amount of
up to € 2,216,025.00 and by issuing 2,216,025 young bearer
shares with no-par value for contribution in cash (Authorized
Capital 2008-II). The Management Board may, with the ap-
proval of the Supervisory Board, exclude the preemptive rights
of the shareholders under the following conditions:
i.
to the extent that such exclusion is necessary to avoid frac-
tional shares; or
ii. the issuance price for the new shares is not substantially
below the stock exchange price quoted for existing shares
at the time of the issuance,
c. Pursuant to Sec. 5 Para. 6b of the Articles of Association, the
Company’s share capital may be conditionally increased by an
amount of up to € 6,600,000.00, divided into up to 6,600,000
bearer shares with no-par value (Conditional Capital 2011-I). The
conditional capital increase shall only be accomplished (i) to
the extent that owners of options and/or convertible bonds make
use of their option and/or conversion rights issued by the Com-
pany by April 30, 2016, in accordance with the resolution of the
Annual General Meeting or (ii) to the extent that owners fulfill
their duties to convert. The same shall apply to owners of options
and/or convertible bonds issued by domestic or foreign affili-
ates which are wholly owned by the Company,
d. Furthermore, there exist Conditional Capital 1999-I in the
Capital 2008-III in the amount of up to € 450,000.00 (Sec. 5
Para. 6e of the Articles of Association). These conditional capi-
tals may be used for the issuance of option and conversion
rights to members of the Management Board and to employees
of the Company or of its affiliates.
au t horizat ion of t hE ManagEMEn t board t o
rEpurchasE s t ocK
The authorization to repurchase treasury stock as provided by
the resolution of the ordinary 2010 Annual Shareholders’ Meeting
was replaced by a new resolution of the 2011 Annual Sharehold-
ers’ Meeting authorizing the Company to buy back up to 10 % of its
share capital existing at the time of the 2011 Annual Shareholders’
Meeting. The authorization has a duration until April 30, 2016.
changE of con t rol proVisions
KE Y AGREEMENTS SUBJEC T TO C ONDITIONS
In 2007, the Company and Novartis Pharma AG extended their orig-
inal 2004 collaboration agreement in the field of pharmaceutical
research. According to this agreement, should certain changes in
control occur involving certain types of companies, Novartis
Pharma AG is permitted, but not obligated, to take several mea-
sures, including the partial or complete termination of the col-
laboration agreement.
A change in control is considered to be the acquisition of 30 % or
more of the voting rights in the Company in accordance with Sec. 29
and Sec. 30 of the German Takeover Act (Wertpapiererwerbs- und
Übernahmegesetz – WpÜG). Such termination of the collaboration
agreement by Novartis Pharma AG could significantly affect the
Company’s future cash flows.
CHANGE OF C ONTROL PROVISIONS FOR MANAGEMENT BOARD
MEMBERS
After a change of control transaction, each member of the Manage-
ment Board is allowed to terminate his/her service agreement and
may demand the outstanding salary for the remaining contractually
provided term of contract.
amount of up to € 87,033.00 (Sec. 5 Para. 6a of the Articles of
Association), Conditional Capital 2003-II in the amount of up
to € 725,064.00 (Sec. 5 Para. 6c of the Articles of Association),
Conditional Capital 2008-II in the amount of up to € 992,872.00
(Sec. 5 Para. 6d of the Articles of Association), and Conditional
Furthermore, in such a case, all granted stock options, convert-
ible bonds and shares granted in the LTI program will be treated
as immediately vested. The same applies to some of the directors
of the Company, to whom options or conversion rights have been
granted.
94
F i n a n c i a l S t a t e m e n t S
Financial State-mentS 95
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C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
1 2 0 p r e pa i d e x p e n s e s , ta x r e c e i va b l e s ,
9 6 c o n s o l i d at e d i n c o m e s tat e m e n t (i f r s)
o t h e r c u r r e n t a s s e t s a n d i n v e n t o r i e s
9 7 c o n s o l i d at e d s tat e m e n t o f c o m p r e h e n s i v e i n c o m e (i f r s)
1 2 1 p r o p e r t y, p l a n t a n d e q u i p m e n t
9 8 c o n s o l i d at e d b a l a n c e s h e e t (i f r s)
1 0 0 c o n s o l i d at e d s tat e m e n t o f c h a n g e s i n
1 2 3
i n ta n g i b l e a s s e t s
1 2 4 o t h e r a s s e t s
s t o c k h o l d e r s ’ e q u i t y (i f r s)
1 2 4 a s s e t s c l a s s i f i e d a s h e l d f o r s a l e
1 0 2 c o n s o l i d at e d s tat e m e n t o f c a s h f l o w s (i f r s)
1 2 4 g o o d w i l l
N O T E S
1 0 4 g e n e r a l i n f o r m at i o n
1 2 5
a c c o u n t s paya b l e a n d a c c r u e d e x p e n s e s
1 2 6 p r o v i s i o n s a n d ta x l i a b i l i t i e s
1 2 6 f i n a n c i a l i n s t r u m e n t s a n d
f i n a n c i a l r i s k m a n a g e m e n t
1 0 5 s u m m a r y o f s i g n i f i c a n t a c c o u n t i n g p o l i c i e s
1 3 0 s t o c k h o l d e r s ’ e q u i t y
1 1 1 s e g m e n t r e p o r t i n g
1 1 4 r e v e n u e
1 1 5 p e r s o n n e l e x p e n s e s
1 3 1 c o n v e r t i b l e b o n d s
1 3 2 s t o c k o p t i o n s
1 3 4 s t o c k a p p r e c i at i o n r i g h t s (s a r s)
1 1 5 n o n - o p e r at i n g i n c o m e a n d e x p e n s e s
1 3 4 l o n g - t e r m i n c e n t i v e p l a n
1 1 5
i n c o m e ta x e s
1 1 8 e a r n i n g s p e r s h a r e
1 1 9 c a s h a n d c a s h e q u i va l e n t s
1 1 9 f i n a n c i a l a s s e t s
1 2 0 a c c o u n t s r e c e i va b l e
1 2 0 o t h e r r e c e i va b l e s
1 3 5
o p e r at i n g l e a s e s a n d o t h e r c o m m i t m e n t s
1 3 5
c o n t i n g e n c i e s
1 3 6 r e l at e d pa r t i e s
1 4 0 c o r p o r at e g o v e r n a n c e
1 4 0 r e s e a r c h a n d d e v e l o p m e n t a g r e e m e n t s
1 4 2 c h a r t o f t h e c o n s o l i d at e d e n t i t y ( a p p e n d i x 1)
1 4 2 r e s p o n s i b i l i t y s tat e m e n t
96
F i n a n c i a l S t a t e m e n t S
Consolidated Income Statement (IFRS)
in €
Revenues
Operating Expenses
Cost of Goods Sold
Research and Development
Sales, General and Administrative
Total Operating Expenses
Other Operating Income
Profit from Operations
Finance Income
Finance Expenses
Other Income
Other Expenses
Profit before Taxes
Income Tax Expenses
Net Profit
Basic Net Profit per Share
Diluted Net Profit per Share
Shares Used in Computing
Basic Net Profit per Share
Shares Used in Computing
Diluted Net Profit per Share
See accompanying Notes to the Consolidated Financial Statements
note
2011
2010
2.7, 4
100,777,157
87,036,308
3
2.9
6
6
6
6
7
8
8
8
8
7,024,341
57,477,141
24,584,145
89,085,627
466,267
12,157,797
1,439,129
27,270
67,341
2,206,717
11,430,280
3,213,883
8,216,397
0.36
0.36
7,284,211
46,899,723
23,226,029
77,409,963
222,418
9,848,763
4,123,286
33,881
469,547
1,236,159
13,171,556
3,975,256
9,196,300
0.41
0.40
22,887,723
22,656,233
23,126,158
22,786,536
Consolidated Income Statement (IFRS) / Consolidated Statement of Comprehensive Income (IFRS)
97
Consolidated Statement of
Comprehensive Income (IFRS)
in €
Net Profit
Change in Unrealized Gains and Losses on Available-for-sale Financial Assets
(Thereof Reclassifications of Unrealized Gains and Losses to Profit and Loss)
Deferred Taxes
Change in Unrealized Gains and Losses on Available-for-sale Financial Assets, Net of Deferred Tax
Effects from Equity-related Recognition of Deferred Taxes
Foreign Currency Gain from Consolidation
Comprehensive Income
2011
2010
8,216,397
(260,949)
(886,717)
68,708
(192,241)
76,798
247,307
9,196,300
(3,580,703)
(3,854,337)
942,799
(2,637,904)
(5,622)
448,445
8,348,261
7,001,219
See accompanying Notes to the Consolidated Financial Statements
98
F i n a n c i a l S t a t e m e n t S
Consolidated Balance Sheet (IFRS)
in €
AS SE TS
Current Assets
Cash and Cash Equivalents
Available-for-sale Financial Assets
Accounts Receivable
Tax Receivables
Other Receivables
Inventories, Net
Prepaid Expenses and Other Current Assets
Assets Classified as Held for Sale
Total Current Assets
Non-current Assets
Property, Plant and Equipment, Net
Patents, Net
Licenses, Net
Intangible Assets under Development
Software, Net
Know-how and Customer Lists, Net
Goodwill
Deferred Tax Asset
Prepaid Expenses and Other Assets, Net of Current Portion
Total Non-current Assets
ToTAl AS SE TS
See accompanying Notes to the Consolidated Financial Statements
note
2011
2010
9, 21
10, 21
11, 21
13
12
13
13
17
14
15
15
15
15
15
54,596,099
79,768,563
12,203,237
215,620
375,360
3,281,240
3,467,402
785,027
44,118,451
64,304,041
15,009,326
499,323
522,520
4,135,446
3,104,340
813,011
154,692,548
132,506,458
6,106,318
9,459,580
9,551,394
10,513,100
1,055,405
1,341,159
6,189,865
10,285,264
12,118,924
10,513,100
505,328
1,685,978
15, 18
7
13, 16
34,107,455
34,099,485
164,949
1,418,542
231,689
1,658,040
73,717,902
77,287,673
228,410,450
209,794,131
Consolidated Balance Sheet (IFRS)
99
in €
note
2011
2010
lIAB IlITIES AND STo CK HolDERS’ EQUIT Y
Current Liabilities
Accounts Payable and Accrued Expenses
Tax Liabilities
Provisions
Current Portion of Deferred Revenue
Total Current Liabilities
Non-current Liabilities
Provisions, Net of Current Portion
Deferred Revenue, Net of Current Portion
Convertible Bonds due to Related Parties
Deferred Tax Liability
Total Non-current Liabilities
Stockholders’ Equity
Common Stock
Ordinary Shares Authorized (43,047,264 and 41,935,950 for 2011 and 2010, respectively)
Ordinary Shares Issued (23,112,167 and 22,890,252 for 2011 and 2010, respectively)
Ordinary Shares Outstanding (22,948,252 and 22,810,356 for 2011 and 2010, respectively)
Treasury Stock (163,915 and 79,896 shares for 2011 and 2010, respectively), at Cost
Additional Paid-in Capital
Reserves
Accumulated Income/(Deficit)
Total Stockholders’ Equity
ToTAl lIAB IlITIES AND STo CKHolDERS’ EQUIT Y
See accompanying Notes to the Interim Consolidated Financial Statements
19, 21
20, 7
20
2.7
20
2.7
23
7
22, 23, 24, 26
19,110,798
15,749,522
3,026,597
275,000
1,338,282
2,144,674
275,000
3,181,605
23,750,677
21,350,801
108,145
6,047,253
73,607
1,295,174
7,524,179
43,344
690,756
127,593
1,659,543
2,521,236
23,112,167
22,890,252
(1,756,841)
(9,774)
170,778,474
166,388,083
(680,099)
5,681,893
(811,963)
(2,534,504)
197,135,594
185,922,094
228,410,450
209,794,131
100
F i n a n c i a l S t a t e m e n t S
Consolidated Statement of Changes in
Stockholders’ Equity (IFRS)
BAl ANCE AS of JANUARY 1, 2010
Compensation Related to the Grant of Stock Options and Convertible Bonds
Exercise of Options and Convertible Bonds Issued to Related Parties
Reserves:
Change in Unrealized Gain on Available-for-sale Financial Assets, Net of Deferred Tax
Effects from Equity-related Recognition of Deferred Taxes
Foreign Currency Gains and Losses from Consolidation
Net Profit for the Period
Comprehensive Income
BAl ANCE AS of DECEmBER 31, 2010
BAl ANCE AS of JANUARY 1, 2011
Compensation Related to the Grant of Stock Options and Convertible Bonds
Exercise of Options and Convertible Bonds Issued to Related Parties
Repurchase of Treasury Stock
Reserves:
Change in Unrealized Gain on Available-for-sale Financial Assets, Net of Deferred Tax
Effects from Equity-related Recognition of Deferred Taxes
Foreign Currency Gains and Losses from Consolidation
Net Profit for the Period
Comprehensive Income
BAl ANCE AS of DECEmBER 31, 2011
See accompanying Notes to the Consolidated Financial Statements
common Stock
Shares
€
22,660,557
22,660,557
0
229,695
0
229,695
0
0
0
0
0
0
0
0
0
0
22,890,252
22,890,252
0
221,915
22,890,252
22,890,252
0
221,915
0
0
0
0
0
0
0
0
0
0
0
0
23,112,167
23,112,167
163,915
(1,756,841)
170,778,474
(1,292,325)
5,681,893
197,135,594
treasury Stock
Paid-in capital
Reserve
Reserve
Deficit/income
holders’ equity
additional
Revaluation
translation
accumulated
total Stock-
Shares
79,896
(9,774)
161,631,268
3,371,195
(1,988,077)
(11,730,804)
173,934,365
€
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,150,655
2,606,160
€
0
0
0
0
0
0
0
0
0
0
0
€
0
0
0
0
0
0
0
0
0
(2,637,904)
(5,622)
(2,643,526)
727,669
727,669
(192,241)
76,798
(115,443)
612,226
79,896
79,896
(9,774)
(9,774)
84,019
(1,747,067)
166,388,083
166,388,083
1,488,342
2,902,049
0
0
0
0
0
0
0
0
0
0
0
0
0
0
€
0
0
0
0
0
0
0
0
0
0
0
€
0
0
0
0
0
0
0
0
0
0
0
€
2,150,655
2,835,855
(2,637,904)
(5,622)
448,445
9,196,300
7,001,219
1,488,342
3,123,964
(1,747,067)
(192,241)
76,798
247,307
8,216,397
8,348,261
448,445
448,445
(1,539,632)
(1,539,632)
9,196,300
9,196,300
(2,534,504)
185,922,094
(2,534,504)
185,922,094
247,307
247,307
8,216,397
8,216,397
Consolidated Statement of Changes in Stockholders’ Equity (IFRS)
101
22,660,557
22,660,557
79,896
(9,774)
161,631,268
3,371,195
(1,988,077)
(11,730,804)
173,934,365
treasury Stock
additional
Paid-in capital
Revaluation
Reserve
translation
Reserve
accumulated
Deficit/income
total Stock-
holders’ equity
Shares
€
€
€
€
€
€
2,150,655
2,606,160
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
448,445
0
448,445
(1,539,632)
(1,539,632)
0
0
0
0
0
247,307
0
247,307
0
0
0
0
0
9,196,300
9,196,300
2,150,655
2,835,855
(2,637,904)
(5,622)
448,445
9,196,300
7,001,219
(2,534,504)
185,922,094
(2,534,504)
185,922,094
0
0
0
0
0
0
8,216,397
8,216,397
1,488,342
3,123,964
(1,747,067)
(192,241)
76,798
247,307
8,216,397
8,348,261
(1,292,325)
5,681,893
197,135,594
(2,637,904)
(5,622)
0
0
(2,643,526)
727,669
727,669
0
0
0
(192,241)
76,798
0
0
(115,443)
612,226
79,896
79,896
0
0
(9,774)
(9,774)
0
0
166,388,083
166,388,083
1,488,342
2,902,049
84,019
(1,747,067)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
23,112,167
23,112,167
163,915
(1,756,841)
170,778,474
BAl ANCE AS of JANUARY 1, 2010
Compensation Related to the Grant of Stock Options and Convertible Bonds
Exercise of Options and Convertible Bonds Issued to Related Parties
Reserves:
Change in Unrealized Gain on Available-for-sale Financial Assets, Net of Deferred Tax
Effects from Equity-related Recognition of Deferred Taxes
Foreign Currency Gains and Losses from Consolidation
Net Profit for the Period
Comprehensive Income
BAl ANCE AS of DECEmBER 31, 2010
BAl ANCE AS of JANUARY 1, 2011
Compensation Related to the Grant of Stock Options and Convertible Bonds
Exercise of Options and Convertible Bonds Issued to Related Parties
Repurchase of Treasury Stock
Reserves:
Change in Unrealized Gain on Available-for-sale Financial Assets, Net of Deferred Tax
Effects from Equity-related Recognition of Deferred Taxes
Foreign Currency Gains and Losses from Consolidation
Net Profit for the Period
Comprehensive Income
BAl ANCE AS of DECEmBER 31, 2011
See accompanying Notes to the Consolidated Financial Statements
common Stock
Shares
229,695
229,695
22,890,252
22,890,252
22,890,252
22,890,252
221,915
221,915
€
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
102
F i n a n c i a l S t a t e m e n t S
Consolidated Statement of Cash Flows (IFRS)
in €
opER ATIN g AC TIvITIES:
Net Profit
Adjustments to Reconcile Net Profit to Net Cash
Provided by Operating Activities:
Non-cash Charges from PPA
Impairment of Assets
Depreciation and Amortization of Tangible and Intangible Assets
Net Gain on Sales of Financial Assets
Purchases of Derivative Financial Instruments
Proceeds from the Disposal of Derivative Financial Instruments
Unrealized Net (Gain)/Loss on Derivative Financial Instruments
Loss/(Gain) on Sale of Property, Plant and Equipment/Intangible Assets
Recognition of Deferred Revenue
Stock-based Compensation
Income Tax Expense
Changes in Operating Assets and Liabilities:
Accounts Receivable
Prepaid Expenses, Other Assets and Tax Receivables
Accounts Payable and Accrued Expenses and Provisions
Other Liabilities
Deferred Revenue
Cash Generated from Operations
Interest Paid
Interest Received
Income Taxes Paid
note
2011
2010
8,216,397
9,196,300
0
236,362
6,628,779
(1,085,911)
(220,921)
386,208
(20,993)
(44,216)
44,000
0
6,120,325
(3,979,920)
(649,650)
9,176
496,181
254,744
(19,980,232)
(37,598,056)
1,538,807
3,190,278
2,123,296
3,974,358
12
12
2,839,264
(34,967)
3,501,662
(80,312)
23,493,407
28,563,611
(3,459)
361,916
(1,851,609)
(3,618,508)
(1,055,955)
2,052,030
(709,879)
27,272,556
3,930,998
(27,143)
148,117
(2,160,368)
1,891,604
NE T CASH pRovIDED BY opER ATINg AC TIvITIES
21
27,070,459
See accompanying Notes to the Interim Consolidated Financial Statements
Consolidated Statement of Cash Flows (IFRS)
103
in €
note
2011
2010
INvESTINg AC TIvITIES:
Purchases of Financial Assets
Proceeds from Sales of Financial Assets
Purchases of Property, Plant and Equipment
Proceeds from Disposals of Property, Plant and Equipment
Purchases of Intangible Assets
Acquisitions, Net of Cash Acquired
(50,686,269)
(20,783,313)
36,046,710
(2,320,353)
152,081
(1,284,629)
0
50,692,950
(2,323,416)
0
(11,486,644)
(18,095,650)
NE T CASH USED IN INvESTINg AC TIvITIES
21
(18,092,460)
(1,996,073)
fINANC IN g AC TIvITIES:
Repurchase Treasury Stock
Proceeds from the Exercise of Options and Convertible Bonds
Granted to Related Parties
Net of Proceeds and Payments from the Issuance of Convertible Bonds
Granted to Related Parties
Net Cost of Share Issuance
NE T CASH pRovIDED BY fINANCIN g AC TIvITIES
Effect of Exchange Rate Differences on Cash
Increase in Cash and Cash Equivalents
CASH AND CASH EQUIvAlENTS AT THE BEg INNINg of THE pERIoD
CASH AND CASH EQUIvAlENTS AT THE END of THE pERIoD
See accompanying Notes to the Interim Consolidated Financial Statements
(1,747,066)
0
3,139,488
2,851,597
(53,986)
(15,500)
1,322,936
176,713
10,477,648
44,118,451
54,596,099
80,586
(15,500)
2,916,683
50,921
2,863,135
41,255,316
44,118,451
104
F i n a n c i a l S t a t e m e n t S
Notes
1 General Information
1.1
BUSine SS anD ORGani Zat iOn
MorphoSys AG (the “Company” or “MorphoSys”) is one of the leading antibody
companies focusing on the generation of fully human antibodies. MorphoSys’s
proprietary state-of-the-art technologies, together with over 15 years of focused
antibody discovery and optimization know-how, are successfully applied to
the development of research reagents, diagnostics and therapeutics for both its
commercial partners and itself. The Company was founded in July 1992 as a
German limited liability company. In June 1998, MorphoSys became a German
stock corporation. In March 1999, the Company went public on Germany’s
“Neuer Markt”, the stock exchange designated for high-growth enterprises.
On January 15, 2003, MorphoSys AG was admitted to the Prime Standard
segment of the Frankfurt Stock Exchange.
1.2
cOnS Ol iDat eD cOmP anie S
The Company has five wholly owned subsidiaries (together referred to as the
“MorphoSys Group” or “Group”):
MorphoSys USA, Inc., was incorporated in the United States on February 16,
2000. The subsidiary’s purpose was to assist the Company in the sale and li-
censing of MorphoSys AG products. MorphoSys USA, Inc., substantially ceased
its operations in November 2002.
tain intangible assets of the MorphoSys Group. The Company’s operations are
physically located on the premises of MorphoSys AG, and operations com-
menced on December 31, 2002.
Serotec Ltd. with its subsidiaries Serotec, Inc., Serotec GmbH and Oxford
Biotechnology Ltd. (together referred to as the “Serotec Group”), was acquired
by MorphoSys in January 2006 and became a wholly owned subsidiary of
MorphoSys AG. The Serotec Group has been integrated into MorphoSys’s exist-
ing AbD Serotec segment. Oxford Biotechnology Ltd. was dissolved in the fi-
nancial year 2009.
Serotec Ltd. and Serotec, Inc., were renamed MorphoSys UK Ltd. and MorphoSys
US, Inc., as of January 2007. Serotec GmbH was renamed MorphoSys AbD
GmbH as of March 2007.
In January 2005, MorphoSys acquired Biogenesis Ltd., Poole, UK, and Biogen-
esis, Inc., New Hampshire, USA. Biogenesis UK was first renamed MorphoSys
UK Ltd. and in 2007 again renamed Poole Real Estate Ltd. Biogenesis, Inc.,
was renamed MorphoSys US, Inc., and merged into Serotec, Inc. The merged
entity resumed the name MorphoSys US, Inc., located in Raleigh, North
Carolina.
In October 2010, MorphoSys acquired 100 % of the shares in Sloning BioTech-
nology GmbH, a private company located in Puchheim near Munich, Germany.
MorphoSys IP GmbH was incorporated in Munich, Germany, on November 6,
2002. The subsidiary’s purpose is to purchase, maintain and administer cer-
The MorphoSys IP GmbH applied sec. 264 para. 3 of the German Commercial
Code (HGB). For this reason, no separate financial statements were published
in the Bundesanzeiger for MorphoSys IP GmbH.
l e G a l S t R U c t U R e O F t H e m O R P H O S Y S G R O U P
morphoSys aG
morphoSys USa, inc.
(Charlotte, NC, USA)
Poole Real estate ltd.
(Poole, UK)
morphoSys iP GmbH
(Martinsried, Germany)
morphoSys UK ltd.
(Oxford, UK)
Sloning Biotechnology GmbH
(Puchheim, Germany)
morphoSys US, inc.
(Raleigh, NC, USA)
morphoSys abD GmbH
(Düsseldorf, Germany)
Notes
105
The consolidated financial statements for the year ended December 31, 2011,
were authorized for issuance in accordance with a resolution of the Manage-
ment Board on February 14, 2012. The Management Board is represented by
Dr. Simon E. Moroney (Chief Executive Officer), Jens Holstein (Chief Financial
Officer), Dr. Marlies Sproll (Chief Scientific Officer) and Dr. Arndt Schottelius
(Chief Development Officer). The Supervisory Board is empowered to amend
the financial statements after the resolution of the Management Board. The
registered offices of the MorphoSys Group’s headquarters are located at Lena-
Christ-Str. 48, 82152 Martinsried, Germany.
2
Summary of Significant Accounting
Policies
2.1
BaSi S OF PReP aRat iOn anD c HanGe in PRe Sen tat iOn
The accompanying consolidated financial statements have been prepared in
accordance with the International Financial Reporting Standards (IFRS)
adopt ed by the International Accounting Standards Board (IASB), London, in
consideration of interpretations of the Standing Interpretations Committee
(SIC) and the International Financial Reporting Interpretations Committee
(IFRIC) as adopted by the European Commission.
The accounting policies set out below have been applied consistently to all
periods presented in these consolidated financial statements, unless stated
otherwise.
2.2
cHanGe S in accOUn t inG P Ol ic ie S anD Di S cl O SURe S
NE W AND AME NDE D STANDARDS THAT ARE E XPEC TE D TO HAVE NO IMPAC T
ON THE GROUP
• Amendments to IAS 32 “Financial Instruments: Presentation” on the classifi-
cation of rights issues.
• Amendments to IFRS 1 “First-time Adoption” on financial instruments dis-
closure.
• IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments”.
• Annual improvements project 2010, including changes to IAS 27 “Consoli-
dated and Separate Financial Statements”; IFRS 3 “Business Combinations” –
contingent consideration, share-based payment transactions, non-control-
ling interests; amendment to IAS 1 “Presentation of Financial Statements”;
amendment to IAS 34 “Interim Financial Reporting”; IFRS 1 “First-time
Adoption” – interim information, deemed cost, rate regulation; IFRS 7 “Fi-
nancial Instruments: Disclosures” – nature and extent of risks arising
from financial instruments; amendment to IFRIC 13 “Customer Loyalty Pro-
grammes”.
• Amendment to IAS 24 “Related-party Disclosures” for government-related
The consolidated financial statements of the Company for the year ended De-
cember 31, 2011, comprise the Company and its subsidiaries (together referred
to as the “MorphoSys Group”).
entities.
• Amendment to IFRIC 14, IAS 19 “The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction”.
The preparation of the consolidated financial statements in conformity with
the International Financial Reporting Standards (IFRS) requires management
to make certain estimates and assumptions that affect the amounts reported
in the consolidated financial statements and the accompanying notes. Actual
results could differ from those estimates. Estimates and underlying assump-
tions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimates are revised and in any future
periods affected.
The consolidated financial statements are presented in euro, which is the
functional currency for the MorphoSys Group. They are prepared on the his-
torical cost convention, except for the following assets and liabilities, which
are stated at their fair value: derivative financial instruments and available-
for-sale financial assets. All figures in this report are rounded either to the
nearest euro, thousand euros or million euros.
In 2011, a deferred tax asset in the amount of € 2.3 million has been offset
with a deferred tax liability for better transparency. Both deferred tax asset
and deferred tax liability relate to income taxes levied by the same tax au-
thority on the same taxable entity. To provide comparative information, prior
year’s deferred tax asset and deferred tax liability (€ 2.8 million) – and thus
total assets as well as total liabilities and stockholders’ equity – have been ad-
justed accordingly.
Furthermore, purchases of derivative financial instruments and proceeds from
disposal of derivative financial instruments have been reclassified within the
cash flow statement from financing activities to operating activities. To provide
comparative information, prior year’s figures have been adjusted accordingly.
NE W STANDARDS , AME NDME NT S AND INTE RPRE TATIONS IS SUE D BUT NOT
E FFEC TIVE FOR THE FINANCIAL YE AR BEGINNING JANUARY 1, 2011, AND
NOT E ARLY AD OP TE D
• IFRS 1 “First-time Adoption”: The changes made are expected to have no
impact on the Group.
• IFRS 7 “Financial Instruments: Disclosures”: This amendment will promote
transparency in the reporting of transfer transactions and improve users’
understanding of the risk exposures relating to transfers of financial assets
and the effect of those risks on an entity’s financial position, particularly
those involving securitization of financial assets. The amendment is expected
to have no impact on the Group.
• IFRS 9 “Financial Instruments”: IFRS 9 replaces the parts of IAS 39 that re-
late to the classification and measurement of financial instruments. IFRS 9
requires financial assets to be classified into two measurement categories:
those measured at fair value and those measured at amortized cost. The
classification depends on the entity’s business model for managing its finan-
cial instruments and the contractual cash flow characteristics of the instru-
ment. For financial liabilities, the main change is that, in cases where the
fair value option is taken for financial liabilities, the part of a fair value
change due to an entity’s own credit risk is recorded in other comprehensive
income rather than the income statement, unless this creates an account-
ing mismatch. The Group is yet to assess IFRS 9’s full impact and intends
to adopt IFRS 9 no later than the accounting period beginning on or after
January 1, 2013.
• IFRS 10 “Consolidated Financial Statements”: IFRS 10 builds on existing
principles by identifying the concept of control as the determining factor in
whether an entity should be included within the consolidated financial state-
ments of the parent company. The standard provides additional guidance to
106
F i n a n c i a l S t a t e m e n t S
assist in the determination of control where this is difficult to assess. The
Group is yet to assess IFRS 10’s full impact and intends to adopt IFRS 10 no
later than the accounting period beginning on or after January 1, 2013.
• IFRS 11”Joint Arrangements”: IFRS 11 is a more realistic reflection of joint
arrangements (joint operations or joint ventures) by focusing on the rights
and obligations of the arrangement rather than its legal form. Joint opera-
tions arise where a joint operator has rights to the assets and obligations
relating to the arrangement and hence accounts for its interest in assets,
liabilities, revenue and expenses. Joint ventures arise where the joint opera-
tor has rights to the net assets of the arrangement and hence equity ac-
counts for its interest. Proportional consolidation of joint ventures is no lon-
ger allowed. The Group is yet to assess IFRS 11’s full impact and intends
to adopt IFRS 11 no later than the accounting period beginning on or after
January 1, 2013.
• IFRS 12 “Disclosure of Interests in Other Entities”: IFRS 12 includes the
disclosure for all forms of interests in other entities, including joint arrange-
ments, associates, special purpose vehicles and other off-balance-sheet
vehicles. The Group is yet to assess IFRS 12’s full impact and intends to
adopt IFRS 12 no later than the accounting period beginning on or after
January 1, 2013.
• IFRS 13 “Fair Value Measurement”: IFRS 13 aims to improve consistency
and reduce complexity by providing a precise definition of fair value and
a single source of fair value measurement and disclosure requirements for
use across IFRS. The requirements, which are largely aligned between
IFRS and US-GAAP, do not extend the use of fair value accounting but pro-
vide guidance on how it should be applied where its use is already required
or permitted by other standards within IFRS or US-GAAP. The Group is yet
to assess IFRS 13’s full impact and intends to adopt IFRS 13 no later than
the accounting period beginning on or after January 1, 2012.
• IAS 1 “Presentation of Financial Statements”: The main change resulting
from these amendments is a requirement for entities to group items pre-
sented in “other comprehensive income” (OCI) on the basis of whether they
are potentially re-classifiable to profit or loss subsequently (reclassification
adjustments). The amendments do not address which items are presented
in OCI. The Group is yet to assess the full impact of the amendments.
• IAS 12 “Income Taxes”: This amendment introduces an exception to the ex-
isting principle for the measurement of deferred tax assets or liabilities
arising on investment property measured at fair value. As a result, SIC 21
“Income Taxes – Recovery of Revalued Non-depreciable Assets” will no
longer apply to investment property carried at fair value. The amendment
is expected to have no impact on the Group.
• IAS 19 “Employee Benefits”: These amendments eliminate the corridor ap-
proach and calculate finance costs on a net funding basis. The amendments
are expected to have no impact on the Group.
• IAS 27 “Consolidated and Separate Financial Statements”: IAS 27 (revised
2011) includes the provisions on separate financial statements that are left
after the control provisions of IAS 27 have been included in the new IFRS 10.
The amendments are expected to have no impact on the Group.
• IAS 28 “Investments in Associates”: IAS 28 (revised 2011) includes the re-
quirements for joint ventures, as well as associates, to be equity accounted
following the issue of IFRS 11. The amendments are expected to have no
impact on the Group.
2.3
BaSi S OF cOnS Ol iDat iOn
Intercompany balances and transactions and any unrealized gains arising
from intercompany transactions are eliminated in preparing the consolidated
financial statements in accordance with IAS 27.20. Unrealized losses are
eliminated in the same way as unrealized gains, but are considered to be an
impairment indicator of the asset transferred. Accounting policies have been
applied consistently for all subsidiaries.
2.4
BUSine SS cOmBinat iOnS
The Group applies IFRS 3 (revised) “Business Combinations” (effective from
July 1, 2009). The revised standard continues to apply the acquisition method
to business combinations, with some significant changes. For example, all
payments to purchase a business are to be recorded at fair value at the acqui-
sition date, with contingent payments classified as debt subsequently re-
measured through the income statement. All acquisition-related costs are
expensed.
2.5
F OReiGn cURRenc Y t RanSl at iOn
IAS 21 “The Effects of Changes in Foreign Exchange Rates” defines the ac-
counting for transactions and balances in foreign currencies. Transactions in
foreign currencies are translated at the foreign exchange rate as of the date
of the transaction. Foreign exchange rate differences arising on these transla-
tions are recognized in the income statement. On the balance sheet date, as-
sets and liabilities are translated at the closing rate, and income and expenses
are translated at the average exchange rate for the period. Goodwill and fair
value adjustments arising on the acquisition of a foreign entity are treated as
assets and liabilities of the foreign entity and translated at the closing rate.
Any foreign exchange rate differences deriving from these translations are
recorded in the income statement. Any further foreign exchange rate differ-
ences on Group level are recognized in the translation reserve (equity).
2.6
in t eRe S t
The Group uses interest rates to calculate fair values. For stock-based com-
pensation calculation, MorphoSys uses for convertible bonds the interest rate
of a German government bond with a duration of five years at grant date and
for stock options the interest rate of a German government bond with a dura-
tion of three years at grant date.
2.7
ReVenUe RecO Gni t iOn
The Group’s revenues include license and milestone fees, service fees and
revenue for the sale of goods.
S e e G l O S S a R Y
s e e pa g e 1 5 2
Notes
107
LICE NSE AND MILESTONE FE ES
Revenues related to non-refundable technology access fees, subscription fees
and license fees are deferred and recognized on a straight-line basis over the
relevant periods of the agreement, generally the research term or the estimated
useful life of the collaboration for those contracts without a stipulated term
unless a more accurate means of recognizing revenue is available. If all of the
criteria of IAS 18.14 are met, revenue is recognized in full. Milestone fees are
recognized upon achievement of certain contractual criteria.
2.9
G OVeRnmen t GRan t S
Grants from governmental agencies for the support of specific research and
development projects for which cash has been received are recorded as a sep-
arate item – “Other Operating Income” – in profit or loss on a systematic basis
to the extent the related expenses have been incurred. Under the terms of the
grants, the governmental agencies generally have the right to audit the use
of the payments received by the Group.
SE RVICE FE ES
Research and development collaboration service fees are recognized in the
period when the services are provided.
SALE OF GO ODS
Revenue from the sale of goods in the AbD Serotec segment is measured at the
fair value of the consideration received or receivable, net of returns, trade dis-
counts and volume rebates. Revenue is recognized when persuasive evidence
exists, usually in the form of an executed sales agreement, that the signifi-
cant risks and rewards of ownership have been transferred to the customer,
recovery of the consideration is probable, the associated costs and possible
return of goods can be estimated reliably, there is no continuing managerial
involvement with the goods, and the amount of revenue can be measured
reliably. If it is probable that discounts will be granted and the amount can be
measured reliably, then the discount is recognized as a reduction of revenue
as the sales are recognized. The timing of the transfer of risks and rewards
varies depending on the individual terms of the sales agreement.
In accordance with IAS 18.21 and 18.25, the total consideration in multiple-ele-
ment transactions will be allocated among the separately identifiable compo-
nents based on their respective fair values under application of IAS 18.20, and
the applicable revenue recognition criteria will be considered separately for
each of the separate components in order to reflect the transaction’s substance.
Deferred revenues represent revenues received but not yet earned as per the
terms of the contracts.
2.8
eXPenSe S
C O ST OF GO ODS SOLD
Cost of goods sold comprises the cost of manufactured products and the acqui-
sition cost of purchased goods which have been sold.
STO CK- BASE D C OMPE NSATION
The Group applies the provisions of IFRS 2 “Share-based Payment” which
obligates the Group to record the estimated fair value for stock options and
other awards at the measurement date as a compensation expense over the
period in which the employees render the services associated with the award.
2.10
in t eRe S t incOme
Interest income is recognized in finance income in the income statement as it
occurs, taking into account the effective yield on the asset.
2.11
in t eRe S t eXPenSe
Borrowing costs are expensed when incurred and are included in finance
expense in the income statement.
2.12
incOme taXe S
Income tax on the profit or loss for the year comprises current and deferred
tax. Income tax is recognized in the income statement except to the extent
that it relates to items recognized directly in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantially enacted at the balance sheet date, and
any adjustment to tax payable with respect to previous years.
Deferred tax is calculated using the balance sheet liability method, providing
for temporary differences between the carrying amounts of assets and liabili-
ties for financial reporting purposes and the amounts used for taxation pur-
poses. The amount of deferred tax provided is based on the expected manner
of realization or settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantially enacted at the balance sheet date.
Deferred tax assets and liabilities are offset if there is a legally enforceable
right to offset current tax liabilities and assets, and if they relate to income
taxes levied by the same tax authority on the same taxable entity or on differ-
ent tax entities, but they intend to settle current tax liabilities and assets on
a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized only to the extent that it is probable that fu-
ture taxable profits will be available against which the asset can be utilized.
Deferred tax assets are reduced to the extent that it is no longer probable that
the related tax benefit will be realized.
OPE R ATING LE ASE PAYME NTS
Payments made under operating leases are recognized in the income state-
ment on a straight-line basis over the term of the lease. According to SIC-15,
all incentives for the agreement of an operating lease are recognized as an
integral part of the net consideration agreed for the use of the leased asset.
The aggregate benefit of incentives is recognized as a reduction of rental ex-
pense over the lease term on a straight-line basis.
2.13
eaRninGS PeR SHaRe
The Group presents basic and diluted earnings per share (EPS) data for its ordi-
nary shares. Basic EPS is calculated by dividing the profit or loss attributable
to ordinary shareholders of the Company by the weighted-average number of
ordinary shares outstanding during the period. Diluted EPS is determined
by adjusting the profit or loss attributable to ordinary shareholders and the
weighted-average number of ordinary shares outstanding for the effects of
108
F i n a n c i a l S t a t e m e n t S
all dilutive potential ordinary shares, which comprise convertible notes and
share options granted to management and employees.
2.17
accOUn t S Rec eiVaBl e
2.14
c aSH anD c aSH eQUiVal en t S
The Group considers all cash at bank and in hand as well as short-term de-
posits with an original maturity of three months or less to be cash or cash
equivalents. The Group invests most of its cash in deposits with three major
German financial institutions, namely Commerzbank (former Dresdner
Bank), HypoVereinsbank and Deutsche Bank.
Guarantees granted for rent deposits and commitments for convertible bonds
issued to employees have been classified in other assets as restricted cash as
they are not available for use in the Group’s operations.
Accounts receivable are measured at amortized cost less provision for impair-
ment, e.g. allowance for doubtful accounts (see accounting policy 2.21).
Other non-derivative financial instruments are measured at amortized cost
using the effective interest method, less provision for impairment.
2.18
inVen t ORie S
Inventories are stated on a first-in, first-out (FIFO) basis at the lower of
manufactur ing/acquisition costs and net realizable value. Manufacturing costs
of self-produced inventories comprise all costs which are directly attributable
and an appropriate portion of overheads. Inventories can be classified into raw
material/consumables, work in progress and finished goods.
2.15
DeRiVat iVe F inanc ial inS t RUmen t S
The Group uses derivative financial instruments to hedge its exposure to
foreign exchange rate risks. In accordance with IAS 39.9, all derivative finan-
cial instruments are held for trading and recognized initially at fair value.
Subsequent to initial recognition, derivative financial instruments are stated
at fair value, which is their quoted market price as of the balance sheet date.
Since the derivatives were not designated for hedge accounting, any resulting
gain or loss is recognized in the income statement. According to the Group’s
foreign currency hedging policy, future cash flows with a high probability and
receivables which are definite and collectible within a twelve-month period
will be hedged.
2.19
PROPeR t Y, Pl an t anD eQUiPmen t
Property, plant and equipment is stated at historical cost less accumulated
depreciation (see also the Notes to the Consolidated Financial Statements –
section 14) and impairment losses (see accounting policy 2.21). Historical cost
includes expenditure that is directly attributable to the acquisition of the
items. Replacements and improvements are capitalized while general repairs
and maintenance are charged to expenses as incurred. Assets are depreciated
over their expected useful lives using the straight-line method (see table be-
low). Leasehold improvements are depreciated over the estimated useful lives
of the assets using the straight-line method.
2.16
nOn-DeRiVat iVe F inanc ial inS t RUmen t S
All non-derivative financial instruments are initially recognized at fair
value, being the fair value of the consideration given and including acquisi-
tion charges.
The Group accounts for its investments in debt and equity securities in accor-
dance with IAS 39. Management determines the proper classification of finan-
cial assets at the time of purchase and re-evaluates such designations as of
each balance-sheet date. The classification depends on the purpose for which
the financial assets were acquired. As of December 31, 2011, and as of De-
cember 31, 2010, some financial assets held by the Group have been classified
as available for sale. These financial assets are recognized or de-recognized
by the Group on the date it commits itself to purchase or sell the financial as-
sets. After initial recognition, available-for-sale financial assets are measured
at fair value, with any resulting gain or loss reported directly in the revaluation
reserve within equity until the financial assets are sold, collected or other-
wise disposed of, or until the financial assets are determined to be impaired,
at which time the cumulative loss is reported in the income statement.
Guarantees granted for rent deposits have been collateralized with available-
for-sale financial assets and have been classified in other assets as restricted
cash as they are not available for use in the Group’s operations.
asset class
Computer Hardware
Low-value Laboratory and Office Equipment
below € 150
Low-value Laboratory and Office Equipment
between € 150 and € 1.000
Permanent Improvements to Property/Buildings
Office Equipment
Laboratory Equipment
Useful life
3 years
Immediately
5 years
10 years
8 years
4 years
The asset’s residual values and useful lives are reviewed, and adjusted if appro-
priate, at the end of each reporting period.
c R O S S - R e F e R e n c e
s e e pa g e 1 0 9 a n d 1 2 1
c R O S S - R e F e R e n c e
s e e pa g e 1 2 4
Notes
109
2.20
in tanGiBl e aSSe t S
RE SE ARCH AND DE VE LOPME NT
Research costs are expensed as incurred. In general, development costs are
expensed as incurred (IAS 38.5 and IAS 38.11–38.23). Development costs are
recognized as an intangible asset when the criteria of IAS 38.21 (probability
of expected future economic benefits, reliability of cost measurement) are met
and if the entity can demonstrate the requirements of IAS 38.57.
PATE NT C OSTS
Patents obtained by the Group are stated at cost less accumulated amortiza-
tion (see below) and impairment losses (see accounting policy 2.21). Patent
costs are amortized on a straight-line basis over the lower of the estimated
useful life of the patent (ten years) and the remaining patent term. Amortiza-
tion commences when the patent is issued. Technology as identified in the
purchase price allocation for the acquisition of Sloning BioTechnology GmbH
is stated at acquisition-date fair value less accumulated amortization (useful
life ten years).
LICE NSE RIGHTS
The Group acquired license rights by making upfront license payments, paying
annual maintenance fees and making sublicense payments to third parties.
The Group amortizes up-front license payments on a straight-line basis over
the estimated useful life of the acquired license (ten years). The amortization
period and the amortization method are reviewed at each balance sheet date
(IAS 38.104). Annual maintenance fees are amortized over the term of each
annual agreement. Sublicense payments are amortized on a straight-line basis
over the life of the contract or the estimated useful life of the collaboration for
those contracts without a stipulated term.
SOF T WARE
Software is stated at cost less accumulated amortization (see below) and im-
pairment losses (see accounting policy 2.21). Amortization is charged to the
income statement on a straight-line basis over the estimated useful life of
three to five years. Software is amortized from the date it is available for use.
KNOW - HOW AND CUSTOME R LISTS
MorphoSys established purchase price allocations (PPA) as required by
IFRS 3 “Business Combinations”. Intangible assets identified consist of tech-
nology (useful life ten years), customer lists (useful life six to ten years),
know-how (useful life eight to ten years) as well as customer relationships
(useful life ten years) and are stated at acquisition-date fair value less accu-
mulated amortization.
INTANGIBLE AS SE TS UNDE R DE VE LOPME NT
This item contains an upfront payment from the in-licensing of a compound for
the Proprietary Development segment. The asset is stated at cost and is not
yet available for use, therefore not subject to amortization. As of the balance
sheet date, the asset has been tested for impairment as required by IAS 36.
GO ODWILL
The goodwill recognized is partly attributable to expected synergies to be
achieved and to the skills of the acquired workforce. Goodwill is tested annu-
ally for impairment as required by IAS 36 (see also the Notes to the Consoli-
dated Financial Statements – section 18).
SUB SEQUE NT E XPE NDITURE
Subsequent expenditure on capitalized intangible assets is only capitalized
when it increases the future economic benefits embodied in the specific asset
to which it relates. All other expenditure is expensed as incurred.
2.21
imP aiRmen t
NON - DE RIVATIVE FINANCIAL AS SE T S
A financial asset not carried at fair value through profit or loss is assessed at
each reporting date to determine whether there is objective evidence that it
is impaired. A financial asset is impaired if objective evidence indicates that
a loss event has occurred after the initial recognition of the asset, and that
the loss event had a negative effect on the estimated future cash flows of that
asset that can be estimated reliably.
Objective evidence that financial assets (including equity securities) are im-
paired can include default or delinquency by a debtor, indications that a debtor
or issuer will enter bankruptcy, adverse changes in the payment status of
borrowers or issuers in the Group, economic conditions that correlate with
defaults or the disappearance of an active market for a security. In addition,
for an investment in an equity security, a significant or prolonged decline in
its fair value below its cost is objective evidence of impairment.
RECE IVABLES
The Group considers evidence of impairment for receivables at both a specific
asset and collective level. All individually significant receivables are assessed
for specific impairment. All individually significant receivables found not to be
specifically impaired are then collectively assessed for any impairment that
has been incurred but not yet identified. Receivables that are not individually
significant are collectively assessed for impairment by grouping together re-
ceivables with similar risk characteristics.
In assessing collective impairment, the Group uses historical trends of the
probability of default, the timing of recoveries and the amount of loss incurred,
adjusted for management’s judgment as to whether current economic and
credit conditions are such that the actual losses are likely to be greater or less
than suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortized cost
is calculated as the difference between its carrying amount and the present
value of the estimated future cash flows discounted at the asset’s original effec-
tive interest rate. Losses are recognized in profit or loss and reflected in an
allowance account against receivables. Interest on the impaired asset contin-
ues to be recognized. When a subsequent event (e.g. repayment by a debtor)
causes the amount of impairment loss to decrease, the decrease in impairment
loss is reversed through profit or loss.
AVAIL ABLE - FOR - SALE FINANCIAL AS SE TS
Impairment losses on available-for-sale financial assets are recognized by re-
classifying the losses accumulated in the fair value reserve in equity, to profit
or loss. The cumulative loss that is reclassified from equity to profit or loss
is the difference between the acquisition cost, net of any principal repayment
110
F i n a n c i a l S t a t e m e n t S
and amortization, and the current fair value, less any impairment loss recog-
nized previously in profit or loss. If, in a subsequent period, the fair value of
an impaired available-for-sale debt security increases and the increase can
be related objectively to an event occurring after the impairment loss was
recognized in profit or loss, then the impairment loss is reversed, with the
amount of the reversal recognized in profit or loss. However, any subsequent
recovery in the fair value of an impaired available-for-sale equity security is
recognized in other comprehensive income.
NON - FINANCIAL AS SE TS
The carrying amounts of the Group’s non-financial assets, inventories and de-
ferred tax assets, are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists, then the
asset’s recoverable amount is estimated. For goodwill, and intangible assets
that have indefinite useful lives or that are not yet available for use, the recov-
erable amount is estimated each year at the same time. An impairment loss
is recognized if the carrying amount of an asset or its related cash-generating
unit (CGU) exceeds its estimated recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use
and its fair value less costs to sell. In assessing value in use, the estimated
future post-tax cash flows are discounted to their present value using a post-
tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset or CGU. For the purpose of impair-
ment testing, assets that cannot be tested individually are grouped together
into the smallest group of assets that generates cash inflows from continuing
use that are largely independent of the cash inflows of other assets or CGUs.
Subject to an operating segment ceiling test, for the purposes of goodwill im-
pairment testing, CGUs to which goodwill has been allocated are aggregated
so that the level at which impairment testing is performed reflects the lowest
level at which goodwill is monitored for internal reporting purposes. Good-
will acquired in a business combination is allocated to groups of CGUs that
are expected to benefit from the synergies of the combination.
The Group’s corporate assets do not generate separate cash inflows and are
utilized by more than one CGU. Corporate assets are allocated to CGUs on a
reasonable and consistent basis and tested for impairment as part of the test-
ing of the CGU to which the corporate asset is allocated.
Impairment losses are recognized in profit or loss. An impairment loss in
respect of goodwill is not reversed. In respect of other assets, impairment
losses recognized in prior periods are assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment
loss is reversed if there has been a change in the estimates used to determine
the recoverable amount. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortization, if no im-
pairment loss had been recognized.
2.22
SHaRe c aPi tal
Ordinary shares are classified as equity. Incremental costs directly attribut-
able to the issue of ordinary shares and share options are recognized as a
deduction from equity, net of any tax effects. When share capital recognized
as equity is repurchased, the amount of consideration paid, which includes
directly attributable costs, is net of any tax effects, and is recognized as a de-
duction from equity classified as treasury shares. When treasury shares
are sold or reissued subsequently, the amount received is recognized as an
increase in equity, and the resulting surplus or deficit on the transaction is
transferred to/from retained earnings.
2.23
t RaDe anD O t HeR P aYaBl e S, PROVi SiOnS
Trade and other payables are stated at amortized cost. Payables with repay-
ment dates exceeding one year are discounted to their net present values. Pay-
ables of uncertain timing or amount are shown as provisions.
2.24
cOnVeR t iBl e B OnD S
The Group issued convertible bonds to the Management Board and to employ-
ees of the Group. In accordance with IAS 32.28, the equity portion of a bond has
to be separated and presented as additional paid-in capital. The equity com-
ponent is assigned the residual amount after deducting from the fair value of
the bond as a whole the amount separately determined for the liability com-
ponent. The income-statement impact of the equity component is accounted for
as stock-based compensation whereas the income-statement impact of the
liability component is presented as interest expense. The Group applies the pro-
visions of IFRS 2 “Share-based Payment” for all convertible bonds granted to
the Management Board and the employees of the Group.
2.25
accOUn t inG e S t imat e S anD JUD Gmen t S
Estimates and judgments are continually evaluated and are based on histori-
cal experience and other factors, including expectations of future events that
are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the related
actual results. The estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabil-
ities within the next financial year are addressed below.
G O ODWILL
The Group tests annually whether goodwill is subject to any impairment, in
accordance with the accounting policy stated in section 2.21. The recoverable
amounts of cash-generating units have been determined based on value-in-
use calculations. These calculations require the use of estimates (see also the
Notes to the Consolidated Financial Statements – section 18).
For the AbD Serotec segment, a sensitivity analysis was performed by chang-
ing different assumptions and variables. An increase in the WACC by 30 % or
a decrease in future cash flows by 30 % would not result in any impairment of
the cash-generating unit.
A further sensitivity analysis was performed for the technology-development
activities within the Partnered Discovery segment, which represent the cash-
c R O S S - R e F e R e n c e
s e e pa g e 1 2 4
Notes
111
generating unit that also comprises the goodwill from the acquisition of Slon-
ing BioTechnology GmbH. An increase in the WACC by 30 % or a decrease in
future cash flows by 30 % would not result in any impairment of the cash-gen-
erating unit.
INC OME TA XES
The Group is subject to income taxes in numerous jurisdictions. Significant
judgment is required in determining the worldwide provision for income
taxes. There are many transactions and calculations for which the ultimate
tax determination is uncertain.
As of December 31, 2011, deferred tax assets on tax loss carry-forwards in
the amount of € 2.3 million were recognized due to positive business expecta-
tions at Sloning BioTechnology GmbH for the financial years 2012 to 2016. No
deferred tax assets were reported for a portion of the corporate tax loss carry-
forwards in the amount of € 2.4 million and trade tax loss carry-forwards in
the amount of € 2.3 million as the usability of these tax loss carry-forwards is
deemed uncertain due to the controversial tax regulation in Germany (both
section 8 para. 4 KStG and section 8c KStG). In the event that a portion of the
total tax loss carry-forwards may not be usable as a result of a tax audit,
the company will have to pay more income taxes at an earlier point in time in
future periods because the total tax loss carry-forwards will be consumed
earlier than expected.
2.26
c aPi tal manaGemen t
Concerning capital management, the Management Board’s policy is to main-
tain a strong and sustainable capital base so as to maintain investor, creditor
and market confidence and to support future development of the business.
Compared to the previous year, the equity ratio slightly decreased from 88.6 %
to 86.3 % (see also table below). The Group is currently not financed via finan-
cial debt.
At present, management and employees can participate in the Group’s re-
turns by way of long-term performance-related remuneration which consists
of convertible bonds and stock options pursuant to the respective incentive
plans as resolved by the Annual General Meeting. In addition, MorphoSys es-
tablished a long-term incentive program in June 2011 based on the issuance
of performance shares which are finally granted in the event that certain pre-
defined success criteria are achieved (see also the Notes to the Consolidated
Financial Statements – section 26). There were no changes in the Group’s ap-
proach to capital management during the year.
3 Segment Reporting
The Group applies IFRS 8 ”Operating Segments” (effective from January 1,
2009). An operating segment is a component of an entity that engages in
business activities from which it may earn revenues and incur expenses,
whose operating results are regularly reviewed by the entity’s chief operat-
ing decision maker and for which discrete financial information is available.
Segment information is presented in respect of the Group’s operating seg-
ments. The operating segments are based on the Group’s management and in-
ternal reporting structure. Segment results and assets include items directly
attributable to a segment and those that can be allocated on a reasonable basis.
Intersegment pricing is determined on an arm’s length basis according to the
Group transfer pricing policy.
The Group consists of the following three operating segments:
PAR TNE RE D DISC OVE RY
MorphoSys possesses one of the leading technologies for the generation of
human antibody therapeutics. The Group commercially exploits this technol-
ogy via partnerships with pharmaceutical and biotechnology companies.
All activities related to these collaborations and the major part of technology
development are reflected in this segment.
PROPRIE TARY DE VE LOPME NT
This segment involves all activities relating to proprietary therapeutic antibody
development. Presently, this includes the Group’s three lead compounds in
its proprietary product portfolio, MOR103, MOR202 and MOR208, as well as
two programs in the discovery phase and two pre-development programs
with Novartis. The Group currently plans to out-license proprietary compounds
after clinical proof of concept.
ABD SE ROTEC
The AbD Serotec segment leverages MorphoSys’s core technological capabili-
ties in the design and manufacture of antibodies for research and diagnostic
purposes. It commercializes the HuCAL technology, focusing on the generation
of bespoke research antibodies for its customers. The AbD Serotec segment
also generates sales from catalogue antibodies and bulk/industrial production
of antibodies.
en t i t Y-WiDe Di S cl O SURe
In presenting entity-wide disclosures, segment revenues are based on the
geographical location of the customers and segment assets on the geographi-
cal location of the assets.
in 000’s €
2011
2010
Equity
in % of Total Capital
Debt
in % of Total Capital
ToTAl CApITAl
197,136
86.3 %
31,275
13.7 %
228,410
185,922
88.6 %
23,872
11.4 %
209,794
c R O S S - R e F e R e n c e
s e e pa g e 1 3 4
112
F i n a n c i a l S t a t e m e n t S
For the twelve-month Period
ended December 31
(in 000’s €)
RE vENUES , ToTAl
External Revenues
Intersegment Revenues
ToTAl opER ATIN g E xpENSES
Cost of Goods Sold
Other Operating Expenses
Intersegment Costs
oTHER opER ATIN g INC omE
SEg mENT RESUlT
Finance Income
Finance Expenses
Other Income
Other Expenses
pRofIT BEfoRE TA xES
Income Tax Expenses
NE T pRofIT
Current Assets
Non-current Assets
ToTAl SEg mENT AS SE TS
Current Liabilities
Non-current Liabilities
Stockholders’ Equity
ToTAl SEg mENT lIAB IlITIES AND EQUIT Y
Capital Expenditure
Depreciation and Amortization
Partnered Discovery
Proprietary Development
abD Serotec
Unallocated
elimination
Group
2011
2010
2011
2010
2011
2010
2011
2010
2010
2011
2010
79,319
79,319
0
23,683
0
23,427
256
59
55,695
0
0
0
0
55,695
0
55,695
18,054
23,061
41,115
4,937
6,047
0
10,984
1,202
3,197
66,267
66,267
0
23,559
0
22,688
871
13
2,398
2,398
0
35,000
0
34,975
25
407
1,771
1,771
0
26,510
0
26,219
291
191
42,721
(32,195)
(24,548)
0
0
0
0
42,721
0
42,721
13,192
26,312
39,504
6,611
690
0
7,301
1,197
2,691
0
0
0
0
(32,195)
0
(32,195)
1,460
16,672
18,132
8,100
0
0
8,100
1,009
1,750
0
0
0
0
(24,548)
0
(24,548)
1,719
16,847
18,566
4,617
0
0
4,617
11,580
1,199
19,341
19,060
281
18,380
7,024
11,356
961
0
0
0
0
0
0
0
961
11,747
30,841
42,588
3,896
543
0
4,439
787
1,247
20,160
18,998
1,162
18,945
7,284
11,661
0
18
1,233
0
0
0
0
0
1,233
10,725
31,287
42,012
3,777
665
0
4,442
482
1,261
0
0
0
0
0
0
12,303
12,303
(12,303)
1,439
27
67
2,207
(13,031)
3,214
(16,245)
123,431
3,144
126,575
6,818
934
197,135
204,887
646
483
0
0
0
0
0
0
9,557
9,557
(9,557)
4,123
34
470
1,237
(6,235)
3,975
(10,210)
106,870
2,842
109,712
6,346
1,166
185,922
193,434
553
1,015
961
1,233
2011
(281)
(281)
(281)
(1,162)
(1,162)
(1,162)
(281)
(1,162)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
100,777
100,777
0
89,085
7,024
82,061
0
466
12,158
1,439
27
67
2,207
11,430
3,214
8,216
154,692
73,718
228,410
23,751
7,524
197,135
228,410
3,644
6,677
87,036
87,036
0
77,409
7,284
70,125
0
222
9,849
4,123
34
470
1,237
13,171
3,975
9,196
132,506
77,288
209,794
21,351
2,521
185,922
209,794
13,812
6,166
Notes
113
Partnered Discovery
Proprietary Development
abD Serotec
Unallocated
elimination
Group
2010
2011
2010
2011
2010
79,319
79,319
66,267
66,267
23,683
23,559
35,000
26,510
(32,195)
(24,548)
55,695
42,721
(32,195)
(24,548)
(32,195)
(24,548)
0
0
0
0
0
0
0
23,427
256
59
55,695
55,695
18,054
23,061
41,115
4,937
6,047
0
10,984
1,202
3,197
0
0
0
0
0
0
0
22,688
871
13
42,721
42,721
13,192
26,312
39,504
6,611
690
0
7,301
1,197
2,691
2010
1,771
1,771
26,219
291
191
1,719
16,847
18,566
4,617
4,617
11,580
1,199
0
0
0
0
0
0
0
0
0
2011
2,398
2,398
34,975
25
407
1,460
16,672
18,132
8,100
8,100
1,009
1,750
0
0
0
0
0
0
0
0
0
2011
2010
2011
2010
19,341
19,060
281
18,380
7,024
11,356
0
0
961
0
0
0
0
961
0
961
11,747
30,841
42,588
3,896
543
0
4,439
787
1,247
20,160
18,998
1,162
18,945
7,284
11,661
0
18
1,233
0
0
0
0
1,233
0
1,233
10,725
31,287
42,012
3,777
665
0
4,442
482
1,261
0
0
0
12,303
0
12,303
0
0
(12,303)
1,439
27
67
2,207
(13,031)
3,214
(16,245)
123,431
3,144
126,575
6,818
934
197,135
204,887
646
483
0
0
0
9,557
0
9,557
0
0
(9,557)
4,123
34
470
1,237
(6,235)
3,975
(10,210)
106,870
2,842
109,712
6,346
1,166
185,922
193,434
553
1,015
2011
(281)
0
(281)
(281)
0
0
(1,162)
0
(1,162)
(1,162)
0
0
(281)
(1,162)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
100,777
100,777
0
89,085
7,024
82,061
0
466
12,158
1,439
27
67
2,207
11,430
3,214
8,216
154,692
73,718
228,410
23,751
7,524
197,135
228,410
3,644
6,677
87,036
87,036
0
77,409
7,284
70,125
0
222
9,849
4,123
34
470
1,237
13,171
3,975
9,196
132,506
77,288
209,794
21,351
2,521
185,922
209,794
13,812
6,166
For the twelve-month Period
ended December 31
(in 000’s €)
RE vENUES , ToTAl
External Revenues
Intersegment Revenues
ToTAl opER ATIN g E xpENSES
Cost of Goods Sold
Other Operating Expenses
Intersegment Costs
oTHER opER ATIN g IN C omE
SEg mENT RESUlT
Finance Income
Finance Expenses
Other Income
Other Expenses
pRofIT BEfoRE TA xES
Income Tax Expenses
NE T pRofIT
Current Assets
Non-current Assets
ToTAl SEg mENT AS SE T S
Current Liabilities
Non-current Liabilities
Stockholders’ Equity
ToTAl SEg mENT lIAB IlITIES AND EQUIT Y
Capital Expenditure
Depreciation and Amortization
114
F i n a n c i a l S t a t e m e n t S
A segment result is defined as segment revenues less operating segment ex-
penses. As a compensation for Partnered Discovery revenues generated from
contracts that had originally been initiated by the AbD Serotec segment,
the Partnered Discovery segment granted a compensatory fee of € 0.3 million
(prior year: € 0.9 million) to the AbD Serotec segment for 2011 as a result of
the revenue-sharing agreement established between the two segments in 2007.
In 2011, revenues in the AbD Serotec segment comprised minor intersegment
revenues with the Proprietary Development segment (2010: € 0.3 million) which
resulted from the sale of antibodies. In 2011, a minor impairment loss was
recognized in the AbD Serotec segment.
The Group’s major customers are all related to the Partnered Discovery seg-
ment. The most significant customer accounts for € 8.9 million of the trade
receivables carrying amount at December 31, 2011 (2010: € 9.4 million). Three
customers individually accounted for € 72.8 million, € 2.2 million, and
€ 2.1 million of the revenues in the year 2011 and were mainly attributed to
the Partnered Discovery segment. In 2010, three customers individually ac-
counted for € 47.2 million, € 8.9 million, and € 3.3 million of the revenues and
were mainly attributed to the Partnered Discovery segment.
In 2011, other operating expenses in “unallocated” mainly included personnel-
related costs (2011: € 6.9 million; 2010: € 4.7 million), costs for external ser-
vices (2011: € 3.1 million; 2010: € 2.1 million) and infrastructure costs (2011:
€ 1.2 million; 2010: € 1.1 million). Current assets in “unallocated” mainly
consisted of cash, cash equivalents and available-for-sale financial assets (2011:
€ 121.0 million; 2010: € 104.9 million). Current liabilities in “unallocated”
mainly comprised accounts payable and accrued expenses (2011: € 4.5 mil-
lion; 2010: € 4.6 million) as well as provisions (2011: € 2.3 million; 2010:
€ 1.7 million).
The following table shows the split of the Group’s consolidated revenues by
geographical market:
in 000’s €
2011
2010
Germany
Europe and Asia
USA and Canada
Other
ToTAl
3,532
81,289
12,444
3,512
100,777
4,702
64,889
16,504
941
87,036
The following table shows the split of the Group’s non-current assets, excluding
deferred tax assets, by geographical segment:
in 000’s €
Germany
UK
USA
ToTAl
2011
2010
71,904
127
1,522
73,553
75,537
44
1,475
77,056
The following table shows the split of the Group’s capital expenditure by geo-
graphical segment:
in 000’s €
Germany
UK
USA
ToTAl
2011
3,035
501
108
3,644
2010
13,508
280
24
13,812
4 Revenue
In 2011, the Group’s revenues included revenues from license and milestones
fees in the amount of € 59.9 million (2010: € 41.8 million), to which the Part-
nered Discovery segment contributed € 58.7 million (2010: € 41.7 million) and
the AbD Serotec segment € 1.5 million (2010: € 1.0 million), before elimination
of inter-segment effects.
Revenues from service fees in the amount of € 24.6 million (2010: € 28.0 mil-
lion) included € 20.6 million from the Partnered Discovery segment (2010:
€ 24.5 million), € 2.4 million from the Proprietary Development segment (2010:
€ 1.8 million) and € 1.6 million from the AbD Serotec segment (2010: € 1.7 mil-
lion).
In 2011, total revenue included approx. 3 % revenue derived from Asia.
Revenues from the sale of goods, which related to the AbD Serotec segment,
amounted to € 15.5 million (2010: € 16.5 million).
Notes
115
5 Personnel Expenses
6 Non-operating Income and Expenses
Non-operating income and expenses includes the following items:
in 000’s €
2011
2010
Wages and Salaries
28,698
25,117
in 000’s €
Social Security
Contributions
Stock-based Compen-
sation Expense
Temporary Staff (External)
Other
ToTAl
4,468
4,011
1,539
228
1,881
36,814
2,123
89
353
31,693
In 2011, other personnel expenses included mostly costs for recruitment and
severance charges.
The average number of employees during the year ended December 31, 2011,
was 459 (2010: 435). Of the 446 employees as of December 31, 2011, 301
worked in research and development and 145 in sales, general and adminis-
tration (December 31, 2010: 309 employees in R&D and 155 employees in
S, G&A). As of December 31, 2011, 199 employees worked in the Partnered
Discovery segment, 67 in the Proprietary Development segment, 140 em-
ployees in the AbD Serotec segment and 40 were unallocated (December 31,
2010: 183 employees in the Partnered Discovery segment, 100 in the Propri-
etary Development segment 142, in the AbD Serotec segment and 39 employ-
ees were unallocated). The expenses for defined contribution plans amounted
to € 0.3 million in 2011 (prior year: € 0.3 million).
Interest Income
Gain on Marketable
Securities
Finance Income
Interest Expenses
Finance Expenses
Gain on Exchange
Gain on Derivatives
Miscellaneous Income
Other Income
Loss on Exchange
Loss on Derivatives
Miscellaneous Expenses
Other Expenses
ToTAl
2011
353
1,086
1,439
(27)
(27)
45
21
1
67
(2,043)
0
(164)
(2,207)
(728)
2010
143
3,980
4,123
(34)
(34)
440
0
30
470
(499)
(496)
(241)
(1,236)
3,323
In 2011, the Group recognized a net Loss on Exchange of € 2.0 million. This
amount includes a net loss of € 1.6 million and € 0.1 million derived from dif-
ferences in foreign exchange rates between date of invoice and date of pay-
ment of accounts receivables and trade accounts payables, respectively, as well
as a net loss of € 0.3 million from bank accounts held in foreign currencies.
7
Income Taxes
The Company and its German subsidiaries MorphoSys IP GmbH, MorphoSys
AbD GmbH and Sloning BioTechnology GmbH are subject to corporate tax, soli-
darity surcharge and trade tax. The Company’s corporation tax rate remained
constant at 15 %, the same applies to the solidarity surcharge of 5.5 % and the
effective trade tax rate of 10.5 %. With regard to affiliated companies in for-
eign countries, income tax rates of 26.5 % (2010: 28 %) and 36.9 % (2010: 37 %)
apply to the UK and the USA, respectively.
116
F i n a n c i a l S t a t e m e n t S
The income tax for the current fiscal year is comprised as follows:
in 000’s €
Current Tax Expense (Thereof Regarding Prior Years: k€ 2; 2010: k€ (16))
Deferred Tax Income/Deferred Tax (Expense)
Total Income Tax
Total Amount of Deferred Taxes Resulting from Entries Directly Recognized in Equity
2011
(3,452)
238
(3,214)
(265)
2010
(4,094)
119
(3,975)
(411)
The following table reconciles the expected income tax expense to the actual
income tax expense presented in the consolidated financial statements. To
calculate the statutory income tax expense in fiscal year 2011, the combined
income tax rate of 26.33 % (2010: 26.33 %) was applied to income before taxes.
The tax rate applied in the reconciliation statement includes corporate tax
and solidarity surcharge, and amounts to 15.83 % plus the effective trade tax
rate based on the multiplier rate (“Hebesatz”) of 300 % for municipal trade
tax, which amounts to 10.50 %.
in 000’ €
Profit Before Income Taxes
Expected Tax Rate
Expected Income Tax
Tax Effects Resulting from:
Deferred Income Tax Arising from the Recognition of DTA on Previously
Unrecognized DTA on Tax Loss Carry-forwards
Stock-based Compensation
Non-tax-deductible Items
Tax Rate Differences
Prior Year Taxes
Other Effects
Actual Income Tax
2011
2010
11,430
26.33 %
(3,010)
389
(339)
(130)
(101)
(2)
(21)
13,172
26.33 %
(3,468)
0
(555)
(114)
(21)
113
70
(3,214)
(3,975)
MorphoSys AG has been subject to tax audits for the financial years 2004
to 2007 and tax loss carry-forwards have been confirmed in their recognized
amount.
As of December 31, 2011, deferred tax assets on tax loss carry-forwards in the
amount of € 2.3 million have been recognized due to positive business expec-
tations at Sloning BioTechnology GmbH for the financial years 2012 to 2016. No
deferred tax assets were reported for a portion of the corporate tax loss carry-
forwards in the amount of € 2.4 million and trade tax loss carry-forwards in the
amount of € 2.3 million as the usability of these tax loss carry-forwards is
Notes
117
deemed uncertain due to the controversial tax regulation in Germany (both
section 8 para. 4 KStG and section 8c KStG; see also Notes to the Consoli-
dated Financial Statements – section 2.25). The tax loss carry-forwards may
be carried forward indefinitely and in unlimited amounts. From 2004 on-
wards, German tax law restricts the offset of taxable income against existing
tax loss carry-forwards to an amount of € 1.0 million plus 60 % of taxable in-
come above € 1.0 million. According to the German Corporation Tax Act (Kör-
perschaftsteuergesetz, KStG), taxes may be carried forward indefinitely.
Significant components of the deferred tax assets and liabilities, before netting
of certain deferred tax assets and liabilities, are as follows:
in 000’s €
Intangible Assets
Non-recognition of DTA on Intangible Assets
Property, Plant and Equipment
Land
Building
Other Equipment, Furnitures, Fixtures
Shares in Affiliated Companies
Inventory
Advanced Payments
Receivables and Other Assets
Treasury Stock
Prepaid Expenses and Deferred Charges
Short-term Securities Investments
Other Accrual/Provisions
Trade Accounts Payable
Bonds, thereof Convertible
Other Liabilities
Tax Losses
* Deferred Tax Asset
** Deferred Tax Liability
Dta * 2011
Dta * 2010
Dtl** 2011
Dtl** 2010
0
0
0
0
0
51
0
161
0
0
0
0
0
0
5
0
0
0
0
0
0
0
61
0
230
0
0
0
0
0
0
4
0
0
2,273
2,490
2,701
2,996
3,287
0
42
0
0
0
0
0
0
0
0
5
231
30
0
0
22
3
4,043
0
66
0
0
0
0
0
0
8
0
7
300
4
0
0
0
0
3,620
4,428
Deferred tax liabilities in the amount of € 0.3 million (prior year: € 0.4 mil-
lion) have been recognized directly in equity. The amount mainly relates to
the revaluation of available-for-sale financial assets.
on the same taxable entity. To ensure comparability, prior year’s deferred tax
asset and deferred tax liability (€ 2.8 million) have been adjusted respectively.
In 2011, a deferred tax asset in the amount of € 2.3 million has been offset with
a deferred tax liability for better transparency. Both deferred tax asset and
deferred tax liability relate to income taxes levied by the same tax authority
At December 31, 2011, a deferred tax liability for temporary differences related
to an investment in a subsidiary was not recognized because the Company
controls whether the liability will be incurred and it is satisfied that it will not
be incurred in the foreseeable future.
c R O S S - R e F e R e n c e
s e e pa g e 11 0
118
F i n a n c i a l S t a t e m e n t S
8 Earnings Per Share
The calculation of basic profit per share is based on the net profit for the year
of € 8,216,397 (2010: € 9,196,300) and the weighted-average number of shares
of common stock outstanding for the respective years (2011: 22,887,723;
2010: 22,656,233).
The weighted-average number of shares of common stock was calculated as
follows:
SHARES IS SUED oN JANUARY, 1
Effect of Treasury Shares Held
Repurchase of Treasury Stock
Effect of Shares Issued in January
Effect of Shares Issued in February
Effect of Shares Issued in March
Effect of Shares Issued in April
Effect of Shares Issued in May
Effect of Shares Issued in June
Effect of Shares Issued in July
Effect of Shares Issued in August
Effect of Shares Issued in September
Effect of Shares Issued in October
Effect of Shares Issued in November
Effect of Shares Issued in December
2011
2010
22,890,252
22,660,557
(79,896)
(45,744)
32,510
10,266
2,408
20,741
40,639
2,286
6,194
0
0
470
7,461
136
(79,896)
0
14,167
0
1,162
0
0
0
52,848
703
0
2,702
0
3,990
WEIg HTED - AvER Ag E NUmBER of SHARES of C ommoN STo CK
22,887,723
22,656,233
The diluted profit per share is calculated by taking into account the Group’s
potential common shares from outstanding stock options and convertible
bonds.
2011
2010
The table below illustrates the reconciliation from basic to diluted earnings
per share (amounts in euros, except per-share data):
Numerator
Net Profit of the Year
8,216,397
9,196,300
Denominator
Weighted-average Shares
Used for Basic EPS
Dilutive Shares Arising
from Stock Options
Dilutive Shares Arising
from Convertible Bonds
22,887,723
22,656,233
229,907
110,569
8,528
19,734
ToTAl DENomINAToR
23,126,158
22,786,536
Earnings per Share (in €)
Basic
Diluted
0.36
0.36
0.41
0.40
Notes
119
9 Cash and Cash Equivalents
in 000’s €
2011
2010
Bank Balances and
Cash in Hand
Term Deposits
Restricted Cash
CASH AND CASH
EQUIvAlENTS
54,596
980
(980)
44,118
959
(959)
54,596
44,118
The € 1.0 million of restricted cash paid for the headquarters buildings in
Martinsried, Puchheim and Oxford is a rent deposit and remained unchanged
compared to the prior year.
10 Financial Assets
Financial assets classified as available for sale consist of the following as of
December 31, 2011 and 2010:
in 000’s €
maturity
cost
Gains
losses
market Value
Gross Unrealized Holding
DECEmBER 31, 2011
DB Money Cash
Restricted Cash
ToTAl
DECEmBER 31, 2010
DB Money Cash
Restricted Cash
ToTAl
daily
79,150
877
daily
63,424
1,138
0
0
80,027
(258)
79,769
64,562
(258)
64,304
The gross unrealized holding gains of € 877,332 for the year ended Decem-
ber 31, 2011, and € 1,138,281 for the year ended December 31, 2010, were
recorded as a separate component of stockholders’ equity (revaluation reserve).
In 2011, the Group recorded gains of € 1,085,911 in the income statement on
the sale of financial assets, which had previously been recognized in equity
(2010: € 3,979,920). The € 0.3 million (2010: € 0.3 million) of restricted cash is
a rent deposit.
For further details on accounting for financial assets, see also the Notes to the
Consolidated Financial Statements – section 2.16.
c R O S S - R e F e R e n c e
s e e pa g e 1 0 8
120
F i n a n c i a l S t a t e m e n t S
11 Accounts Receivable
All accounts receivable are non-interest-bearing and are generally due on a
30- to 45-day term. On December 31, 2011 and 2010, accounts receivable in-
cluded unbilled amounts of € 1,856,827 and € 2,104,854, respectively. In some
cases, the Group does require collateral from customers for accounts receiv-
able in the AbD Serotec segment. The amount of collaterals held as of Decem-
ber 31, 2011, was not material.
Based on the management’s assessment, in 2011 a net loss in the amount of
€ 3,243 was recognized in the income statement for allowances for doubtful
accounts (2010: net gain of € 4,400).
12 Other Receivables
According to the Group’s hedging policy, expected future cash flows with a
high probability and definite foreign currency receivables which are collect-
ible within a twelve-month period are reviewed for hedging. These deriva-
tives are shown as other receivables with their fair values. Starting in 2003,
MorphoSys entered into foreign currency options and forward contracts to
hedge foreign exchange exposure related to US dollar accounts receivable.
As of December 31, 2011, no option contracts (2010: two option contracts in
the nominal amounts of each $ 10 million) are outstanding, and therefore
no unrealized gains or losses have been recognized in profit and loss (2010:
unrealized loss of € 0.3 million). At the beginning of the year, the Group
entered into eleven option contracts that were due during the financial year
2011. A realized loss of € 0.3 million (2010: loss of € 0.2 million) was recog-
nized as other expenses.
13
Prepaid Expenses, Tax Receivables,
Other Current Assets and Inventories
Prepaid expenses, both the current and the non-current portion, mainly
include prepaid sublicense fees of € 0.2 million as of December 31, 2011
(2010: € 0.2 million), and other prepayments in the amount of € 1.6 million
as of December 31, 2011 (2010: € 2.2 million).
Tax receivables amounted to € 0.2 million as of December 31, 2011 (2010:
€ 0.5 million) and mainly comprised receivables in connection with withhold-
ing tax on capital gains.
Inventories of € 3.3 million (2010: € 4.1 million) are located in Oxford, UK, in
Raleigh, USA, in Martinsried, Germany, and in Puchheim, Germany. As of
December 31, 2011, inventories comprised raw materials, merchandise, con-
sumables and supplies in the amount of € 1.9 million (prior year: € 0.9 mil-
lion), work in progress of € 0.1 million (prior year: € 0.3 million) and finished
goods of € 1.3 million (prior year: € 2.9 million). As of December 31, 2011, the
inventory reserve amounted to € 3.0 million (prior year: € 2.8 million) and the
movement to prior year’s inventory reserve is included in COGS. Inventories
carried at fair value less cost to sell amount to € 0 (prior year: € 0). In 2011, raw
materials, consumables and changes in finished goods and work in progress
recognized as COGS amounted to € 5.1 million (prior year: € 5.6 million).
Notes
121
14 Property, Plant and Equipment
in 000’s €
Cost
JANUARY 1, 2011
Additions
Disposals
Foreign Exchange Variance
DECEmBER 31, 2011
Accumulated Depreciation
JANUARY 1, 2011
Depreciation Charge for the Year
Disposals
Foreign Exchange Variance
DECEmBER 31, 2011
Carrying Amount
JANUARY 1, 2011
DECEmBER 31, 2011
Cost
JANUARY 1, 2010
Additions
Additions from business combination
Disposals
Foreign Exchange Variance
DECEmBER 31, 2010
Accumulated Depreciation
JANUARY 1, 2010
Depreciation Charge for the Year
Disposals
Foreign Exchange Variance
DECEmBER 31, 2010
Carrying Amount
JANUARY 1, 2010
DECEmBER 31, 2010
land and
Buildings
Office and
laboratory
equipment
Furniture and
Fixtures
916
257
0
18
1,191
294
152
0
6
452
622
739
869
0
0
0
47
916
226
57
0
11
294
643
622
14,404
1,882
(1,235)
20
15,071
9,382
2,010
(1,122)
3
10,273
5,022
4,798
11,542
2,266
1,164
(614)
46
14,404
7,793
1,921
(362)
30
9,382
3,749
5,022
2,460
208
(28)
10
2,650
1,914
182
(21)
6
2,081
546
569
2,339
58
36
(1)
28
2,460
1,734
162
0
18
1,914
605
546
totals
17,780
2,347
(1,263)
48
18,912
11,590
2,344
(1,143)
15
12,806
6,190
6,106
14,750
2,324
1,200
(615)
121
17,780
9,753
2,140
(362)
59
11,590
4,997
6,190
122
F i n a n c i a l S t a t e m e n t S
As of December 31, 2011, land and building located in Poole, UK, in the amount
of € 785,027 (prior year: € 813,011) is classified as held for sale, for which a
minor impairment loss due to a re-valuation of the sales price has been recog-
nized in 2011. No borrowing costs have been capitalized during the period.
No restrictions on title, and property, plant and equipment were pledged as
security for liabilities. The Group recognized minor expenditure in property,
plant and equipment in the course of construction (2010: 0.5 million). No sig-
nificant contractual commitments for the acquisition of property, plant and
equipment have been entered into as of the reporting date.
The depreciation charge is included in the following line items of the income
statement:
in 000’s €
Research and Development
Sales, General and
Ad ministrative
Cost of Goods Sold
ToTAl
2011
1,718
560
98
2,376
2010
1,354
687
100
2,141
As of December 31, 2011, minor foreign exchange effects were recognized for
the assets acquired and were accounted as translation reserve in equity.
Notes
123
15
Intangible Assets
in 000’s €
Cost
Patents
licenses
intangible
assets under
Development
Know-How
and
Software
customer list
Goodwill
total
5,419
34,099
JANUARY 1, 2011
14,449
25,425
10,513
Additions
Disposals
Foreign Exchange Variance
218
(8)
0
138
(371)
15
0
0
0
DECEmBER 31, 2011
14,659
25,207
10,513
Accumulated Amortization
JANUARY 1, 2011
Amortization Charge for the Year
Write-offs for the Year
Disposals
Foreign Exchange Variance
DECEmBER 31, 2011
4,164
1,036
8
(8)
0
13,306
2,528
186
(371)
6
5,200
15,655
Carrying Amount
JANUARY 1, 2011
DECEmBER 31, 2011
Cost
JANUARY 1, 2010
Additions
Additions from business
combination
Disposals
Foreign Exchange Variance
10,285
9,459
4,148
221
10,080
0
0
12,119
9,552
24,781
612
0
0
32
0
0
0
0
0
0
10,513
10,513
0
10,513
0
0
0
3,126
942
(1,189)
5
2,884
2,620
392
0
(1,188)
4
1,828
506
1,056
2,955
140
22
(3)
12
DECEmBER 31, 2010
14,449
25,425
10,513
3,126
Accumulated Amortization
JANUARY 1, 2010
Amortization Charge for the Year
Write-offs for the Year
Disposals
Foreign Exchange Variance
DECEmBER 31, 2010
Carrying Amount
JANUARY 1, 2010
DECEmBER 31, 2010
3,358
806
0
0
0
11,001
2,295
0
0
10
4,164
13,306
790
10,285
13,780
12,119
0
0
0
0
0
0
0
10,513
2,243
368
0
0
9
2,620
712
506
As of December 31, 2011, intangible assets under development were tested as
required by IAS 36. No impairment was deemed necessary.
0
0
106
5,525
3,733
377
0
0
74
4,184
1,686
1,341
5,107
0
0
0
312
5,419
3,022
516
0
0
195
3,733
2,085
1,686
0
0
8
34,107
0
0
0
0
0
0
34,099
34,107
26,742
0
93,031
1,298
(1,568)
134
92,895
23,823
4,333
194
(1,567)
84
26,867
69,208
66,028
63,733
11,486
7,352
17,454
0
5
(3)
361
34,099
93,031
0
0
0
0
0
0
26,742
34,099
19,624
3,985
0
0
214
23,823
44,109
69,208
124
F i n a n c i a l S t a t e m e n t S
The amortization charge is included in the following line items of the income
statement:
17 Assets Classified as Held for Sale
in 000’s €
Research and Development
Research and Development
(Write-off)
Sales, General and
Administrative
Cost of Goods Sold
ToTAl
2011
4,036
194
35
229
4,494
2010
3,097
0
666
218
3,981
As of December 31, 2011, an impairment loss of € 0.2 million was recognized
for intangible assets in the Proprietary Development segment in connection
with a program, which was discontinued due to a strategic decision (2010: mi-
nor impairment loss in the AbD segment).
As of December 31, 2011, minor foreign exchange effects were recognized for
the assets acquired and were accounted for as translation reserve in equity.
16 Other Assets
The Group has classified certain items in other assets that are not available
for use in its operations as restricted cash (see Notes to the Consolidated
Financial Statements – section 9 and 10). As of December 31, 2011 and 2010,
the Group had commitments of € 1.2 million and € 1.3 million for guarantees
issued as well as € 73,607 and € 113,256 respectively for convertible bonds
issued to employees.
As of December 31, 2011, assets classified as held for sale comprise the com-
mercial properties of the subsidiary Poole Real Estate Ltd., Poole, UK; (AbD
Serotec segment) with a net book value of € 785,027 (prior year: € 813,011). In
2011, intense efforts to sell the property did not succeed. However, efforts
for a commercialization will be intensified in 2012 by searching for a potential
buyer in a wider area and a sale is expected within one year. An external,
independent real estate company, having appropriate recognized professional
qualifications and recent experience in the location and category of property
being valued, has valued the property in the fourth quarter of 2011. A minor
impairment was deemed necessary in the 2011 financial year.
18 Goodwill
As of October 31, 2011, the goodwill attributed to the AbD Serotec segment
(€ 26.8 million) was tested as required by IAS 36. The recoverable amount of
the cash-generating unit (CGU), the AbD Serotec segment, has been deter-
mined based on value-in-use calculations, and the value in use was determined
to be higher than the carrying amount of the CGU. In addition, a detailed
sensitivity analysis was done (see Notes to the Consolidated Financial State-
ments – section 2.25). The cash-flow projections refer to a ten-year period
because AbD Serotec’s management assumes that the move to sign more high-
margin license deals in the research field, increasingly entering the diagnos-
tics market and to strengthen the e-commerce business will fully materialize
in the mid to long-term. Hence, a projection reflecting ten years (instead
of only five years) is deemed reasonable for calculating the value in use. The
cash-flow projections assume average yearly increases in revenues of approxi-
mately 8 % and an average EBIT margin of 20 % in the next ten years. The major
underlying key assumption for the cash-flow projections is the expansion of
the current customer base as mentioned above. The values of the underlying
key assumptions have been determined by using both internal sources (past
experience) and external sources of information (market intelligence, financial
reports). Based on the updated outlook to cash flows for the upcoming ten
years, the value in use was calculated as follows: beta factor of 1.18, income
tax rate of 31 %, WACC of 8.61 % (2010: 8.50 %) and a growth rate of 1 % of the
perpetual annuity. The values assigned to the assumptions represent manage-
ment’s estimates of future trends and are based on internal planning sce-
narios as well as external sources.
c R O S S - R e F e R e n c e
s e e pa g e 11 9
c R O S S - R e F e R e n c e
s e e pa g e 11 0
As of October 31, 2011, the goodwill from the acquisition of Sloning BioTech-
nology GmbH in 2010 (€ 7.4 million) was tested as required by IAS 36. The
recoverable amount of the CGU, the technology-development team within the
Partnered Discovery segment, has been determined based on value-in-use
calculations, and the value in use was determined to be higher than the carry-
ing amount of the CGU. In addition, a detailed sensitivity analysis was done
(see Notes to the Consolidated Financial Statements – section 2.25). The cash-
flow projections refer to a ten-year period because management assumes that
a commercialization via license deals comprising upfront payments, milestone
payments, FTE funding as well as royalties will fully materialize in the mid
to long-term. Hence, a projection reflecting ten years (instead of only five years)
is deemed reasonable for calculating the value in use. The cash-flow projec-
tions are mainly based on the key assumption that the technology presently
developed is highly beneficial for current and new customers and will result
in a number of new deals. The values of the underlying key assumptions have
been determined by using both internal sources (past experience) and exter-
nal sources of information (market intelligence). Based on the updated outlook
to cash flows for the upcoming ten years, the value in use was calculated
as follows: beta factor of 1.3, income tax rate of 26.33 %, WACC of 8.89 % (2010:
8.22 %) and a growth rate of 1 % of the perpetual annuity. The values assigned
to the assumptions represent management’s estimates of future trends and are
based on internal planning scenarios as well as external sources.
Notes
125
19 Accounts Payable and Accrued Expenses
Accounts payable are non-interest-bearing and are normally settled within
30 days.
Accounts payable are listed in the table below:
in 000’s €
2011
2010
Trade Accounts Payable
Licenses Payable
Accrued Expenses
Other Liabilities
ToTAl
1,057
397
17,069
588
19,111
2,148
135
12,800
667
15,750
Accrued expenses include mainly accruals for payments to employees and
management of € 5.1 million (2010: € 4.1 million), amounts for outstanding in-
voices in the amount of € 2.6 million (2010: € 2.4 million), external laboratory
funding of € 6.6 million (2010: € 3.6 million), € 2.4 million for license compen-
sation (2010: € 2.2 million), € 0.1 million for Supervisory Board members’
compen sation (2010: € 0.1 million), € 0.1 million for audit fees and costs related
thereto (2010: € 0.2 million) and € 0.2 million for legal services (2010:
€ 0.2 million).
At the Company’s Annual General Meeting in May 2011, the Supervisory
Board was authorized to appoint PricewaterhouseCoopers AG Wirtschafts-
prüfungsgesellschaft, Munich, as its auditor.
In 2011, the PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft,
Munich (PwC AG) and their partner companies within the international
network were remunerated by MorphoSys in the amount of € 276,525
(thereof PwC AG € 211,475) , including audit fees of € 250,050 (thereof PwC
AG € 185,000) and audit-related fees of € 26,475 (thereof PwC AG € 26,475).
c R O S S - R e F e R e n c e
s e e pa g e 11 0
126
F i n a n c i a l S t a t e m e n t S
20 Provisions and Tax Liabilities
As of December 31, 2011 and 2010, the Group recorded provisions and tax
liabilities of € 3.4 million and € 2.5 million, respectively.
Tax Liabilities mainly comprise expenses for income tax. Provisions and Tax
Liabilities remain uncertain with respect to their amounts as of December 31,
2011, and are expected to be settled in 2012.
Provisions and tax liabilities changed during the 2011 financial year as follows:
in 000’s €
Taxes
Other Obligations
ToTAl
01/01/2011
additions
Utilized
Released
12/31/2011
2,145
318
2,463
1,950
73
2,023
1,068
0
1,068
0
8
8
3,027
383
3,410
€ 19,078 and € 15,835 in relation to the AbD Serotec business segment were
necessary as of December 31, 2011 and 2010. The carrying amount of finan-
cial assets represents the maximum credit exposure.
The maximum exposure for credit risk for trade receivables at the reporting
date by geographic region was:
in €
2011
2010
Europe and Asia
USA and Canada
Other
ToTAl
10,981,860
1,221,377
0
12,186,914
2,822,412
0
12,203,237
15,009,326
21
Financial Instruments and Financial
Risk Management
CRE DIT AND LIQUIDIT Y RISK
Financial instruments that potentially subject the Group to concentrations of
credit and liquidity risk consist primarily of cash, cash equivalents, market-
able securities, derivative financial asets and accounts receivable. The Group’s
cash and cash equivalents are principally denominated in euros, US dollars
and pounds sterling. Marketable securities are placed in high-quality securi-
ties. Cash, cash equivalents and marketable securities are maintained prin-
cipally with three high-quality financial institutions in Germany. The Group
continually monitors its positions with, and the credit quality of, the financial
institutions, which are counterparties to its financial instruments, and does
not anticipate non-performance.
It is the Group’s policy that all customers who wish to trade on credit terms
are subject to credit verification procedures, which are based on external
ratings. However, the Group’s revenues and accounts receivable are subject to
credit risk as a result of customer concentration. The Group’s most significant
customer accounted for € 8.9 million of the trade receivables carrying amount
as of December 31, 2011 (2010: € 9.4 million). This customer individually ac-
counted for approximately 73 % of the Group’s 2011 accounts receivable balance.
Three customers individually accounted for 72 %, 2 %, and 2 % of the Group’s
total revenues in the year 2011. On December 31, 2010, one customer had ac-
counted for 62 % of the prior year’s accounts receivable balance and three
customers individually had accounted for 54 %, 10 %, and 4 % of the Group’s
revenues in 2010. Based on the management’s assessment, allowances of
Notes
127
The aging of trade receivables at the reporting date was as follows:
in €; A/R are due in
Accounts Receivable
Allowance for Impairment
AC C oUNTS RECEIvABlE , NE T of AlloWANCE foR ImpAIRmENT
2011
0 (30) days
2011
30 (60) days
2011
60 + days
2011
total
9,519,422
0
9,519,422
851,283
0
851,283
1,851,610
(19,078)
1,832,532
12,222,315
(19,078)
12,203,237
2010
0 (30) days
2010
30 (60) days
2010
60 + days
2010
total
14,013,200
0
434,349
0
434,349
577,612
(15,835)
561,777
15,025,161
(15,835)
15,009,326
in €; A/R are due in
Accounts Receivable
Allowance for Impairment
AC C oUNTS RECEIvABlE , NE T of AlloWANCE foR ImpAIRmENT
14,013,200
As of December 31, 2011, the Accounts Receivable of the Group included over-
due receivables in the amount of € 0.5 million, for which impairment was not
yet deemed necessary.
As of December 31, 2011, the Group had no exposure for credit risk of deriva-
tive financial assets (prior year: maximum exposure of € 0.1 million). The
maximum exposure for credit risk of financial guarantees (rent deposits) at
the reporting date amounted to € 1.2 million (prior year: € 1.3 million).
The contractual maturities and the related contractual cash flows of financial
liabilities are within one year and five years, respectively. The convertible
bonds due to related parties have a term until December 31, 2015 (€ 0.1 mil-
lion).
MARKE T RISK
Market risk is the risk that changes in market prices, such as foreign exchange
rates, interest rates and equity prices, will affect the Group’s income or the
value of its holdings in financial instruments. The Group is exposed to cur-
rency and interest rate risks.
128
F i n a n c i a l S t a t e m e n t S
CURRE NCY RISK
The Group accounts are administered in euros. While the expenses of
MorphoSys are predominantly paid in euros, a significant part of the revenues
depends on the current exchange rates of the US dollar and the pound ster-
ling. The Group examines the necessity of hedging foreign exchange trans-
actions to minimize currency risk during the year and addresses this risk
by using derivative financial instruments.
The Group’s exposure to foreign currency risk based on carrying amounts
was as follows:
as of December 31, 2011 (in €)
eUR
USD
GBP
Other
total
Cash and Cash Equivalents
Available-for-sale Assets
Accounts Receivable
Accounts Payable and Accrued Expenses
ToTAl
51,076,181
79,768,563
10,478,522
(16,707,898)
124,615,368
723,518
0
1,248,021
(384,779)
1,586,760
2,796,400
0
394,116
(2,018,121)
1,172,395
0
0
82,578
0
82,578
54,596,099
79,768,563
12,203,237
(19,110,798)
127,457,101
as of December 31, 2010 (in €)
eUR
USD
GBP
Other
total
Cash and Cash Equivalents
Available-for-sale Assets
Accounts Receivable
Accounts Payable and Accrued Expenses
ToTAl
41,209,349
64,304,041
12,354,868
(13,109,993)
104,758,265
1,302,992
1,606,110
0
2,116,494
(212,972)
3,206,514
0
502,878
(2,427,249)
(318,261)
0
0
35,086
692
35,778
44,118,451
64,304,041
15,009,326
(15,749,522)
107,682,296
Different foreign exchange rates and their impact on assets and liabilities
have been simulated in a detailed sensitivity analysis in order to determine
resulting effects in the income statement. A ten percent increase of the euro
against the US dollar as of December 31, 2011, would have decreased earn-
ings by € 0.1 million (assuming that interest rates remain constant) (prior year:
decrease of € 0.3 million). A ten percent weakening of the euro against the
US dollar would have increased earnings by € 0.2 million (prior year: increase
of € 0.3 million). A ten percent increase of the euro against the British pound
as of December 31, 2011, would have decreased earnings by € 0.1 million (as-
suming that interest rates remain constant) (prior year: decrease of € 0.1 mil-
lion). A ten percent weakening of the euro against the British pound would
have increased earnings by € 0.1 million (prior year: increase of € 0.2 million).
If the foreign exchange rates for US dollar against the euro and the British
pound against the euro had remained constant at the average rate of 2010,
total Group revenues would have been higher in the amount of € 1.1 million
(prior year: lower by € 0.6 million).
INTE REST R ATE RISK
The exposure of the Group to changes in interest rates relates mainly to in-
vestments in available-for-sale securities. Changes in the general level of
interest rates may lead to an increase or decrease in the fair value of these
investments. The risk of a decrease in fair value is limited due to fair value
guarantees given by the issuing financial institutions in addition to the fact
that all financial instruments in these respective money market funds have
short maturity durations. The guarantees are renewed every six months. With
regard to the liabilities shown in the balance sheet, the Group is currently
not subject to significant interest rate risks.
Notes
129
FAIR VALUE HIE R ARCHY AND VALUATION ME THODS
MorphoSys uses the following hierarchy for determining and disclosing the
fair value of financial instruments:
Level 1:
Level 2:
Level 3:
Quoted (unadjusted) prices in active markets for identical assets or
liabilities.
Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices).
Inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs).
The carrying value of financial assets and liabilities such as cash and cash
equivalents, marketable securities, accounts receivable and accounts payable
approximates their fair value due to the short-term maturities of these in-
struments. The fair value of marketable securities is based upon quoted mar-
ket prices (Hierarchy Level 1, quoted prices in active markets; see Notes to
the Consolidated Financial Statements – section 10). None of the financial as-
sets and liabilities are categorized in Level 2 or 3. The fair value of licenses
payable is determined by the effective interest method. Convertible bonds are
recorded at their accreted values, which approximate the cash outlay that is
due upon the note settlements. There were no transfers from one fair value
hierarchy level to another in 2011 and 2010.
The fair values of financial assets and liabilities, together with the carrying
amounts shown in the Consolidated Balance Sheet, are as follows:
as of December 31, 2011
(in 000’s €)
Cash and Cash Equivalents
Accounts Receivable
Forward Exchange Con-
tracts Used for Hedging
Available-for-sale
Financial Assets
Convertible Bonds –
Liability Component
Accounts Payable and
Accrued Expenses
Fair Value –
Hedging
instruments
note
Receivables
available
for Sale
Other
Financial
liabilities
total
carrying
amount
Fair Value
9
11
12
10
23
19
54,596
12,203
54,596
12,203
54,596
12,203
0
0
66,799
79,769
79,769
0
(74)
79,769
146,568
79,769
146,568
(74)
(74)
0
0
(19,111)
(19,185)
(19,111)
(19,185)
(19,111)
(19,185)
0
0
0
c R O S S - R e F e R e n c e
s e e pa g e 11 9
130
F i n a n c i a l S t a t e m e n t S
December 31, 2010
(in 000’s €)
Cash and Cash Equivalents
Accounts Receivable
Forward Exchange Con-
tracts Used for Hedging
Available-for-sale
Financial Assets
Convertible Bonds –
Liability Component
Accounts Payable and
Accrued Expenses
Fair Value –
Hedging
note
instruments
Receivables
available
for Sale
Other
Financial
liabilities
total
carrying
amount
Fair Value
9
11
12
10
23
19
44,118
15,009
144
144
59,127
64,304
64,304
44,118
15,009
44,118
15,009
144
144
0
(128)
64,304
123,575
64,304
123,575
(128)
(128)
0
0
0
(15,750)
(15,878)
(15,750)
(15,878)
(15,750)
(15,878)
22
Stockholders’ Equity
C OMMON STO CK
On December 31, 2011, the common stock of the Company including treasury
shares amounted to € 23,112,167. This represented an increase of € 221,915
compared to December 31, 2010 (€ 22,890,252). Each share of common stock is
entitled to one vote. The increase arose as a result of the conversion and exer-
cise of 221,915 convertible bonds and options issued to the Management Board
and to employees.
On December 31, 2010, the common stock of the Company had amounted to
€ 22,890,252. An increase of € 229,695, or 229,695 shares, was the result of
the conversion and exercise of options in 2010.
On December 31, 2011, treasury shares amounted to € 1,756,841 (163,915
shares) and increased by € 1,747,066 compared to December 31, 2010 (79,896
shares, € 9,774), due to the repurchase of 84,019 MorphoSys shares on the
stock market for the Group’s long-term incentive plan for management.
AUTHORIZE D CAPITAL
Unused Authorized Capital I remained unchanged on December 31, 2011, com-
pared to December 31, 2010, to create a maximum of 8,864,103 new shares.
Unused Authorized Capital II remained unchanged on December 31, 2011, com-
pared to December 31, 2010, to create a maximum of 2,216,025 new shares.
C ONDITIONAL CAPITAL
In 2011, a total of 3,696 shares were raised from Conditional Capital II through
the exercise of options by employees, increasing the subscribed capital by
€ 3,696. Furthermore, 95,400 shares were raised from Conditional Capital IV
through the exercise of convertible bonds by employees, increasing the sub-
scribed capital by € 95,400 and 122,819 shares were raised from Conditional
Capital V through the exercise of options by employees and Management
Board members, increasing the subscribed capital by € 122,819.
In 2010, a total of 3,441, 3,600 and 222,654 shares had been raised from Con-
ditional Capital II, IV and V respectively with subscribed capital increasing by
€ 3,441, € 3,600 and € 222,654 from respective Conditional Capitals.
ADDITIONAL PAID - IN CAPITAL
On December 31, 2011, additional paid-in capital amounted to € 170,778,474
(December 31, 2010: € 166,388,083). The total increase of € 4,390,391 is due to
stock-based compensation in the amount of € 1,488,342, including the intrin-
sic value of convertible bonds. A further increase of € 2,902,049 arose from the
exercise and conversion of options and convertible bonds in the year 2011.
In 2010, the additional paid-in capital had increased by € 4,756,815, resulting
from stock-based compensation of € 2,150,655 and € 2,606,160 from the exer-
cise and conversion of options in the year 2010.
IFRS 2 “Share-based Payment” requires an expense to be recognized where
the Group buys goods or services in exchange for shares or rights over
shares (“equity-settled transactions”) or in exchange for other assets equiva-
lent in value to a given number of shares or rights over shares (“cash-settled
transactions”). The main impact of IFRS 2 on the Group refers to the expense
associated with employees’ as well as management boards’ and supervisory
boards’ share options and other share-based incentives by using an option
Notes
131
pricing model. In accordance with IFRS 2.54, the Group has applied IFRS 2
to equity-settled awards granted on or after January 1, 1999. In accordance
with IFRS 2.56, options granted prior to January 1, 1999, are therefore not
expensed. All information is nonetheless disclosed in line with IFRS 2.44 and
2.45. Further details are given in the Notes to the Consolidated Financial
Statements – sections 23, 24, 25 and 26.
23
Convertible Bonds
In the year 2011, 95,400 convertible bonds were exercised and converted into
shares. Of these, 60,000 convertible bonds were exercised by members of the
Management Board. Further details are given in the Notes to the Consolidated
Financial Statements – section 29.
On April 1, 2010, 352,800 convertible bonds were granted to Management
Board members and employees of MorphoSys AG. The exercise price for the
convertible bonds is € 16.79, representing the market price in the final Xetra
auction at the Frankfurt Stock Exchange on the trading day preceding the
issuance of the convertible bonds. Each convertible bond with a nominal value
of € 0.33 can be exchanged for one share of ordinary no-par value common
stock of the Group against payment of the exercise price. The beneficiaries may
exercise the conversion rights only after the expiration of a waiting period
of four years from grant date. The exercise of the conversion rights is only pos-
sible if on one trading day during the lifetime of the convertible bond the
stock exchange price of one share has amounted to at least 110 % of the exer-
cise price at grant date. The convertible bonds cannot be exercised beyond
December 31, 2015. In the event of non-exercise of the conversion rights, ben-
eficiaries are refunded the amount paid to acquire the convertible bonds
(€ 0.33 per bond/share).
The Convertible bonds are recorded at their accreted values, which approxi-
mate the cash outlay that is due upon the note settlements.
A summary of the activity under the Group’s employee incentive convertible
bonds plan for the years ended December 31, 2011 and 2010 is represented as
follows:
convertible
Bonds
Weighted-
average
Price (€)
99,000
352,800
(3,600)
0
0
12.81
16.79
12.81
0
0
448,200
15.94
448,200
15.94
0
(95,400)
(24,750)
0
0
12.81
16.79
0
oU TSTANDIN g oN
JANUARY 1, 2010
Granted
Exercised
Forfeited
Expired
oU TSTANDIN g oN
DECEmBER 31, 2010
oU TSTANDIN g oN
JANUARY 1, 2011
Granted
Exercised
Forfeited
Expired
oU TSTANDIN g oN
DECEmBER 31, 2011
328,050
16.79
Convertible bonds exercisable on December 31, 2011 and 2010 amounted to
0 and 95,400 shares, respectively.
c R O S S - R e F e R e n c e
s e e pa g e 1 3 1 – 1 3 4 a n d 1 3 6
The following table presents the weighted-average price and information
about the contractual life for significant convertible bond groups outstanding
on December 31, 2011:
Range of Exercise Prices
€ 10.00 – € 17.00
number
Outstanding
Remaining
contractual life
(in Years)
Weighted-
average exer-
cise Price (€)
number
exercisable
Weighted-
average exer-
cise Price (€)
328,050
328,050
4.00
4.00
16.79
16.79
0
0
0.00
0.00
132
F i n a n c i a l S t a t e m e n t S
The Group accounts for stock-based compensation in accordance with the pro-
visions of IFRS 2 and IAS 32.28. The equity portion of the bonds has to be
separated and presented as additional paid-in capital. The equity component is
deducted from the fair value of the bonds. The remaining value is recognized
as stock-based compensation. The compensation expense recorded in 2011 and
2010 in connection with convertible bonds was € 666,920 and € 989,416, re-
spectively.
24
Stock Options
The general terms and conditions of stock option plans that existed at any
time during the period are presented in the following table; all options are to
be settled by physical delivery of shares.
Grant Date/Employees Entitled
Granted
Stock Options
Vesting Period
Vesting
conditions
(Share Price in
comparison to
Strike Price)
contractual life
of Options
July 1, 2007 to employees
180,000
January 25, 2008 to Management Board and employees
283,335
January 25, 2008 to employees
October 1, 2008 to employees
29,070
92,664
April 1, 2010 to Management Board and employees
422,200
2 years 50 %,
3 years 75 %,
4 years 100 %
Increase of 20 % on at
least one trading day
during the lifetime
2 years 50 %,
3 years 75 %,
4 years 100 %
Increase of 20 % on at
least one trading day
during the lifetime
2 years 50 %,
3 years 75 %,
4 years 100 %
Cumulative increase
of more than 10 %
per annum
2 years 50 %,
3 years 75 %,
4 years 100 %
Increase of 20 % on at
least one trading day
during the lifetime
2 years 50 %,
3 years 75 %,
4 years 100 %
Increase of 20 % on at
least one trading day
during the lifetime
5 years
5 years
5 years
5 years
5 years
For the years 2011 and 2010, 3,696 and 3,441 options from the 1999 Plan were
exercised respectively. For the years 2011 and 2010, 122,819 and 222,654 op-
tions from the 2002 Plan were exercised respectively.
Notes
133
A summary of activity under the Group’s employee incentive stock option plans
for the years ended December 31, 2011, and 2010, is represented as follows:
Shares
Weighted-
average
Price (€)
oU TSTANDIN g oN
JANUARY 1, 2010
1,151,987
13.33
Granted
Exercised
Forfeited
Expired
oU TSTANDIN g oN
DECEmBER 31, 2010
oU TSTANDIN g oN
JANUARY 1, 2011
Granted
Exercised
Forfeited
Expired
0
(226,095)
(1,875)
0
0
12.41
10.45
0
924,017
13.56
924,017
13.56
0
0
(126,515)
15.16
0
0
0
0
oU TSTANDIN g oN
DECEmBER 31, 2011
797,502
13.31
Stock options exercisable on December 31, 2011 and 2010 amounted to
503,657 and 294,953 shares, respectively. The weighted-average exercise
price of exercisable stock options was € 13.51 on December 31, 2011.
The following table presents the weighted-average price and information
about the contractual life for significant option groups outstanding on Decem-
ber 31, 2011:
Range of Exercise Prices
€ 10.00 – € 12.99
€ 13.00 – € 13.99
€ 14.00 – € 17.00
number
Outstanding
Remaining
contractual life
(in Years)
Weighted-
average exer-
cise Price (€)
number
exercisable
Weighted-
average Price
(€)
392,907
266,166
138,429
797,502
2.20
1.07
1.13
1.64
12.81
13.03
15.26
13.31
187,197
197,633
118,827
503,657
12.81
13.03
15.40
13.51
134
F i n a n c i a l S t a t e m e n t S
If a member of the Management Board ceases to hold an office within the
MorphoSys Group by reason of termination, resigning from office, death,
injury, disability or retirement (receipt of a normal retirement pension, an
early retirement pension as well as a disability pension as long as the re-
quirements for the disability pension entitlement are met) or – subject to the
Supervisory Board’s discretion – under other circumstances, the member
of the Management Board (or his/her inheritor) will be entitled to a pro-rated
number of performance shares. In such case the member of the Management
Board will receive the number of performance shares already vested on the
date on which the member of the Management Board ceases to hold office
within the MorphoSys Group.
If a member of the Management Board ceases to hold an office within the
MorphoSys Group for good reason in the meaning of § 626 para. 2 German
Civil Code and/or within the meaning of § 84 para 3 German Stock Corpora-
tion Act or if notice to cease to hold office is given by the member of the Man-
agement Board, the beneficiary shall not be entitled to any performance
share allocation. In the event of a change in control during the 4-year period,
all performance shares shall become fully vested.
In June 2011, the Company repurchased 84,019 MorphoSys shares for the
LTI plan on the stock market with an average share price of € 20.79 per share.
As of June 01, 2011, 84,019 shares were granted to the beneficiaries, thereof
53,997 shares to the Management Board (for details, see the table in section
29) and 30,022 shares to Senior Management. The fair value of the perfor-
mance shares as of the grant date (June 01, 2011) amounted to € 21.34 per
share. No dividends were incorporated in the measurement of the fair value
of the repurchased shares, because the Company does not anticipate paying
a dividend in the foreseeable future. No beneficiaries of the LTI plan left
MorphoSys and no performance shares forfeited from the grant date until
December 31, 2011.
As of December 31, 2011, the Group accounted for stock-based compensation
from the LTI plan in the amount of € 292,945.
The Group accounts for stock-based compensation in accordance with the pro-
visions of IFRS 2 “Share-based Payment”. Compensation expense recorded in
2011 and 2010 in connection with stock options was € 528,477 and € 1,119,543,
respectively.
25
Stock Appreciation Rights (SARs)
On October 1, 2010, 15,000 stock appreciation rights (SARs) were granted to
employees of MorphoSys AG with terms and conditions identical to the con-
vertible bond grant from April 1, 2010. Convertible bonds are to be settled by
physical delivery of shares, while SARs are settled in cash. The exercise price
for the SARs on December 31, 2011, is € 17.53. The compensation expense re-
corded in 2011 was € 50,465. As of December 31, 2011, a non-current liability
in the amount of € 64,801 was accounted for accordingly. The SARs cannot be
exercised beyond June 30, 2016.
26
Long-term Incentive Plan
On June 01, 2011, MorphoSys established a long-term incentive plan (LTI plan)
for the Management Board and Senior Management. The plan qualifies as
an equity-settled share-based payment transaction under IFRS 2 and is ac-
counted for accordingly. The LTI plan is a performance share plan and will
be paid out in common shares of MorphoSys AG, provided that defined key
performance indicators as annually approved by the Supervisory Board are
achieved. Key performance indicators currently comprise revenues, EBIT and
the number of projects in the R&D portfolio.
The grant date is June 01, 2011, and the vesting period comprises four years.
25 % of the granted performance shares are vested in each year of the 4-year
vesting period, provided that the key performance indicators of that period
are achieved by 100 %. The number of vested shares in each single year will
be reduced to the extent that the key performance indicators of that period
are achieved by 50 %-99 % only or increased if the key performance indicators
are achieved by more than 100 % (110 % in a maximum). Taking into account
these conditions, the common shares of MorphoSys AG are delivered to the
beneficiaries after the 4-year period. In any case, the maximum payout at
the end of the 4-year period is capped by a company factor which generally
amounts to “1”. The Supervisory Board may deviate from this company fac-
tor, e.g. in the case that the payout level seems inadequate compared to the
overall development of the Group.
In the event that the repurchased shares do not suffice to serve the LTI plan,
MorphoSys reserves the right to pay out a specific amount of cash from the
LTI plan equivalent to the value of the performance shares at the end of the
vesting period, provided that such cash amount shall not exceed 200 % of the
fair market value of the performance shares as at grant date.
c R O S S - R e F e R e n c e
s e e pa g e 1 3 6
Notes
135
27
Operating Leases and
Other Commitments
The Group leases facilities and equipment on long-term operating leases. Total
rent expense amounted to € 2,588,817 and € 2,342,528 for the years ended
December 31, 2011 and 2010, respectively. Significant leasing contracts mainly
related to the buildings rented in Martinsried (Germany), Oxford (UK), Düs-
seldorf (Germany), Raleigh (USA) and Puchheim (Germany). The main part of
these contracts can be renewed on an annual or quarterly basis. Some agree-
ments can be terminated early.
Future minimum payments under non-cancellable operating leases, insur-
ances and other services are as follows:
in 000’s €
Rent and
Rent and
leasing 2011
leasing 2010
Other
2011
Other
2010
Up to One Year
Between One and Five Years
More than Five Years
ToTAl
3,129
5,519
3,726
12,374
3,238
4,923
1,672
9,833
681
15
0
696
793
35
0
828
total
2011
3,810
5,534
3,726
13,070
total
2010
4,031
4,958
1,672
10,661
The Group’s total expenses due to operating leases, insurances and other
services in the years ended December 31, 2011 and 2010, totaled € 3,096,917
and € 3,518,477 respectively.
Furthermore, the following future payments for cancellable external studies
can become due as a result of currently active contracts. However, in case
of early termination, these amounts can be reduced substantially in line with
the respective contractual early-termination clauses.
in 000’s €
total 2011
Up to One Year
Between One and Five Years
More than Five Years
ToTAl
6,384
6,499
0
12,883
28
Contingencies
The management is not aware of any matters that could give rise to any
material liability to the Group that would have a material adverse effect on
the Group’s financial condition or results of operations.
In the event that certain milestones in the Proprietary Development seg-
ment will be achieved, e.g. the filing of an application for an investigational
new drug (IND) with regard to specific targets, milestone payments to licen-
sors may be triggered. However, given the uncertainty regarding the timing
and achievement of such milestones, no further details are disclosed.
In the event that certain milestones in the Partnered Discovery segment will
be achieved by the respective partner, e.g. the filing of an application for an in-
vestigational new drug (IND) with regard to specific targets or the transfer
of technology, milestone payments to the Group may be triggered. However,
given the uncertainty regarding the timing and achievement of such mile-
stones, no further details are disclosed.
136
F i n a n c i a l S t a t e m e n t S
29
Related Parties
The Group has related party transactions with its Management Board mem-
bers and with members of the Supervisory Board. In addition to the cash
remuneration, the Company has issued stock options, convertible bonds and
performance shares to the Management Board. The tables below show the
shares, stock options, convertible bonds and performance shares as well as
the changes of ownership of the same, which were held by members of the
Management Board and the Supervisory Board during the year 2011:
S H a R e S
mANAg EmENT B oARD
Dr. Simon E. Moroney
Dave Lemus*
Jens Holstein**
Dr. Arndt Schottelius
Dr. Marlies Sproll
ToTAl
SUpERvISoRY B oARD
Dr. Gerald Möller
Prof. Dr. Jürgen Drews
Dr. Walter Blättler
Dr. Daniel Camus
Dr. Metin Colpan
Dr. Geoffrey N. Vernon
ToTAl
01/01/2011
additions
Forfeitures
Sales
31/12/2011
416,385
5,400
–
1,500
3,105
426,390
7,500
7,290
2,019
0
0
0
16,809
3,500
0
1,000
500
4,000
9,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
419,885
–
5,000
2,000
7,105
433,990
7,500
7,290
2,019
0
0
0
16,809
* Mr. Lemus left MorphoSys’ Management Board in Q1/2011
** 4,000 shares were bought by Mr. Holstein prior to election to the Management Board
Notes
137
S t O c K O P t i O n S
mANAg EmENT B oARD
Dr. Simon E. Moroney
Dave Lemus*
Jens Holstein
Dr. Arndt Schottelius
Dr. Marlies Sproll
ToTAl
SUpERvISoRY B oARD
Dr. Gerald Möller
Prof. Dr. Jürgen Drews
Dr. Walter Blättler
Dr. Daniel Camus
Dr. Metin Colpan
Dr. Geoffrey N. Vernon
ToTAl
* Mr. Lemus left MorphoSys’ Management Board in Q1/2011
c O n V e R t i B l e B O n D S
mANAg EmENT B oARD
Dr. Simon E. Moroney
Dave Lemus*
Jens Holstein
Dr. Arndt Schottelius
Dr. Marlies Sproll
ToTAl
SUpERvISoRY B oARD
Dr. Gerald Möller
Prof. Dr. Jürgen Drews
Dr. Walter Blättler
Dr. Daniel Camus
Dr. Metin Colpan
Dr. Geoffrey N. Vernon
ToTAl
* Mr. Lemus left MorphoSys’ Management Board in Q1/2011
01/01/2011
additions
Forfeitures
exercises
31/12/2011
191,445
102,867
–
90,000
102,867
487,179
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
191,445
–
0
90,000
102,867
384,312
0
0
0
0
0
0
0
01/01/2011
additions
Forfeitures
exercises
31/12/2011
88,800
63,000
–
33,000
63,000
247,800
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
30,000
58,800
0
0
0
30,000
60,000
0
0
0
0
0
0
0
–
0
33,000
33,000
124,800
0
0
0
0
0
0
0
138
F i n a n c i a l S t a t e m e n t S
P e R F O R m a n c e S H a R e S
mANAg EmENT B oARD
Dr. Simon E. Moroney
Jens Holstein
Dr. Arndt Schottelius
Dr. Marlies Sproll
ToTAl
SUpERvISoRY B oARD
Dr. Gerald Möller
Prof. Dr. Jürgen Drews
Dr. Walter Blättler
Dr. Daniel Camus
Dr. Metin Colpan
Dr. Geoffrey N. Vernon
ToTAl
01/01/2011
additions
Forfeitures
exercises
31/12/2011
0
0
0
0
0
0
0
0
0
0
0
0
17,676
12,107
12,107
12,107
53,997
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
17,676
12,107
12,107
12,107
53,997
0
0
0
0
0
0
0
Compensation for both the Management Board and the Supervisory Board con-
sisted of fixed and variable components as well as other compensatory ben-
efits. In the event of a non-reappointment and non-prolongation of the service
agreement, each member of the Management Board is entitled to receive a
severance payment in the amount of one annual fixed salary. Total compensa-
tion for the Supervisory Board excluding reimbursements of travel expenses
amounted to € 384,750 in 2011 (2010: € 382,750).
Notes
139
The tables below show the detailed compensation for the Management Board
and the Supervisory Board:
m a n a G e m e n t B O a R D c O m P e n S at i O n 2011:
Fixed compensation
Short-term
incentive
compensation
long-term incentive compensation
(target attainment Depends on
company Goals)
total
compensation
Base Salary
in €
Other
compensatory
Benefits
Variable
compensation
in €
in €***
no. of
Performance
Shares
Granted
Fair Value at
the time of
the Grant
in €
in €
Dr. Simon E. Moroney
Dave Lemus*
Jens Holstein**
Dr. Arndt Schottelius
Dr. Marlies Sproll
ToTAl
386,862
132,119
167,500
256,000
262,259
1,204,740
135,131
479,009
181,584
99,046
94,563
989,333
181,825
72,026
83,750
107,520
125,884
571,005
17,676
–
12,107
12,107
12,107
53,997
377,206
1,081,024
–
258,363
258,363
258,363
683,154
691,197
720,929
741,069
1,152,296
3,917,374
* Left the Management Board of MorphoSys AG on March 10, 2011
** Joined the Management Board of MorphoSys AG on May 1, 2011
*** The total remuneration figures shown for 2011 include the corresponding bonus accruals for 2011, which will be paid out in February 2012.
m a n a G e m e n t B O a R D c O m P e n S at i O n 2010 :
Fixed compensation
Short-term
incentive
compensation
long-term incentive compensation
(target attainment Depends on
Share Price Performance)
total
compensation
Base Salary
in €
Other
compensatory
Benefits
Variable
compensation
in €
in €***
no. of
convertible
Bonds
Granted
Fair Value at
the time of
the Grant
in €
Dr. Simon E. Moroney
Dave Lemus*
Jens Holstein**
Dr. Arndt Schottelius
Dr. Marlies Sproll
ToTAl
368,498
259,157
–
231,000
249,623
1,108,278
130,178
156,639
–
90,158
90,879
467,854
208,570
152,902
–
132,594
146,778
640,844
58,800
33,000
–
33,000
33,000
157,800
* Left the Management Board of MorphoSys AG on March 10, 2011
** Joined the Management Board of MorphoSys AG on May 1, 2011
*** The total remuneration figures shown for 2010 include the corresponding bonus accruals for 2010, which was paid out in March 2011.
in €
1,098,854
788,478
–
673,532
707,060
391,608
219,780
–
219,780
219,780
1,050,948
3,267,924
140
F i n a n c i a l S t a t e m e n t S
On February 24, 2011, MorphoSys announced that Mr. Jens Holstein was to
succeed Mr. Dave Lemus both as Chief Financial Officer of MorphoSys AG
and as a member of the Management Board (Vorstand). Mr. Lemus stepped
down from his position as CFO with the Company in March 2011 to pursue
other opportunities. He received the contractually agreed compensation set
out in his service agreement until June 30, 2011. Further, he obtained his
contractually agreed payment equal to his fixed gross annual salary in the
amount of € 264,238 plus his bonus, calculated as the average bonus in the
years 2009 and 2010, in the amount of € 144,053. Additionally, Mr. Lemus’s
unvested portion of outstanding stock options granted for the years 2008 and
2009 was vested prematurely.
Mr. Jens Holstein was appointed Chief Financial Officer of MorphoSys AG on
May 1, 2011. His service agreement runs until June 30, 2014. As an additional
incentive for joining the Company, MorphoSys compensated Mr. Holstein for
lost benefits from his previous position with a non-recurring signing bonus
in the amount of € 100,000.
S U P e R V i S O R Y B O a R D c O m P e n S at i O n 2011 a n D 2010 :
in €
2011
2010
2011
2010
2011
2010
Fixed compensation
attendance Fees
total compensation
Dr. Gerald Möller
Prof. Dr. Jürgen Drews
Dr. Walter Blättler
Dr. Daniel Camus
Dr. Metin Colpan
Dr. Geoffrey N. Vernon
ToTAl
70,000
57,750
39,500
36,500
36,500
39,500
70,000
57,750
39,500
36,500
36,500
39,500
26,000
17,500
13,500
19,000
8,500
20,500
22,000
15,000
18,000
19,000
10,000
19,000
96,000
75,250
53,000
55,500
45,000
60,000
92,000
72,750
57,500
55,500
46,500
58,500
279,750
279,750
105,000
103,000
384,750
382,750
No other agreements with current or former members of the Supervisory
Board are currently in place.
30
Corporate Governance
The Group issued its declaration of compliance with the recommendations of
the Government Commission on the German Corporate Governance Code for
fiscal year 2011 according to section 161 of the German Stock Corporation Act
(Aktiengesetz). This declaration was published and made permanently acces-
sible to stockholders accordingly on the Group’s website on December 08, 2011.
31
Research and Development Agreements
The Group has a significant number of research and development relationships
in conjunction with its partnered discovery strategy, its proprietary research
and development activities and to a smaller degree in the research reagent and
diagnostic space, operated by the Group’s AbD Serotec segment.
PAR TNE RE D DISC OVE RY SEGME NT
In its commercial agreements within the Partnered Discovery segment
MorphoSys receives different types of payments, which are booked as reve-
nues spread over the lifetime of the agreement or booked in full in connec-
tion with the achievement of defined tasks and milestones. These payments
include upfront payments at signature, annual license payments in ex-
change for access to MorphoSys’s technologies, and research funding for work
carried out at MorphoSys on behalf of the partner company. Additionally,
MorphoSys is eligible to receive development-dependent milestone payments
and royalties on product sales for individual antibody drug programs.
a D D i t i O n a l i n F O R m at i O n
w w w. m o r p h o s y s . c o m
Notes
141
The active collaboration with several partners was already concluded prior
to fiscal year 2011 as the original term of the agreements came to an end.
Drug development programs initiated during the active phase can, however,
continue and could result in future success-based payments. More details
on individual drug candidates within the various alliances, restricted to public
information, can be found in the Research & Development section on page 53
and in the overview of the Group’s drug pipeline in this report. More details
on the individual research alliances can be found on the Group’s website.
Partnerships, that were already concluded prior to the start of 2011, but
had active drug development programs ongoing, include (in alphabetic order):
Bayer Healthcare, Boehringer Ingelheim, F. Hoffmann-La Roche, Janssen
Biotech (formerly Centocor Ortho Biotech), Merck & Co., OncoMed Pharma-
ceuticals and Prochon Biotech Ltd.
Partnerships, that were still active during 2011, included (in alphabetic order),
Astellas, ContraFect, Daiichi-Sankyo, GeneFrontier Corporation/Kaneka,
Novartis, Pfizer and Schering-Plough (a subsidiary of Merck & Co.). Of those
partnerships, the active collaboration with Daiichi-Sankyo and Schering-
Plough were concluded in 2011. The cooperation with ContraFect was started
in 2011, focusing on the field of infectious disease.
The Group’s largest alliance today is with Novartis AG. The two companies
started working together in 2004 in a collaboration that has so far resulted in
multiple active therapeutic antibody programs in various diseases. In De-
cember 2007, MorphoSys and Novartis substantially expanded their previous
relationship and forged one of the most comprehensive strategic alliances
in the discovery and development of biopharmaceuticals. Based on a ten-year
term, committed annual payments total more than € 400 million in technol-
ogy access, internalization fees and R&D funding, excluding reimbursement
of R&D costs related to early-stage development activities. Total payments
under the agreement, including committed payments and probability-weighted
success-based milestones, contingent upon successful clinical development
and market approval of multiple products, could potentially exceed € 650 mil-
lion, assuming the collaboration successfully runs its maximum term. In addi-
tion to these payments, MorphoSys would also be entitled to royalty payments
and/or profit sharing on any future product sales. Additionally, MorphoSys
also has options to participate in certain development activities in various pro-
grams, with part of the early-stage costs being funded by Novartis. Under the
co-development options, MorphoSys may elect to participate in these projects
through cost and profit-sharing with financial participation reflecting its
level of investment in the respective programs.
PROPRIE TARY DE VE LOPME NT SEGME NT
In the Proprietary Development Segment partnerships are aligned along the
Group’s goals for own drug development activities in its key indications –
cancer, inflammatory diseases and infections. These partnerships include (in
alphabetic order): Absynth Biologicals, Galapagos and Xencor.
In September 2010, MorphoSys announced a new proprietary development
program against novel infectious disease targets. As part of this initiative,
MorphoSys has signed a license and collaboration agreement with UK-based
Absynth Biologics, providing access to novel target molecules associated
with Staphylococcus aureus infections including MRSA (methicillin-resistant
S. aureus). MorphoSys will generate antibodies using its proprietary HuCAL
PLATINUM antibody library which Absynth will test in relevant disease mod-
els. MorphoSys will be solely responsible for the development and partnering
of the resulting compounds. Absynth has received an upfront payment and is
eligible for development-dependent milestone payments and royalties.
In November 2008, MorphoSys and Galapagos announced the launch of a
long-term co-development alliance aimed at discovering and developing anti-
body therapies based on novel modes of action in bone and joint disease,
including rheumatoid arthritis, osteoporosis and osteoarthritis. The alliance
spans all activities from target discovery through to completion of proof of
concept clinical trials of novel therapeutic antibodies. Following proof of con-
cept in human clinical trials, programs will be partnered for subsequent
development, approval and marketing. Both companies contributed their core
technologies and expertise to the alliance. Galapagos provided antibody
targets implicated in bone and joint disease in addition to its adenoviral tar-
get discovery platform to discover further targets for antibody development.
MorphoSys contributed its HuCAL antibody technologies to generate fully
human antibodies directed against these targets. Under the terms of the
agreement, Galapagos and MorphoSys shared the research and development
costs equally.
In June 2010, MorphoSys AG and US-based biopharmaceutical company
Xencor signed a worldwide exclusive license and collaboration agreement.
The agreement provided MorphoSys with an exclusive worldwide license
to XmAb5574/MOR208 for the treatment of cancer and other indications. As
part of the agreement, the companies will collaborate on the phase 1 trial
in patients with chronic lymphocytic leukemia in the US. MorphoSys will be
solely responsible for further clinical development after successful comple-
tion of the phase 1 clinical trial. MorphoSys paid to Xencor an upfront payment
of US$ 13 million (approx. € 10.5 million), which was activated as an intan-
gible asset under development. Xencor will be eligible to receive development-,
regulatory- and commercialization-related milestone payments and tiered
royalties based on product sales.
ABD SE ROTEC SEGME NT
MorphoSys’s research and development segment AbD Serotec has relationships
with a growing number of diagnostic companies, industrial customers and
research organizations including (in alphabetic order): FIND, Merck & Co.,
Novozymes, Phadia, Proteomika, Shionogi and Spinreact.
c R O S S - R e F e R e n c e
s e e pa g e 5 3
a D D i t i O n a l i n F O R m at i O n
w w w. m o r p h o s y s . c o m
142
F i n a n c i a l S t a t e m e n t S
a P P e n D i X 1: c H a R t O F t H e c O n S O l i D at e D e n t i t Y a S O F D e c e m B e R 31, 2011
Name and Corporate Seat of the Company
C ompAN Y C oNSolIDATED (ApART fRom pARENT C ompAN Y )
MorphoSys USA, Inc., Charlotte, North Carolina, USA
MorphoSys IP GmbH, Munich, Germany
MorphoSys UK Ltd., Oxford, UK
MorphoSys US, Inc., Raleigh, North Carolina, USA
MorphoSys AbD GmbH, Düsseldorf, Germany
Poole Real Estate Ltd., Poole, UK
Sloning BioTechnology GmbH, Puchheim, Germany
exchange Rate
on Dec 31, 2011
one Unit of euro
in local currency
local currency
US $
€
£
US $
€
£
€
1.29257
–
0.83819
1.29257
–
0.83819
–
Share capital
total assets
total liabilities
total Revenue
Profit/loss
Share of
capital %
in local
currency
in local
currency
in local
currency
in local
currency
in local
currency
100
100
100
100
100
100
100
2,000
25,000
100
50,000
25,000
200
2,779
3,326,667
7,591,872
2,882,372
1,345,897
835,763
0
3,294,999
2,465,402
803,914
85,212
7,400
3,343,800
9,822,704
9,670,994
3,035,750
0
0
(1,169)
(4,597)
12,390
509,448
72,247
(91,120)
951,660
10,532,743
4,449,167
4,200,419
2,478,504
Responsibility Statement
To the best of our knowledge, and in accordance with the applicable reporting
principles, the Consolidated Financial Statements give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Group, and the
Group Management Report includes a fair review of the development and per-
formance of the business and the position of the Group, together with a descrip-
tion of the principal opportunities and risks associated with the expected de-
velopment of the Group.
Martinsried, February 14, 2012
Dr. Simon E. Moroney
Chief Executive Officer
Mr. Jens Holstein
Chief Financial Officer
Dr. Arndt Schottelius
Chief Development Officer
Dr. Marlies Sproll
Chief Scientific Officer
Notes
143
a P P e n D i X 1: c H a R t O F t H e c O n S O l i D at e D e n t i t Y a S O F D e c e m B e R 31, 2011
Name and Corporate Seat of the Company
C ompAN Y C oNSolIDATED (ApAR T fRom pARENT C ompAN Y )
MorphoSys USA, Inc., Charlotte, North Carolina, USA
MorphoSys IP GmbH, Munich, Germany
MorphoSys UK Ltd., Oxford, UK
MorphoSys US, Inc., Raleigh, North Carolina, USA
MorphoSys AbD GmbH, Düsseldorf, Germany
Poole Real Estate Ltd., Poole, UK
Sloning BioTechnology GmbH, Puchheim, Germany
exchange Rate
on Dec 31, 2011
one Unit of euro
local currency
in local currency
US $
1.29257
US $
€
£
€
£
€
0.83819
1.29257
0.83819
–
–
–
Share of
capital %
Share capital
in local
currency
total assets
in local
currency
total liabilities
in local
currency
total Revenue
in local
currency
Profit/loss
in local
currency
100
100
100
100
100
100
100
2,000
25,000
100
50,000
25,000
200
2,779
3,326,667
7,591,872
2,882,372
1,345,897
835,763
0
3,294,999
2,465,402
803,914
85,212
7,400
0
3,343,800
9,822,704
9,670,994
3,035,750
0
(1,169)
(4,597)
12,390
509,448
72,247
(91,120)
951,660
10,532,743
4,449,167
4,200,419
2,478,504
Responsibility Statement
To the best of our knowledge, and in accordance with the applicable reporting
principles, the Consolidated Financial Statements give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Group, and the
Group Management Report includes a fair review of the development and per-
formance of the business and the position of the Group, together with a descrip-
tion of the principal opportunities and risks associated with the expected de-
velopment of the Group.
Martinsried, February 14, 2012
Dr. Simon E. Moroney
Chief Executive Officer
Mr. Jens Holstein
Chief Financial Officer
Dr. Arndt Schottelius
Chief Development Officer
Dr. Marlies Sproll
Chief Scientific Officer
144
Auditor’s Report
We have audited the consolidated financial statements prepared by
the MorphoSys AG, Martinsried, comprising the consolidated income
statement, consolidated statement of comprehensive income, con
solidated balance sheet, consolidated statement of changes in stock
holders’ equity, consolidated statement of cash flows and notes, to
gether with the group management report for the business year from
January 1, 2011 to December 31, 2011. The preparation of the con
solidated financial statements and the group management report in
accordance with the IFRSs, as adopted by the EU, the additional re
quirements of German commercial law pursuant to Article 315a Sec
tion 1 German Commercial Code and supplementary provisions of
the articles of incorporation are the responsibility of the Parent Com
pany's Board of Managing Directors. Our responsibility is to express
an opinion on the consolidated financial statements and on the group
management report based on our audit.
We conducted our audit of the consolidated financial statements in
accordance with Article 317 German Commercial Code and German
generally accepted standards for the audit of financial statements
promulgated by the Institute of Public Auditors in Germany. Those
standards require that we plan and perform the audit such that
misstatements materially affecting the presentation of the net assets,
financial position and results of operations in the consolidated finan
cial statements in accordance with the applicable financial reporting
framework and in the group management report are detected with
reasonable assurance. Knowledge of the business activities and the
economic and legal environment of the Group and expectations as to
possible misstatements are taken into account in the determination
of audit procedures. The effectiveness of the accountingrelated in
ternal control system and the evidence supporting the disclosures in
the consolidated financial statements and the group management
report are examined primarily on a test basis within the framework
of the audit. The audit includes assessing the annual financial state
ments of those entities included in consolidation, the determination
of the entities to be included in consolidation, the accounting and
consolidation principles used and significant estimates made by the
Company´s Board of Managing Directors, as well as evaluating the
overall presentation of the consolidated financial statements and the
group management report. We believe that our audit provides a rea
sonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit the consolidated
financial statements comply with the IFRSs as adopted by the EU,
the additional requirements of German commercial law pursuant to
Article 315a Section 1 German Commercial Code and supplementary
provisions of the articles of incorporation and give a true and fair view
of the net assets, financial position and results of operations of the
Group in accordance with these requirements. The group management
report is consistent with the consolidated financial statements and as
a whole provides a suitable view of the Group's position and suitably
presents the opportunities and risks of future development.
Munich, February 15, 2012
PricewaterhouseCoopers
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
Stefano Mulas
Wirtschaftsprüfer
(German Public Auditor)
Dietmar Eglauer
Wirtschaftsprüfer
(German Public Auditor)
Auditor’s Report / Supervisory Board Report
145
Supervisory Board Report
In this report the Supervisory Board describes the performance of its functions
and its work during the fiscal year 2011. Its discussions focused on the financial
situation of the Group, the progress in the pipeline, investments in its proprietary
portfolio and technologies and the strategic perspectives for the Group.
C ontinuous Dialog with the Manage Me nt BoarD
During 2011, the Supervisory Board performed its duties assigned to
it by law, the Company’s Articles of Association and its internal Rules
of Procedure. We regularly advised the Management Board on the
management of the Company and continuously observed and super
vised its conduct of business. The Management Board fulfilled its
duty to inform and furnished us with regular written and verbal re
ports containing uptodate and comprehensive information on all
incidents and activities of relevance to the Company, which were pre
pared by the Management Board with the input of the respective
departments. In our committees and in full Supervisory Board meet
ings we always had the opportunity to critically discuss the reports
and resolution proposals of the Management Board and to contribute
suggestions. When we had questions about strategic topics impact
ing the Company, the Management Board provided sufficiently detailed
answers on the basis of the documents presented. Deviations from
business plans were explained to us in detail. In justified cases reso
lutions were passed outside meetings by written procedure.
In the periods between meetings of the full Supervisory Board and the
committees, as the Chairman of the Board, I personally maintained
regular contact with the Management Board and especially with the
Chief Executive Officer, Dr. Simon Moroney, and was kept informed
about the current business situation and key business transactions.
I also took the opportunity to talk directly to members of the Senior
Management Group.
Main topiC s at the Me e tings of the supe rvisory BoarD
in 2011
The Supervisory Board was intensively involved from an early stage
in all decisions of significance for the Company. Decisions were
based on the Company’s agreed strategy. In 2011, the majority of our
discussions focused on the Company’s proprietary drug development
plans as well as opportunities to accelerate the growth and increase
the value of MorphoSys.
The topics of our regular discussion at the Supervisory Board’s ple
nary meetings were revenue and profit development of MorphoSys, as
well as the progress and challenges in the three business segments.
The discussions were based on comprehensive documentation provided
by the Management Board in advance of each meeting.
We also decided on the compensation of Management Board members
for the fiscal year 2011 on the basis of external benchmarking and
their achievement of performancerelated targets. The appropriateness
of the Management Board’s compensation was confirmed by an inde
pendent remuneration consultant.
On January 30, 2011, the Supervisory Board reviewed and approved
an updated financial plan for the business segment AbD Serotec,
and discussed the revised revenue recognition of the agreement with
Pfizer, which was signed in December 2010.
At our meeting on February 22, 2011, we primarily discussed the
Group Management Report and the Financial Statements according
to IFRS for the MorphoSys Group as of December 31, 2010. We also
discussed and agreed on the key performance indicators for the newly
introduced longterm incentive program for the Management Board
and the Senior Management Group. We also approved the recommen
dation for the upcoming Annual Shareholders’ Meeting to reelect
Prof. Jürgen Drews for another year as member of the Supervisory
Board.
146
At our meeting on March, 10, 2011, we approved the Management Re
port and the Financial Statements for MorphoSys AG according to
German GAAP (HGB) as of December 31, 2010 as well as the agenda
for the Annual Shareholders’ Meeting on May 19, 2011. We also ap
proved Dave Lemus’s resignation from the Management Board as of
March 10, 2011, prior to the expiration of his appointment.
At our meeting on May 18, 2011, an external consultant joined the
board meeting to discuss the upcoming examination of the efficiency
of the Supervisory Board. In addition, we received a presentation on
Ylanthia, MorphoSys’s latest technology platform.
At our meeting on July 27, 2011, an improved risk management sys
tem was presented. We also discussed AbD Serotec’s strategy for
the commercialization of the Slonomics technology in the industrial
biotechnology sector. In addition, the results of the board efficiency
examination were discussed. Finally, we updated the responsibilities
within the Management Board and the Rules of Procedure.
At our meeting on October 19, 2011, we discussed and approved the
budget for the fiscal year 2012. The Management Board also pre
sented an update on the Company’s drug discovery activities and
strategy.
At our meeting on December 8, 2011, we discussed the possible com
mercialization strategies of MorphoSys’s latest antibody platform
Ylanthia. In addition, the results of the latest risk management assess
ment were presented and we updated the Audit Committee charter.
Finally, the Internal Audit results were presented.
In 2011, no conflict of interest occurred.
supervisory BoarD Mee tings anD C oMMit tees
In 2011, seven Supervisory Board meetings were held. No Super
visory Board member was absent from more than two meetings. With
one exception, the committee meetings were fully attended.
Three committees deliberated on various aspects of the Company’s
business in 2011: the Audit Committee, the Remuneration & Nomi
nation Committee, and the Science & Technology Committee. The com
position of these committees can be found in the Declaration about
Corporate Management on MorphoSys’s website.
The Audit Committee met ten times, dealing mainly with accounting
issues, the quarterly financial statements and the annual financial
statements. The auditor attended four meetings of the Audit Committee
and informed its members of the audit results. In addition, the Audit
Committee made a recommendation to the Supervisory Board for the
Supervisory Board’s proposal to the Annual Shareholders’ Meeting
concerning the election of the independent auditors. The Audit Com
mittee gave indepth consideration to the appointment of the inde
pendent auditors for fiscal 2011 and the transition to the new auditors,
PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft, Munich.
The Remuneration & Nomination Committee met formally twice and
concerned itself with topics relating to the remuneration system and
the level of compensation for the Management Board. The Committee
also deliberated on the composition of the Supervisory Board, in par
ticular its diversity, focusing on its internationality, the range of expe
rience of its members and the representation of women. Based on
these discussions, its future composition was also discussed in the
Supervisory Board.
The Science & Technology Committee met five times, focusing on the
Company’s technology and drug development plans, target selection
and the start of new development programs, interim results from ongo
ing studies, and the design of the planned and current clinical trials.
Reports on the meetings of the Committees were presented at the ple
nary sessions of the Supervisory Board.
The Supervisory Board did not establish any other committees.
C orp or ate governanCe anD ManageMent BoarD C oMpensation
The Supervisory Board dealt with corporate governance at MorphoSys,
taking into account amendments made to the German Corporate
Governance Code in May 2010. Information on corporate governance
at the Company including a detailed report on the level and structure
of the compensation paid to the members of the Supervisory and Man
agement Boards is provided on pages 81 – 87 of this Annual Report.
We discussed with the Management Board the Company’s compli
ance with the Code’s recommendations and agreed, based on well
founded arguments, to some minor deviations. Based on these delib
erations, the boards approved an interim update of the Declaration
of Compliance as of March 10, 2011, and the annual Declaration of
Compliance as of December 8, 2011. As stated in the Declaration
of Compliance, MorphoSys complies with all but four of the Code’s rec
a d d i t i o n a l i n f o r m at i o n
w w w. m o r p h o s y s . c o m
c r o s s - r e f e r e n c e
s e e pa g e s 8 1 – 8 7
Supervisory Board Report
147
ommendations. The latest version of the Declaration of Compliance can
be found in this report on page 82 and is also permanently available
to shareholders on MorphoSys’s website.
ne w Chief finanCial offiCer
We were very pleased to welcome Mr. Jens Holstein, who started on
May 1, 2011 as the Group’s new Chief Financial Officer. He will be a
key member of the Management Board of MorphoSys. Mr. Holstein
has an outstanding track record and brings international business ex
perience, which will be important for the Company as it continues
its growth as one of Europe’s leading biopharmaceutical companies.
auDit of the annual finanCial state Me nts
In 2011, the Company commenced work with a new audit firm. The au
dit contract was awarded to PricewaterhouseCoopers AG Wirtschafts
prüfungsgesellschaft, Munich by the Audit Committee of the Super
visory Board in accordance with the resolution of the Annual General
Meeting on May 19, 2011.
PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft, Mu
nich, audited the parentcompany financial statements for the fiscal
year January 1, 2011 to December 31, 2011 prepared by the Manage
ment Board in accordance with HGB (German GAAP) rules, and the
Management Report of MorphoSys AG. The auditors issued an unquali
fied audit opinion.
The focus of the 2011 audit of the financial statements and the Manage
ment Report of MorphoSys AG was the recoverability of intangible
and financial assets, completeness and valuation of other provisions,
accounting and disclosure of the longterm incentive share based
payment program and revenue recognition including correct cutoff
presentation.
The auditors also confirmed that the Management Board has installed
an appropriate reporting and monitoring system which is suitable
in its design and handling to identify at an early stage developments
which could place the continued existence of the Company at risk.
In accordance with § 315 a HGB, the consolidated financial state
ments of MorphoSys Group for the fiscal year from January 1, 2011 to
December 31, 2011 and the Management Report on the Group were
prepared on the basis of International Financial Reporting Standards
(IFRS) as applicable in the European Union. The consolidated finan
cial statements and the Management Report on the Group were also
given an unqualified audit opinion.
c r o s s - r e f e r e n c e
s e e pa g e 8 2
a d d i t i o n a l i n f o r m at i o n
w w w. m o r p h o s y s . c o m
The main emphasis of the 2011 audit of the consolidated financial
statements and the Management Report of the MorphoSys Group
were the audit of the accuracy of the accounting for the new long
term incentive program, the audit of the impairment test on goodwill
and intangible assets without an underlying definite useful life ac
cording to IAS 36, the audit of calculated current and deferred taxes,
the audit of the accuracy regarding group’s segment reporting, the
audit of completeness and accuracy in Group’s notes disclosures and
the plausibility check on all prognostic information in the Group’s
Management Report. On completing its work, the auditor issued an
unqualified audit opinion.
The audit reports and the financial statement documentation were
sent to all Supervisory Board members with a sufficient amount of
lead time for review. The audit report as well as the consolidated
financial statements and the MorphoSys Group Management Report
were intensively discussed at the Audit Committee meeting on Feb
ruary 24, 2012, and at the Supervisory Board meeting on the same day.
The audit report as well as the financial statements and the manage
ment report of MorphoSys AG were the subject of detailed discussion
at the Audit Committee meeting on March 15, 2012, and at the sub
sequent Supervisory Board meeting on the same day. The auditor took
part in the discussion of the financial statements. He reported on the
main results of his audits and was available to the Supervisory Board
to answer questions and provide supplementary information. After
our final review, the Supervisory Board approved the financial state
ments without objection or amendment and thus adopted them. The
Supervisory Board also reviewed the proposal of the Management
Board for the use of the 2011 earnings and resolved in accordance
with their recommendation.
On behalf of the entire Supervisory Board I would like to thank the
members of the Management Board and the employees of all
MorphoSys companies for their hard work and great commitment
over the past fiscal year.
Martinsried, March 15, 2012
Dr. Gerald Möller
Chairman of the Supervisory Board
148
Supervisory Board of MorphoSys AG
d r . G e r a l d m ö l l e r
Chairman, Heidelberg, Germany
Member of the Supervisory Board of:
4sigma*, Bermuda (Chairman)
Adrenomed GmbH*, Germany (Director)
Bionostics, Inc.*, USA (Director)
Illumina, Inc.*, USA (Director)
Invendo Medical GmbH*, Germany (Chairman)
VIVACTA Ltd.*, UK (Director)
P r o f. d r . J ü r G e n d r e w s
Deputy Chairman, Feldafing, Germany
and Cureggia, Switzerland
No other Supervisory Board memberships
d r . w a lt e r B l ät t l e r
Member, Brookline, MA, USA
No other Supervisory Board memberships
Supervisory Board of MorphoSys AG
149
d r . G e o f f r e y n . V e r n o n
Member, Devon, UK
Member of the Supervisory Board of:
Cornwall Farmers Ltd.*, UK (Chairman)
Genable Ltd.*, Ireland (Chairman)
Medpharm Ltd.*, UK (Chairman)
Veryan Medical Ltd.*, UK (Chairman)
XL TechGroup, Inc.*, USA (Chairman)
Ziggus Holdings Ltd.*, UK (Chairman)
d r . d a n i e l c a m u s
Member, Croissy-sur-Seine, France
Member of the Supervisory Board of:
Cameco Corp.*, Canada (Director)
SGL Group SE, Germany (Member)
Valéo SA*, France (Director)
Vivendi SA*, France (Member)
d r . m e t i n c o l P a n
Member, Essen, Germany
Member of the Supervisory Board of:
Qalovis GmbH*, Germany (Director)
Qiagen N.V.*, the Netherlands (Director)
* Membership in comparable domestic and foreign supervisory boards of commercial enterprises
150
Senior Management Group of MorphoSys AG
s a s c h a a l i l o V i c
Head of Corporate Finance
k l a u s d e w a l l
Head of Accounting & Controlling
s i lV i a d e r m i e t z e l
Head of Global Human Resources
d r . m a r k u s e n z e l B e r G e r
Head of Discovery Alliances Technologies
d i e t e r f e G e r
Head of AbD Serotec
d r . c l a u d i a G u t J a h r - l ö s e r
Head of Corporate Communications &
Investor Relations
Senior Management Group of MorphoSys AG
151
d r . B a r B a r a k r e B s - P o h l
Head of Business Development
d r . u l r i c h m o e B i u s
Head of Preclinical Development &
Project Management
d r . r a l f o s t e n d o r P
Head of Protein Sciences
d r . l i s a r o J k J a e r
Head of Clinical Development
d r . m a r G i t u r B a n
Head of Target and Antibody Discovery
d r . h a r a l d w at z k a
Head of Alliance Management
d r . a r m i n w e i d m a n n
Head of Quality Assurance & Regulatory Affairs
d r . G ü n t e r w e l l n h o f e r
Head of Technical Operations
152
Glossary
a
B
G
amyloid beta – Target molecule
in Alzheimer’s disease therapy; main
constituent of amyloid plaques in the
brains of Alzheimer’s disease patients
antigen – Foreign substance stimulat-
ing antibody production; binding partner
of antibody
adc – Antibody-drug conjugate; a new
type of targeted therapy combining the
specificity of monoclonal antibodies
with the potency of cytotoxic molecules
adcc – Antibody-dependent cell-
mediated cytotoxicity; a mechanism
of cell-mediated immunity whereby
an effector cell of the immune system
actively destroys a target cell that
has been bound by specific antibodies
all – Acute lymphoblastic leukemia;
a form of cancer of the white blood cells
characterized by excess lymphoblasts
antibody – Proteins of the immune
system that recognize antigens, thereby
triggering an immune response
antibody library – A collection of
genes that encode corresponding human
antibodies
autoimmune disease – Disease
caused by an immune response by the
body against one of its own tissues,
cells or molecules
BilmoG – Bilanzrechtsmodernisierungs-
gesetz; Accounting Law Modernization
Act
Biosimilars – Term used to describe
officially approved new versions of in-
novator biopharmaceutical products,
following patent expiry
cll – Chronic lymphocytic leukemia;
most common type of cancer of the
blood and bone marrow, affecting the
B-cells
coGs – Cost of goods sold; direct
costs attributable to the production of
the goods sold by AbD Serotec
Bite – A class of artificial bispecific
monoclonal antibodies that are investi-
gated for the use as anti-cancer drugs
by directing the T cells’ cytotoxic activity
against cancer cells. BiTE® is a registered
trademark of Micromet AG
e
ema – European Medicines Agency
c
f
GcP – Good clinical practice; an inter-
national ethical and scientific quality
standard for designing, conducting, re-
cording and reporting trials that involve
the participation of human subjects
GlP – Good laboratory practice; a for-
mal framework for the implementation
of safety tests on chemical products
Gm -csf – Granulozyte-macrophage
colony-stimulating factor; underlying
target molecule of MOR103 program
GmP – Good management practice;
term for the control and management
of manufacturing and quality control
testing of pharmaceutical products and
medical devices
Goodwill – An intangible asset that
reflects the value of a company’s name
and reputation, its customer relations,
and other factors influencing its stand-
ing and competitiveness
fc-engineered – Modification within
the Fc part of an antibody to improve
effector function
fc-part – Constant part of an antibody
known as the Fc (Fragment, crystalliz-
able) region
fda – Food and Drug Administration;
US federal agency for the supervision of
food and drugs
h
hGB – German accounting standards
hucal – Human Combinatorial Anti-
body Library. Proprietary antibody
library enabling rapid generation of
specific human antibodies for all
applications (explanation of GOLD/
Platinum)
human – Of human origin
cash flow – Key performance indicator
in the cash flow statement used to as-
sess the financial and earning capacity
cd19 – Therapeutic target for the
treatment of B-cell lymphomas and
leukemias
cd20 – Therapeutic target for the
treatment of B-cell lymphomas and
leukemias
cd38 – Therapeutic target for the
treatment of multiple myeloma and
certain leukemias
clinical trial – Clinical trials allow
safety and efficacy data to be collected
for new drugs or devices. Depending
on the type of product and the stage of
its development, investigators enroll
healthy volunteers and/or patients into
small pilot studies initially, followed by
larger-scale studies in patients
Glossary
153
i
P
t
ifrs – International Financial Report-
ing Standards; future EU-wide standards
produced by the IASB
milestone – Predefined events relating
to the development of the substance
into a drug
Pharmacokinetics – Determination
of the fate of substances administered
externally to a living organism
target – Target molecule for thera-
peutic intervention, e.g. on surface of
diseased cell
immunization – Generation of anti-
bodies by administering antigen
in vitro – In a test tube
in vivo – In a living organism
iPf – Idiopathic pulmonary fibrosis;
chronic, progressive form of lung
disease characterized by the buildup
of scar tissue in the lungs
monoclonal antibody – Homogeneous
antibody originating from a single clone,
produced by hybridoma cell
mrsa – Methicillin-resistant Staphylo-
coccus aureus; type of bacteria that
is resistant to certain antibiotics and
causing severe infections; occurs most
frequently among patients in healthcare
settings
Plaque psoriasis – Most common
form of psoriasis, a chronic, non-conta-
gious autoimmune disease which affects
the skin and joints
tecdaX – Index of the 30 largest
technology companies listed on the
Frankfurt Stock Exchange
Preclinic – Preclinical stage of drug
development; tests in animal models as
well as in laboratory essays
y
Protein – Polymer consisting of amino
acids, e. g. antibodies and enzymes
ylanthia – Novel next-generation anti-
body platform of MorphoSys
J
multiple myeloma – Type of cancer
that develops in a subset of white blood
cells called plasma cells formed in the
bone marrow
r
Jak – Janus kinase; a molecule involved
in signal transduction in cells
multiple sclerosis – Disease of the
central nervous system characterized
by the destruction of nerve fibers
l
n
nhl – Non-Hodgkin lymphomas; diverse
group of blood cancers that include any
kind of lymphoma except Hodgkin’s lym-
phomas
nih – National Institutes of Health;
part of the U.S. Department of Health
and Human Services, the primary
federal agency for conducting and
supporting medical research
life sciences – All branches of science
that study all organisms, especially living
ones
m
macrophage – White blood cell that
ingests foreign material. Macrophages
are key players in the immune response
to foreign invaders such as infectious
microorganisms.
market capitalization – Value of a
company’s outstanding shares, as mea-
sured by shares times current price
m&a – Mergers & Acquisitions
r & d – Research and Development
reagent – A substance used in re-
search and diagnostic applications
rheumatoid arthritis – Inflammatory
disease of the joints; abbreviation: RA
royalties – Percentage share of owner-
ship of the revenue generated by drug
products
s
s, G & a – Sales, general and adminis-
trative
slonomics – DNA engineering and pro-
tein library generation platform acquired
by MorphoSys in 2010
specificity – Property of anti bodies,
for example, to discriminate between
different, but similar, antigens
154
Index
a
e
l
P
Annual General Meeting
Assets
Auditor’s report
82, 125
63, 98
144
Earnings per share
EBIT
Employees
Environmental protection
Equity
107, 118
61
70et seq.
68
64, 100
Letter to the shareholders
Liabilities
Liquidity
5 et seq.
63, 126
9, 62, 80, 126
B
m
Balance sheet
BHQ880
63, 98, 144
44
f
c
62
102
62
46 et seq.
93 et seq.
Cash flows
Cash flow statement
Capital expenditure
CD38
Change of control
Committees of the
Supervisory Board
Competition
Convertible bonds
Corporate Governance Report
Cost of goods sold
Credit rating
Currency risk
83
51, 76
110, 131 et seq.
40, 81
60
64
128
Financial analysis
2012 Financial calendar
Forecast
59 et seq.
Back cover
65, 77
G
Gantenerumab
Glossary
GM-CSF
Goodwill
54
152
44, 70
109, 110, 124
Management Board
Management of the Group
Management report
Manufacturing license
Market capitalization
Milestone payments
4, 57, 76, 83,
87, 90, 92 et seq.
39
38 et seq.
69
8 et seq.
38, 43, 47, 53,
65, 66, 78, 80, 125, 135, 140, 141
5, 7, 44, 47, 54, 55, 65
70, 76, 78 et seq., 111
5, 46, 47, 54, 55,
65, 70, 78, 80, 111
5, 45, 47, 54 et seq.
70, 78, 80, 81, 111, 141
MOR208
MOR202
MOR103
h
n
Human resources
57, 70
Net Profit
Non-operating items
61
61
d
i
o
81
Declaration of Conformity
Declarations pursuant to sec. 315,
para. 4, of the German Commercial
Code (HGB)
Directors’ dealings
Dividend
92 et seq.
84
81
107, 111, 115
Income taxes
Information required under
takeover law
Intellectual property
ISO certificates
92
70
69
Operating expenses
Operating leases
Operating profit
Opportunities
Outlook
60, 80
107, 135
7, 41, 61
46, 72 et seq.
77 et seq.
k
Key figures
Front cover
Patents
Pensions
Personnel costs
Pipeline
Procurement
Production
Proprietary pipeline
Provisions
51, 70, 75, 109
89
60, 115
Front cover, 49
68
68, 73, 111
80, 89 et seq.
126
Q
Quality assurance
Quality management
69
69, 70, 86
r
91
87 et seq.
Remuneration report
Remuneration,
Supervisory Board
Remuneration,
Management Board
87 et seq.
Supervisory Board Report 145 et seq.
Research and
development
Research and
development expenses
Research Antibodies
Responsibility statement
Revenues
Revenue recognition
Risks
Risk management
60
111
142
59
106
72 et seq.
72, 87
109, 140 et seq.
Index / List of Figures and Tables
155
List of Figures and Tables
s
fig.
Sales, general and
administrative expenses
60
Segment reporting
111 et seq.
Segment Research Antibodies
111
Segment Therapeutic Antibodies 5, 39
41, 47, 53, 56, 66, 76, 78, 80
9
Shareholder structure
Shareholdings, Management
and Supervisory Boards
Share price development
Share, repurchase
Social responsibility
Statements of changes in
shareholders’ equity
Stock-based compensation
Stock options
Subsequent events
Subsidiaries
Supervisory Board
Sustainability
100
60, 107
84 et seq., 132 et seq.
77
104 et seq.
145 et seq.
66
136
9
85, 134
66
t
Taxes
Trading volumes
Trainee position
Training
w
WACC
WpHG
61
9
71
68 et seq.
110, 124, 125
84, 92
fig. 1: Organizational Structure of the MorphoSys Group
fig. 2: Worldwide Locations of the MorphoSys Group
fig. 3: Clinical Pipeline at Year-End
fig. 4: Overview of MorphoSys’s Latest Technologies
fig. 5: Total Headcount of the MorphoSys Group
fig. 6: Occupational Safety at MorphoSys AG
fig. 7: Quality Management Systems at MorphoSys
fig. 8: Workforce by Gender in 2011 (2010)
fig. 9: MorphoSys’s Risk Management System (RMS)
fig. 10: Risk Evaluation by MorphoSys
fig. 11: MorphoSys’s Compliance System
fig. 12: Risk-Based Internal Audit Plan
tab.
tab. 1: Top 5 Monoclonal Antibody Drugs
tab. 2: Partnered Discovery Segment’s Share of Total Revenues
tab. 3: Market Data on Selected Partnered Programs in Clinical Phase 2
tab. 4: Development of Financial Performance Indicators
tab. 5: Employees by Region
tab. 6: Employees by Segment and Function
tab. 7: Split of R&D Expenses
tab. 8: Multiple-Year Overview – Results of Operations
tab. 9: Multiple-Year Overview – Financial Situation
tab. 10: Multiple-Year Overview – Balance Sheet Structure
tab. 11: Comparison of Actual Business Results with Forecasts
tab. 12: Absence Rates at MorphoSys
tab. 13: Composition of the Supervisory Board
tab. 14: Directors’ Dealings 2011
tab. 15a: Compensation of the Management Board 2011
tab. 15B: Compensation of the Management Board 2010
tab. 16: Compensation of the Supervisory Board
39
40
49
50
58
69
70
71
73
74
85
86
42
43
44
49
58
58
61
62
63
64
65
72
83
84
88
89
92
156
Imprint
morphosys aG
Lena-Christ-Str. 48
82152 Martinsried/Planegg
Germany
Phone: +49-89-89927-0
Fax: +49-89-89927-222
www.morphosys.com
concept and design
3st kommunikation GmbH, Mainz
Photos
Andreas Pohlmann, Munich
Karsten Thormaehlen, Frankfurt/Main
Marcus Pietrek, Düsseldorf
corporate communications and
investor relations
Phone: +49-89-89927-404
Fax: +49-89-89927-5404
Email: investors@morphosys.com
translation and editorial support
Finkom Gesellschaft für
Finanzkommunikation mbH, Usingen
Friedrichs & Friends, Hamburg
MC Services AG, Munich
typesetting and lithography
Knecht GmbH, Ockenheim
Printer
Westdeutsche Verlags- und Druckerei
GmbH, Mörfelden-Walldorf
copy deadline
March 15, 2012
(except financial statements)
This financial report is also published
in German and is available
for download from our website.
HuCAL®, HuCAL GOLD®,
HuCAL PLATINUM®, Ylanthia®, arYla®,
CysDisplay® and RapMAT® are registered
trademarks of MorphoSys AG.
Slonomics® is a registered trademark
of Sloning BioTechnology GmbH, a sub-
sidiary of MorphoSys AG.
Key Figures (IFRS)*
M o R p h o S y S G R o u p (in € million, if not stated otherwise)
12/31/11
12/31/10
12/31/09
12/31/08
12/31/07
12/31/06
12/31/05
12/31/04
12/31/03
program / partner
indication
discovery
preclinic
phase 1
phase 2
phase 3
Market
Results
Revenues
Cost of Goods Sold
R&D Expenses
S, G&A Expenses
Personnel Expenses
(Excluding Stock-based Compensation)
Capital Expenditure
Depreciation
Amortization of Intangible Assets
Profit/(Loss) from Operations
EBITDA
EBIT
Net Profit/(Loss)
Bal ance shee t
Total Assets
Cash, Cash Equivalents and
Available-for-sale Financial Assets
Intangible Assets
Total Liabilities
Stockholders' Equity
Equity Ratio (in%)
MoRphosys shaRe
100.8
7.0
57.5
24.6
35.3
3.6
2.4
4.3
12.2
18.0
11.1
8.2
87.0
7.3
46.9
23.2
29.6
13.8
2.1
4.0
9.8
19.2
13.1
9.2
81.0
6.7
39.0
23.9
26.1
3.8
1.6
3.8
11.4
18.1
12.8
9.0
71.6
7.1
27.6
20.5
21.5
3.8
1.5
4.8
16.4
21.9
16.5
13.2
62.0
7.9
22.2
24.8
18.8
12.0
1.5
3.7
7.0
13.3
8.3
11.5
53.0
8.0
17.5
21.4
33.5
2.5
14.0
10.8
18.1
10.8
4.0
1.5
3.4
6.2
10.3
5.4
6.0
0.7
0.9
2.7
6.2
8.6
5.3
4.7
22.0
0.91)
11.41)
7.51)
9,1
1,7
0,7
2,0
0,6
3,2
0,5
0,3
15.3
-
9.01)
7.21)
7.5
0.7
0.5
1.5
(3.1)
(0.4)
(2.5)
(3.1)
228.42)
209.82)
206.1
203.3
184.7
127.8
80.1
55.8
42.9
134.4
66.0
31.32)
197.1
86%
108.4
69.2
23.92)
185.9
89%
135.1
17.4
32.2
173.9
84%
137.9
19.7
41.3
162.0
80%
106.9
22.3
39.2
145.5
79%
66.0
14.8
27.8
100.1
78%
53.6
12.4
16.1
64.0
80%
37.2
12.8
16.4
39.4
71%
23.2
14.5
15.6
27.3
64%
Number of Shares Issued
23,112,167 22,890,252 22,660,557 22,478,787 22,160,259 20,145,966 18,077,589 16,316,556 14,703,996
Financial Calendar
March 1, 2012
Publication of 2011 Year End Results
May 4, 2012
Publication of 2012 Three Months’ Report
May 31, 2012
2012 Annual Shareholders’ Meeting in Munich
August 2, 2012
Publication of 2012 Six Months’ Report
November 7, 2012 Publication of 2012 Nine Months’ Report
G
A
s
y
S
o
h
p
r
o
M
1
1
0
2
t
r
o
p
e
R
l
a
u
n
n
A
ExplorE... Annual Report 2011
Product Pipeline
M o R p h o S y S’ S p R o d u c t p i p e l i n e A S o f d e c e M b e R 31, 2011
Rheumatoid arthritis
Multiple sclerosis
Multiple myeloma
Chronic lymphocytic
leukemia
MOR103
MOR202
MOR208
Early-stage Programs
MorphoSys/Novartis
CNTO888/Janssen Biotech
Cancer
Idiopathic pulmonary fibrosis
CNTO1959/Janssen Biotech
Psoriasis
Novartis
BHQ880/Novartis
BYM338/Novartis
not. discl.
Cancer
Musculoskeletal
Gantenerumab/Roche
Alzheimer’s disease
BAY94-9343/Bayer
Boehringer Ingelheim
Cancer
not. discl.
CNTO3157/Janssen Biotech
Asthma
Janssen Biotech
Novartis
Novartis
OMP-18R5/Oncomed
OMP-59R5/Oncomed
Pfizer
24 Partnered Programs
28 Partnered Programs
Inflammation
Ophthalmology
Inflammation
Cancer
Cancer
Cancer
6 proprietary programs
2 pre-development programs
68 partnered programs
0.40
-
0.40
-
0.59
-
0.53
-
0.31
-
0.28
-
0.02
(0.24)
-
Earnings/(Loss) per Share, Diluted (in €)
Dividend (in €)
Share Price (in €)
peRsonnel Data
Total Group Employees (Number)
Germany (Number)
Other Countries (Number)
0.36
-
17.53
446
352
94
18.53
17.04
18.75
16.10
18.12
13.77
12.70
464
370
94
404
301
103
334
236
98
295
192
103
279
183
96
172
145
27
132
132
-
-
3.71
95
95
-
* MorphoSys is publishing its consolidated financial statements in accordance with IFRS since 2003. In earlier periods, the Company reported according to US GAAP.
1) Excluding stock-based compensation
2) In 2011, a deferred tax asset in the amount of € 2.3 million has been offset with a deferred tax liability for better transparency. Both deferred tax asset and deferred tax liability
relate to income taxes levied by the same tax authority on the same taxable entity. To provide comparative information, prior year’s deferred tax asset and deferred tax liability
(€ 2.8 million) – and thus total assets as well as total liabilities and stockholders’ equity – have been adjusted accordingly.
MorphoSys AG
Lena-Christ-Str. 48
82152 Martinsried / Planegg
Germany
Phone: +49-89-89927- 0
Fax:
+49-89-89927-222
www.morphosys.com
Key Figures (IFRS)*
M o R p h o S y S G R o u p (in € million, if not stated otherwise)
(Excluding Stock-based Compensation)
18.1
10.8
Results
Revenues
Cost of Goods Sold
R&D Expenses
S, G&A Expenses
Personnel Expenses
Capital Expenditure
Depreciation
EBITDA
EBIT
Net Profit/(Loss)
Bal ance shee t
Total Assets
Intangible Assets
Total Liabilities
Stockholders' Equity
Equity Ratio (in%)
MoRphosys shaRe
Amortization of Intangible Assets
Profit/(Loss) from Operations
Cash, Cash Equivalents and
Available-for-sale Financial Assets
Earnings/(Loss) per Share, Diluted (in €)
Dividend (in €)
Share Price (in €)
peRsonnel Data
Total Group Employees (Number)
Germany (Number)
Other Countries (Number)
100.8
7.0
57.5
24.6
35.3
3.6
2.4
4.3
12.2
18.0
11.1
8.2
134.4
66.0
31.32)
197.1
86%
0.36
-
17.53
446
352
94
87.0
7.3
46.9
23.2
29.6
13.8
2.1
4.0
9.8
19.2
13.1
9.2
81.0
6.7
39.0
23.9
26.1
3.8
1.6
3.8
11.4
18.1
12.8
9.0
71.6
7.1
27.6
20.5
21.5
3.8
1.5
4.8
16.4
21.9
16.5
13.2
62.0
7.9
22.2
24.8
18.8
12.0
1.5
3.7
7.0
13.3
8.3
11.5
53.0
8.0
17.5
21.4
4.0
1.5
3.4
6.2
10.3
5.4
6.0
108.4
69.2
23.92)
185.9
89%
135.1
17.4
32.2
173.9
84%
137.9
19.7
41.3
162.0
80%
106.9
22.3
39.2
145.5
79%
66.0
14.8
27.8
100.1
78%
464
370
94
404
301
103
334
236
98
295
192
103
279
183
96
33.5
2.5
14.0
10.8
0.7
0.9
2.7
6.2
8.6
5.3
4.7
53.6
12.4
16.1
64.0
80%
0.28
-
172
145
27
22.0
0.91)
11.41)
7.51)
9,1
1,7
0,7
2,0
0,6
3,2
0,5
0,3
37.2
12.8
16.4
39.4
71%
-
-
132
132
15.3
-
9.01)
7.21)
7.5
0.7
0.5
1.5
(3.1)
(0.4)
(2.5)
(3.1)
23.2
14.5
15.6
27.3
64%
-
3.71
95
95
-
Number of Shares Issued
23,112,167 22,890,252 22,660,557 22,478,787 22,160,259 20,145,966 18,077,589 16,316,556 14,703,996
0.40
-
0.40
-
0.59
-
0.53
-
0.31
-
0.02
(0.24)
18.53
17.04
18.75
16.10
18.12
13.77
12.70
228.42)
209.82)
206.1
203.3
184.7
127.8
80.1
55.8
42.9
* MorphoSys is publishing its consolidated financial statements in accordance with IFRS since 2003. In earlier periods, the Company reported according to US GAAP.
1) Excluding stock-based compensation
2) In 2011, a deferred tax asset in the amount of € 2.3 million has been offset with a deferred tax liability for better transparency. Both deferred tax asset and deferred tax liability
relate to income taxes levied by the same tax authority on the same taxable entity. To provide comparative information, prior year’s deferred tax asset and deferred tax liability
(€ 2.8 million) – and thus total assets as well as total liabilities and stockholders’ equity – have been adjusted accordingly.
12/31/11
12/31/10
12/31/09
12/31/08
12/31/07
12/31/06
12/31/05
12/31/04
12/31/03
program / partner
indication
discovery
preclinic
phase 1
phase 2
phase 3
Market
Financial Calendar
March 1, 2012
Publication of 2011 Year End Results
May 4, 2012
Publication of 2012 Three Months’ Report
May 31, 2012
2012 Annual Shareholders’ Meeting in Munich
August 2, 2012
Publication of 2012 Six Months’ Report
November 7, 2012 Publication of 2012 Nine Months’ Report
G
A
s
y
S
o
h
p
r
o
M
1
1
0
2
t
r
o
p
e
R
l
a
u
n
n
A
ExplorE... Annual Report 2011
Product Pipeline
M o R p h o S y S’ S p R o d u c t p i p e l i n e A S o f d e c e M b e R 31, 2011
Rheumatoid arthritis
Multiple sclerosis
Multiple myeloma
Chronic lymphocytic
leukemia
MOR103
MOR202
MOR208
Early-stage Programs
MorphoSys/Novartis
CNTO888/Janssen Biotech
Cancer
Idiopathic pulmonary fibrosis
CNTO1959/Janssen Biotech
Psoriasis
Novartis
BHQ880/Novartis
BYM338/Novartis
not. discl.
Cancer
Musculoskeletal
Gantenerumab/Roche
Alzheimer’s disease
BAY94-9343/Bayer
Boehringer Ingelheim
Cancer
not. discl.
CNTO3157/Janssen Biotech
Asthma
Janssen Biotech
Novartis
Novartis
OMP-18R5/Oncomed
OMP-59R5/Oncomed
Pfizer
24 Partnered Programs
28 Partnered Programs
Inflammation
Ophthalmology
Inflammation
Cancer
Cancer
Cancer
6 proprietary programs
2 pre-development programs
68 partnered programs
MorphoSys AG
Lena-Christ-Str. 48
82152 Martinsried / Planegg
Germany
Phone: +49-89-89927- 0
Fax:
www.morphosys.com
+49-89-89927-222