MorphoSys Annual Report 2015

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FY2015 Annual Report · MorphoSys

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Annual Report 2015
Engineering the Medicines
of Tomorrow

M O S T A D V A N C E D
D E V E L O P M E N T S TA G E

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Product Pipeline

MorphoSys’s Product Pipeline, as of December 31, 2015

M O S T A D V A N C E D
D E V E L O P M E N T S TA G E

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P R O G R A M / P A R T N E R
I N D I C AT I O N

Bimagrumab/BYM338 ( Novartis)
sIBM (musculoskeletal)

Guselkumab/CNTO1959 (Janssen/J&J)
Psoriasis

Gantenerumab (Roche)
Alzheimer’s disease

MOR208 (not partnered)
CLL, NHL

MOR202 (not partnered)
Multiple myeloma

MOR103/GSK3196165 ( GlaxoSmithKline)
Rheumatoid Arthritis (RA)

Anetumab Ravtansine/BAY94-9343 (Bayer)
Mesothelioma

BHQ880 (Novartis)
Multiple myeloma

BPS804 (Mereo/Novartis)
Brittle bone syndrome

CNTO3157 (Janssen/J&J)
Inﬂ ammation

CNTO6785 (Janssen/J&J)
Inﬂ ammation

LFG316 (Novartis)
Eye diseases

LJM716 (Novartis)
Cancer

Tarextumab/OMP-59R5 (OncoMed)
Solid tumors

VAY736 (Novartis)
Inﬂ ammation

MOR209/ E S 414 (Emergent)
Prostate cancer

P R O G R A M / P A R T N E R
I N D I C AT I O N

BAY1093884 (Bayer)
Hemophilia

BI-836845 (BI)
Solid tumors

NOV-7 (Novartis)
Eye diseases

NOV-8 (Novartis)
Inﬂ ammation

NOV-9 (Novartis)
Diabetic eye diseases

NOV-10 (Novartis)
Cancer

NOV-11 (Novartis)
Blood disorders

PF-05082566 (Pﬁ zer)
Solid tumors

Vantictumab/OMP-18R5 (OncoMed)
Solid tumors

MOR106 ( Galapagos)
Inﬂ ammation

MOR107/ L P2 (not partnered)
Fibrosis

25 partnered programs
Various

Immuno-oncology program (Merck Serono)
Cancer

Immuno-oncology program (Immatics)
Cancer

6 MOR programs
Various

43 partnered programs
Various

L E G E N D :

m o r p r o g r a m

o u t - l i c e n s e d m o r p r o g r a m

pa r t n e r e d d i s c o v e r y p r o g r a m

Product Pipeline

MorphoSys’s Product Pipeline, as of December 31, 2015

P R O G R A M / P A R T N E R

I N D I C AT I O N

Bimagrumab/BYM338 ( Novartis)

sIBM (musculoskeletal)

Guselkumab/CNTO1959 (Janssen/J&J)

Psoriasis

MOR103/GSK3196165 ( GlaxoSmithKline)

Rheumatoid Arthritis (RA)

Anetumab Ravtansine/BAY94-9343 (Bayer)

Gantenerumab (Roche)

Alzheimer’s disease

MOR208 (not partnered)

CLL, NHL

MOR202 (not partnered)

Multiple myeloma

Mesothelioma

BHQ880 (Novartis)

Multiple myeloma

BPS804 (Mereo/Novartis)

Brittle bone syndrome

CNTO3157 (Janssen/J&J)

Inﬂ ammation

CNTO6785 (Janssen/J&J)

Inﬂ ammation

LFG316 (Novartis)

Eye diseases

LJM716 (Novartis)

Cancer

Tarextumab/OMP-59R5 (OncoMed)

Solid tumors

VAY736 (Novartis)

Inﬂ ammation

MOR209/ E S 414 (Emergent)

Prostate cancer

P R O G R A M / P A R T N E R

I N D I C AT I O N

BAY1093884 (Bayer)

Hemophilia

BI-836845 (BI)

Solid tumors

NOV-7 (Novartis)

Eye diseases

NOV-8 (Novartis)

Inﬂ ammation

NOV-9 (Novartis)

Diabetic eye diseases

NOV-10 (Novartis)

Cancer

NOV-11 (Novartis)

Blood disorders

PF-05082566 (Pﬁ zer)

Solid tumors

Vantictumab/OMP-18R5 (OncoMed)

Solid tumors

MOR106 ( Galapagos)

Inﬂ ammation

MOR107/ L P2 (not partnered)

Fibrosis

25 partnered programs

Various

Immuno-oncology program (Merck Serono)

Immuno-oncology program (Immatics)

Cancer

6 MOR programs

Various

43 partnered programs

Various

L E G E N D :

m o r p r o g r a m

o u t - l i c e n s e d m o r p r o g r a m

pa r t n e r e d d i s c o v e r y p r o g r a m

M O S T A D V A N C E D

D E V E L O P M E N T S TA G E

M O S T A D V A N C E D

D E V E L O P M E N T S TA G E

103

Programs in Total

Out-licensed Program

Proprietary Programs

Partnered Discovery Programs

Clinical Product Candidates

in Phase 1

in Phase 2

in Phase 3

In addition, 8 proprietary programs and 43 partnered discovery programs are in discovery stage,
2 proprietary and 25 partnered discovery programs are in preclinic.

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103

Programs in Total

Outlicensed Program

Proprietary Programs

Partnered Discovery Programs

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Clinical Product Candidates

in Phase 1

in Phase 2

in Phase 3

In addition, 8 proprietary programs and 43 partnered discovery programs are in discovery stage,
2 proprietary and 25 partnered discovery programs are in preclinic.

Engineering the
Medicines
of Tomorrow

Our mission is to build the most valuable pipeline of biopharmaceuticals
in the biotechnology industry. We are driven by an ambition to develop excep-
tional new treatments for patients suffering from serious diseases. Innovative
technologies and smart development strategies are central to our approach.
Success is based on our people living the Company’s core values. By focusing
on inno vation, collaborating closely across disciplines, and moving quickly,
we can make the medicines of tomorrow a reality.

CONTENTSMorphoSys
at a glance

Figures, data, facts (as of December 31, 2015)

P R O G R A M S I N
discovery

P R O G R A M S I N
phase 1

P R O G R A M S I N
preclinic

P R O G R A M S I N
phase 2

P R O G R A M S I N
phase 3

>50

active clinical studies

>10,000

patients
have been and are going to be treated in the
near future with MorphoSys antibodies
in clinical trials

>35

partnerships
with leading pharmaceutical and biotechnology
companies as well as research organizations

Increase in R&D expenses
F R O M 2 0 0 5 T O 2 015 I N T O TA L

479%

€ million

56.0

€ million

78.7

€ million

13.6

2005

2014

2015

13.5

years
average period from project start through to
market approval

Project start

Market approval

4.5 years

discovery and
preclinic

9 years

clinical development

365

employees

F ROM

nations

52 %

oncology

Drug candidates
in clinical development
F O R T H E F O L L O W I N G I N D I C AT I O N S

27 %

autoimmune and
inflammatory diseases

11 %

musculoskeletal
diseases

6 %

eye
diseases

4%
neurological
diseases

CONTENTS
Nearly one million people
worldwide were
diagnosed with blood
cancer in 2015.

our rese arch: fighting blood cancer

Learn more in our Online Magazine

CONTENTSAntibodies attack
blood cancer cells in
a targeted manner.

our antibody mor 2 0 8: mode of action

Learn more in our Online Magazine

CONTENTS
New developments
in the treatment
of blood cancer bene
fiting patients.

the mor 2 0 8 antibody in clinical de v elopment

Learn more in our Online Magazine

CONTENTS

A N N U A L R E P O R T 2 0 1 5
Contents

Contents

A N N U A L R E P O R T 2 0 1 5
Contents

t h e c o m pa n y
Management Board of MorphoSys AG
Letter to the Shareholders

g r o u p m a n ag e m e n t r e p o r t
Operations and Business Environment
Analysis of Net Assets, Financial Position and
Results of Operations
Outlook and Forecast
Shares and the Capital Market
Sustainable Business Development
Risk and Opportunity Report
Statement on Corporate Governance and
Corporate Governance Report
Subsequent Events

S
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12
12

33
41
45
48
53

61
83

f i n a n c i a l s tat e m e n t s
Consolidated Statement of Income (IFRS)
86
87
Consolidated Statement of Comprehensive Income (IFRS)
Consolidated Balance Sheet (IFRS)
88
Consolidated Statement of Changes in Stockholders’ Equity (IFRS) 90
92
Consolidated Statement of Cash Flows (IFRS)
94
Notes
132
Responsibility Statement

a d d i t i o n a l i n f o r m at i o n
Auditor’s Report
Report of the Supervisory Board
Supervisory Board of MorphoSys AG
Senior Management Group of MorphoSys AG
Glossary
List of Figures and Tables
Imprint

133
134
138
140
142
145
146

T H E C O M P A N Y
Management Board of MorphoSys AG

Management Board
of MorphoSys AG

DR. SIMON MORONE Y
Chief Executive Officer

T H E C O M P A N Y
Management Board of MorphoSys AG

» Excellent progress over the last

JENS HOL S T EIN
Finanzvorstand

year means that today our pipeline
is broader and more mature than
ever before. The first therapeutic
antibodies are nearing market
approval, bringing us closer to a
productbased revenue stream.
Meanwhile, our proprietary develop
ment portfolio is expanding and
the two most advanced programs
are approaching decisive stages
of clinical development. Across our
entire pipeline, we see many pro
grams with outstanding therapeu
tic potential, to the benefit of all
of our stakeholders, not least the
patients who they will help. «

Letter to the Shareholders

T H E C O M P A N Y
Management Board of MorphoSys AG

Management Board
of MorphoSys AG

Letter to the Shareholders

I am very pleased to present our 2015 Annual Report following a year of solid progress for
MorphoSys. Comprising 103 programs in 60 active clinical trials, our product pipeline – the
primary source of the Company’s value – is broader and more mature than ever before. The
first therapeutic antibodies are nearing market approval, bringing us closer to a product-based
revenue stream that we expect to grow significantly in the years ahead. Meanwhile, our propri-
etary development portfolio is expanding and the two most advanced programs are approach-
ing the decisive stage of clinical development. Across our entire pipeline, we see many pro-
grams which have the potential to transform the treatment of the diseases they address, to the
benefit of all of our stakeholders, not least, the patients who they will help.

DR. SIMON MORONE Y
Vorstandsvorsitzender

MOR208 is our most advanced proprietary program and our key focus. We are developing this
antibody to treat B cell malignancies and are aiming to offer patients in this area of substantial
unmet medical need a new, effective and durable treatment option. In the past year, MOR208
has delivered compelling phase 2 clinical data in two indications, confirming the progress we
are making and the outstanding potential of the program. Based on our findings, we have
initiated a campaign of several clinical studies to drive MOR208’s development forward in the
settings where it can make the greatest difference to current medical practice. At the center
of this campaign are two studies in diffuse large B cell lymphoma, one of which we expect to
transition directly into phase 3 in 2017. This could become the first pivotal study within our
proprietary development activities and would mark yet another major milestone in the history
of MorphoSys. Chronic lymphocytic leukemia is a second focus indication for MOR208, spe-
cifically in patients who no longer respond to ibrutinib, for whom the prognosis is very poor. In
both of these indications, the medical need is great, and the options are few.

T H E C O M P A N Y
Management Board of MorphoSys AG

MOR202, our second clinical antibody for blood cancers, also made encouraging progress in
the reporting year. Despite an unexpected setback in March 2015 when our partnership with
Celgene ended, we reported very encouraging clinical data in December. Based on all the effi-
cacy and safety data we have collected so far, MOR202 is shaping up to be a genuine advance
in the treatment of multiple myeloma.

JENS HOL S T EIN
Finanzvorstand

The two most advanced programs in our proprietary development portfolio were augmented
in 2015 by a third clinical candidate, MOR209/ES414. This bispecific antibody is being devel-
oped to treat prostate cancer, in partnership with the U.S. biotechnology company Emergent
BioSolutions. Shortly after MOR209/ES414 entered the clinic, our acquisition of Lanthio Pharma
brought us MOR107, a product of their highly innovative lanthipeptide platform, which we
aim to take into clinical trials in 2016. Furthermore, we are fast approaching the start of clinical
development of MOR106, an exciting antibody from our collaboration with Galapagos. By
year-end 2016, our Proprietary Development segment could comprise six clinical programs,
which would be an all-time high, and validation of our efforts to build a sustainable thera-
peutic portfolio.

As we advance our proprietary programs, we are nearing the first market introductions of prod-
ucts emerging from our partnered discovery alliances. Novartis’s bimagrumab could become
the first therapeutic antibody to reach the market from our proprietary HuCAL platform. In the
first half of this year, we expect decisive phase 3 data with this agent in sporadic inclusion
body myositis – a rare disease for which there is no effective treatment. We are also looking for-
ward to phase 3 results for guselkumab, a HuCAL antibody for the treatment of psoriasis,
being developed by Janssen. As I write this, there are 89 programs in our Partnered Discovery
segment, 12 of which are in phase 2 or phase 3 clinical development.

T H E C O M P A N Y
Management Board of MorphoSys AG

Management Board
of MorphoSys AG

MorphoSys has entered a very exciting stage of its corporate development. Over the past several
years you have seen us progress from being one of the leading providers of antibody technology
to become a drug discovery and development organization with a highly attractive therapeutic
portfolio. Our proprietary development programs, led by our cancer antibody MOR208, are now
approaching an important stage of development and now is the time to scale our investment
to ensure that we capture the full value of our portfolio. Our long-term ambition is to become
a fully-integrated, commercial biopharmaceutical company marketing its own products. We
are convinced that this is how we can best build substantial value for our stakeholders and are
well-positioned to execute this strategy.

DR. SIMON MORONE Y
Vorstandsvorsitzender

Since the beginning of 2016, MorphoSys’s shares and those of many other biotechnology
companies have been affected by the tremendous volatility that has hit stock markets globally.
Nevertheless, MorphoSys, with financial resources of EUR 298 million at the end of the
reporting year, is in a position of strength. Our solid financial foundation, combined with
our well-known disciplined approach to investment, provides a firm basis from which we
can build future value.

T H E C O M P A N Y
Management Board of MorphoSys AG

We owe our success to the efforts of our highly dedicated employees. I would like to thank them
for their consistent hard work on behalf of the MorphoSys Management Board and all of our
important stakeholders, including our partners, investors, and, increasingly, patients. I would
also like to thank you, our shareholders, for your continued support. I am sure you will join
JENS HOL S T EIN
me in wishing our Company a successful 2016.
Finanzvorstand

DR. SIMON MORONEY
Chief Executive Officer

T H E C O M P A N Y
Management Board of MorphoSys AG

Management Board
of MorphoSys AG

» With financial resources of close
to EUR 300 million at yearend
2015, MorphoSys continues to
operate from a position of
strength. Our solid financial base
has been the foundation for
MorphoSys’s successful develop
ment over the years, allowing
us to continue making targeted
investments and grow the Com
pany’s value without losing sight
of our prudent and efficient use
of resources. «

DR. SIMON MORONE Y
Vorstandsvorsitzender

T H E C O M P A N Y
Management Board of MorphoSys AG

JENS HOL S T EIN
Chief Financial Officer

T H E C O M P A N Y
Management Board of MorphoSys AG

DR. MARL IE S SPROL L
Chief Scientific Officer

T H E C O M P A N Y
Management Board of MorphoSys AG

» During 2015, our product pipeline

DR. ARND T S CHO T T EL IUS
Chief Development Officer

became broader and more mature
than ever before. Our partnered
programs are on the cusp of reap
ing the first rewards of our long
time efforts. In 2016, Novartis’s
bimagrumab and Janssen’s gusel
kumab will be the first HuCAL anti
bodies to deliver phase 3 data, and
we may see the first MorphoSys
antibody reach the market before
yearend – another exciting year
is lying ahead. «

T H E C O M P A N Y
Management Board of MorphoSys AG

DR. MARL IE S SPROL L
Chief Scientific Officer

» In 2015 we generated encouraging
clinical data with our proprietary
cancer agents. We are now expand
ing these programs and moving
them, stepbystep, towards ap
proval and commercial viability.
At the center of this campaign will
be the start of three combination
studies with our most advanced
antibody MOR208 in DLBCL and CLL
in 2016, one of which is expected
to progress directly into a pivotal
study next year, marking yet an
other major milestone in the history
of MorphoSys. «

T H E C O M P A N Y
Management Board of MorphoSys AG

DR. ARND T S CHO T T EL IUS
Chief Development Officer

G R O U P M A N A G E M E N T R E P O R T
Contents

Group
Management
Report

G R O U P M A N A G E M E N T R E P O R T
Contents

1 Operations and Business Environment
2

Analysis of Net Assets, Financial Position and
Results of Operations
3 Outlook and Forecast
4
5
6 Risk and Opportunity Report
7

Shares and the Capital Market
Sustainable Business Development

Statement on Corporate Governance and
Corporate Governance Report
Subsequent Events

33
41
45
48
53

61
83

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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

During the 2015 financial year, MorphoSys vigorously pursued
its strategy of building a broad and advanced pipeline of valuable
biopharmaceutical compounds. The Company’s emphasis is in-
creasingly shifting towards the development of proprietary drug
candidates. During the financial year we presented promising
results from our antibody programs MOR208 and MOR202 in
several hematological indications. Our partnered discovery
programs also delivered positive performance and generated
solid success-based revenues. Two of these compounds are
expected to deliver decisive clinical data in 2016, which could
lead to the first regulatory approvals of antibodies based on
MorphoSys’s technology. After the end of the partnership with
Celgene in March 2015 MorphoSys continued the clinical
development of MOR202 independently and went on to publish
compelling clinical data by year-end. We have initiated an
ambitious investment program for 2016 so that we can further
accelerate the clinical development of our proprietary candi-
dates MOR208, MOR202 and MOR209/ES414 and begin clinical
development of MOR106 and MOR107. This will mark another
step forward on our path to becoming a fully integrated, commercial
biopharmaceutical company with our own products on the market.

G R O U P M A N A G E M E N T R E P O R T
Operations and Business Environment

Operations and Business Environment

Strategy and Group Management

S T RAT EGY AND OBJEC T IVES
MorphoSys’s goal is to build the most valuable biopharmaceutical
pipeline in the biotech industry. In line with this goal, the Com-
pany is successfully transitioning from a technology provider to a
drug development organization. The Company’s powerful technol-
ogy platform for generation of therapeutic antibodies has led to
more than 100 drug candidates in development, three of which are
in phase 3 studies. The majority of development programs are con-
ducted in partnership with pharmaceutical and biotechnology
companies. The revenues generated from these partnerships are
used to expand MorphoSys’s proprietary development portfolio.
This segment, which currently comprises 14 programs, is gaining
in importance and builds on top of an even bigger pipeline of pro-
grams generated on behalf of partners. With so many development
programs ongoing, any potential setbacks that may arise during
the lengthy drug development process can be compensated and
the value of our technology can be maximized.

The Proprietary Development segment is focused on developing
therapeutic agents based on the Company’s proprietary technol-
ogy platforms as well as candidates in-licensed from other compa-
nies. During clinical development, the Company decides whether
and at which point it will pursue a partnership for later develop-
ment and commercialization. The drug candidate can then be either
completely out-licensed or developed further in cooperation with a
pharmaceutical or biotechnology company (co-development). In se-
lected cases, individual projects may be developed on a proprietary
basis until they are ready for commercialization.

In the Partnered Discovery segment, MorphoSys’s role is limited to
generating antibody* candidates for partners in the pharmaceutical
and biotechnology industries. MorphoSys receives contractual pay-
ments including license fees for technologies and funded research
as well as success-based milestone payments and royalties* on
product sales. The funds generated from these partnerships sup-
port the Company’s long-term business model and help fund its
proprietary development activities.

Both segments are based on the Company’s innovative technolo-
gies. The foremost growth drivers are HuCAL*, the industry’s most
successful antibody library* measured by the number of clinical
development candidates it has produced and the follow-on plat-
form Ylanthia*, which is today’s largest known antibody library
based on antibody Fab fragments. Through the acquisition of the
biopharmaceutical company Lanthio Pharma B.V. in the reporting
year, MorphoSys added an innovative and complementary plat-
form of therapeutic peptides. Additionally, the Company uses its
financial resources to expand and deepen its technological base,
for example through in-licensing.
*S E E G L O S S A R Y – page 142

Along with investing in proprietary development and new technol-
ogies, MorphoSys supplements its long-term growth by in-licens-
ing. The in-licensed programs MOR208 and MOR209/ES414 and
the acquisition of Lanthio Pharma are good examples of how we
are successfully implementing this strategy.

The Company’s goal is to maximize the portfolio’s full value by
investing in proprietary drug candidates while maintaining finan-
cial discipline and strict cost control to ensure enterprise value
growth.

GROUP MANAGEMEN T AND PERF ORMANCE INDIC AT ORS
MorphoSys uses both financial as well as non-financial indicators
to steer the Group, monitor the success of strategic decisions and
give the Company the opportunity to take corrective action
promptly when necessary. Additionally, management monitors
and evaluates selected early indicators to thoroughly assess a
pro ject’s progress and act quickly if there are any undesirable
developments.

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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
Operations and Business Environment

FINANCIAL PERFORMANCE INDICATORS
Our financial performance indicators are described in detail in the
section “Analysis of Net Assets, Financial Position and Results of
Operations.” Revenues and earnings before interest and taxes
(EBIT) are the key financial indicators used to measure operational
business performance. The performance of the segments is re-
viewed monthly and the current financial year’s budget is revised
and updated on a quarterly basis. The Company prepares a mid-
term plan once a year that encompasses the following three years.
A thorough cost analysis is made regularly and is used to monitor
the Company’s adherence to financial targets and make compari-
sons with previous periods.

01 T A B L E

Development of Financial Performance Indicators 1

MorphoSys’s business performance is influenced by factors such
as milestone and license payments, research and development ex-
penses, other operating cash flows*, existing liquidity resources,
expected cash inflows and working capital. These indicators are
also routinely analyzed and evaluated with special attention being
given to the statement of income, existing and future liquidity
and available investment opportunities. The net present value of
investments is calculated using discounted cash flow models*.

in million €

2015

2014

2013

2012

2011

MORPHOSYS G ROUP

Revenues from continuing operations2

EBIT (Earnings before interest and taxes) from continuing operations3

PROPRIE TARY DE VELOPMENT

Segment revenues

Segment result

PARTNERED DISC OVERY

Segment revenues

Segment result

106.2

17.2

59.9

10.7

46.3

20.4

64.0

(5.9)

15.0

(18.4)

49.0

25.9

78.0

9.9

26.9

(0.5)

51.0

25.4

51.9

2.4

7.0

(11.0)

44.7

23.0

82.1

9.8

2.4

(32.2)

79.3

55.7

1 Differences due to rounding
2 Revenues from discontinued operations 2013 – 2011: 2013: € 0.6 million, 2012: € 17.7 million, 2011: € 18.7 million
3 Contains unallocated expenses (see also item 3.3 of the Notes): 2015: € 13.9 million, 2014: € 13.4 million, 2013: € 15.0 million, 2012: € 9.6 million, 2011: € 13.7 million

NON - FINANCIAL PERFORMANCE INDICATORS
Non-financial performance indicators are equally important for
managing the Company. For reporting purposes, MorphoSys uses
the Sustainable Development Key Performance Indicators (SD KPIs*)
recommended by the SD KPI standard that include success in pro-
prietary research and development (SD KPI 1) and achievements in
partnered programs as benchmarks for the commercialization
rate (SD KPI 2). In the past five years, there have been no product
recalls, fines or settlements as the result of product safety or prod-
uct liability disputes (SD KPI 3).
*S E E G L O S S A R Y – page 142

To secure its lead in the market for therapeutics, MorphoSys relies
on the steady progress of its product pipeline, not only in terms of
the number of therapeutic antibody candidates – 103 at the end of
the reporting year – but also based on the progress of its develop-
ment pipeline and prospective market potential. Since successful
products are based on superior technologies, another key perfor-
mance indicator is the progress of the Company’s technology de-
velopment. In addition to the quality of our research and develop-
ment, our professional management of partnerships is also at the
heart of our success. This refers to new contracts as well as the
continued strategic development of existing alliances. Details on
these performance indicators can be found in the section “Re-
search and Development and Business Development” (page 26).

G R O U P M A N A G E M E N T R E P O R T
Operations and Business Environment

The non-financial performance indicators described in the section
“Sustainable Business Development” (page 48) are also used to
manage the MorphoSys Group successfully.

02 T A B L E

Sustainable Development of Key Performance Indicators (SD KPIs) at MorphoSys (December 31)

PROPRIE TARY DE VELOPMENT (NUMBER OF INDIVIDUAL ANTIBODIES)

Programs in Discovery

Programs in Preclinic

Programs in Phase I

Programs in Phase II1

TOTAL1

PARTNERED DISC OVERY (NUMBER OF INDIVIDUAL ANTIBODIES)

Programs in Discovery

Programs in Preclinic

Programs in Phase I

Programs in Phase II

Programs in Phase III

TOTAL

R&D E XPENSES (IN MILLION € )

R&D Expenses on behalf of Partners

Proprietary Development Expenses

Expenses for Technology Development

TOTAL

1 Thereof one out-licensed program: MOR103, out-licensed to GSK

2015

2014

2013

2012

2011

22.1

54.1

2.5

78.7

19.6

33.5

2.9

56.0

17.5

27.5

4.2

49.2

16.0

18.1

3.6

37.7

19.1

33.9

2.9

55.9

LE ADING INDICATORS
MorphoSys monitors a variety of leading indicators for the macro-
economic environment, the industry and the Company itself on a
monthly basis. At the Company level, economic data is gathered
on the progress of the segments’ individual programs. MorphoSys
uses general market data from external financial reports as macro-
economic leading indicators. The Company carefully reviews these
reports and looks for information on industry transactions, changes
in the legal environment and the availability of research funds.

For active collaborations, there are joint steering committees that
meet regularly to update and monitor the programs’ progress.
These ongoing reviews give the Company a chance to intervene
early when there are any negative developments and provide it
with information on expected milestones and related payments
well in advance. Partners in non-active collaborations report to
MorphoSys regularly in writing so that we can follow the progress
of ongoing therapeutic programs.

2345678

G R O U P M A N A G E M E N T R E P O R T
Operations and Business Environment

The business development area uses market analyses to get an
indication of the market’s demand for new technologies. By con-
tinuously monitoring the market, MorphoSys can quickly respond
to trends and requirements and initiate its own activities or
partnerships.

Before a therapeutic product is developed, a target product profile*
(TPP) is created and continually updated during the development
process. This approach gives an early indication of the properties
the product needs to be successful in the market and answers im-
portant questions, such as the level of efficacy to be achieved and
whether development should be focused on improving the safety
profile or changing the drug candidate’s dosage form. The TPP also
includes a detailed description of how the product could be posi-
tioned in the market and the relevant patient groups. By continu-
ously monitoring the criteria and their fulfillment, the Company
can always take the key factors into account during product devel-
opment and respond promptly to any changes.

Business Activities

DRUG DEVEL OPMEN T
MorphoSys develops drugs using its own research and develop-
ment (R&D) and in cooperation with pharmaceutical and biotech-
nology partners. Our core business activity is developing new
treatments for patients suffering from serious diseases. The Com-
pany possesses one of the broadest pipelines in the biotechnology
industry and had a total of 103 individual therapeutic antibody
programs at the end of 2015, three of which are in phase 3 trials.

T ECHNOL OGIES
MorphoSys has developed a number of technologies that provide
direct access to fully human* antibodies for treating diseases. One
of the most widely known MorphoSys technologies is HuCAL,
which is a collection of billions of fully human antibodies and a
system for their optimization. Another is Ylanthia, which rep-
resents the next generation of antibody technology and is cur-
rently the largest known antibody library in Fab format* based on
an innovative concept for generating highly specific and fully
human antibodies. MorphoSys expects Ylanthia to influence the
pharmaceutical industry’s development of therapeutic antibodies
in this decade and beyond. Slonomics* gives MorphoSys a patented,
fully automated technology for gene synthesis and modification for
generating highly diverse gene libraries in a controlled process.
The lanthipeptide* technology developed by Lanthio Pharma B.V.,
and fully acquired in the reporting year, is a valuable addition to
our existing library of antibodies and opens up new possibilities
for discovering potential drugs based on stabilized peptides.
›› S E E F I G U R E 01 – Revenues of the MorphoSys Group by Segment
›› S E E F I G U R E 0 2 – MorphoSys’s Product Pipeline

PROPRIE TARY DEVEL OPMEN T
An important goal of MorphoSys is to increase enterprise value
through the proprietary development of innovative antibodies,
focusing on cancer and inflammatory diseases.

ONC OLOGY
The ability of monoclonal antibodies* to bind specific antigens* has
led to their dominant role in targeted cancer therapies. Referring
to a study by IMS Institute for Healthcare Informatics expenditure
in oncology is expected to amount up to US$ 83 – 88 billion world-
wide in 2016 and thus represent the largest therapy class in the
healthcare sector. Within this sector innovative biological thera-
pies show an important option for cancer treatment. The Company
is currently investing in the clinical development of three cancer
programs: MOR208, MOR202 and MOR209/ES414.

MOR208 is directed against the target* molecule CD19*, which is
of particular interest for many B cell malignancies. The market
research firm Decision Resources expects the therapeutic market
for the B cell malignancy non-Hodgkin’s lymphoma (NHL*) to
reach approximately US$ 10 billion in 2022. Current biological
therapies for the treatment of B cell malignancies, including the
blockbuster rituximab (trade name Rituxan®), obinutuzumab (trade
name Gazyva®), and ofatumumab (trade name Arzerra®) are di-
rected against the CD20* target molecule. Because the target
molecule CD19 is expressed on a larger number of B cell subtypes
in comparison to CD20, the CD19 antibodies may offer a better
therapeutic approach. The activity of MOR208 is enhanced by a
change in the constant Fc part* of the antibody, which leads to
higher antibody-dependent cell-mediated cytotoxicity (ADCC*)
and an improvement in antibody-dependent cellular phagocytosis
(ADCP*). The most advanced therapeutic approach against CD19 is
the bispecific* antibody blinatumomab (trade name Blincyto®),
which is approved for acute lymphoblastic leukemia (ALL*). Other
clinical programs directed against the same target molecule use
alternative approaches to increase the antibody’s efficacy, for ex-
ample, by coupling with toxic substances or changing the anti-
body’s glycosylation pattern. Another therapeutic approach against
CD19 is the CAR-T* technology. This therapy extracts a certain
type of immune cells (T cells*) from the patients’ blood that are
then altered outside of the body so that they can be better directed
to the patients’ tumor cells and kill them. When these T cells are
later re-administered into the patients’ blood via infusion, they
subsequently bind and destroy targeted cancer cells. Alternative
approaches using small molecules* are also being developed in
the field of B cell malignancies.
*S E E G L O S S A R Y – page 142

01 F I G U R E

T O TA L

MOR202 is currently being developed for the treatment of mul-
tiple myeloma* (MM) and is directed against the CD38* target
Revenues of the MorphoSys Group by Segment (in million €)
molecule. After MorphoSys regained its rights to MOR202 from
Celgene in March 2015, the Company continued developing MOR202
independently. Although MM is a relatively small area of oncology
in terms of frequency of occurrence, the MM market has shown
impressive growth. Significant achievements in clinical practice
and the introduction of effective new treatments have helped the
market expand. However, there is still untapped market potential
in terms of therapy forms that have better survival rates and lower
82.11
side effects compared to the compounds currently available. De-
spite significantly higher survival rates, the disease is seldom cur-
able and a majority of patients experience a relapse. This has in-
creased the attractiveness of alternative treatments, such as those
79.3
targeting CD38. The approval by the FDA* (Food and Drug Admin-
istration) in November 2015 of the CD38 antibody daratumumab
(trade name Darzalex®) validated this treatment approach.

78.01

51.91

51.0

49.0

44.7

7.0

2.4

26.9

2011

In March 2015, MorphoSys and Emergent BioSolutions announced
the commencement of a phase 1 clinical study to investigate the
safety, tolerability and clinical activity of MOR209/ES414 in pa-
tients suffering from metastatic castration-resistant prostate can-
cer (mCRPC*). MOR209/ES414 is a bispecific anti-PSMA/anti-CD3*
antibody based on Emergent’s ADAPTIR™ platform (modular pro-
tein technology). The immunotherapeutic protein* activates the
body’s T cell immune response against prostate cancer cells bear-
ing prostate specific membrane antigen (PSMA), an antigen com-
monly over-expressed in this tumor. The anti-CD3 binding do-
mains of the molecule selectively bind to the T cell receptor on
cytotoxic T cells, which become activated when the anti-PSMA
binding domains crosslink them to the cancer cells. Prostate cancer
is the most commonly occurring cancer in men with approximately
900,000 new cases annually worldwide. As preclinical* in vitro
and in vivo studies have shown, MOR209/ES414 redirects T cell
cytotoxicity towards prostate cancer cells expressing PSMA.

2013

2012

partnered disc ov ery
proprie tary de v elopment

G R O U P M A N A G E M E N T R E P O R T
Operations and Business Environment

INFL AMMATORY AND AUTOIMMUNE DISE ASES*
Chronic inflammatory and autoimmune diseases affect millions of
patients worldwide and impose an enormous social and economic
burden. The IMS Institute for Healthcare Informatics (IMS Health)
expects the global market for the treatment of autoimmune dis-
eases to reach US$ 33 – 36 billion in the year 2016.

64.0

106.2

MOR103, the antibody fully out-licensed by MorphoSys to
GlaxoSmithKline (GSK) in 2013, targets GM-CSF* (granulocyte
macrophage colony-stimulating factor) – a central factor in the
emergence of inflammatory diseases, such as rheumatoid arthri-
tis* (RA). The market for drugs treating rheumatoid arthritis has
tremendous commercial potential and biotechnologically produced
drugs already comprise the majority of this market’s total reve-
nue. The overall RA market is growing steadily and Datamonitor
expects that it will reach US$ 18 billion in the year 2020. MOR103
has the potential to become the first antibody in the anti-GM-CSF
antibody class of drugs. Comparable drugs currently in develop-
ment are targeted against the GM-CSF target molecule or the GM-
CSF receptor.

46.3

59.9

New mechanisms for treating inflammatory diseases are being
15.0
examined in cooperation with the Belgian company Galapagos NV
with the goal of developing new antibody therapies to treat these
diseases. MOR106 is the first drug candidate from this coopera-
tion to enter preclinical development and is scheduled to enter
clinical development in 2016. Under this alliance both partners
contribute their core technologies and expertise and have an equal
share in research and development costs and all future revenues.

2015

2014

The acquisition of the Dutch pharmaceutical company Lanthio
Pharma B.V. in May 2015 enhanced MorphoSys’s proprietary port-
folio with the addition of MOR107 (formerly LP2), a novel lanthi-
peptide in development for diabetic nephropathy* and fibrotic dis-
eases. MOR107 has demonstrated potent angiotensin II type 2
(AT2) receptor-dependent activity in preclinical in vivo studies.
*S E E G L O S S A R Y – page 142

1 Group revenues from continuing operations; Sale of AbD Serotec to Bio-Rad was announced
in 2012, and therefore respective revenues were reclassifi ed as discontinued operations in
accordance with IFRS 5

234567822

G R O U P M A N A G E M E N T R E P O R T
Operations and Business Environment

MorphoSys’s Product Pipeline (as of December 31, 2015)

02 F I G U R E

P R O G R A M / P A R T N E R
I N D I C AT I O N S

Bimagrumab ( Novartis)
sIBM* (RESILIENT)
sIBM* (extension study)
sIMB* (long-term study)
Hip fracture surgery
Cachexia (COPD)
Sarcopenia (dose-making)
Sarcopenia (extension study)

Before a therapeutic product is developed, a target product profile*
(TPP) is created and continually updated during the development
process. This approach gives an early indication of the properties
the product needs to be successful in the market and answers im-
portant questions, such as the level of efficacy to be achieved and
whether development should be focused on improving the safety
profile or changing the drug candidate’s dosage form. The TPP also
includes a detailed description of how the product could be posi-
Guselkumab (Janssen/J&J)
Psoriasis (VOYAGE 1)
tioned in the market and the relevant patient groups. By continu-
Psoriasis (VOYAGE 2)
ously monitoring the criteria and their fulfillment, the Company
Psoriasis (NAVIGATE)
can always take the key factors into account during product devel-
Pustular or erythrodermic psoriasis
opment and respond promptly to any changes.
Moderate to serious Plaque Psoriasis
Palmoplantar pustulosis
Active psoriatic arthritis

Business Activities

Gantenerumab (Roche)
Mild Alzheimer’s disease (Marguerite RoAD)
Prodromal Alzheimer’s disease
Genetically predisposed individuals (DIAN)

MOR208 ( Not partnered)
NHL*
CLL*

MOR202 ( Not partnered)
Multiple myeloma

MOR103/GSK3196165 ( GlaxoSmithKline)
Rheumatoid arthritis* (RA)

Anetumab Ravtansine (Bayer HealthCare)
Mesothelioma
Advanced malignancies (Japan)
Solid tumors
Advanced solid tumors

BHQ880 (Novartis)
Multiple myeloma (renal insuﬃ ciency)
Smoldering multiple myeloma

BPS804 (Mereo/Novartis)
Osteoporosis
Hypophosphatasia (HPP)
Brittle bone disease (OI)

CNTO6785 (Janssen/J&J)
COPD*
Rheumatoid arthritis* (RA)

CNTO3157 (Janssen/J&J)
Asthma
Safety/Pharmacokinetics

LFG316 (Novartis)
Age related macular degeneration
Geographic atrophy (combo with CLG561)
Panuveitis
Paroxysmal nocturnal hemoglobinuria

PH AS E 1 2 3 M1

PROPRIE TARY DEVEL OPMEN T
An important goal of MorphoSys is to increase enterprise value
through the proprietary development of innovative antibodies,
focusing on cancer and inflammatory diseases.

P R O G R A M / P A R T N E R
I N D I C AT I O N S

PH AS E 1 2 3 M1
ONC OLOGY
The ability of monoclonal antibodies* to bind specific antigens* has
LJM716 (Novartis)
led to their dominant role in targeted cancer therapies. Referring
ESCC*, combo with BYL719
HER2+ cancer
to a study by IMS Institute for Healthcare Informatics expenditure
(combo with BYL719 & trastuzumab)
in oncology is expected to amount up to US$ 83 – 88 billion world-
HER2+ cancer, combination with trastuzumab
wide in 2016 and thus represent the largest therapy class in the
Tarextumab (OncoMed)
healthcare sector. Within this sector innovative biological thera-
Pancreatic cancer (ALPINE)
pies show an important option for cancer treatment. The Company
Small cell lung cancer (PINNACLE)
is currently investing in the clinical development of three cancer
Solid tumors
programs: MOR208, MOR202 and MOR209/ES414.

MOR209/ E S 414 ( Emergent BioSolutions)
Metastatic, castration-resistant prostate
cancer (mCRPC*)

VAY736 (Novartis)
Pemphigus Vulgaris
MOR208 is directed against the target* molecule CD19*, which is
Primary Sjögren’s syndrome
Primary Sjögren’s syndrome
of particular interest for many B cell malignancies. The market
research firm Decision Resources expects the therapeutic market
for the B cell malignancy non-Hodgkin’s lymphoma (NHL*) to
reach approximately US$ 10 billion in 2022. Current biological
therapies for the treatment of B cell malignancies, including the
BAY1093884 (Bayer HealthCare)
blockbuster rituximab (trade name Rituxan®), obinutuzumab (trade
Bleeding disorders (hemophilia)
name Gazyva®), and ofatumumab (trade name Arzerra®) are di-
BI-836845 (Boehringer Ingelheim)
rected against the CD20* target molecule. Because the target
Solid tumors, Japanese patients
(EGFR*) Mutant Non-small Cell Lung Cancer
molecule CD19 is expressed on a larger number of B cell subtypes
Breast cancer
in comparison to CD20, the CD19 antibodies may offer a better
Castration-resistant Prostate Cancer
therapeutic approach. The activity of MOR208 is enhanced by a
(CRPC) + enzalutamide
change in the constant Fc part* of the antibody, which leads to
Various solid cancer
Advanced solid tumors
higher antibody-dependent cell-mediated cytotoxicity (ADCC*)
and an improvement in antibody-dependent cellular phagocytosis
(ADCP*). The most advanced therapeutic approach against CD19 is
the bispecific* antibody blinatumomab (trade name Blincyto®),
which is approved for acute lymphoblastic leukemia (ALL*). Other
clinical programs directed against the same target molecule use
alternative approaches to increase the antibody’s efficacy, for ex-
ample, by coupling with toxic substances or changing the anti-
body’s glycosylation pattern. Another therapeutic approach against
CD19 is the CAR-T* technology. This therapy extracts a certain
type of immune cells (T cells*) from the patients’ blood that are
then altered outside of the body so that they can be better directed
to the patients’ tumor cells and kill them. When these T cells are
PF-05082566 (Pfi zer)
Solid tumors, combination with avelumab
later re-administered into the patients’ blood via infusion, they
Solid tumors, NHL (+rituximab)
subsequently bind and destroy targeted cancer cells. Alternative
Solid tumors, combination with
approaches using small molecules* are also being developed in
PD-1 inhibitor MK-3475
the field of B cell malignancies.
Advanced solid tumors, combination
with mogamulizumab
*S E E G L O S S A R Y – page 142

NOV-9 (Novartis)
Diabetic eye disease

NOV-10 (Novartis)
Cancer

NOV-11 (Novartis)
Blood disorders

NOV-7 (Novartis)
Eye disease

NOV-8 (Novartis)
Infl ammation

Vantictumab (OncoMed)
Solid tumors
Breast cancer
Pancreatic cancer
Non-small-cell lung carcinoma

L E G E N D :

p r o p r i e ta r y p r o g r a m

o u t - l i c e n s e d p r o g r a m

pa r t n e r e d p r o g r a m 1 m a r k e t

*S E E G L O S S A R Y – page 142

G R O U P M A N A G E M E N T R E P O R T
Operations and Business Environment

MOR202 is currently being developed for the treatment of mul-
tiple myeloma* (MM) and is directed against the CD38* target
molecule. After MorphoSys regained its rights to MOR202 from
Celgene in March 2015, the Company continued developing MOR202
independently. Although MM is a relatively small area of oncology
in terms of frequency of occurrence, the MM market has shown
impressive growth. Significant achievements in clinical practice
and the introduction of effective new treatments have helped the
market expand. However, there is still untapped market potential
in terms of therapy forms that have better survival rates and lower
side effects compared to the compounds currently available. De-
spite significantly higher survival rates, the disease is seldom cur-
able and a majority of patients experience a relapse. This has in-
creased the attractiveness of alternative treatments, such as those
targeting CD38. The approval by the FDA* (Food and Drug Admin-
istration) in November 2015 of the CD38 antibody daratumumab
(trade name Darzalex®) validated this treatment approach.

New mechanisms for treating inflammatory diseases are being
examined in cooperation with the Belgian company Galapagos NV
with the goal of developing new antibody therapies to treat these
diseases. MOR106 is the first drug candidate from this coopera-
tion to enter preclinical development and is scheduled to enter
clinical development in 2016. Under this alliance both partners
contribute their core technologies and expertise and have an equal
share in research and development costs and all future revenues.

234567824

G R O U P M A N A G E M E N T R E P O R T
Operations and Business Environment

INFLUENCING FAC TORS
Many countries strive to provide proper medical care for the public
as the need for new forms of therapy continues to grow in the face
of demographic change. Cost-cutting could slow down the indus-
try’s development. As part of their austerity measures, govern-
ments in Europe, the United States and Asia have stepped up
their healthcare restrictions and are closely monitoring drug
reimbursement.

Generic competition, which is already common in the field of small
molecule drugs, now poses an increasing challenge to the biotech-
nology industry because of drug patent expiries. The technical
barriers for generic biopharmaceuticals, so-called biosimilars*,
will remain high. Nevertheless, many drug manufacturers, particu-
larly those from Europe and Asia, are now penetrating this market
and placing more competitive pressure on established biotech-
nology companies. In the US, the approval of biosimilars as an
alternative form of treatment has been very slow; however, they
are gaining more attention because of increasing pressure in the
healthcare sector to reduce costs. According to industry experts,
the global market for biosimilars is expected to reach US$ 20 bil-
lion in 2025.

PAR T NERED DISCOVERY
In the Partnered Discovery segment, MorphoSys applies technolo-
gies for the research, development and optimization of therapeutic
antibodies as drug candidates in partnership with pharmaceutical
and biotechnology companies. While the development costs are
borne by the respective partners, MorphoSys profits from research
financing, milestone payments and potential royalties on the sales
of products from successful programs.

The Company’s largest alliance to date is the strategic alliance
formed in 2007 with Novartis – a pharmaceutical partner with a
growing pipeline of biotechnologically developed drugs. This alli-
ance was expanded in 2012 through a supplementary cooperation
agreement under which the companies will collaborate on creating
therapeutic antibodies using MorphoSys’s next generation anti-
body platform Ylanthia in addition to HuCAL.

Developing drugs with partners gives MorphoSys the opportunity
to be involved in indications where it lacks proprietary expertise
and typically would not pursue a program on its own. Examples of
this include:

The HuCAL antibody bimagrumab, being developed by MorphoSys’s
partner Novartis for sporadic inclusion body myositis* (sIBM*)
and other muscle-wasting disorders, is one of the most promising
treatments in MorphoSys’s pipeline. This antibody is currently in
a phase 3 trial and received “breakthrough therapy designation”
from the US Food and Drug Administration (FDA*) and “orphan
drug designation” (in Europe and the USA) for sIBM. Novartis
announced that it may file for regulatory approval of this antibody
in 2016.

Guselkumab, a HuCAL antibody against psoriasis* developed by
MorphoSys’s partner Janssen, is currently in six phase 3 clinical
trials* and in a phase 2 trial in psoriatic arthritis. Data are ex-
pected from the first completed phase 3 trials in 2016, which could
lead to a filing for regulatory approval in 2016.
*S E E G L O S S A R Y – page 142

The HuCAL antibody gantenerumab, developed by MorphoSys’s
partner Roche, adds a promising treatment for Alzheimer’s dis-
ease to MorphoSys’s pipeline. This compound is being investi-
gated in three clinical studies to see if there is a positive effect
from intervening at an early stage in the disease’s progression. In
one of these studies, Roche is evaluating the compound in around
1,000 patients with mild Alzheimer’s disease. This study is ongo-
ing as an open label study, in which higher doses of gantenerumab
are being tested. A second trial with roughly 800 patients with
prodromal Alzheimer’s disease was converted into an open-label
study after being discontinued temporarily at the end of 2014. A
further study, run by the Dominantly Inherited Alzheimer Net-
work (DIAN), is assessing the safety, tolerability and biomarker
efficacy in individuals with a genetic predisposition to Alzheimer’s
disease. There are currently no drugs that fundamentally improve
the course of Alzheimer’s disease, which means there is still a very
high medical need for new treatment options in this indication.

G R O U P M A N A G E M E N T R E P O R T
Operations and Business Environment

03 T A B L E

Market Data from Selected Phase 3 Partnered Programs

Program name

MorphoSys partner

Indication

Market potential

Bimagrumab/BYM338

Novartis

Sporadic inclusion body
myositis, cachexia,
sarcopenia, muscle
wastage after hip
fracture surgery

Sporadic inclusion body myositis:
• Slowly progressive degenerative inflammatory disease of the

skeletal muscles with very low prevalence of 4.9 to 9.3/1,000,000
(orphan disease)

• No curative therapy available
• Indication’s peak sales potential: US$ 400 to 890 million
Cachexia:
• Emaciation through degradation of muscle and fatty tissue
• Indication’s peak sales potential: US$ 1.0 to 2.0 billion
Peak sales potential of all indications in clinical testing (sporadic
inclusion body myositis, cachexia, sarcopenia, muscular atrophy
after hip fracture surgery): US$ 2.6 to 4.9 billion

Guselkumab/CNTO1959

Janssen/J&J

Psoriasis,
psoriatic arthritis

Psoriasis:
• Lifelong disease with high morbidity; has a negative influence

on the quality of life

• Prevalence: 16 million patients1 in 2015
Psoriatic arthritis:
• Inflammatory joint disease, usually accompanied by psoriasis
• up to 30 % of psoriasis patients are affected
Peak sales potential (psoriasis, psoriatic arthritis): US$ 2.8 billion

1 Seven key markets: USA, Japan, France, Germany, Italy, Spain and Great Britain
Sources: Defined Health, Decision Resources, Medscape

Organizational Structure

ORGANIZAT ION OF T HE MORPHOSY S GROUP
The MorphoSys Group, consisting of MorphoSys AG and its subsid-
iaries, develops and commercializes high-quality antibodies for
therapeutic applications. The activities of the Group’s two business
segments are based on leading-edge proprietary technologies. The
Proprietary Development segment combines all of the Company’s
proprietary research and development of therapeutic compounds.
MorphoSys initially develops its proprietary and in-licensed com-
pounds independently with the option to bring them into partner-
ships or out-license them. The second business segment, Partnered
Discovery, uses MorphoSys’s cutting-edge technologies to make
human antibody-based therapeutics on behalf of partners in the
pharmaceutical industry. This segment encompasses all business
activities related to these collaborations and most of the techno-
logical development.

INNOVAT ION C API TAL*
MorphoSys started its Innovation Capital initiative to combine the
traditional investment approach of an industry partner with the
cooperative elements of compound development as flexibly as pos-
sible. Under this initiative, the Company intends to invest selec-
tively in promising start-ups who have products and technologies
that interest MorphoSys. Activities are focused on antibodies,
technologies to generate antibody-like structures (scaffolds*), pro-
teins and peptides.

The initiative set the stage for the acquisition of the Dutch pharma-
ceutical company Lanthio Pharma B.V. in May 2015. MorphoSys
had initially acquired a 19.98 % interest in the company in 2012
under the Innovation Capital initiative. In 2014, MorphoSys exer-
cised its option and acquired the technology and, in this past
financial year, went on to purchase all of the remaining shares
in Lanthio Pharma B.V., which is specialized in the research and
development of lanthipeptides*. Lanthipeptides are a novel class of
therapeutics demonstrating high target molecule selectivity* and
improved compound properties. This transaction adds MOR107
(formerly LP2) to MorphoSys’s proprietary portfolio and three
other earlier-stage molecules. MOR107 is a novel lanthipeptide
with potential to treat diabetic nephropathy and fibrotic diseases.
*S E E G L O S S A R Y – page 142

2345678

G R O U P M A N A G E M E N T R E P O R T
Operations and Business Environment

MorphoSys AG acquired the remaining interest in the Dutch bio-
pharmaceutical company Lanthio Pharma B.V., headquartered in
Groningen, the Netherlands, for a price of € 20.0 million on May 7,
2015. Prior to the acquisition, the Company held 19.98 % of
Lanthio Pharma B.V. The company Lanthio Pharma B.V. wholly
owns LanthioPep B.V., which is also headquartered in Groningen.
These companies were consolidated by the MorphoSys Group for
the first time as of May 7, 2015.

Poole Real Estate Ltd. was liquidated and the remaining assets
were distributed to MorphoSys AG as the sole shareholder on
December 9, 2015.

In the 2015 financial year, the Group maintained both the regis-
tered office of the parent company, MorphoSys AG, in Martinsried
near Munich and the registered office of Lanthio Pharma B.V. and
LanthioPep B.V. in Groningen, the Netherlands. The Martinsried
office houses the central Group functions such as accounting, con-
trolling, human resources, legal, patents, corporate communica-
tions and investor relations, as well as the Proprietary Develop-
ment and Partnered Discovery segments. The subsidiary Lanthio
Pharma B.V. and its subsidiary LanthioPep B.V. in Groningen, the
Netherlands, are largely autonomous and independently managed.
These subsidiaries have their own research and development labo-
ratories, general management and administration functions, as
well as human resources, accounting and business development
departments.

Research and Development and
Business Development

2015 BUSINESS PERF ORMANCE
MorphoSys strongly focuses its business activities on advancing
its therapeutic programs in research and development to increase
the Company’s enterprise value. The clinical development of pro-
prietary drug candidates is at the core of the Company’s focus. In
this context, the Company strives to gain access to novel disease-
specific target molecules, advanced product candidates and inno-
vative technology platforms to expand its proprietary development
pipeline. MorphoSys also participates in the development success
of its partners’ therapeutic programs. The first of these antibodies
based on MorphoSys’s technology are approaching the market.

To MorphoSys, the fundamental measures for success in pharma-
ceutical research and development include:
• industry partnerships which create a broad development pipe-
line, leverage the MorphoSys technology platform and/or enable
the commercialization of its therapeutic programs
• focused progression of its development programs
• clinical and preclinical results
• regulatory guidance of health authorities to pursue commercial-

ization of individual therapeutic programs

• robust patent protection to secure MorphoSys’s market position

Additional information on consolidated companies can be found in
the Notes (Item 2.2.1).

COL L ABORAT IONS AND PAR T NERSHIP S
New contracts and contract terminations in 2015 almost exclu-
sively involved the Proprietary Development segment.

L EGAL S T RUC T URE OF T HE MORPHOSY S GROUP :

GROUP MANAGEMEN T AND SUPERVISION
MorphoSys AG, a German stock corporation listed in the Prime
Standard segment of the Frankfurt Stock Exchange, is the parent
company of the MorphoSys Group. In accordance with the German
Stock Corporation Act, the Company has a dual management struc-
ture with the Management Board as the governing body whose
four members are appointed and supervised by the Supervisory
Board. The Supervisory Board is elected by the Annual General
Meeting and currently consists of six members. Detailed infor-
mation concerning the Group’s management and control and its
corporate governance principles can be found in the Corporate
Governance Report (page 67). The Senior Management Group,
made up of 20 managers from various departments, supports the
Management Board of MorphoSys AG.

At the end of March 2015, MorphoSys and Celgene Corporation
agreed to end the existing co-development and co-promotion
agreement for MOR202. Following this termination, MorphoSys
regained the rights to MOR202. We expect lucrative opportunities
to open up – such as a new partnership – provided that sufficiently
competitive clinical efficacy and safety data can be generated. The
Company is no longer entitled to receive royalties and milestone
payments announced under this alliance. MorphoSys is continuing
the compound’s clinical development as planned in a phase 1/2a
study in patients with relapsed/refractory multiple myeloma
with MOR202 alone and in combination with the compounds
lenalidomide and pomalidomide, which are provided to MorphoSys
by Celgene.

Active Clinical Studies with MorphoSys Antibodies (31 December)

03 F I G U R E

P HA SE

2011

2012

2013

2014

2015

G R O U P M A N A G E M E N T R E P O R T
Operations and Business Environment

MorphoSys concluded transactions with several industry part-
ners in 2015, including the purchase of the remaining shares in
the Dutch biopharmaceutical company Lanthio Pharma B.V. for
€ 20.0 million in May. This purchase added new development
candidates to the Company’s proprietary portfolio, including LP2
for various fibrotic diseases. Following the acquisition, LP2 was
renamed MOR107. MOR107 is a lanthipeptide with potential to
treat diabetic nephropathy and fibrotic diseases. Lanthipeptides
are a novel class of therapeutics demonstrating high target mole-
cule selectivity and drug-like properties. Their high specificity is
expected to open up new therapeutic applications with potential in
indications that are not usually targeted with antibodies. Prior to
the acquisition, MorphoSys held 19.98 % of Lanthio Pharma, which
it had acquired under its Innovative Capital initiative in 2012 as
part of Lanthio Pharma’s Series A funding.

In August 2015, MorphoSys and Swiss-based G7 Therapeutics AG
announced a new collaboration to develop novel antibody thera-
peutics targeting G protein-coupled receptors (GPCRs*) and other
potentially disease-related transmembrane proteins, such as
ion channels. Under this agreement, G7 Therapeutics will give
MorphoSys a choice of various receptors that can be linked to the
emergence of a variety of diseases. MorphoSys will use its propri-
etary Ylanthia antibody library to identify and develop antibodies
directed against these receptors. MorphoSys has the right to sub-
license access to these target molecules in conjunction with thera-
peutic antibody programs.

In August 2015, MorphoSys also announced a strategic alliance
in the field of immuno-oncology* with the German company
Immatics Biotechnologies GmbH. The alliance was formed to
develop novel antibody-based therapies against a variety of cancer
antigens that are recognized by T cells. The agreement gives
MorphoSys access to several of Immatics’s proprietary tumor-
associated peptides (TUMAPs). In return, Immatics receives the
right to develop MorphoSys’s Ylanthia antibodies against several
TUMAPs. The companies will pay each other milestone payments
and royalties on commercialized products based on the compa-
nies’ development progress.
*S E E G L O S S A R Y – page 142

PROJEC T INI T IAT IONS AND PROGRESS, T RIAL EX T ENSIONS
During the 2015 financial year, the number of individual therapeu-
tic antibodies in the MorphoSys pipeline grew to a total of 103
(December 31, 2014: 94 individual antibodies) Proprietary Devel-
opment and Partnered Discovery projects. At the end of 2015,
MorphoSys had 14 projects (December 31, 2014: ten) in its Propri-
etary Development portfolio, four of which were in clinical devel-
opment and ten in preclinical development or the discovery phase.
The number of programs being pursued by our partners in the
Partnered Discovery segment grew to a total of 89 (December 31,
2014: 84), 21 of which were in clinical development, 25 in preclin-
ical development and 43 in the discovery phase. MorphoSys’s
partnered and proprietary clinical pipeline currently comprises
25 unique antibody molecules which are being evaluated in more
than 50 clinical trials.
›› S E E F I G U R E 0 3 – Active Clinical Studies with MorphoSys Antibodies

PROPRIE TARY DE VELOPME NT
When the bispecific antibody MOR209/ES414 entered a phase 1
trial in 2015, it became the fourth clinical-stage drug candidate in
MorphoSys’s Proprietary Development segment. In early March
2015, MorphoSys and its development partner Emergent BioSolu-
tions announced the commencement of a phase 1 clinical study
with MOR209/ES414 in up to 130 patients suffering from meta-
static castration-resistant prostate cancer (mCRPC). The study is
being conducted in clinical centers in the USA and Australia and
will evaluate the safety, tolerability and clinical activity of the
compound in two stages. Stage one’s main objective is to identify
the maximum tolerated dose (MTD) and stage two’s objective is to
investigate the clinical activity. The study’s launch triggered a
milestone payment to Emergent of € 4.7 million. The existing coop-
eration agreement was updated in the past financial year. After a
joint examination of the initial data, the companies decided to ad-
just the dosing regimen and administration of MOR209/ES414.
Clinical development will continue in 2016 with an adapted clini-
cal development plan. Under the terms of the updated agreement,
the parties have reduced MorphoSys’s cost sharing in the years
2016 to 2018 and have reduced future milestone payments pay-
able by MorphoSys to Emergent BioSolutions to a total of up to
US$ 74 million. Other financial terms and the split of the commer-
cial rights remain unchanged.

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03 F I G U R E

P HA SE

Poole Real Estate Ltd. was liquidated and the remaining assets
were distributed to MorphoSys AG as the sole shareholder on
December 9, 2015.

6
In the 2015 financial year, the Group maintained both the regis-
tered office of the parent company, MorphoSys AG, in Martinsried
near Munich and the registered office of Lanthio Pharma B.V. and
LanthioPep B.V. in Groningen, the Netherlands. The Martinsried
office houses the central Group functions such as accounting, con-
trolling, human resources, legal, patents, corporate communica-
tions and investor relations, as well as the Proprietary Develop-
ment and Partnered Discovery segments. The subsidiary Lanthio
Pharma B.V. and its subsidiary LanthioPep B.V. in Groningen, the
Netherlands, are largely autonomous and independently managed.
These subsidiaries have their own research and development labo-
ratories, general management and administration functions, as
well as human resources, accounting and business development
departments.

2011

2012

Active Clinical Studies with MorphoSys Antibodies (31 December)

Research and Development and
Business Development

2015 BUSINESS PERF ORMANCE
MorphoSys strongly focuses its business activities on advancing
its therapeutic programs in research and development to increase
the Company’s enterprise value. The clinical development of pro-
24
prietary drug candidates is at the core of the Company’s focus. In
this context, the Company strives to gain access to novel disease-
specific target molecules, advanced product candidates and inno-
vative technology platforms to expand its proprietary development
pipeline. MorphoSys also participates in the development success
of its partners’ therapeutic programs. The first of these antibodies
1
based on MorphoSys’s technology are approaching the market.

2013

To MorphoSys, the fundamental measures for success in pharma-
ceutical research and development include:
2014
2015
• industry partnerships which create a broad development pipe-
line, leverage the MorphoSys technology platform and/or enable
the commercialization of its therapeutic programs
• focused progression of its development programs
• clinical and preclinical results
• regulatory guidance of health authorities to pursue commercial-

ization of individual therapeutic programs

• robust patent protection to secure MorphoSys’s market position

Additional information on consolidated companies can be found in
the Notes (Item 2.2.1).

COL L ABORAT IONS AND PAR T NERSHIP S
New contracts and contract terminations in 2015 almost exclu-
sively involved the Proprietary Development segment.

L EGAL S T RUC T URE OF T HE MORPHOSY S GROUP :

G R O U P M A N A G E M E N T R E P O R T
Operations and Business Environment

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Operations and Business Environment

MOR103 was fully out-licensed to GlaxoSmithKline (GSK) in 2013.
In the third quarter of 2015, GSK announced the commencement
of a phase 2 study with MOR103 (re-named GSK3196165) for rheu-
matoid arthritis. GSK also plans to initiate a second phase 1b/2a
study in hand osteoarthritis during 2016.

In 2015, an ongoing investigator-initiated clinical trial with the
anti-CD19 antibody MOR208 for patients with relapsed/refractory
chronic lymphocytic leukemia (CLL*) conducted at the Ohio State
University was expanded to include patients with Richter’s trans-
formation*, a particularly aggressive sub-type of CLL. These patients
will be treated with a combined therapy of MOR208 and ibrutinib.
A phase 2 clinical trial of MOR208 as monotherapy for patients
with acute lymphoblastic leukemia (ALL) was terminated in the
first quarter in order to focus on a planned investigator-initiated
pediatric study* using MOR208 in combination with an immune
cell transplantation. This study is scheduled to begin in 2016.

PAR TNERED DISC OVERY
In early April 2015, MorphoSys announced its receipt of a clinical
milestone payment from its partner Janssen. This payment was
triggered by the initiation of a phase 2 clinical study with the
HuCAL antibody guselkumab (CNTO1959) in a new indication,
psoriasis arthritis, and was recognized in the first quarter of 2015.

In July 2015, MorphoSys announced the receipt of a clinical mile-
stone payment from its partner Novartis. The payment was trig-
gered by the initiation of a phase 1 study of a HuCAL antibody in
the field of blood disorders. This became the 11th therapeutic anti-
body based on MorphoSys’s technologies that Novartis is evaluat-
ing in clinical trials. The milestone payment was recognized in the
second quarter of 2015.

In July 2015, MorphoSys also announced that its partner Heptares
Therapeutics, a wholly owned subsidiary of Japan’s Sosei Group
Corporation, exercised an option to initiate its own therapeutic an-
tibody program under the research alliance entered into by the
companies in February 2013. The program will use MorphoSys’s
Ylanthia technology to generate antibody candidates against dis-
ease-relevant molecules targeting G protein-coupled receptors
(GPCRs). Heptares intends to pursue the subsequent development
and later commercialization of a program with MorphoSys receiv-
ing research funding and development-dependent milestone pay-
ments as well as royalties on sales of the resulting therapeutic
antibodies.

In October 2015, MorphoSys announced the receipt of a milestone
payment from its partner Bayer HealthCare for the initiation of a
phase 1 clinical trial of a HuCAL antibody (BAY1093884) in the
field of bleeding disorders. The antibody targets the tissue factor
pathway inhibitor (TFPI), a major inhibitor of tissue factor-initiated
blood clotting. The study is focused on for the treatment of hemo-
philia A, the most common type of hemophilia, which affects ap-
proximately 400,000 people worldwide.

In January 2016, MorphoSys’s partner Bayer initiated a phase 2
clinical study in mesothelioma with the mesothelin-targeting
anetumab ravtansine antibody (BAY94-9343). The objective is to
support registration of the compound based on the study’s results
if successful. The related milestone payment was recognized in
the first quarter of 2016.

CL INIC AL S T UD Y DATA FROM CURREN T PROJEC T S

PROPRIE TARY DE VELOPME NT
In 2015, MorphoSys announced interim data from clinical studies
for its proprietary drug programs MOR202 and MOR208 at several
industry conferences.

Advanced and progressively more detailed data from the ongoing
phase 2a study with the anti-CD19 antibody MOR208 in patients
with subtypes of relapsed or refractory non-Hodgkin’s lymphoma
(NHL) were presented at the 2015 American Society of Clinical
Oncology (ASCO) Annual Meeting in May/June, the European He-
matology Association (EHA) congress in June 2015 and the annual
American Society of Hematology (ASH) meeting in December 2015.
In this open-label multicenter study, MOR208 was tested as a
single-agent in 92 patients with diffuse large B cell lymphoma
(DLBCL*), follicular lymphoma (FL*), mantle cell lymphoma (MCL*)
and other indolent NHLs (iNHL). MOR208 monotherapy was well
tolerated in the study and showed encouraging clinical activity.
The data presented at the ASH annual meeting in December showed
an overall response rate (ORR) of 28 % across all four NHL sub-
types, reaching 36 % in the DLBCL subgroup (both based on evalu-
able patients). At the time of the most recent analysis, several
patients – a total of 9 out of 21 – had an ongoing response to the
single-agent treatment. The longest response duration exceeded
20 months in both DLBCL and FL. Based on these results, MorphoSys
is planning to initiate combination studies of MOR208 in 2016.
*S E E G L O S S A R Y – page 142

G R O U P M A N A G E M E N T R E P O R T
Operations and Business Environment

The first promising results on safety and clinical activity from an-
other ongoing phase 2 study with MOR208 were announced at the
ASH annual conference in December. In this investigator-initiated
clinical trial conducted by scientists at the Ohio State University,
combination of MOR208 and the immunomodulator lenalidomide
is being evaluated in relapsed/refractory and treatment-naïve
chronic lymphocytic leukemia (CLL) patients. Patient recruitment
was still underway in both patient groups at the time of the presen-
tation, whereby 16 patients were already enrolled and 11 evalu-
ated. The combination of MOR208 with lenalidomide was generally
well tolerated. In patients with relapsed/refractory CLL, three pa-
tients showed a partial response (PR) and two patients showed
stable disease (SD). Four of the treatment-naïve CLL patients showed
partial responses (PR). Patient response generally deepened over
time, and five patients were able to complete a 12-week therapy
cycle with MOR208.

MorphoSys’s anti-CD38 antibody MOR202 is currently being eval-
uated in an ongoing phase 1/2a clinical study. Meaningful and
encouraging interim data from this safety and tolerability study
were released at a number of conferences in 2015, including the
ASCO annual conference in May/June, the EHA congress in June,
the Multiple Myeloma Workshop in September and the ASH an-
nual meeting in December. The study evaluates MOR202 at esca-
lating doses alone and in combination with the immunomodula-
tory drugs lenalidomide and pomalidomide in a total of 52 heavily
pretreated patients with relapsed/refractory multiple myeloma. In
this study, MOR202 showed encouraging clinical activity, an ex-
cellent safety profile and best-in-class infusion tolerability with
just a two-hour infusion time. The data presented at the ASH con-
ference in December showed the following clinical efficacy: Among
the patients receiving MOR202 alone, three out of nine in groups
with clinically relevant dose regimens showed an objective tumor
response (ORR = 33 %) and the other six patients showed stable
disease. In the combination therapy at 8 mg/kg MOR202 with
lenalidomide or pomalidomide, one of the six patients showed a
very good partial response (VGPR), two showed partial responses
(PR) and one showed a minimal response (MR). Other patients
were scheduled to receive 16 mg/kg MOR202 in combination with
pomalidomide or lenalidomide. Further patient therapy is planned
to validate the recommended dose of MOR202 alone and in combi-
nation with pomalidomide or lenalidomide.

At the 2015 ASH conference, MorphoSys also presented promis-
ing preclinical data on MOR202 which demonstrated synergy of
MOR202 in combination with different compounds commonly
used in the treatment of multiple myeloma. Another set of pre-
clinical experiments focused on MOR202’s ability to kill targeted
cells via antibody-dependent cell-mediated cytotoxicity (ADCC).
MOR202 showed a level of killing of multiple myeloma cells via
ADCC equivalent to that of surrogates of the competing anti-CD38
antibodies daratumumab and isatuximab, but exhibited signifi-
cantly reduced killing of natural killer cells (NK cells*) from the
body’s own immune system. NK cells, as effector cells, are needed
for the killing of the tumor cells. These results suggest that
MOR202 may show a more durable clinical response than other
compounds of its class by sparing the NK cells needed for ADCC.

PAR TNERED DISC OVERY
MorphoSys’s partners continued developing their antibody pro-
grams in the reporting year and presented their progress at vari-
ous scientific conferences.

At the 2015 American Society of Clinical Oncology (ASCO) An-
nual Meeting at the end of May/early June in Chicago, several of
MorphoSys’s partners presented clinical data for a number of
HuCAL antibodies.

Pfizer presented phase 1 data from its study of anti-4-1BB antibody
PF-05082566 in patients with non-Hodgkin’s lymphoma (NHL).
The combination of PF-05082566 with rituximab was well tolerated
and showed anti-tumor activity as well as biomarker modulation.

Novartis presented results from its phase 1 combination trial eval-
uating the HuCAL antibody LJM716 in combination with BYL719
and trastuzumab in patients with HER2-positive metastatic breast
cancer. The study created a safety profile for the combination ther-
apy and demonstrated the therapy’s anti-tumor activity. Novartis
presented preclinical data at the annual American Association for
Cancer Research (AACR) conference in April 2015 showing that
LJM716 successfully inhibited the target molecules HER3* and
EGFR* in lung squamous cell carcinoma* cell lines and showed
preclinical anti-tumor activity.
*S E E G L O S S A R Y – page 142

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Operations and Business Environment

OncoMed published the final results of its phase 1a study of
tarextumab (OMP-59R5) in combination with an etoposide and
platinum-based therapy (EP) in small cell lung cancer (PINNACLE
trial). The combination was well tolerated and showed encouraging
anti-tumor activity. Additionally, a dosage was determined that is
currently being tested in an ongoing, randomized placebo-con-
trolled phase 2 study. At the World Conference on Lung Cancer in
September 2015, OncoMed announced new biomarker data and
updated its clinical phase 1 data for tarextumab (OMP-59R5).

MorphoSys’s partner Bayer also presented new clinical results
from a phase 1 study at the World Conference on Lung Cancer in
September 2015. The study evaluated different doses of the HuCAL
antibody anetumab ravtansine (BAY94-9343) in 77 patients with
advanced mesothelioma and other solid tumors. Anetumab ravtan-
sine is an antibody drug conjugate (ADC*) directed against the
mesothelin target molecule. The study determined the maximum
tolerated dose (MTD) that showed encouraging efficacy in meso-
thelioma patients.
*S E E G L O S S A R Y – page 142

REGUL AT ORY EVEN T S

PAR TNERED DISC OVERY
In the first quarter of 2015, MorphoSys announced that its partner
OncoMed had received orphan drug status from the US Food and
Drug Administration for the HuCAL antibody tarextumab in pan-
creatic cancer and small cell lung cancer. The program is currently
in clinical development for both indications.

There were no regulatory decisions announced relevant to the
Partnered Discovery segment.

PAT EN T S
During the 2015 financial year, MorphoSys continued to consoli-
date and expand the patent protection of its development programs
and its growing technology portfolio, which are the Company’s
most important value drivers.

At the end of the financial year, the Company maintained roughly
50 different proprietary patent families worldwide in addition to
the numerous patent families it pursues with its partners.

Group Headcount Development

The success of MorphoSys is based on highly qualified, dedicated
employees who are creative and motivated. On December 31, 2015,
the MorphoSys Group had 365 employees (December 31, 2014:
329), 145 of whom hold PhD degrees (December 31, 2014: 124). The
MorphoSys Group employed an average of 356 employees in 2015
(2014: 315).
›› S E E F I G U R E 0 4 – Headcount of the MorphoSys Group

A competitive and attractive remuneration system is a decisive
factor when competing for the best employees. To be a competitive
employer, MorphoSys compares the Company’s compensation with
that paid by other companies in the biotech industry and similar
sectors and makes adjustments when necessary. The remunera-
tion system at MorphoSys includes fixed compensation and a vari-
able annual bonus that is linked to the achievement of corporate
goals. Individual goals promote both the employees’ personal de-
velopment and the achievement of key corporate goals.

A “spot bonus” (given “on the spot”) is promptly awarded to em-
ployees for exceptional accomplishments.

A detailed overview of headcount development and MorphoSys’s
activities to promote successful long-term human resource devel-
opments can be found in the section “Sustainable Business
Development.”

Changes in the Business Environment

The global economy lost more steam in 2015. In its latest forecast
in January 2016, the International Monetary Fund (IMF) expects
global growth to be a modest 3.1 % in 2015 following 3.4 % in 2014.
Weak growth in China, the fall in commodity prices and geopolitical
tensions, particularly in Russia and the Middle East, will continue
to weigh on global growth.

G R O U P M A N A G E M E N T R E P O R T
Operations and Business Environment

04 F I G U R E

Headcount of the MorphoSys Group (31 December)1

While the advanced economies had another year of slightly in-
creasing growth momentum and reported 1.9 % growth in 2015
(2014: 1.8 %), the expansion in emerging markets and developing
economies slowed significantly with growth reported at 4.0 % (2014:
4.6 %). Growth in the eurozone rose 1.5 % (2014: 0.9 %) compared to
the previous year due to a boost in exports because of the weak
euro. Germany’s growth held fairly steady at 1.5 % (2014: 1.6 %).
Growth momentum in the USA was again much stronger with the
economy growing 2.5 % (2014: 2.4 %).

T O TA L

The industry is also subject to potential pricing restrictions be-
cause of the dominant role played by cost savings in the healthcare
system’s regulatory requirements. References to overpricing and
potentially more stringent price control in the US drug market
made by presidential candidate Hillary Clinton during the US pri-
maries in September 2015 stirred up uncertainty in the biotech
Serotec, which was sold as of 10 January 2013 (closing date)
and related sectors.

1 2011 to 2012 includes employees of research and diagnostic segment AbD

446

421

China, which has been the driving force of the world economy,
continued to falter and reported growth in 2015 of 6.9 % (2014:
7.3 %). The pace of growth and the outlook during the year deterio-
rated progressively, which placed tremendous pressure on both
the Chinese and global financial markets in the fourth quarter.
The two large emerging countries, Russia (2015: – 3.7 % versus
2014: 0.6 %) and Brazil (2015: – 3.8 % versus 2014: 0.1 %) were in
deep recession in 2015.

299

Economists expect the ongoing risks to keep the economy vulner-
able to setbacks. Global economic uncertainty and rising geopolit-
ical tensions are also a threat to the growth of the global pharma-
ceutical and biotechnology industries, particularly because fading
euphoria in the capital markets and less favorable financing condi-
tions can have an adverse impact on sectors heavily reliant on re-
2013
2012
search financing, such as the biotechnology sector.

2011

E M P L O Y E E S B Y S E G M E N T

MorphoSys takes into account all potential macroeconomic risks
and opportunities when conducting business activities. Political
uncertainty in the global markets did not cause the Company to
refrain from or change any of its key activities in the past financial
year. MorphoSys’s operations were also not affected by any fluctu-
ations within individual countries and, therefore, in this respect,
were not directly impacted by global economic developments.

169

176

REGUL AT ORY ENVIRONMEN T
The healthcare industry’s regulatory environment is dominated by
ever-increasing product quality, safety and efficacy requirements
and places high demands on companies. Novel drugs need to
demonstrate a significant benefit over existing therapies in order
to be approved, gain the market’s acceptance and be reimbursed
57
by the healthcare system.

132

105

Despite the high demands placed on the sector, the market’s situa-
tion continues to be positive, particularly in the USA. The US Food
and Drug Administration granted approval to 45 drugs in 2015,
surpassing the already high number of approvals in the previous
year (2014: 41). From 2006 to 2014, the FDA approved an average
of 28 new compounds every year, which corroborates the impor-
tance of the industry’s commitment to innovation for developing
technologically better products and optimizing approved treat-
ment methods.

365

329

The FDA supports compounds with exceptional medicinal poten-
tial through measures such as the “breakthrough therapy desig-
nation,” introduced in 2013, and the “fast-track” program, both of
which help expedite product development and testing. MorphoSys
received fast-track status for its proprietary compound MOR208,
which is currently undergoing phase 2 clinical evaluation for
patients suffering from diffuse large B cell lymphoma (DLBCL).
Closer cooperation with the regulatory authorities facilitates the
antibody’s targeted development and may help bring it more
quickly to the market.

2015

2014

E M P L O Y E E S B Y F U N C T IO N

DEVEL OPMEN T OF T HE PHARMACEU T IC AL AND

305

BIO T ECHNOL OGY SEC T ORS
The global pharmaceutical industry had a stellar year in 2015.
After years of stagnating sales, the 20 largest global pharmaceuti-
274
cal companies saw the reemergence of sustainable sales growth:
On a constant currency basis, Group sales increased 7 % on average.
Experts believe two key factors are responsible for this positive
performance: First, companies have overcome the impact of expir-
ing patents and related sales declines, and second, the sector has
seen tremendous success in terms of research and development
and regulatory approvals for products.

2014

2015

2014

2015

proprie tary de v elopment
partnered disc ov ery
unallo cated

employ ees in gener al
and adminis tr ati v e

employ ees in r&d

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REGUL AT ORY EVEN T S

There were no regulatory decisions announced relevant to the
Partnered Discovery segment.

At the end of the financial year, the Company maintained roughly
50 different proprietary patent families worldwide in addition to
the numerous patent families it pursues with its partners.

Group Headcount Development

A “spot bonus” (given “on the spot”) is promptly awarded to em-
ployees for exceptional accomplishments.

Changes in the Business Environment

G R O U P M A N A G E M E N T R E P O R T
Operations and Business Environment

Economists expect the ongoing risks to keep the economy vulner-
able to setbacks. Global economic uncertainty and rising geopolit-
ical tensions are also a threat to the growth of the global pharma-
ceutical and biotechnology industries, particularly because fading
euphoria in the capital markets and less favorable financing condi-
tions can have an adverse impact on sectors heavily reliant on re-
search financing, such as the biotechnology sector.

DEVEL OPMEN T OF T HE PHARMACEU T IC AL AND

BIO T ECHNOL OGY SEC T ORS
The global pharmaceutical industry had a stellar year in 2015.
After years of stagnating sales, the 20 largest global pharmaceuti-
cal companies saw the reemergence of sustainable sales growth:
On a constant currency basis, Group sales increased 7 % on average.
Experts believe two key factors are responsible for this positive
performance: First, companies have overcome the impact of expir-
ing patents and related sales declines, and second, the sector has
seen tremendous success in terms of research and development
and regulatory approvals for products.

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Operations and Business Environment

The market for cancer drugs, which is the most important market
for MorphoSys’s pipeline development, is one of the most attractive
and fastest-growing segments in pharmaceuticals. The US market
research institute IMS Health estimates that in 2014, global sales
of oncological compounds exceeded US$ 100 billion for the first
time and will continue to grow on average by 6 to 8 % annually
until 2018. The aging global population has sustained this growth
trend. The World Health Organization (WHO) expects the number
of new cancer cases to rise 70 % in the next 20 years.

Antibodies in the field of cancer immunotherapy continued to
dominate headlines in 2015. Clinical data was shown that further
corroborated the efficacy of the anti-PD1 and anti-PD-L1 antibodies
which act by blocking immune checkpoints. These compounds,
which reactivate the body’s immune system for identifying and kill-
ing tumor cells, was also a dominant theme at the May/June 2015
ASCO conference, the world’s premier cancer conference. Compa-
nies presented promising clinical study results particularly in the
areas of skin cancer (melanoma) and lung cancer.

However, there are also factors that could slow down the pharma-
ceutical market. Political and public opposition to higher drug
prices became abundantly evident in 2015, particularly in connec-
tion with the launch of a new hepatitis C drug by Gilead Sciences
priced at US$ 1,000 per pill. Price pressure on biotechnology
drugs emerged with the successful development of generically
manufactured, patent-free imitation products. Experts also expect
pharmaceutical prices to come under pressure due to competition
within the biotech and pharmaceutical industry as a result of the
global expansion of research pipelines.

The number of mergers and acquisitions in the pharmaceutical
and biotechnology sectors has grown dramatically. In the first half
of 2015, transactions reached a record US$ 210 billion and were
triple their level in the same period of the previous year; at the end
of the full year, transactions in the medical sector had reached
US$ 724 billion, or one-seventh of the aggregate volume of merg-
ers and acquisitions worldwide.

More information on the development of the stock market can be
found in the section “Shares and the Capital Market” on page 45.

DEVEL OPMEN T OF T HE AN T IBOD Y SEC T OR
The year 2015 marked a very successful year for the clinical devel-
opment of therapeutic antibodies. The FDA set a record with its
approval of nine antibodies. According to the scientific publica-
tion, mAbs Journal, there are currently 53 antibodies in phase 3
clinical studies and 16 of those are to treat cancer. The “Antibodies
to Watch in 2016” list presented by mAbs Journal at the Antibody
Engineering Conference in San Diego in December 2015 included
guselkumab which is derived from MorphoSys’s technology plat-
form and is being developed by Janssen. Results are expected in
2016 from a phase 3 clinical study of this compound in psoriasis.

Additionally, the following antibodies received approval in 2015:
• Secukinumab (trade name Cosentyx®), the first monoclonal anti-
body targeting IL 17a for treating patients with moderate to se-
vere psoriasis was approved in the USA and EU.

• Daratumumab (trade name Darzalex®) targeting the CD 38 anti-
gen became the first antibody to receive FDA approval for treat-
ing patients with multiple myeloma, a form of bone cancer.

• Elotuzumab (trade name Empliciti®), another potent antibody
for treating multiple myeloma targeting glycoprotein SLAMF7
(Signaling Lymphocytic Activation Molecule Family Member 7)
received FDA approval.

CURRENC Y DEVEL OPMEN T S
The European debt crisis, a faster-growing US economy and a
stronger US dollar on the back of the US key interest rate increase
in December resulted in an even weaker euro. Falling energy
prices brought down European inflation rates, which raised the
monetary regulator’s deflationary concerns, and the European Cen-
tral Bank reinforced its expansionary monetary policy, putting
additional pressure on the euro. At the end of 2015, the euro was
quoted at US$ 1.09, or roughly 10 % lower than its level at the start
of the year. According to experts, the euro will continue to move
closer to parity with the dollar.

Changes in these currencies could have an effect on MorphoSys’s
future costs and revenues because most of the Company’s busi-
ness is transacted in euros and US dollars. The ongoing weakness
in the euro versus the US dollar has a direct influence on the Com-
pany’s operating results because a growing share of its clinical
study costs are incurred in the USA.

05 F I G U R E

Revenue of the MorphoSys Group by Region (in %)

N O R T H AMERIC A

EURO P E AND A SIA

Analysis of Net Assets, Financial
Position and Results of Operations

G R O U P M A N A G E M E N T R E P O R T
Analysis of Net Assets, Financial Position and Results of Operations

2011

2012

2013

2014

2015

106.2

59.9

06 F I G U R E

Revenues Proprietary Development and Partnered Discovery (in million €)

T O TA L

82.1

46.6

32.7

78.0

64.0

51.9

42.7

48.0

43.6

42.3

26.9

2.4

7.0

1.9

3.0

15.0

5.4

4.0

2011

2012

2013

2014

2015

partnered disc ov ery s egment – funded research and licensing fees

partnered disc ov ery s egment – success-based payments

proprie tary de v elopment segment

The MorphoSys Group’s scope of consolidation changed as of
December 31, 2015. The consolidated financial statements as of
December 31, 2015 include MorphoSys AG, Sloning BioTechnology
GmbH, Lanthio Pharma B.V. and its subsidiary LanthioPep B.V.
Further information on the Group’s organizational structure can
be found on page 25.

PAR T NERED DISCOVERY SEGMEN T
The revenues generated by the Partnered Discovery segment in-
cluded € 42.3 million in funded research and license fees (2014:
€ 43.6 million) and € 4.0 million in success-based payments (2014:
€ 5.4 million).
›› S E E F I G U R E 0 6 – Revenues Proprietary Development and Partnered Discovery

Based on the average foreign exchange rates in 2014, the revenues
of the Proprietary Development and Partnered Discovery segments
would have totaled € 106.1 million.

Operating Expenses

In 2015, operating expenses increased 34 % to € 93.7 million (2014:
€ 70.1 million). Expenses consisted of research and development
expenses of € 78.7 million (2014: € 56.0 million) and general and
administrative expenses of € 15.1 million (2014: € 14.1 million).
Research and development expenses increased as planned due to
ongoing projects.

Operating expenses in the Proprietary Development segment rose
from € 33.5 million to € 54.1 million and in the Partnered Discov-
ery segment increased to € 25.9 million (2014: € 23.0 million).

Personnel expenses from share-based payments are included in
general and administrative expenses and research and develop-
ment expenses. These expenses amounted to € 3.6 million in 2015
(2014: € 4.0 million).

Revenues

Group revenues increased 66 % year-on-year to € 106.2 million
(2014: € 64.0 million). This increase mainly originated from the
realization of deferred revenue resulting from the termination of
the MOR202 co-development and co-promotion agreement with
Celgene.

Success-based payments amounted to 4 % (2014: 8 %) of total
revenue.

On a regional basis, MorphoSys generated 59 %, or € 62.2 million,
of its commercial revenues with biotechnology and pharmaceutical
companies and non-profit organizations headquartered in North
America and 41 %, or € 44.0 million, with customers headquar-
tered primarily in Europe and Asia. In the same period of the pre-
vious year the distribution was 29 % and 71 %, respectively.
›› S E E F I G U R E 0 5 – Revenue of the MorphoSys Group by Region

Roughly 97 % of Group revenues are attributable to activities with
our partners Celgene, Novartis and Pfizer (2014: 92 % with Novartis,
Celgene and Centocor).

PROPRIE TARY DEVEL OPMEN T SEGMEN T
The Proprietary Development segment achieved revenues of
€ 59.9 million in 2015 (2014: € 15.0 million). Most of this revenue
resulted from the termination of co-development activities with
Celgene in the first quarter of 2015.

34567832

G R O U P M A N A G E M E N T R E P O R T
Operations and Business Environment

Revenue of the MorphoSys Group by Region (in %)

05 F I G U R E

N O R T H AMERIC A

EURO P E AND A SIA

2012

2011

• Daratumumab (trade name Darzalex®) targeting the CD 38 anti-
gen became the first antibody to receive FDA approval for treat-
ing patients with multiple myeloma, a form of bone cancer.

• Elotuzumab (trade name Empliciti®), another potent antibody
for treating multiple myeloma targeting glycoprotein SLAMF7
2015
(Signaling Lymphocytic Activation Molecule Family Member 7)
received FDA approval.

2013

2014

Revenues Proprietary Development and Partnered Discovery (in million €)

06 F I G U R E

More information on the development of the stock market can be
found in the section “Shares and the Capital Market” on page 45.

T O TA L

82.1

46.6

42.7

51.9

32.7

106.2

78.0

64.0

59.9

43.6

42.3

48.0

26.9

2.4

7.0

1.9

3.0

15.0

5.4

4.0

2011

2012

2013

2014

2015

partnered disc ov ery segment – funded research and licensing fees
partnered disc ov ery segment – success-based payments
proprie tary de v elopment segment

G R O U P M A N A G E M E N T R E P O R T
Analysis of Net Assets, Financial Position and Results of Operations

Analysis of Net Assets, Financial
Position and Results of Operations

Based on the average foreign exchange rates in 2014, the revenues
of the Proprietary Development and Partnered Discovery segments
would have totaled € 106.1 million.

Operating Expenses

Revenues

Success-based payments amounted to 4 % (2014: 8 %) of total
revenue.

Roughly 97 % of Group revenues are attributable to activities with
our partners Celgene, Novartis and Pfizer (2014: 92 % with Novartis,
Celgene and Centocor).

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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
Analysis of Net Assets, Financial Position and Results of Operations

RESEARCH AND DEVEL OPMEN T EXPENSES
Research and development expenses increased by € 22.7 million
in 2015 to a total of € 78.7 million (2014: € 56.0 million) and consist
of expenses for external laboratory services (2015: € 29.2 million;
2014: € 14.9 million), personnel expenses (2015: € 25.6 million;
2014: € 21.0 million), expenses for intangible assets (2015: € 7.2 mil-
lion; 2014: € 8.1 million), expenses for external services (2015:
€ 5.2 million; 2014: € 2.7 million), technical infrastructure ex-
penses (2015: € 5.2 million; 2014: € 4.1 million), other expenses
(2015: € 3.4 million; 2014: € 2.9 million) and expenses for consum-
ables (2015: € 3.0 million; 2014: € 2.3 million). In 2015, a € 3.7 mil-
lion impairment was recognized on goodwill resulting from the
acquisition of Sloning BioTechnology GmbH. In 2014, expenses for
intangible assets included impairment on patents, license rights
and laboratory facilities of € 4.1 million.
›› S E E F I G U R E 0 7 – Selected R&D Expenses

EBIT

Earnings before interest and taxes (EBIT) amounted to € 17.2 mil-
lion compared to € – 5.9 million in the previous year. The Propri-
etary Development segment reported EBIT of € 10.7 million (2014:
€ – 18.4 million), while the Partnered Discovery segment achieved
EBIT of € 20.4 million (2014: € 25.9 million).

Finance Income and Expenses

Finance income of € 3.8 million (2014: € 1.8 million) was generated
in 2015 and included mainly interest income as well as realized
and unrealized gains from currency hedging transactions. Fi-
nance expenses amounted to € 0.4 million (2014: € 0.2 million) and
resulted mainly from realized and unrealized losses from cur-
rency hedging transactions.

In 2015, the Company incurred proprietary development expenses
of € 54.1 million (2014: € 33.5 million) and € 2.5 million (2014:
€ 2.9 million) for technology development.
›› S E E F I G U R E 0 8 – Distribution of R&D Expenses

Taxes

The Group reported income tax expenses of € 5.7 million in 2015
(2014: tax benefit of € 1.3 million) consisting of current tax ex-
penses of € 4.2 million and deferred tax expenses of € 1.5 million.

Consolidated Net Profit/Loss
for the Period

In 2015, the Company generated a net profit of € 14.9 million
(2014: net loss of € – 3.0 million). The basic net result per share for
2015 is € 0.57 (2014: € – 0.12).

GENERAL AND ADMINIS T RAT IVE EXPENSES
General and administrative expenses were above the previous
year’s level and amounted to € 15.1 million (2014: € 14.1 million).
They mainly consisted of personnel expenses (2015: € 10.4 mil-
lion; 2014: € 9.6 million), expenses for external services (2015:
€ 2.6 million; 2014: € 2.7 million), technical infrastructure ex-
penses (2015: € 1.0 million; 2014: € 0.8 million) and other expenses
(2015: € 1.1 million; 2014: € 1.0 million).

Other Income and Expenses

Other income totaled € 5.5 million (2014: € 0.8 million) and mainly
stemmed from earnings effects from the fair-value measurement
of the shares already held in Lanthio Pharma B.V. in the amount of
€ 4.5 million. Other income also included income from grants re-
ceived and currency gains. Other expenses totaled € 0.8 million
(2014: € 0.6 million) and mainly resulted from currency losses.

G R O U P M A N A G E M E N T R E P O R T
Analysis of Net Assets, Financial Position and Results of Operations

07 F I G U R E

Multi-Year Overview –
Income Statement
Selected R & D Expenses (in million €)

T O TA L

04 T A B L E

Multiple-Year Overview – Income Statement1

in million €

55.91

Revenues

Research and Development Expenses

49.21

56.0

General and Administrative Expenses

37.71

Other Income/Expenses

EBIT

Finance Income/Expenses

Income Tax Income/Expenses
20.7
17.8
Profit/(Loss) for the Year from Continuing Operations

21.2

18.3

Profit/(Loss) for the Year from Discontinued Operations2

11.1

13.0

13.6

7.2

Consolidated Net Profits/(Loss)

1.6

3.3

21.0

17.8

12.8

15.0

2.2

2.3

78.7

2015

2014

20132

20122

20112

106.2

78.7

15.1

4.7

17.2

3.4
29.2
(5.7)

25.6

14.9

0.0

14.9

64.0

56.0

14.1

0.2

(5.9)

1.6

1.3
21.0
(3.0)

0.0

3.0

(3.0)

78.0

49.2

18.8

(0.1)

9.9

0.8

(3.3)

7.4

6.0

13.3

51.9

37.7

12.1

0.3

2.5

0.6

(0.7)

2.4

(0.4)

1.9

82.1

55.9

14.9

(1.5)

9.8

1.4

(3.0)

8.2

0.01

8.2

1 Differences due to rounding
2 Due to the sale of substantially all of the AbD Serotec business agreed in December 2012, line items in the income statement related to this transaction are recorded in a single line

2011
titled “Results from discontinued operations” from the year 2011 onwards. Other line items contain the results of the continuing operations.

2015

2013

2012

2014

e x ternal

l ab or atory fundin g

personnel

c onsumab les
other (includes expenses for intangible assets,
technical infrastructure, and external services)

1 Due to the sale of sub -stantially all of the AbD Serotec

operating segment with of closing date of 10 January 2013,
the fi gures for the years

08 F I G U R E

Financial Position

Distribution of R & D Expenses (in million €)

T O TA L

PRINC IPL ES OF F INANC IAL MANAGEMEN T
At MorphoSys, the primary goal of financial management is to en-
sure sufficient liquidity reserves at all times for the Company’s
continued growth. The most important sources of this liquidity are
the cash inflows from the operating business and commercial op-
erations. Cash flow projections and scenarios are used to deter-
mine the level of liquidity needed.
55.91

C ASH FL OWS*
The net cash outflow from operating activities in 2015 totaled
37.71
€ 23.5 million (2014: cash outflow of € 14.2 million).
*S E E G L O S S A R Y – page 142

49.21

33.9

19.1

33.5
In 2015, the Company invested in a variety of financial assets such
as available-for-sale securities and bonds and financial assets clas-
sified as loans and receivables. These investments brought cash
3.6
inflows of € 86.3 million (2014: cash outflow of € 21.5 million).

16.0

18.1

27.5

17.5

4.2

2.9

INVES T MEN T S
In 2015, MorphoSys invested € 1.4 million in property, plant and
equipment (2014: € 2.9 million) mainly for laboratory equipment
(i.e., machinery) and computer hardware. Depreciation of property,
plant and equipment increased slightly to € 1.5 million (2014:
€ 1.4 million).

78.7

56.0

The Company invested € 7.4 million in intangible assets in 2015
(2014: € 17.6 million). Amortization of intangible assets was
slightly below the prior year’s level and amounted to € 1.9 million
in 2015 (2014: € 2.7 million). In 2015, impairments of € 0.02 mil-
lion (2014: on patents, licenses and laboratory equipment of
€ 4.1 million) were recognized on patents.

54.1

L IQUIDI T Y
On December 31, 2015, the Company held liquid funds, marketable
securities and other financial assets of € 298.4 million versus
€ 352.8 million on December 31, 2014.

22.1

19.6

In 2015, financing activities led to a cash outflow of € 4.1 million
(2014: cash outflow of € 3.9 million).

2013

2012

2011

2014

proprie tary de v elopment e xpenses
r&d e xpenses on b ehalf of partners
technolo gy de v elopment e xpenses

1 Due to the sale of sub -stantially all of the AbD Serotec

operating segment with of closing date of 10 January 2013,
the fi gures for the years

2.9

2.5

2015

34567834

G R O U P M A N A G E M E N T R E P O R T
Analysis of Net Assets, Financial Position and Results of Operations

EBIT

Finance Income and Expenses

Taxes

Consolidated Net Profit/Loss
for the Period

In 2015, the Company generated a net profit of € 14.9 million
(2014: net loss of € – 3.0 million). The basic net result per share for
2015 is € 0.57 (2014: € – 0.12).

Other Income and Expenses

Multi-Year Overview –
Income Statement

04 T A B L E

Multiple-Year Overview – Income Statement1

in million €

Revenues

Research and Development Expenses

General and Administrative Expenses

Other Income/Expenses

EBIT

Finance Income/Expenses

Income Tax Income/Expenses

Profit/(Loss) for the Year from Continuing Operations

Profit/(Loss) for the Year from Discontinued Operations2

Consolidated Net Profits/(Loss)

G R O U P M A N A G E M E N T R E P O R T
Analysis of Net Assets, Financial Position and Results of Operations

2015

2014

20132

20122

20112

106.2

78.7

15.1

4.7

17.2

3.4

(5.7)

14.9

0.0

14.9

64.0

56.0

14.1

0.2

(5.9)

1.6

1.3

(3.0)

0.0

(3.0)

78.0

49.2

18.8

(0.1)

9.9

0.8

(3.3)

7.4

6.0

13.3

51.9

37.7

12.1

0.3

2.5

0.6

(0.7)

2.4

(0.4)

1.9

82.1

55.9

14.9

(1.5)

9.8

1.4

(3.0)

8.2

0.01

8.2

titled “Results from discontinued operations” from the year 2011 onwards. Other line items contain the results of the continuing operations.

Financial Position

C ASH FL OWS*
The net cash outflow from operating activities in 2015 totaled
€ 23.5 million (2014: cash outflow of € 14.2 million).
*S E E G L O S S A R Y – page 142

In 2015, the Company invested in a variety of financial assets such
as available-for-sale securities and bonds and financial assets clas-
sified as loans and receivables. These investments brought cash
inflows of € 86.3 million (2014: cash outflow of € 21.5 million).

In 2015, financing activities led to a cash outflow of € 4.1 million
(2014: cash outflow of € 3.9 million).

L IQUIDI T Y
On December 31, 2015, the Company held liquid funds, marketable
securities and other financial assets of € 298.4 million versus
€ 352.8 million on December 31, 2014.

34567836

G R O U P M A N A G E M E N T R E P O R T
Analysis of Net Assets, Financial Position and Results of Operations

This amount consisted of cash and cash equivalents of € 90.9 mil-
lion (December 31, 2014: € 32.2 million), marketable securities and
bonds of € 97.4 million (December 31, 2014: € 113.5 million) and
other financial assets in the amount of € 94.6 million (Decem-
ber 31, 2014: € 157.0 million) that are categorized as “loans and
receivables” under “other receivables” contained in “current assets.”
Other investments under the category of “loans and receivables” of

€ 15.5 million were reported under non-current assets as of De-
cember 31, 2015 (December 31, 2014: € 50.0 million).

The decrease in marketable securities and other financial assets
mainly resulted from the acquisition of the remaining shares in
Lanthio Pharma B.V., the share buyback, the milestone payment to
Emergent and the use of cash for operating activities in 2015.

05 T A B L E

Multiple-Year Overview – Financial Situation1

in million €

2015

2014

2013

2012

2011

Net Cash Provided by/Used in Operating Activities2, 4

Net Cash Provided by/Used in Investing Activities4

Net Cash Provided by/Used in Financing Activities2, 4

Cash and Cash Equivalents (as of 31 December)3

Available-for-sale Financial Assets

Bonds, Available-for-sale

Financial Assets Categorized as Loans and Receivables, Current Portion

Financial Assets Categorized as Loans and Receivables, Net of Current Portion

(23.5)

86.3

(4.1)

90.9

64.3

33.1

94.6

15.5

(14.2)

(21.5)

(3.9)

32.2

106.0

7.5

157.0

50.0

89.1

(193.9)

130.6

71.9

188.4

11.1

119.3

0.0

1.8

(12.1)

1.6

40.7

79.7

0.0

10.0

0.0

27.1

(18.1)

1.3

54.6

79.8

0.0

1 Differences due to rounding
2 In 2011, purchases of derivative financial instruments and proceeds from the sale of derivative financial instruments were reclassified from financing activities to operating activities

in the statement of cash flows. In order to provide comparative information for the previous year, the figures for 2010 have been adjusted accordingly.

3 In 2012, € 5.3 million in cash and cash equivalents was recorded under assets of disposal group classified as held for sale.
4 In 2015, interest paid and interest received were reclassified from operating activities into investing activities and financing activities in the statement of cash flows. In order to provide

comparative information for the previous year, the figures for 2014 have been adjusted accordingly.

Net Assets

ASSE T S
As of December 31, 2015, total assets amounted to € 400.1 million
and were € 26.4 million lower compared to December 31, 2014
(€ 426.5 million). Current assets declined by € 22.3 million. The
rise in cash and cash equivalents and available-for-sale bonds was
overcompensated by the use of cash for operating activities in
2015, the cash payment of € 20.0 million for the acquisition of the
remaining shares in Lanthio Pharma B.V. and the decline in ac-
counts receivable.

Most of the cash and cash equivalents were invested in various
securities. As of December 31, 2015, an amount of € 64.3 million
(December 31, 2014: € 106.0 million) was invested in various
money market funds and reported under “available-for-sale finan-
cial assets.” The item “bonds, available-for-sale” contained bonds
totaling € 33.1 million (December 31, 2014: € 7.5 million). Finan-
cial instruments totaling € 94.6 million (December 31, 2014:
€ 157.0 million) were allocated to the category “loans and receiv-
ables.” These instruments were mainly term deposits with either
fixed or variable interest rates.

G R O U P M A N A G E M E N T R E P O R T
Analysis of Net Assets, Financial Position and Results of Operations

Non-current assets declined by € 4.1 million year-on-year to
€ 100.0 million due to the reclassification of cash invested in long-
term assets to current assets because maturities had fallen below
12 months. The effect of this reclassification was largely compen-
sated by the rise in R&D programs under development of € 32.7 mil-
lion from the purchase of preclinical programs through the acqui-
sition of Lanthio Pharma B.V. and a milestone payment to Emergent.
The preclinical program MOR107 (formerly LP2) as well as three
further molecules at an earlier stage of development acquired
through the acquisition of Lanthio Pharma B.V. have been part of
MorphoSys’s proprietary portfolio since May 2015.

L IABIL I T IES
Current liabilities declined from € 32.7 million on December 31,
2014 to € 27.5 million on December 31, 2015. This effect mainly
resulted from a decrease in the item “deferred revenue, net of cur-
rent portion” and was partially compensated by higher accounts
payable and accrued expenses.

Non-current liabilities (December 31, 2015: € 9.9 million; Decem-
ber 31, 2014: € 45.0 million) declined by € 35.1 million year-on-
year mainly due to the recognition of deferred revenues through
profit and loss after the termination of the co-development and
co-promotion agreement with Celgene for the MOR202 program.

S T OCKHOL DERS’ EQUI T Y
As of December 31, 2015, Group equity totaled € 362.7 million
compared to € 348.8 million on December 31, 2014.

The number of shares issued totaled 26,537,682 as of Decem-
ber 31, 2015, of which 26,103,012 shares were outstanding (De-
cember 31, 2014: 26,456,834 shares issued and 26,005,944 shares
outstanding).

The number of authorized ordinary shares increased from 4,957,910
on December 31, 2014 to 13,206,421 as a result of the creation of
€ 10,584,333 in new Authorized Capital 2015-I and the cancella-
tion of € 2,335,822 in Authorized Capital 2013-I at the Annual Gen-
eral Meeting on May 8, 2015.

The number of ordinary shares of conditional capital declined from
7,166,848 to 7,086,000 after the exercise of 80,848 conversion
rights in 2015.

The value of treasury stock increased from € 14,251,962 on Decem-
ber 31, 2014 to € 15,827,946 on December 31, 2015 mainly as the
result of MorphoSys’s repurchase of 88,670 of its own shares on
the stock exchange. The repurchase, which totaled € 5,389,984,
was carried out at an average share price of € 60.79. Brokerage
fees for the repurchase totaled € 2,947. The effect of this repur-
chase was offset by the transfer of 104,890 of the Company’s own
shares from the 2011 long-term incentive plan (LTI plan) amount-
ing to € 3,816,947 to the Management Board and Senior Manage-
ment Group. The vesting period for this LTI program expired on
June 1, 2015. As of December 31, 2015, the Company held a total of
434,670 of its own shares.

Financing

As of December 31, 2015, the Company’s equity ratio had risen to
91 % compared to 82 % on December 31, 2014. The Group is cur-
rently not financed by debt.

Off-Balance Sheet Financing

MorphoSys does not use any off-balance sheet financing instru-
ments such as the sale of receivables, asset-backed securities,
sale-and-leaseback transactions or contingent liabilities in combi-
nation with non-consolidated special-purpose entities.

Credit Rating

There is no agency currently assessing the creditworthiness of
MorphoSys.

34567838

G R O U P M A N A G E M E N T R E P O R T
Analysis of Net Assets, Financial Position and Results of Operations

Multi-Year Overview –
Balance Sheet Structure

06 T A B L E

Multi-Year Overview – Balance Sheet Structure1

in million €

Assets

Current Assets

Non-current Assets

Assets of Disposal Group Classified as Held for Sale

Total

Equity and Liabilities

Current Liabilities

Non-current Liabilities

Liabilities of Disposal Group Classified as Held for Sale

Stockholders’ Equity

Total

1 Differences due to rounding

12/31/2015

12/31/2014

12/31/2013

12/31/2012

12/31/2011

300.1

100.0

0.0

400.1

27.5

9.9

0.0

362.7

400.1

322.4

104.1

0.0

426.5

32.7

45.0

0.0

348.8

426.5

406.6

41.1

0.0

447.7

35.4

60.1

0.0

352.1

447.7

142.9

40.6

40.9

224.3

11.9

6.6

3.7

202.0

224.3

153.9

73.7

0.8

228.4

23.8

7.5

0.0

197.1

228.4

Comparison of Actual Business
Results to Forecasts

In the 2015 reporting year, MorphoSys demonstrated solid finan-
cial performance. The revenue and earnings targets published at
the start of the financial year were revised in March 2015 follow-
ing the termination of the cooperation with Celgene to develop
MOR202. The full recognition of deferred revenue from the origi-
nal agreement and a one-time payment from Celgene prompted an

upward revision in the revenue and earnings forecasts. The re-
lated projected costs for proprietary research and development
were also raised.

A detailed comparison of our forecasts with the actual results can
be found in Table 7.

G R O U P M A N A G E M E N T R E P O R T
Analysis of Net Assets, Financial Position and Results of Operations

07 T A B L E

Comparison of Actual Business Results to Forecasts

2015 Targets

2015 Results

Financial targets

Proprietary Development

Group revenue between € 101 million and € 106 million
(initial guidance € 58 million to € 63 million, updated on
March 26, 2015 with the announcement of termination
of Celgene cooperation)

Expenses for proprietary product and technology development
of € 56 million to € 63 million (initial guidance € 48 million to
€ 58 million, updated on March 26, 2015 with the announce-
ment of termination of Celgene cooperation)

EBIT of € 9 million to € 16 million (initial guidance € – 20 million
to € – 30 million, updated on March 26, 2015 with the
announcement of termination of Celgene cooperation)

MOR208
• Continuation of the phase 2 study in NHL and B-ALL*
• Initiation of further combination studies in NHL

MOR202
• Continuation of the phase 1/2a study in additional

cohorts and combination studies with pomalidomide
and lenalidomide

Group revenue of € 106.2 million

Expenses for proprietary product and technology develop-
ment of € 56.6 million

EBIT of € 17.2 million

MOR208
• Presentation of clinical data from the ongoing phase 2a
study in NHL at the ASCO Annual Meeting in May/June,
the EHA conference in June and the annual ASH meeting
in December

• Planned initiation of further combination studies in 2016

based on data presented in the 2015 financial year

MOR202
• Presentation of clinical data from the ongoing phase 1/2a
study at the ASCO Annual Meeting in May/June, the
EHA conference in June and the annual ASH meeting in
December

• Initiated treatment of additional patient groups in combi-
nation with pomalidomide or lenalidomide shortly after
financial year end

MOR209/ES414
• Initiation of phase 1 trial in mCRPC under the cooperation

MOR209/ES414
• Initiation in March 2015 of a phase 1 trial in up to

with Emergent

130 patients suffering from mCRPC

Partnered Discovery

Progress of partnered development programs

• Net addition of five partnered programs
• Initiation of a phase 2 clinical study with the HuCAL

antibody guselkumab (CNTO1959) in psoriasis arthritis
by partner Janssen

• Initiation of a phase 1 trial of a HuCAL antibody in the field

of blood disorders by partner Novartis

• Exercise of the option by partner Heptares to initiate

its own therapeutic antibody program under an existing
research alliance

• Initiation of a phase 1 trial of the HuCAL antibody

BAY1093884 in the field of bleeding disorders by partner
Bayer HealthCare

*S E E G L O S S A R Y – page 142

345678

G R O U P M A N A G E M E N T R E P O R T
Analysis of Net Assets, Financial Position and Results of Operations

The Management Board’s General
Assessment of Business Performance

The 2015 financial year marked a successful year for the Group
overall, even though not all targets were reached. We made solid
progress in growing our pipeline and raised our number of devel-
opment programs to 103 by the end of 2015 (2014: 94).

The Group’s revenue increased to € 106.2 million in the 2015 fi-
nancial year, and EBIT grew to € 17.2 million. The rise in revenue
and the positive operating result were mainly driven by the recog-
nition of deferred revenues arising from the termination of the
Celgene cooperation. Net cash outflows from operating activities
in 2015 totaled € 23.5 million. These outflows stemmed from in-
creased investment in the proprietary R&D, in line with expecta-
tions. The equity ratio of 91 % and liquidity of € 298.4 million
underscore the Group’s very sound financial position.

The number of development programs in the Proprietary Develop-
ment segment increased to 14. Promising results from preclinical
and clinical studies of MOR202 and MOR208 were presented at
major medical conferences. MorphoSys is developing both of these
programs independently after the cooperation with Celgene to de-
velop MOR202 ended in March. In the first quarter, MOR209/ES414
commenced clinical development, and GSK announced the initia-
tion of an additional study of MOR103 in osteoarthritis. The acqui-
sition of Lanthio Pharma added four development candidates to
MorphoSys’s portfolio. Collaborations with Immatics, Heptares
and G7 give the Company broader access to innovative targets to
be validated as part of our R&D activities.

Solid progress was also made in our Partnered Discovery segment.
The number of programs in this segment increased to 89, with
three of these programs in clinical phase 3 studies, nine antibody
programs in clinical phase 2 and a further nine development can-
didates in clinical phase 1.

Accounting Judgements

In preparing the 2015 consolidated financial statements, no ac-
counting policies or accounting options were used that differ from
those in prior years and that, if used or exercised differently, would
have had a material effect on the Company’s net assets, financial
position or balance sheet structure. Information on the effects of
the Management Board’s use of estimates, assumptions and judg-
ments can be found in the Notes to the Consolidated Financial
Statements.

G R O U P M A N A G E M E N T R E P O R T
Outlook and Forecast

Outlook and Forecast

MorphoSys is increasingly focusing on the development of its
proprietary therapeutic antibodies. These activities are supple-
mented by numerous partnered programs. By maximizing the
number of development programs, MorphoSys raises its future
growth potential and limits the overall risk inherent in developing
novel drugs.

General Statement on Expected
Development

MorphoSys’s strategic focus is on the development of a broad and
sustainable pipeline of innovative drug candidates, both on a pro-
prietary basis and with partners. The development of drug candi-
dates is based on MorphoSys’s established and proven technolo-
gies and the Company continues to invest in their development. In
the therapeutic area, the commercialization of these technologies
provides contractually secured cash flows from long-term partner-
ships with major pharmaceutical companies. MorphoSys also ben-
efits from the successful development of drug candidates through
milestone payments and royalties from product sales as soon as
the drugs are commercialized.

Revenues from R&D funding, license and milestone payments and
a strong liquidity position enable the Company to build its com-
mercial operations by investing in the development of proprietary
drugs and technologies. The Management Board expects the fol-
lowing developments in 2016:
• Higher investment in proprietary product candidates by initiat-

ing further clinical studies.

• Continued expansion of proprietary development activities
through in-licensing and possibly also through company acqui-
sitions as well as co-development or new proprietary develop-
ment activities.

• New strategic agreements based on proprietary technologies
focused on gaining access to innovative target molecules and
compounds.

• Investments in technology development to maintain the Com-
pany’s lead in the field of antibodies and related technologies,
such as lanthipeptides.

• Expansion of the therapeutic antibody pipeline as part of the

partnership with Novartis.

Strategic Outlook

MorphoSys’s business model is based on its proprietary technolo-
gies, including the HuCAL and Ylanthia antibody libraries, the
Slonomics platform and the lanthipeptide library. We use these
technologies to develop innovative drug candidates so that pa-
tients have access to better treatment alternatives. MorphoSys’s
management intends to continue expanding the Company’s pro-
prietary portfolio of drug candidates and increase its investment
in its proprietary development portfolio. MorphoSys will also con-
tinue to concentrate on using and expanding its technologies in
fast-growing, innovation-driven areas of the life sciences sector.

In the Proprietary Development segment, MorphoSys develops
proprietary therapeutic antibodies and peptides, primarily in the
areas of inflammatory diseases and oncology. Decisions to enter
into alliances to develop MorphoSys’s proprietary candidates will
be made on an individual basis. In some cases projects can remain
in proprietary development for a longer period – even until their
commercialization.

The Partnered Discovery segment generates contractually secured
cash flows based on long-term cooperation agreements. The part-
nership with Novartis is responsible for the majority of develop-
ment candidates. This partnership is scheduled to end in Decem-
ber 2017 with an option for Novartis to extend it for an additional
two years. The development of candidates from this partnership
and others continues even after the contract expires and can lead
to further milestone payments. The Company’s broad pipeline
promises an impressive number of market-ready, therapeutic anti-
bodies in the coming years and financial participation in the form
of royalty payments from product sales. Results from phase 3 tri-
als of two product candidates are expected in 2016. If the study
results are positive, the antibodies could receive approval as early
as 2016/2017.

For the foreseeable future, MorphoSys plans to invest a substantial
portion of its financial resources in proprietary R&D. Management
believes that this is the best way to expand the Company’s port-
folio of proprietary development candidates and strengthen its
technology platform and thereby, maximize shareholder value.

4567842

G R O U P M A N A G E M E N T R E P O R T
Outlook and Forecast

Expected Economic Development

The International Monetary Fund (IMF) expects the growth of the
global economy in 2016 to be higher than in 2015 but, because of
increasing global risk, growth is anticipated to be lower than pre-
viously expected. In its January forecast, the IMF estimates growth
will reach 3.4 % in the current year (2015: 3.1 %), whereas in its fall
2015 forecast the IMF still expected growth of 3.6 %. The reasons
given for the higher level of economic uncertainty at the start of
the year were the ongoing slowdown in China and several other
emerging markets, the sharp drop in oil and commodity prices
and the unpredictable impact of the refugee crisis. The global
economy and the capital markets were also shaken by the massive
declines in stock markets in the first few weeks of the year.

Based on reduced growth prospects in the emerging economies,
the economic outlook was further reduced by other institutions. In
its latest update from February 2016, OECD reduced its estimate
for global growth to 3.0 % (previously 3.3 %).

The advanced economies should grow by a total of 2.1 % on average
in 2016 compared to the previous year (2015: 1.9 %). The IMF ex-
pects Germany to grow 1.7 % in 2016 (2015: 1.5 %), which is the
average rate expected for the eurozone (2016: 1.7 %, 2015: 1.5 %),
but below European countries such as Spain and Great Britain.
Europe’s growth is expected to be more consumer-led rather than
export-led because the very low level of inflation coupled with
sluggish growth in the emerging markets will pressure exports.
The US economy is expected to remain more robust and could
reach growth of 2.6 % (2015: 2.5 %). In 2016, the emerging markets
are expected to achieve overall growth of 4.3 % following 4.0 % in
2015 but will still be pressured by weaker growth in China, which
the IMF has estimated at 6.3 % (2015: 6.9 %). There is also some
concern about Brazil, which is expected to remain in a deep reces-
sion (2016: -3.5 % versus 2015: -3.8 %), and Russia, whose economy
is also expected to shrink (2016: -1.0 % versus 2015: -3.7 %).

Expected Development of the
Life Sciences Sector

After four years (2012 – 2015) of outstanding performance for bio-
technology shares, during which the Nasdaq Biotechnology Index*
more than tripled, the industry news service BioCentury expects
the sector’s performance in 2016 to be more in line with the over-
all market. The sector’s volatility is expected to increase because

of potential discussions during the US presidential campaign on
price controls in the pharmaceutical industry. The sector has
already come under massive pressure on the stock markets in
early 2016 with the Nasdaq Biotechnology Index falling to a
15-month low. The significantly greater volatility of the capital
markets means that it has become more difficult to forecast devel-
opment of the sector’s financing conditions in 2016.
*S E E G L O S S A R Y – page 142

Fundamentally, the sector is still on a strong footing. Scientific
advances and a growing understanding of biological relationships,
such as those in combination therapies in the area of immuno-
oncology, coupled with a continued high unmet medical need par-
ticularly in the areas of cancer and rare diseases, lead industry
experts to expect more innovation and new drug approvals. After
an exceptional year 2015 in which the FDA granted 45 approvals,
BioCentury has already listed a potential 35 approvals for the year
2016.

Expected Business Development

MorphoSys will use the majority of the proceeds from the Novartis
contract, which are guaranteed until at least the end of November
2017, and its strong liquidity position to concentrate on expanding
and increasing the value of its development pipeline.

The Company expects the Partnered Discovery segment to start
ten new partnered programs every year on average until the end
of 2017. The customary attrition rates in drug development mean
that the net growth of the overall pipeline, however, will be some-
what lower. The Company aims to enter new partnerships with
pharmaceutical and biotechnology companies based on the Ylanthia
technology. These collaborations and those with academic insti-
tutes are also expected to provide access to new target molecules
and technologies.

In a best-case scenario, the Company may see the first approval of
a therapeutic antibody from one of its partnerships in 2016. Re-
sults from a phase 3 study of bimagrumab (BYM338) are expected
in the first half of 2016. Novartis is solely responsible for the devel-
opment of this antibody and recently announced that it will seek
approval in 2016 if the study results are positive. An application
for approval might also be submitted for guselkumab (CNTO1959),
being developed by Janssen.

G R O U P M A N A G E M E N T R E P O R T
Outlook and Forecast

Expected Personnel Development

The number of employees in the Proprietary Development and
Partnered Discovery segments is expected to remain stable during
the 2016 financial year.

Future Research and Development

The Company’s R&D budget for proprietary drug development will
rise significantly again in the 2016 financial year compared to
the prior year. The majority of investment will fund the clinical
development of the most advanced drug candidates MOR208,
MOR202 and MOR209/ES414. Further investment is planned in
the areas of target molecule validation and antibody and tech-
nology development.

The steps planned for the Company’s proprietary portfolio in 2016
are expected to include:
• Initiation of the L-MIND combination study of MOR208 in combi-

nation with lenalidomide in DLBCL

• Initiation of a safety evaluation of MOR208 in combination with
bendamustine (B-MIND); this study is expected to be transi-
tioned into a pivotal phase 3 study in 2017 in which MOR208 in
combination with bendamustine is tested in comparison to ritux-
imab and bendamustine

• Initiation of the combination study of MOR208 in combination

with idelalisib in CLL

• Continuation of the phase 1/2a study of MOR202 with additional
patients and a recommended dosage of 16 mg/kg alone and in
combination with pomalidomide and lenalidomide

• Continuation of an adapted phase 1 trial of MOR209/ES414 in

mCRPC as part of the cooperation with Emergent

• Continuation and initiation of a phase 1 study of the MOR106

co-development program with Galapagos

• Initiation of a phase 1 study of MOR107
• In-licensing of one or more target molecules or compounds to

reinforce the proprietary portfolio

• Further development of the lanthipeptide technology
• Initiation and continuation of new development programs in the

field of antibody identification and preclinical development

Expected Development of the
Financial Position and Liquidity

MorphoSys has a solid financial base and predictable revenues
that stem mainly from its collaboration with Novartis. Addition-
ally, MorphoSys receives performance-based milestone payments
for the successful development of product candidates. Based on
these factors, the Management Board expects Group revenue for
the 2016 financial year in the range of € 47 million to € 52 million.
This forecast does not include any additional revenue from new
collaborations. The majority of the Group’s revenue is expected to
be generated by the Partnered Discovery segment.

Based on management’s current projections, R&D expenses for
proprietary programs and technology development in 2016 should
be in the range of € 76 million to € 83 million. MorphoSys plans to
initiate further clinical studies in addition to continuing the cur-
rent ongoing studies for MOR208, MOR202 and MOR209/ES414.
R&D expenses in the Partnered Discovery segment are expected
to be at roughly the same level as the previous year.

The Company’s EBIT in 2016 is expected to be in the range of
€ – 58 million to € – 68 million. This guidance does not include any
potential in-licensing or co-development of further development
candidates. The Partnered Discovery segment is expected to gen-
erate operating results in 2016 at roughly the same level as the
previous year. MorphoSys anticipates the Proprietary Development
segment to report a significant loss brought on by higher expenses
for proprietary R&D.

In the years ahead, there will be an increasing impact on net assets
and the financial position from one-time events, such as in-licens-
ing and out-licensing proprietary product candidates, major mile-
stone payments as well as royalties related to HuCAL or Ylanthia
antibodies that reach the market. Just as failures in drug develop-
ment can have a negative impact on the MorphoSys Group, these
types of events can lead to a significant change in our financial
targets. Near-term revenue growth depends on the Company’s
ability to enter new partnerships and/or out-license proprietary
programs. Royalties for commercialized products could start con-
tributing to revenue growth as of 2017.

4567844

G R O U P M A N A G E M E N T R E P O R T
Outlook and Forecast

At the end of the 2015 financial year, MorphoSys had liquid funds
of € 298.4 million (December 31, 2014: € 352.8 million). This de-
cline resulted from proprietary R&D expenses as well as the acqui-
sition of the remaining shares in Lanthio Pharma B.V. The projected
loss in 2016 will cause the liquidity position to decline even fur-
ther. MorphoSys considers its solid cash position as an advantage
that can be used to accelerate its future growth through strategic
activities, such as in-licensing compounds and investments in
promising companies. The funds can also be used for increased
research and development in the Company’s portfolio of drug
candidates.

DIVIDEND
Based on German accounting principles, MorphoSys’s financial
statements report an accumulated profit that could be used for
dividends. Based on the expected losses in 2016, the Company no

longer expects to report any accumulated income. MorphoSys will
continue investing in the development of proprietary drugs and
intends to do further in-licensing and acquisitions so that it can
continue creating shareholder value and open up new growth op-
portunities. For this reason, the Company does not expect to pay a
dividend in the foreseeable future.

This outlook is based on Management Board assumptions and
factors that were known at the time of preparing this Annual Re-
port that could influence the Company in 2016 and beyond. Future
results may differ materially from the expectations described in
the section “Outlook and Forecast.” Key risks are described in the
risk report.

G R O U P M A N A G E M E N T R E P O R T
Shares and the Capital Market

Shares and the Capital Market

MorphoSys’s share price was highly volatile during the reporting
year. The year’s high of € 78 was reached on January 8, 2015 and
the year’s low of € 52.52 was set in early November 2015. The main
reason for the poor share price performance was the termination
of the cooperation with Celgene. The shares closed the financial
year at € 57.65, giving the Company a market capitalization* of
€ 1.53 billion. MorphoSys’s share price performance lagged be-
hind the performance of the benchmark indices, which increased
34 % (TecDAX*) and 11 % (Nasdaq Biotechnology Index) in the 2015
financial year.
*S E E G L O S S A R Y – page 142
›› S E E F I G U R E 0 9 – Performance of the MorphoSys Share in 2015
›› S E E F I G U R E 10 – Comparison of the MorphoSys Share Price Development

between 2011 and 2015

Stock Market Development

For global stock markets 2015 was a turbulent year. The DAX, Ger-
many’s leading index, closed the year with sharp price gains for
the fourth consecutive year. As in previous years, performance in
Germany was supported by lower interest rates that offset the neg-
ative effects of falling oil prices and a slide in the Chinese stock
market. After a six-year rally in the US Dow Jones Index that ended
in 2014, US stock markets had to accept a decline in the 2015 re-
porting year.

MorphoSys’s investor relations activities in 2015 continued to
target Europe and the USA. There continued to be tremendous in-
terest in biotechnology shares from US investors.

Liquidity and Index Membership

In 2015, stronger interest in MorphoSys shares boosted their year-
on-year average daily trading volume across all trading platforms
in the regulated market to € 14.9 million (2014: € 12.0 million). The
trading volume of the shares traded on the TecDAX, the index for
the 30 largest technology stocks on the Frankfurt Stock Exchange,
increased by almost 15 % on average. By the end of 2015, MorphoSys
improved its standing in the TecDAX and was ranked 8th in terms
of trading volume (year-end 2014: 9th). In terms of market capital-
ization, MorphoSys was ranked 10th (year-end 2014: 8th).

In addition, the average daily trading volume in MorphoSys shares
on the alternative trading platforms (“dark pools”) in 2015 amounted
to approximately 89,800 shares valued at € 5.8 million (2014: ap-
prox. 64,400 shares valued at € 4.6 million).

Common Stock

The exercise of 80,848 convertible bonds in 2015 prompted a
rise in the Company’s common stock to 26,537,682 shares or
€ 26,537,682.00.

MorphoSys issued stock options and non-interest-bearing con-
vertible bonds under its employee incentive program until 2010. In
2011, the Company introduced a performance-based long-term in-
centive (LTI) plan. The Company repurchases shares annually for
this plan. A detailed description of this program can be found in
the Corporate Governance Report contained in this Annual Report.
In April 2015, 40,425 performance shares were issued to the Man-
agement Board and the Senior Management Group under the LTI
plan. For more information, please refer to the Notes (see section
8.2.5). Stock options were not issued to the Management Board,
members of the Senior Management Group or the workforce in the
reporting year.

567844

G R O U P M A N A G E M E N T R E P O R T
Outlook and Forecast

09 F I G U R E

highest le ve l
01/08/2015

150

140

130

120

110

DIVIDEND
Based on German accounting principles, MorphoSys’s financial
statements report an accumulated profit that could be used for
dividends. Based on the expected losses in 2016, the Company no

100

Performance of the MorphoSys Share in 2015 (1 January 2015 = 100 %)

lowest le ve l
11/04/2015

31.46 %

+ 2.63 %

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

morphosys

nas daq b iotechn olo gy inde x

tecda x

10 F I G U R E

Comparison of the MorphoSys Share Price Development between 2011 and 2015 (1 January 2011 = 100 %)

highest le ve l
12/18/2014

€ 86.72

lowest le ve l
11/23/2011

€ 15.89

550

500

450

400

350

300

250

200

150

100

2011

2012

2013

2014

2015

morphosys

nas daq b iotechn olo gy inde x

tecda x

G R O U P M A N A G E M E N T R E P O R T
Shares and the Capital Market

Shares and the Capital Market

between 2011 and 2015

Stock Market Development

MorphoSys’s investor relations activities in 2015 continued to
target Europe and the USA. There continued to be tremendous in-
terest in biotechnology shares from US investors.

Liquidity and Index Membership

Common Stock

The exercise of 80,848 convertible bonds in 2015 prompted a
rise in the Company’s common stock to 26,537,682 shares or
€ 26,537,682.00.

567846

G R O U P M A N A G E M E N T R E P O R T
Shares and the Capital Market

08 T A B L E

Key Data for the MorphoSys Share (as of December 31)

Total Stockholders’ Equity (in million €)

Number of Shares Issued (number)

Market Capitalization (in million €)

Closing Price in € (Xetra)

Average Daily Trading Volume (in million €)1

Average Daily Trading Volume (in % of Share Capital)1

1 Figures of 2011 only include trading on Xetra and German regional exchanges.

2015

2014

2013

2012

2011

362.7

348.8

352.1

202.0

197.1

26,537,682

26,456,834

26,220,882

23,358,228

23,112,167

1,530

57.65

14.9

0.87

2,027

76.63

11.9

0.65

1,464

55.85

6.9

0.59

685

29.30

1.9

0.38

405

17.53

1.8

0.38

International Investor Base

Annual General Meeting

Various voting right notifications were issued during the report-
ing year in accordance with Sections 21, 25 and 26 of the German
Securities Trading Act (WpHG). These notifications were published
on the MorphoSys website and can be found under Media and
Investors – Stock Information – Shareholder Structure.

According to the definition given by the Deutsche Börse, 98.3 % of
MorphoSys AG’s shares were in free float at the end of the report-
ing year. Novartis Pharma AG (Basel, Switzerland) held roughly
4.1 % and Celgene Netherlands II BV (Amsterdam, the Nether-
lands) held about 3 % of the shares. International institutional
investors continued to hold approximately 70 % of the shares. Ac-
cording to the latest voting right announcements, our largest sin-
gle shareholders were Flossbach von Storch Invest S.A. (Luxem-
bourg) with 5.8 %, Baillie Gifford & Co. (Edinburgh, UK) with 5.0 %,
Templeton Investment Counsel, LLC (Wilmington, DE, USA) with
3.1 %, Templeton Global Advisors Limited (Nassau, Bahamas) with
3.1 %, and Invesco Holding Company Limited (Henley-on-Thames,
UK) with 3.0 %.

An overview of the current shareholder structure can also be
found on the Company’s website (Media and Investors – Stock
Information – Shareholder Structure).

The Management and Supervisory Boards of MorphoSys AG
welcomed shareholders to the Company’s 17th Annual General
Meeting in Munich on May 8, 2015. The shareholders and proxies
attending represented more than 50 % of the common stock of
MorphoSys AG (2014: 47.8 % of the common stock). All 15 agenda
items submitted for resolution were adopted by a clear majority.
This year’s Annual General Meeting is scheduled for June 2, 2016
and will take place again in Munich.

Investor Relations Activities

During the 2015 financial year, MorphoSys continued to strengthen
its communication with the capital markets. The Company took
part in 20 international investor conferences and held several road
shows and private meetings in both Europe and the USA. There
continued to be strong interest from specialized healthcare inves-
tors headquartered in the USA. With the Company’s publication of
the annual, half-yearly and quarterly results, the Management
Board held conference calls to report past and expected business
developments and answer questions from analysts and investors.

In private meetings, investors were not only interested in the gen-
eral progress of the drug pipeline but were especially interested in
the development of the proprietary portfolio, which had a total of
14 active programs at the end of the reporting year.

Ten analysts were covering MorphoSys shares at the end of 2015.

G R O U P M A N A G E M E N T R E P O R T
Shares and the Capital Market

09 T A B L E

Analyst Recommendations (as of December 31, 2015)

Buy/Overweight

Hold

Sell

n/a

Buy/Overweight; Hold; Sell; n/a = not available (no rating)

For the second consecutive year, MorphoSys was awarded the first
prize in the “Investors’ Darling 2015 – Capital Market Strategist
of the Year” competition for the TecDAX. The Handelshochschule
Leipzig, supported by the Manager Magazine, evaluated the capi-
tal market communications of all index-listed stock companies.
The evaluation included the quality of standard financial report-
ing, the IR website, investor presentations and capital market
performance.

Detailed information on the MorphoSys share, financial ratios, the
Company’s strategic direction and the Group’s recent developments
can be found on the Company’s website (Media and Investors).

567848

G R O U P M A N A G E M E N T R E P O R T
Sustainable Business Development

Sustainable Business Development

At MorphoSys, sustainability is a value firmly anchored in the
Company’s corporate culture to ensure it acts in an environmen-
tally and socially responsible manner for the benefit of present and
future generations. Complying with the highest ethical, social and
environmental standards goes hand in hand with long-term eco-
nomic success. This section describes the measures taken in the
reporting year to ensure the Company meets these standards. To
ensure compliance with these standards, MorphoSys uses selected
non-financial performance indicators in addition to the financial
performance indicators discussed in the section “Analysis of Net
Assets, Financial Position and Results of Operations”. The Corpo-
rate Governance Report details MorphoSys’s management struc-
ture and corporate governance practices.

Sustainable Corporate Management

Sustainability is a hallmark of MorphoSys’s corporate manage-
ment and plays a major role in the pursuit of corporate goals and
contributing value to society. This applies to the short- and long-
term objectives of all levels of management and is reflected in the
Company’s core task of developing even more effective and safer
drugs. To ensure lasting business success, the Company incorpo-
rates environmental and social responsibility into its daily busi-
ness and bases its business model on sustainable growth that pro-
tects the interests of its shareholders, creates long-term value and
weighs the Company’s actions in terms of their impact on the en-
vironment, society, patients and employees. Internally, this busi-
ness model is reflected in a progressive human resources policy
that takes employees’ needs seriously.

A comprehensive risk management system ensures that factors
that could threaten sustainable corporate performance are identi-
fied early and corrected if necessary. MorphoSys only assumes
risk when there is an opportunity to increase the Company’s en-
terprise value. At the same time, a great effort is made to system-
atically identify new opportunities and leverage its business suc-
cess (more information on risks and opportunities can be found on
page 53).

Group-wide compliance with the sustainability strategy is moni-
tored by the entire Management Board, chaired by the Chief Fi-
nancial Officer. The Code of Conduct’s credo, which is available in
German and English and applies to employees group-wide, regu-
lates the strategy’s implementation in daily operations. Employee
training on general and specific sections of the Code of Conduct is
conducted regularly to ensure that the guidelines are understood
and implemented. The Code of Conduct Committee consists of four
members (a Chairperson and three other members) and is avail-
able to employees at all times. A Compliance Officer coordinates
MorphoSys’s Compliance Management System. Detailed infor-
mation on this subject can be found on page 78 of the Corporate
Governance Report. Employees can ask for advice on all matters
concerning legal compliance and corporate responsibility and re-
port any suspected violations. This may be done on an anonymous
basis, if preferred. Violations are systematically pursued and ap-
propriate remedial action is taken. No such violations have been
reported to date, and the Company believes it is unlikely in the
future that any serious offenses would occur that could materi-
ally affect the Group’s net assets, financial position and results of
operations.

The Company’s long-term and sustainable business success rests
on innovative research and development to meet the major chal-
lenge of providing comprehensive healthcare in the future. Be-
cause of a growing and aging population, biotechnology-derived
drugs represent a growing portion of the overall healthcare sys-
tem. In the opinion of management, all aspects of the current busi-
ness model of MorphoSys support the sustainable investment in-
terests of its shareholders.

Detailed information on the KPIs for sustainable development used
by MorphoSys is provided in the section “Strategy and Group Man-
agement” (page 19). The following report on the implementation
of MorphoSys’s corporate strategy and the Company’s sustainable
business development is based on the recommendations of the
German Sustainability Code originally presented by the Council
for Sustainable Development in October 2011 and updated in
January 2015.

Non-Financial Performance
Indicators

E T HIC AL S TANDARDS AND COMMUNIC AT ION WI T H

S TAKEHOL DERS
The highest scientific and ethical principles for conducting human
clinical trials and animal testing are anchored in MorphoSys’s
Code of Conduct, which is modeled after the “Declaration of Hel-
sinki” of the World Medical Association (WMA). Strict adherence
to applicable national and international regulations is mandatory
for all MorphoSys employees and sub-contractors.

Because European legislation prescribes the performance of animal
testing to determine the toxicity*, pharmacokinetics* and pharma-
codynamics* of drug candidates, the biotechnology industry can-
not forgo this type of testing. Animal studies for MorphoSys are
given to contract research organizations (CROs*) because the Com-
pany does not have laboratories suitable for this type of research.
In the course of product development, MorphoSys contracts out
animal studies according to the principles of good animal welfare
and the respectful treatment of animals as set out in national and
European regulations. MorphoSys introduced a quality assurance
and control system with written standard operating procedures
(SOPs*) that are continually updated to ensure that the Company
only contracts with contract research organizations that adhere to
local, national and international regulations for animal studies.
Studies are carried out only after the approval of the relevant ethics
committee and under the constant supervision of a veterinarian.

Institutes cooperating with MorphoSys must comply with ethical
principles and legal regulations for research involving animals
and, within certain circumstances, have the Good Laboratory Prac-
tice (GLP*) quality assurance certification. This is how MorphoSys
ensures it fulfills its moral obligation for the respectful treatment
of animals. The Company also conducts on-site inspections of the
research institute’s study centers that include a review of the staff’s
skills and training as well as animal welfare. These inspections
are carried out during the audits conducted prior to contract
awards.

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The Declaration of Helsinki mentioned above also defines the
ethical principles MorphoSys follows when dealing with healthy
volunteers and patients in clinical trials. MorphoSys carries out
clinical trials in accordance with Good Clinical Practice (GCP*),
and testing is conducted in compliance with the relevant provi-
sions on privacy and confidentiality. Protecting the rights, safety
and welfare of all clinical trial participants has the highest priority
at MorphoSys. Clinical trials are initiated only after the approval of
the relevant independent ethics committee and/or institutional re-
view board. Before participating in a clinical trial, each participant
must voluntarily submit an informed consent.
*S E E G L O S S A R Y – page 142

The goal of MorphoSys’s business activities is to improve patients’
health through its scientific work. The Company can only achieve
this goal if its activities are socially accepted. Achieving this ac-
ceptance requires continuous and open dialog with stakeholders
so that MorphoSys can understand potential concerns with regard
to biotechnological approaches and explain the Company’s activi-
ties and their benefits. To this end, MorphoSys is active in a variety
of ways that range from participation in public information events
to active support of the Communication and Public Relations task
force of BIO Deutschland e.V.

PROCUREMEN T
The Central Purchasing and Logistics Department is responsible
for purchasing external goods, consulting and services for
MorphoSys in specified areas. New systems and processes were
introduced during the reporting year to improve efficiency and re-
duce purchasing costs. This department reinforced MorphoSys’s
position in key areas by introducing special framework agree-
ments and establishing preferred partnerships with suppliers. All
suppliers selected by MorphoSys agree to comply with all anti-
corruption standards, human rights practices and internationally
recognized labor standards and data protection laws.

ENVIRONMEN TAL PRO T EC T ION AND OCCUPAT IONAL SAFE T Y
Because the biotechnology industry is subject to stringent regula-
tory requirements, environmental protection and occupational
safety are important tasks of Group management. The Environ-
mental Protection and Occupational Safety Department monitors
compliance with all relevant requirements. In addition to strict
compliance with all legal requirements, MorphoSys makes a tre-
mendous effort to maintain sustainable environmental manage-
ment and the effective protection of its employees.

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For the seventh consecutive year, the Company took part in a sur-
vey conducted by the Carbon Disclosure Project (CDP), an indepen-
dent non-profit organization whose aim is to reduce greenhouse
gases and ensure the sustainable use of water. As in previous years,
the study results showed that there is no need for the Company to
take any action. The results are used for the current monitoring of
consumption and provide an additional control indicator.

MorphoSys was certified for the sixth consecutive year as a “bicy-
cle-friendly company” for its participation in the “Bike to Work” ini-
tiative sponsored by the German Bicycle Club (ADFC) and a German
health insurance company. MorphoSys also offers employees an
extensive range of preventative healthcare options, such as auto-
genic training, ball sports, weight training and marathons.

With one reportable occupational accident in the reporting year,
the number of accidents remained below the previous year’s low
level of two accidents and placed the ratio of reportable accidents
at MorphoSys significantly below the average ratio in Germany
(22.3 reportable occupational accidents per 1,000 full-time em-
ployees in the latest survey conducted in 2014).

MorphoSys tries to minimize the amount of harmful substances
used in its laboratories. Only those who are specially trained are
allowed to work with toxins. Work involving contagious pathogens
can only be carried out in secure laboratories. MorphoSys only
uses certified companies to dispose of chemical waste and also
refrains from labeling antibodies with radioactive substances.
›› S E E F I G U R E 11 – Occupational Safety at MorphoSys

QUAL I T Y ASSURANCE
Biopharmaceutical companies bear a special responsibility to com-
ply with the highest quality and safety standards. MorphoSys fol-
lows detailed procedures and stringent rules in drug development
to avoid safety risks that may pose a threat to patients and, in turn,
the Company’s financial situation. This is how the Company en-
sures the quality of the investigational medicinal products, keeps
risks to volunteers and patients in clinical studies as low as possi-
ble and assures that the data are measured reliably and processed
correctly.

To control and regulate these processes in its own development
department, MorphoSys created an integrated quality management
system that complies with the principles of Good Manufacturing
Practice (GMP*), Good Clinical Practice (GCP) and Good Laboratory
Practice (GLP). An independent quality assurance department
ensures that all development activities comply with national and
international laws, rules and guidelines. The Quality Assurance
Manager reports to and coordinates activities with the Chief
Executive Officer to meet the stringent quality standards, ensure
product quality and data integrity as well as the safety of volun-
teers and patients in clinical trials.
*S E E G L O S S A R Y – page 142

The Quality Assurance Department prepares an annual review
plan using a risk-based approach that is used when auditing
the contract research institutes, suppliers and contract manufac-
turers selected for clinical studies as well as MorphoSys’s own
departments.

MorphoSys holds a manufacturing license for the approval of
tested compounds for its proprietary development activities and
was also issued a certificate from the German authorities of Upper
Bavaria confirming the Company’s compliance with Good Manu-
facturing Practice (GMP) standards and guidelines.
›› S E E F I G U R E 12 – Quality Management System at MorphoSys

IN T EL L EC T UAL PROPER T Y
Proprietary technology and the drug candidates derived therefrom
are MorphoSys’s most valuable assets. Therefore, it is critical to
the Company’s success that these assets are protected by patents
and other appropriate measures so that they may be utilized exclu-
sively and effectively.

MorphoSys’s core technologies – HuCAL, Ylanthia, Slonomics and
lanthipeptide technology – form the Company’s basis for success.
Each single technology is protected by a number of patent families
that are complemented by various independent technology pat-
ents. Most of these have now been issued in all major markets, in-
cluding Asian markets such as China.

Our development program portfolio was also strengthened this
past financial year through the acquisition of Lanthio Pharma and
the related development of the MOR107 drug candidate. This pro-
gram, like other proprietary drug programs, is protected by the

12 F I G U R E

Quality Management System at MorphoSys

M A N A G E M E N T B O A R D

C O R P O R AT E R E Q U I R E M E N T S /

D E P A R T M E N TA L R E Q U I R E M E N T S

R E G U L AT O R Y R E Q U I R E M E N T S

Q U A L I T Y M A N A G E M E N T

S Y S T E M S

Training and Qualifi cation

Self Inspection/Internal Audits

Documentation System

Handling of Deviations, Change

Batch Record Review/Batch

Control, Complaints, Out of

Specifi cation (OOS) and Recalls

Release

SOP System*

External Audits (CMO*, CTO*,

CRO*, clinical trial sites)

*S E E G L O S S A R Y – page 142

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11 F I G U R E

Occupational Safety at MorphoSys

appropriate patents and applications. The development candidates
MOR103 (out-licensed to GSK) and MOR202 are each protected by
more than half a dozen issued patents and patent applications that
cover various aspects of the compounds and provide effective pro-
tection. The relevant patents and associated protection certificates
are expected to expire in 2031. The MOR208 program is also pro-
tected by various patents scheduled to expire in 2029 (US patent)
and 2027 (European patent), excluding any consideration given to
possible regulatory or patent office extensions. Patent applications
covering MOR209/ES414 are scheduled to expire in 2032 at the
earliest, also without giving any consideration to possible regula-
tory or patent office extensions.

O N LY S P E C I A L LY T R A I N E D E M P L O Y E E S A R E
A L L O W E D T O W O R K W I T H T O X I C S U B S TA N C E S ;
P AT H O G E N I C O R G A N I S M S A R E P R O C E S S E D
I N L A B O R AT O R I E S W I T H P A R T I C U L A R S A F E T Y
S TA N D A R D S

MorphoSys requires all executives with management responsibil-
ity to take part in management seminars created exclusively for
the Company. The training is based on several thematically related
components that aim to provide not only theoretical knowledge but
also prepare participants for the special demands placed on the
Company’s executives. As in previous years, all executives in the
reporting year took part in an external workshop that fully ad-
dressed the challenges of management under the motto “Mission:
Management.”
L O W E S T P O S S I B L E A M O U N T S O F H A Z A R D O U S
S U B S TA N C E S U S E D

MorphoSys also actively promoted the professional career paths of
specialists and experts during the reporting year. The goal of this
type of career promotion – also for those without personnel re-
sponsibilities – is to maintain flat hierarchies and put traditional
management and professional career paths on an equal footing,
also in terms of titles and compensation structures.

MorphoSys offers in-house vocational training to open up promis-
ing career prospects, particularly for young people. In awarding
apprenticeships, the Company has been very successful in consid-
ering students who are equally suitable but do not have a diploma.
On December 31, 2015, MorphoSys had three trainees in the IT
department and six biology laboratory trainees (December 31,
2014: two IT trainees; six biology laboratory trainees).

Transparent communication among employees is a central aspect
of MorphoSys’s corporate culture as stated in the Company’s credo.
In meetings held every two weeks, the Management Board pre-
sents the Company’s recent developments and answers questions,
and employees are given the opportunity to present selected proj-
ects. Questions and feedback from the staff can be taken directly
in the meeting or submitted in advance in writing – anonymously
if desired. The Company’s intranet was technologically and con-
ceptually redesigned in the reporting year to streamline internal
communication. The new design ensures that the Company is using
the latest generation of document management systems and appli-
cations. Employees have access to a broader range of information
on external communication especially created for the internal tar-
get group.

The programs developed in cooperation with or for partners are
also fully secured by patent protection. MorphoSys’s patent depart-
ment works closely with the relevant partners. Patents covering all
drug development programs have durations that significantly ex-
ceed those of the underlying technologies.

MorphoSys’s patent lawyers are currently maintaining over 50 dif-
ferent patent families worldwide in addition to the numerous pat-
ent families the Company pursues with its partners. The patent
portfolio is routinely analyzed and adapted to the Company’s cor-
porate strategy.

HUMAN RES OURCES
MorphoSys operates a progressive human resources policy for
the long-term retention of professionally and personally suitable
employees from a variety of fields. In an industry such as the bio-
technology industry, in which success is largely dependent on the
creativity and commitment of staff, employee retention and satis-
faction are crucial success factors. At the end of the reporting year,
MorphoSys had employees representing 29 different nationalities
(2014: 22) employed at the Company for an average of 6.0 years
(2014: 5.8 years).
›› S E E F I G U R E 13 – Employees by Gender
›› S E E F I G U R E 14 – Seniority

Employees have access to a broad range of in-house and external
training programs, advanced education, specialized continuing
education and development programs as well as industry confer-
ences. MorphoSys promotes not only ongoing professional educa-
tion but also the personal development of its employees and, in
individual cases, even offers support through customized coaching.

O N LY C E R T I F I E D C O M P A N I E S A R E
A U T H O R I Z E D B Y M O R P H O S Y S T O D I S P O S E O F
C H E M I C A L W A S T E

I N T R O D U C T I O N O F H A Z A R D O U S M AT E R I A L S F O R
R & D P U R P O S E S :

• A dedicated biosafety team as defi ned by the “Gentech-
nik Sicherheitsverordung” (German Genetic Engineer-
ing Safety Directive) and other safety professionals per-
form an internal audit to assess the risk involved

• Specifi c safety and evacuation training for the employ-

ees working with the substances

• Assurance that all safety measures are implemented

before actual work commences

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12 F I G U R E

Quality Management System at MorphoSys

With one reportable occupational accident in the reporting year,
the number of accidents remained below the previous year’s low
level of two accidents and placed the ratio of reportable accidents
at MorphoSys significantly below the average ratio in Germany
C O R P O R AT E R E Q U I R E M E N T S /
(22.3 reportable occupational accidents per 1,000 full-time em-
D E P A R T M E N TA L R E Q U I R E M E N T S
ployees in the latest survey conducted in 2014).

MorphoSys tries to minimize the amount of harmful substances
used in its laboratories. Only those who are specially trained are
allowed to work with toxins. Work involving contagious pathogens
can only be carried out in secure laboratories. MorphoSys only
1
uses certified companies to dispose of chemical waste and also
refrains from labeling antibodies with radioactive substances.
›› S E E F I G U R E 11 – Occupational Safety at MorphoSys

Self Inspection/Internal Audits

Training and Qualifi cation

Documentation System

*S E E G L O S S A R Y – page 142

M A N A G E M E N T B O A R D

R E G U L AT O R Y R E Q U I R E M E N T S

Q U A L I T Y M A N A G E M E N T
S Y S T E M S

Batch Record Review/Batch

Release

SOP System*

Our development program portfolio was also strengthened this
External Audits (CMO*, CTO*,
past financial year through the acquisition of Lanthio Pharma and
the related development of the MOR107 drug candidate. This pro-
gram, like other proprietary drug programs, is protected by the

CRO*, clinical trial sites)

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To improve employer branding, MorphoSys started a Facebook
career page in March 2015. The target group is potential appli-
cants who want to gain a better understanding of the Company.
Employee profiles and information on a variety of activities that
extend beyond a typical workday are presented to give an authen-
tic and positive impression of the Company.

MorphoSys helps new employees become more familiar with the
Group through extensive onboarding activities. Employees can
learn about the Company’s processes in two-day orientation semi-
nars with presentations from all operating departments and by
participating in laboratory tours.

Free sport and relaxation options, such as the recently introduced
barbell weight training for strengthening the back muscles, soc-
cer, volleyball and basketball, as well as autogenic training and
massage for a fee promote health and socializing among employ-
ees across departments. All of the members of the Senior Manage-
ment Group accepted an offer for free health checkups.

Feasible concepts for reconciling professional development with
personal life are a strategic success factor for progressive compa-
nies and the reason MorphoSys has offered employees a diverse
range of options, such as flexible work hours and special part-time
employment arrangements, for many years. Modern IT equipment

also allows employees to work during business trips or from their
home office without interruption. MorphoSys makes it easier for
employees with families to re-enter the workforce and combine
work and family life. MorphoSys is also a co-founder of the “Biokids”
kindergarten in Martinsried. Special arrangements for other ser-
vices for working family members have also been made with a
German service provider.

MorphoSys makes every effort to protect employees from work-
place hazards and maintain their health through preventative
measures. The extremely low number of occupational accidents
illustrates the success of the Company’s strict monitoring of all
occupational protection and safety measures. During the reporting
year, there was one reportable occupational accident. MorphoSys
tries to maintain the low number of accidents and the highest level
of employee safety and well-being through the help of policies and
training from the Department of Health and Occupational Safety
and by offering routine medical examinations. The continued de-
cline in the fluctuation rate during the reporting year to 4.1 %
(2014: 5.6 %) is another indication of employees’ strong identifica-
tion with the Company.
›› S E E F I G U R E 15 – Labor Turnover Rate

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13 F I G U R E
Risk and Opportunity Report

Employees by Gender (2015)

37 %

MorphoSys operates in an industry characterized by constant
change and innovation. The challenges and opportunities in the
healthcare sector are influenced by a wide variety of factors. Global
demographic changes, medical advances and the desire to in-
crease quality of life provide excellent growth opportunities for
the pharmaceutical and biotechnology industries; however, com-
panies must also grapple with growing regulatory requirements
in the field of drug development as well as cost pressure on the
healthcare systems.

63 %

2 014: 6 6 %

N U M B E R

2 014: 3 4 %

All material risks in the various business segments and the Com-
pany as a whole are assessed using a systematic risk process that
is carried out twice a year. Risks are assessed by comparing their
quantifiable financial impact on the MorphoSys Group with their
probability of occurrence with and without initiating a risk mitiga-
tion process. This method is applied over a 12-month assessment
period as well as a period of three years to include risks related to
the Company’s proprietary development that have longer dura-
tions. Additionally, there is a strategic risk assessment that spans
more than three years. An overview of MorphoSys’s current risk
assessment activities can be found in Tables 10 and 11 (page 60).

MorphoSys makes a great effort to identify new opportunities and
6
to leverage its business success to generate a lasting increase in
4
enterprise value. Entrepreneurial success, however, is not achiev-
able without conscious risk-taking. Through its worldwide opera-
tions, MorphoSys is confronted with a number of risks that could
affect its business. MorphoSys’s risk management system identi-
fies these risks, evaluates them and takes suitable action to avert
risk and reach its corporate objectives. A periodic strategy review
ensures that there is a balance of risk and opportunity. MorphoSys
only assumes risk when there is an opportunity to increase the
Company’s enterprise value.
2015

T R A I N E E S

2014

Risk Management System

The risk management system is an essential element of MorphoSys’s
corporate governance and ensures the Company adheres to good
corporate governance principles and complies with regulatory
requirements.

15 F I G U R E

14 F I G U R E

Seniority (average duration in years)

Labor Turnover Rate (in %)

Y E A R S

MorphoSys has a comprehensive system in place to identify, as-
sess, communicate and deal with risks throughout the Company.
The risk management system identifies risk at a very early stage,
making it possible to take action to limit operating losses and mon-
itor risks that could jeopardize the Company. All actions to mini-
6.0
mize risk are assigned to risk officers, most of whom belong to
MorphoSys’s Senior Management Group.

5.8

5.6

2014

2015

E X E C U T I V E S

Risk managers enter their risks into a Group-wide IT platform that
makes monitoring, analyzing and documenting risks much easier.
Any changes can be tracked in this system. The risk management
system distinguishes risk owners from risk managers. Risk own-
ers are typically the relevant department heads (usually members
of the Senior Management Group). Risk managers can be depart-
ment employees when the risks that fall under their area of re-
sponsibility are included in the risk management system. Risk
owners and risk managers are required to review and update their
risks and assessments at half-yearly intervals. The process for this
is coordinated and led by the Corporate Finance & Corporate De-
velopment Department, which is also responsible for monitoring
the evaluation process and summarizing the key information. The
information is presented to the Management Board and Supervi-
sory Board twice a year. The entire evaluation process is based on
standardized forms and diagrams and includes a “heat map” as
well as a detailed description of the major risks over one- and
three-year time frames. The heat map graphically illustrates the
effectiveness of the controls implemented for the five largest risks
(one- and three-year time frames) so that the effect of the monitor-
ing activities for various risks can be visualized. Risk manage-
ment and monitoring activities are carried out by the relevant
managers. The changes in the risk profile resulting from these
activities are recorded at regular intervals. Risk owners and risk
managers are also required to report risks outside of these peri-
odic assessments when the risks exceed a certain threshold (ad
hoc reporting). An audit by external consultants ensures the on-
going development of the risk management system and that any

4.1

2014

2015

2014

2015

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Risk and Opportunity Report

MorphoSys makes a great effort to identify new opportunities and
to leverage its business success to generate a lasting increase in
enterprise value. Entrepreneurial success, however, is not achiev-
able without conscious risk-taking. Through its worldwide opera-
tions, MorphoSys is confronted with a number of risks that could
affect its business. MorphoSys’s risk management system identi-
fies these risks, evaluates them and takes suitable action to avert
risk and reach its corporate objectives. A periodic strategy review
ensures that there is a balance of risk and opportunity. MorphoSys
only assumes risk when there is an opportunity to increase the
Company’s enterprise value.

Risk Management System

MorphoSys has a comprehensive system in place to identify, as-
sess, communicate and deal with risks throughout the Company.
The risk management system identifies risk at a very early stage,
making it possible to take action to limit operating losses and mon-
itor risks that could jeopardize the Company. All actions to mini-
mize risk are assigned to risk officers, most of whom belong to
MorphoSys’s Senior Management Group.

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potential changes in the Company’s risk areas are promptly incor-
porated. The risk and opportunity management system combines
a bottom-up approach for recognizing both short- and medium-
term risks with a top-down approach in the area of strategic risks
and opportunities. The top-down approach systematically identi-
fies global strategic risks and opportunities and completes the
overview of the overall risks and opportunities. Examples include
environmental and industry risks, personnel risks and other risks
that may result from the public perception of the Company. As part
of the top-down approach, a workshop is held with selected mem-
bers of the Senior Management Group in which the strategic risks
and opportunities in different areas of the Company are assessed
and discussed including those exceeding a period of three years.
These workshops are held twice a year as part of the routine risk
assessment. The evaluation process is solely qualitative. These
risks are listed in Table 11 (page 60).

Principles of Risk and Opportunity
Management

MorphoSys continually encounters both risks and opportunities.
These could have a potential material impact on the net assets and
financial position as well as a direct effect on intangible assets,
such as the Company’s image in the sector or the Company’s
trademark.

MorphoSys defines risk as an internal or external event that has
an immediate impact on the Company and includes an assessment
of the potential financial impact on the Company’s goals. There is
a direct relationship between opportunity and risk. Seizing oppor-
tunities has a positive influence on Company goals, whereas risk
emergence has a negative influence.

Responsibilities under the Risk and
Opportunity Management System

The Management Board of MorphoSys AG is responsible for the
risk and opportunity management system and ensures that all
risks and opportunities are evaluated, monitored and presented in
their entirety. The Corporate Finance & Corporate Development
Department oversees the risk management process and reports to
the Management Board regularly. The Supervisory Board has ap-
pointed the Audit Committee to monitor the effectiveness of the
Group’s risk management system. The Audit Committee periodi-
cally reports its findings to the entire Supervisory Board, which is
also directly informed by the Management Board twice a year.
›› S E E F I G U R E 16 – The Risk and Opportunity Management System at MorphoSys

Accounting-Related Internal Control
System

MorphoSys employs extensive internal controls, Group-wide re-
porting guidelines as well as other measures, such as employee
training and ongoing professional education with the goal of main-
taining accurate bookkeeping and accounting and ensuring reli-
able financial reporting in the consolidated financial statements
and Group Management Report. This essential component of Group
accounting consists of preventative, monitoring and detection
measures intended to ensure security and control in accounting
and operating functions. Detailed information about the internal
control system for financial reporting can be found in the Corpo-
rate Governance Report.

Risks

16 F I G U R E

The Risk and Opportunity Management System at MorphoSys

RISK C AT EGORIES
MorphoSys divides its key risks into the following six categories:
• Financial risk (includes risk resulting from insolvencies and
payment defaults; license fees; research funding and milestones
that are lower than planned or anticipated; and risks associated
with any form of financing and financial instruments, such as
cash investments, bank failures, currencies, interest rates, taxes,
debt collection and lack of funding)

CORP ORAT E
G O VERNANC E

• Operational risk (risk, for example, in the areas of procurement/
production, customers, and personnel, as well as risk related to
preclinical or clinical trial results and other risk specific to the
biotechnology industry)

• Strategic risk (for example, mergers and acquisitions (M&A),
shareholdings, R&D, corporate image, superior development proj-
ects and technologies of competitors and portfolio development)
MANAGEMEN T
SUPERVI S OR Y
• External risk (risk beyond the Company’s control, such as eco-
B OARD
B OARD
nomic, political and legal risk; as well as risk specific to compa-
nies in the biotechnology and pharmaceutical industries, such
as the risk to intellectual property protection or in the regulatory
environment when seeking the approval of new drugs)

• Organizational risk (includes risk concerning IT, facilities man-
agement, succession planning, business interruption and pro-
cess delays as a result of the high complexity and number of
projects)

COMPL IANC E
MANAGEMEN T

RI SK
• Compliance risk (for example, non-compliance with US FDA and
MANAGEMEN T
European EMA* regulations, quality management policies, ac-
counting standards, corporate governance or violations of the
German Stock Corporation Act)

OPP OR T UNI T Y
MANAGEMEN T

*S E E G L O S S A R Y – page 142

F INANC IAL RISK
MorphoSys’s financial risk management seeks to limit financial
risk and reconciles this risk with the requirements of its business.

DEF INE
OB JEC T IVE S

IMPL EMEN T
MEA SURE S

Financial risk can arise in relation to licensing agreements, for
example when projects (products or technologies) do not material-
ize, are delayed or out-licensed to a different degree than origi-
MONI T OR
A SSE SS
T EC HNOL O G Y
S Y S T EM
RI SK
S COU T ING
nally planned. Risk also arises when revenues do not reach their
projected level or when costs are higher than planned due to
higher resource requirements. Detailed project preparations, such
as those made through in-depth exchanges with internal and
external partners and consultants, ensure the optimal starting
point early in the process and are important for minimizing risk.
Financial risk related to the Company’s proprietary programs was
reduced by successfully partnering MOR103. The financial risk
relating to the fully proprietary programs MOR202 and MOR208
remains entirely with MorphoSys. The Company’s increasing focus
on proprietary development programs means the risks related to
this area of MorphoSys’s business model will gain in importance.
The termination of individual programs or clinical trials may have a
significant effect on the Company’s short-, medium-, and long-term

IN T ERNAL
AUDI T

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Risk and Opportunity Report

financial planning. The termination of in-licensed programs can
result in extraordinary amortization and negatively affect the net
assets and results of operations. MorphoSys retains some risk
with respect to the clinical development of programs introduced
into partnerships. The early termination of development partner-
ships may force MorphoSys to bear future development costs alone
and have a major impact on the Company’s income statement and
financial planning.

Continuing economic difficulties in Europe indicate that potential
bank insolvencies still pose a financial risk. For this reason,
MorphoSys continues to invest only in securities and bank instru-
ments deemed safe – to the extent this is possible and can be esti-
mated – and that have maintained their high rating and/or are
secured by a strong partner and are liquid (short-term investment
horizon). MorphoSys has simulated various scenarios and set up
appropriate contingency plans. Adequate returns on financial as-
sets also represent a risk. Short-term interest rates in the eurozone
are currently negative, for example the three-month Euribor inter-
est rate was at the beginning of February 2016 at – 17 basis points.
In addition, the higher the credit quality, the lower the respective
interest rate. In this environment, MorphoSys has opted for higher
safety at the expense of lower return.

IN T ERNAL
CON T ROL
S Y S T EM

In future, MorphoSys will continue to spend substantial resources
on the development of product candidates, including the identifi-
cation of target molecules and drug candidates, the conducting of
preclinical studies and clinical trials, the manufacturing of mate-
rial and the support of collaborations and joint development of
programs as well as the acquisition of new technologies and the
in-licensing of new development candidates. The current financial
resources and expected future cash in-flows should be sufficient to
meet the Company’s current and near-term capital requirements.
However, it is not guaranteed that funding will be sufficient at all
times.

DI S CUSSION
F ORUM

OPERAT IONAL RISK
Operational risk includes risks related to the exploration and de-
velopment of proprietary drug candidates and the risks associated
with antibody production.

BUSINE SS
DEVEL OPMEN T

INNO VAT ION
C AP I TAL

The termination of a clinical trial prior to out-licensing to part-
ners – which does not necessarily imply the failure of an entire
program – can occur when the trial data does not produce the ex-
pected results, show unexpected adverse side effects or were com-
piled incorrectly. Clinical trial design and drafts of development
plans are always completed with the utmost care. This gives the
trials the best opportunity to show clinically relevant data in clini-
cal testing and persuade regulatory agencies and potential part-
ners. External experts also contribute to the Company’s existing
internal know-how. Special steering committees and panels are
formed to monitor the progress of clinical programs.

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Principles of Risk and Opportunity
Management

Responsibilities under the Risk and
Opportunity Management System

Accounting-Related Internal Control
System

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Risk and Opportunity Report

Risks

• Strategic risk (for example, mergers and acquisitions (M&A),
shareholdings, R&D, corporate image, superior development proj-
ects and technologies of competitors and portfolio development)
• External risk (risk beyond the Company’s control, such as eco-
nomic, political and legal risk; as well as risk specific to compa-
nies in the biotechnology and pharmaceutical industries, such
as the risk to intellectual property protection or in the regulatory
environment when seeking the approval of new drugs)

• Compliance risk (for example, non-compliance with US FDA and
European EMA* regulations, quality management policies, ac-
counting standards, corporate governance or violations of the
German Stock Corporation Act)

*S E E G L O S S A R Y – page 142

F INANC IAL RISK
MorphoSys’s financial risk management seeks to limit financial
risk and reconciles this risk with the requirements of its business.

Financial risk can arise in relation to licensing agreements, for
example when projects (products or technologies) do not material-
ize, are delayed or out-licensed to a different degree than origi-
nally planned. Risk also arises when revenues do not reach their
projected level or when costs are higher than planned due to
higher resource requirements. Detailed project preparations, such
as those made through in-depth exchanges with internal and
external partners and consultants, ensure the optimal starting
point early in the process and are important for minimizing risk.
Financial risk related to the Company’s proprietary programs was
reduced by successfully partnering MOR103. The financial risk
relating to the fully proprietary programs MOR202 and MOR208
remains entirely with MorphoSys. The Company’s increasing focus
on proprietary development programs means the risks related to
this area of MorphoSys’s business model will gain in importance.
The termination of individual programs or clinical trials may have a
significant effect on the Company’s short-, medium-, and long-term

OPERAT IONAL RISK
Operational risk includes risks related to the exploration and de-
velopment of proprietary drug candidates and the risks associated
with antibody production.

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As part of the development of compounds, however, results and
findings may come to light which cause a failure or adaptation of
the development steps, administration and development timelines.
These findings and those from competing companies can lead to
changes in the development plan, market potential and timeline.
The risk involved in drug development is difficult to control.

Antibody production is a significant cost factor in the development
of this class of drugs. The Company’s obligation to comply with
international drug regulatory agencies’ requirements at every
step of production in order to ensure the highest quality compounds
and patient safety plays a critical role in its costs. The production
process for biopharmaceuticals is usually performed in cell cul-
ture systems with several thousand liters of culture volume and
requires a number of steps to be carried out under strict super-
vision and controlled conditions until the individual investiga-
tional medicinal products are ready for use in patients. Therefore,
depending on the phase of the project, lead times of one to two
years must be scheduled for the supply of antibody material. This
planning, coupled with early strategic financial investments,
represent major factors in drug development because of the high
complexity and risk involved in both the production process and
clinical trial planning, which can have a considerable effect on the
speed and cost of development.

S T RAT EGIC RISK
Strategic risk exists in relation to the proprietary portfolios of ther-
apeutic candidates. After successfully introducing an existing pro-
prietary program into a partnership, the focus continues to be on
forming further partnerships and adding to the portfolio. Risk can
emerge from a lack of attractive targets, compounds or innovative
technologies or from missed or failed M&A transactions that would
have provided access to strategically important assets. MorphoSys
mitigates these risks by forming multidisciplinary teams respon-
sible for adding to the proprietary portfolio and identifying suit-
able therapeutic candidates. In the Company’s search for new drug
candidates, a New Discovery Team searches for suitable targets for
developing novel therapeutic molecules using proprietary or exter-
nal technology platforms. MorphoSys also started the Innovation
Capital program, which invests in innovative start-up companies
to secure long-term options on new technologies and therapeutic
molecules.

Development programs introduced into partnerships can also
fail, and partnerships can be terminated prematurely forcing
MorphoSys to search for new development partners or bear the
substantial cost of further development alone. This may result in a
delay or even the termination of the development of individual can-
didates and could lead to additional costs and a potential long-term
loss of revenue for MorphoSys due to delayed market entry.

Another strategic risk is the emergence of better molecules or
more beneficial therapeutic approaches that could destroy the
competitiveness of antibodies in the future or delay a drug candi-
date’s market entry. This risk could also be classified as industry
risk. MorphoSys tries to minimize this risk by conducting its own
discovery activities and using detailed time schedules for its pro-
prietary programs. The Company’s Innovation Capital program is
an effective tool for identifying and investing in new trends early
on so that MorphoSys can join in their development. MorphoSys
also has its own scouting team that searches worldwide for new
and innovative technologies and keeps track of the competition.

Another strategic risk is the possible non-renewal of the coopera-
tion agreement with Novartis. The current agreement runs until
the end of November 2017 and Novartis has the option to extend
the agreement an additional two years. If Novartis does not exer-
cise this option, MorphoSys will stand to lose annual revenues of
approximately € 40 million as of the 2018 financial year.

EX T ERNAL RISK
MorphoSys faces external risk with respect to intellectual prop-
erty, among others. The patent protection of MorphoSys’s propri-
etary technologies and compounds is especially important. To
minimize risks in this area, MorphoSys keeps a vigilant eye on
published patents and patent applications and analyzes the corre-
sponding results. The Company also develops strategies to cir-
cumvent external patents that may one day be relevant before they
are issued or takes other appropriate action. Through the years,
MorphoSys has seen increasing success with this strategy and has
created ample leeway for its proprietary technology platforms and
products for many years to come. Risks can also arise from enforc-
ing the Company’s patents against third parties. External risks
can also emerge from changes in the regulatory environment.
These risks are minimized by providing ongoing training to the
relevant personnel and by audits and discussions with external

experts. It is also conceivable that competitors challenge patents
of MorphoSys Group companies or that MorphoSys concludes
that MorphoSys’s patents or patent families are infringed by
competitors, which may prompt MorphoSys to take legal action
against competitors. This type of legal action, particularly when
it occurs in the USA, involves high costs and poses a significant
financial risk.

Another area where external risk can arise is our collaborations
with service providers in preclinical and clinical development and
the processing of clinical data. Insufficient or poor performance
from service providers can lead to development delays, financial
loss or even threaten entire programs.

As an internationally operating biotechnology company with nu-
merous partnerships and an in-house research and development
department for developing drug candidates, the MorphoSys Group
is subject to a number of legal risks. These risks include those re-
lated to patent, competition, tax and antitrust law, potential liabil-
ity claims from existing partnerships, and environmental protec-
tion. Future legal proceedings are conceivable and cannot be
anticipated. Therefore, we cannot rule out that we may incur ex-
penses for legal or regulatory judgments or settlements that are
not or cannot be partially or fully covered by insurance and may
have a significant impact on our business and results.

ORGANIZAT IONAL RISK
The Proprietary Development, Partnered Discovery and Technical
Operations areas, among others, are subject to organizational risk.
Proprietary Development and Partnered Discovery may suffer
quality problems or delays within the organization if the number
of programs or their complexity increases. To reduce complexity
and thereby reduce risk, the Company introduced uniform proce-
dures and monitors their compliance by means of routine audits.

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Risk and Opportunity Report

Risk in the Technical Operations area concerns procedures that
may cause lasting damage, business interruptions or accidents in-
volving harmful or polluting substances. Measures taken to avoid
these types of disruptions include the routine inspection and
maintenance of equipment and facilities and providing training
and tutorials for the employees concerned. These risks are reduced
even further using electronic monitoring systems. Financial risk
in this area is generally covered by insurance. Additional informa-
tion on MorphoSys’s operating environment can be found in the
section “Sustainable Business Development.”

COMPL IANCE RISK
Compliance risk can arise when quality standards are not met or
business processes are not conducted properly from a legal stand-
point. To counter this risk, MorphoSys is committed to having its
business operations meet the highest quality standards as set out
in the Sustainability Report. The system is also routinely checked
by external specialists and subjected to repeat testing by an inter-
nal, independent in-house quality assurance department.

Specific risk can arise, for example, when the internal quality
management system does not meet the legal requirements or
when there is no internal system for detecting quality problems.
If the internal controls are not able to detect violations of Good
Manufacturing Practice (GMP), Good Clinical Practice (GCP) or
Good Laboratory Practice (GLP) then this also would represent a
compliance risk.

Inadequate or late financial communication can lead to fines or
even lawsuits. Annual General Meetings conducted incorrectly
may lead to legal disputes with shareholders resulting in signifi-
cant costs from attempts to prevent either a challenge to or repeat
of the Annual General Meeting. Pending decisions for corporate
actions, such as capital increases, could also be compromised. To
minimize these risks, the preparation and execution of the Annual
General Meeting and all related documents and processes are
carefully reviewed and monitored by the relevant internal depart-
ments as well as external lawyers and auditors.

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T HE MANAGEMEN T BOARD’S EVALUAT ION OF T HE OVERAL L

RISK SI T UAT ION AT T HE MORPHOSY S GROUP
MorphoSys Group’s Management Board considers the overall risk
to be appropriate and trusts in the effectiveness of the risk man-
agement system in relation to changes in the environment and the
needs of the ongoing business. It is the Management Board’s view
that the MorphoSys Group’s continued existence is not jeopar-
dized. This assessment applies to the MorphoSys Group as a whole
as well as to each Group company. This conclusion is based on
several factors that are summarized in the following:
• As in previous years, the major Group objectives have been

reached.

• The MorphoSys Group has an exceptionally high equity ratio.
• The Management Board firmly believes that the MorphoSys
Group is well positioned to cope with any adverse events that
may occur.

• The Group controls a comprehensive portfolio of preclinical and
clinical programs in partnerships with a number of large phar-
maceutical companies and has a strong base of technologies for
expanding the Company’s proprietary portfolio.

Despite these factors, it is impossible to rule out, control or influ-
ence risk in its entirety.

Opportunities

Leading antibody technologies, powerful strategic alliances, excel-
lent know-how and a broad portfolio of validated clinical programs
have made MorphoSys one of the world’s leading biotechnology
companies in the field of therapeutic antibodies. This therapeutic
class is now one of the most successful in the industry, and there
is an impressive number of pharmaceutical and biotechnology
companies in the field of antibodies that could potentially become
customers or partners for MorphoSys’s products and technologies.
Due to this fact and thanks to the Company’s extensive techno-
logical and product development expertise, MorphoSys has identi-
fied a number of future growth opportunities.

MorphoSys’s technologies for developing and optimizing thera-
peutic antibody candidates have distinct advantages that can lead
to higher success rates and shorter development times in the drug
development process. The transfer and application of MorphoSys’s
core capabilities – even those outside of the field of antibodies –
opens up new opportunities for the Group because many classes
of compounds have similar molecular structures. The Innovation
Capital initiative seizes previously unavailable opportunities by
making MorphoSys a strategic investor in young, innovative com-
panies and allowing it to use synergies effectively.

OPP OR T UNI T Y MANAGEMEN T SY S T EM
The opportunity management system is an important component
of MorphoSys’s corporate management and is used to identify
opportunities early and generate added value for the Company.

Opportunity management is based on four pillars:
• a routine discussion forum involving the Management Board

and selected members of the Senior Management Group;

• the Company’s business development activities;
• a technology scouting team; and
• the Innovation Capital initiative.

Committees discuss specific opportunities and decide what action
should be taken to exploit these opportunities. The meetings and
their outcomes are recorded in detail, and any subsequent action
is reviewed and monitored. The Group’s Business Development
Team takes part in numerous conferences and in the process
identifies different opportunities that can enhance the Company’s
growth. These opportunities are presented and evaluated within
the committee using an evaluation process. The Technology Scout-
ing Team searches specifically for innovative technologies that
can generate synergies with MorphoSys’s technological infra-
structure and identify new therapeutic molecules. These outcomes
are also discussed and evaluated in interdepartmental commit-
tees. The Innovative Capital initiative already described also al-
lows MorphoSys to participate in these early innovations and
make it possible for the Company to use them in the future.
A proven process for evaluating opportunities gives MorphoSys
a qualitative and replicable evaluation.

GENERAL S TAT EMEN T ON OPP OR T UNI T IES
Increased life expectancy in industrialized countries and rising
incomes and living standards in emerging countries are expected
to drive the demand for more innovative treatment options and
advanced technologies. Scientific and medical progress has led to
a better understanding of the biological process of disease and
paves the way for new therapeutic approaches. Innovative thera-
pies, such as fully human antibodies, have reached market matu-
rity in recent years and have led to the development of commer-
cially successful medical products. Therapeutic compounds based
on proteins are less subject to generic competition than chemically
produced molecules because the production of biological com-
pounds is far more complex. The sharp rise in both the demand for
antibodies and the interest in this class of drug candidates can be
seen by the acquisitions and significant licensing agreements
made over the past two to three years.

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These types of technological advances can help the Company ex-
pand its list of partners and increase not only the speed but also
the success rate of its partnered and proprietary drug development
programs. New technology modules that enable the production of
antibodies against novel classes of target molecules can also pro-
vide access to new disease areas in which antibody-based treat-
ments are underrepresented.

Technology development is carried out by a team of scientists
whose focus is the further development of MorphoSys technolo-
gies. MorphoSys not only develops technology internally but also
uses external resources to enhance its own activities. A good ex-
ample of this is the Company’s acquisition of Lanthio Pharma, a
Dutch company developing lanthipeptides.

ACQUISI T ION OPP OR T UNI T IES
In the past, MorphoSys has proven its ability to acquire compounds
and technologies that accelerate its growth. Potential acquisition
candidates are also systematically presented, discussed and eval-
uated during the routine meetings described above between the
Management Board and selected members of the Senior Manage-
ment Group. After these meetings, promising candidates are
reviewed in terms of their strategic synergies and evaluated by
internal specialist committees. Protocols are completed on all can-
didates and evaluations are systematically archived for follow-up
and monitoring. A proprietary database helps administer this in-
formation and keep it available.

MorphoSys plans to move forward with its acquisition strategy in
the year ahead in order to enhance its existing portfolio and tech-
nology platform and secure access to patents and licenses for novel
proprietary technologies and products.

F INANC IAL OPP OR T UNI T IES
Exchange rate and interest rate developments can positively or
negatively affect the Group’s financial results. Interest rate and
financial market developments are continuously monitored – par-
ticularly during this period of extremely low interest rates – to
promptly identify and take advantage of opportunities.

MARKE T OPP OR T UNI T IES
MorphoSys believes its antibody platforms HuCAL, Ylanthia,
Slonomics and the lanthipeptide technology acquired in the re-
porting year can all be used to develop products addressing high
unmet medical needs.

T HERAPEU T IC AN T IBODIES – PROPRIE TARY DEVEL OPMEN T
It is reasonable to assume that the pharmaceutical industry will
increase the level of in-licensing new drugs to refill its pipelines
and replace key products and blockbusters that have lost patent pro-
tection. MorphoSys’s most advanced compounds MOR103, MOR202
and MOR208 place the Company in an excellent position to capital-
ize on the needs of pharmaceutical companies.

Secured cash flows from the Partnered Discovery segment have
allowed MorphoSys to strengthen its proprietary portfolio con-
tinously. By investigating new disease areas, MorphoSys will con-
tinue to expand its proprietary portfolio by adding clinical trials
using the Company’s key drug candidates. MorphoSys intends to
enhance its portfolio with additional programs and in doing so
could take advantage of existing and future opportunities for
co-development or partnerships. The Company is also looking for
more opportunities to in-license interesting drug candidates.

Drug candidates MOR208 and MOR202 may give MorphoSys its
first opportunity to market a drug on its own.

T HERAPEU T IC AN T IBODIES – PAR T NERED DISCOVERY
By developing drugs with a number of partners, MorphoSys has
been able to spread the risk inextricably linked with drug develop-
ment over a broader spectrum. With around 90 individual thera-
peutic antibodies currently in partnered development programs, it
is becoming more likely that MorphoSys will have an opportunity
to participate financially in marketed drugs. In 2015, three antibod-
ies were in phase 3 clinical development. If the results of the clini-
cal studies are positive, it is conceivable that an approval could be
granted in the near future. Our partner Novartis, for example, has
announced that it may file for the approval of bimagrumab in 2016.

T ECHNOL OGY DEVEL OPMEN T
MorphoSys continues to invest in its existing and new technolo-
gies to defend its technological leadership. MorphoSys established
a new technology platform with Ylanthia that, in contrast to its
previous version HuCAL, is eligible for broader licensing to differ-
ent partners.

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10 T A B L E

Summary of Key Short- and Medium-Term Risks at MorphoSys

FINANCIAL RISK

Risk of missing revenue targets/incorrect budgeting

Risk of bank insolvencies

OPER ATIONAL RISK

Risk related to development of proprietary antibodies

Risk related to antibody production

STR ATEG IC RISK

Risk of failure to in-license new therapeutic molecules

Risk of missed acquisition opportunities

E X TERNAL RISK

Patent-related risk (related to lawsuits, patent situation of technology platform,
new national/international regulations)

Risk related to external service providers in the clinical area

ORG ANIZ ATIONAL RISK

Risk due to growing number and complexity of programs

Risk in the technical operations area

C OMPLIANCE RISK

Quality risk related to legal requirements

Legal risk

L EGEND

•
••
•••
••••

LOW RISK :

MODER ATE RISK :

HIG H RISK :

CATASTROPHIC RISK :

11 T A B L E

Summary of Key Long-Term Risks at MorphoSys

1-Year Assessment

3-Year Assessment

••
••

Moderate

••
•

Moderate

Low

•••
••

High

Moderate

•••
••

High

Moderate

••
•

••
••

••
•

Moderate

Low

••
•

Moderate

Low

Moderate

••
••

Moderate

Low

••
•

Moderate

Low

Moderate

Low

••
•

Moderate

Low

low probability of occurrence, low impact

moderate probability of occurrence, moderate impact

moderate probability of occurrence, moderate to strong impact

high probability of occurrence, severe impact

Segment

Risk

Order of Importance1

Proprietary Development

Lack of competitiveness of the MorphoSys pipeline

Partnered Discovery

Termination of partnered programs

Proprietary Development

Lack of funding for proprietary development activities

Proprietary Development

Premature establishment of sales structure with delayed development
of proprietary drug candidates

1 Declining importance of risk from 1 to 4, whereby 1 represents the most important risk.

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

Statement on Corporate Governance
and Corporate Governance Report

The Statement on Corporate Governance and the Corporate Gover-
nance Report are available on the Company’s website under Media
and Investors – Corporate Governance.

Statement on Corporate Governance
under Sec. 289a (HGB) for the 2015
Financial Year

In the Statement on Corporate Governance under Sec. 289a HGB,
the Management Board and the Supervisory Board report on cor-
porate governance. In addition to the annual Declaration of Con-
formity in accordance with Sec. 161 of the Stock Corporation Act
(AktG), the Statement on Corporate Governance also includes rele-
vant information on corporate governance practices and other as-
pects of corporate governance, including a description of the work-
ing practices of the Management Board and Supervisory Board.

DECL ARAT ION OF CONF ORMI T Y WI T H T HE GERMAN CORP O -

RAT E GOVERNANCE CODE ( T HE “CODE” ) OF T HE MANAGEMEN T

BOARD AND SUPERVISORY BOARD OF MORPHOSY S AG
The Management Board and Supervisory Board of MorphoSys AG
declare the following under Sec. 161 of the German Stock Corpora-
tion Act:
1. Since the last Declaration of Conformity on December 5, 2014,
MorphoSys AG has complied with the recommendations of the
“Government Commission on the German Corporate Governance
Code” dated June 24, 2014 and the version from May 5, 2015
with the following exceptions:

a. There is no cap on the overall or individual variable remuner-
ation components of Management Board members’ remuner-
ation (see Item 4.2.3 Para. 2 sentence 6 of the Code). Based on
the Supervisory Board’s existing limitations for the Manage-
ment Board’s variable remuneration components and their
annual allocation, the Supervisory Board does not believe
that an additional cap is required.

b. Until July 21, 2015, the Supervisory Board refrained from
fully applying the recommendations in Item 5.4.1 Paras. 2
and 3 sentence 1 of the Code. According to Item 5.4.1 Para 2,
the Supervisory Board shall specify certain objectives re-
garding the Board’s composition that provides for an appro-
priate level of female participation. Recommendations made
by the Supervisory Board to the responsible election bodies
shall take these objectives into account in accordance with
Item 5.4.1 Para. 3 sentence 1. The Supervisory Board has es-
tablished concrete objectives for its composition and has
thereby resolved to strive for adequate female representation.
An exact quota of women was not specified because qualifica-
tion and not gender should be the deciding criteria in appoint-
ing members of the Supervisory Board. As of July 22, 2015,
the recommendations in Item 5.4.1 Paras. 2 and 3 sentence 1
of the Code have been fully applied because on this date a
corresponding quota was established.

2. MorphoSys will continue to comply with the recommendations
of the “Government Commission on the German Corporate Gov-
ernance Code” in the version dated May 5, 2015 with the excep-
tions described under Item 1a.

Martinsried/Planegg, December 3, 2015

MorphoSys AG

On behalf of the
Management Board:

On behalf of the
Supervisory Board:

Dr. Simon Moroney
Chief Executive Officer

Dr. Gerald Möller
Chairman of the Supervisory Board

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Statement on Corporate Governance and Corporate Governance Report

REL EVAN T INF ORMAT ION ON CORP ORAT E G OVERNANCE

COMP OSI T ION OF T HE MANAGEMEN T BOARD AND

PRAC T ICES
MorphoSys ensures compliance with laws and rules of conduct
through the Group-wide application of the following documents:
the Code of Conduct, the Compliance Handbook and supplemen-
tary internal guidelines.

MorphoSys’s Code of Conduct sets out the fundamental principles
and key policies and practices for business behavior. The code is a
valuable tool for employees and executives, particularly in busi-
ness, legal and ethical situations of conflict. It reinforces the prin-
ciples of transparent and sound management and fosters trust in
the Company from the financial markets, business partners, em-
ployees and the public. Compliance with the Code of Conduct is
carefully monitored. The Group-wide application of the Code is
overseen by a Code of Conduct Committee, and the Code itself is
routinely reviewed and updated when necessary. The Code of Con-
duct can be downloaded from the Company’s website under Media
and Investors – Corporate Governance.

The Compliance Handbook describes MorphoSys’s compliance
management system and is intended to ensure compliance with
all legal regulations as well as set out high ethical standards that
apply to both the management and all employees. The Manage-
ment Board has overall responsibility for the compliance manage-
ment system and is required to report regularly to the Audit Com-
mittee and the Supervisory Board. In carrying out its compliance
responsibility, the Management Board has assigned the relevant
tasks to various offices at MorphoSys.

The Compliance Officer monitors the communication between the
individual compliance posts within MorphoSys and makes adjust-
ments to the system as needed in consultation with the Manage-
ment Board. The Compliance Officer also routinely reports all rele-
vant developments in the Company’s compliance system to the
Chief Executive Officer.

The Compliance Officer is supported by a Compliance Committee
that meets at regular intervals to discuss compliance issues. This
committee serves as a liaison between the various departments
dealing with compliance issues and facilitates the identification
and discussion of all the compliance posts’ relevant issues. This is
the basis upon which the Compliance Officer periodically verifies
adherence to the compliance management system and MorphoSys’s
compliance status.

More information on MorphoSys’s compliance management sys-
tem can be found in the Corporate Governance Report on page 78.

SUPERVISORY BOARD

MANAGEME NT BOARD
The Management Board of the Company consists of a Chief Execu-
tive Officer and three other members. A schedule of responsibilities
defines the different areas of responsibility as follows:
• Dr. Simon Moroney, Chief Executive Officer, responsible for
Strategy and Planning; Compliance and Quality Assurance;
Internal Audit; Human Resources; Business Development & Port-
folio Management; Legal; the coordination of individual areas of
the Management Board; and representation of the Management
Board to the Supervisory Board.

• Jens Holstein, Chief Financial Officer, responsible for Accounting
and Taxes; Controlling; Corporate Finance & Corporate Develop-
ment; Risk Management; IT; Technical Operations; Procurement &
Logistics; Corporate Communications and Investor Relations;
and Environmental Social Governance (ESG).

• Dr. Arndt Schottelius, Chief Development Officer, responsible for
Preclinical Development; Clinical Research; Clinical Operations;
Drug Safety & Pharmacovigilance; Regulatory Affairs; and Proj-
ect Management.

• Dr. Marlies Sproll, Chief Scientific Officer responsible for Develop-
ment Partnerships & Technology Development; Target Molecule
& Antibody Research; Protein Chemistry; Alliance Management;
and Intellectual Property.

SUPERVISORY BOARD
As of December 31, 2015, the MorphoSys AG Supervisory Board
consisted of six members who oversee and advise the Management
Board. The current Supervisory Board consists of professionally
qualified members who represent MorphoSys AG shareholders.
Dr. Gerald Möller, acting Chairman of the Supervisory Board, coor-
dinates the Board’s activities, chairs the Supervisory Board meet-
ings and represents the interests of the Supervisory Board exter-
nally. All Supervisory Board members are independent, as defined
in the German Corporate Governance Code, and have many years
of experience in the biotechnology and pharmaceutical industries.
The members are duly elected by the shareholders during the
Annual General Meeting. The Chairperson of the Supervisory
Board is not a former member of MorphoSys AG’s Management
Board. The terms of office of all six Supervisory Board members
ended with the conclusion of the 2015 Annual General Meeting
and, therefore, six Supervisory Board members were either elected
or reelected to the Supervisory Board during the 2015 Annual
General Meeting. The members of the Supervisory Board and its
committees are listed in the table below.

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

12 T A B L E

Composition of the Supvervisory Board until Termination of the 2015 Annual General Meeting

Position

Appointment

End of Period

Committee

Initial

Audit

Remuneration
and Nomination
Committee

Science and
Technology
Committee

Dr. Gerald Möller

Chairman

1999

2015

Dr. Geoffrey Vernon

Deputy Chairman

Dr. Walter Blättler

Dr. Daniel Camus

Dr. Marc Cluzel

Karin Eastham

Member

1999

2007

2002

2012

2015

Independent Financial Expert

Chairperson

Member

13 T A B L E

Composition of the Supvervisory Board since Termination of the 2015 Annual General Meeting

Position

Appointment

End of Period

Committee

Initial

Audit

Remuneration
and Nomination
Committee

Science and
Technology
Committee

Dr. Gerald Möller

Chairman

1999

2018

Dr. Frank Morich

Deputy Chairman

Karin Eastham

Klaus Kühn

Dr. Marc Cluzel

Wendy Johnson

Member

2015

2012

2015

2012

2015

2017

2018

2017

2018

2017

Independent Financial Expert

Chairperson

Member

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

WORK ING PRAC T ICES OF T HE MANAGEMEN T BOARD AND

SUPERVISORY BOARD
To ensure good corporate governance, a guiding principle of the
cooperation between the Management Board and Supervisory
Board at MorphoSys AG is the open, comprehensive and regular
communication of information. The dual board system prescribed
by the German Stock Corporation Act clearly differentiates be-
tween a company’s management and supervision. The responsi-
bility of both Boards is clearly stipulated by the legislator and
the Boards’ bylaws and Articles of Association. The stated objec-
tive of MorphoSys AG’s Management Board and Supervisory Board
is to sustainably increase Company value. The Boards work closely
together to make decisions and take actions for the Company’s
benefit.

Management Board members have their own area of responsibility
defined in the schedule of responsibilities and regularly report to
their Management Board colleagues. Cooperation among Manage-
ment Board members is governed by the bylaws. The Supervisory
Board ratifies both the schedule of responsibilities and the bylaws.
Management Board meetings are typically held weekly and chaired
by the Chief Executive Officer. During these meetings, resolutions
are passed concerning dealings and transactions that, under the
bylaws, require the approval of the entire Management Board. At
least half of the Management Board’s members must be present to
pass a resolution. Management Board resolutions are passed by a
simple majority and, in the event of a tied vote, the Chief Executive
Officer’s vote decides. For material events, each Management
Board or Supervisory Board member can call an extraordinary
meeting of the entire Management Board. Management Board res-
olutions can also be passed outside of meetings by an agreement
made orally, by telephone or in writing (also by e-mail). A written
protocol is completed for each meeting of the full Management
Board and is submitted for approval to the full Management Board
and for signature to the chief executive officer at the following
meeting.

Management Board strategy workshops are also held in which the
Group-wide strategic objectives are developed and prioritized.

The Management Board promptly and comprehensively informs
the Supervisory Board in writing and at Supervisory Board meet-
ings about planning, business development, the Group’s position,
risk management and other compliance issues. Extraordinary
meetings of the Supervisory Board are also called for material
events. The Management Board involves the Supervisory Board in
the strategy, planning and all fundamental Company issues. In
addition to routine Supervisory Board meetings, a strategy meeting

takes place between the Management Board and Supervisory
Board once annually to discuss MorphoSys’s strategic direction.
The Management Board’s bylaws specify that material business
transactions require the approval of the Supervisory Board. De-
tailed information on the cooperation of the Management Board
and Supervisory Board and important items of discussion during
the 2015 financial year can be found in the Report of the Supervi-
sory Board.

The Supervisory Board holds a minimum of two meetings per
calendar half-year and at least six meetings per full calendar
year. The Supervisory Board has supplemented the Articles of
Association with rules of procedure that apply to its duties: The
Chairperson of the Supervisory Board coordinates the activities of
the Supervisory Board, chairs the Supervisory Board meetings
and represents the interests of the Supervisory Board externally.
The Supervisory Board typically passes its resolutions in meet-
ings, but resolutions may also be passed outside of meetings in
writing (also by e-mail), by telephone or video conference.

The Supervisory Board has a quorum when at least two-thirds of
its members (including either the Chairperson or Deputy Chair-
person of the Supervisory Board) take part in the vote. Resolutions
of the Supervisory Board are passed with a simple majority unless
the law prescribes otherwise. In the event of a tied vote, the Chair-
person of the Supervisory Board’s vote decides.

Protocols are completed for Supervisory Board meetings, and res-
olutions passed outside of meetings. A copy of the Supervisory
Board’s protocol is made available to all Supervisory Board mem-
bers. The Supervisory Board conducts an efficiency evaluation
regularly in accordance with the recommendation in Item 5.6 of
the Code.

COMPOSITION AND WORKING PRACTICES OF THE MANAGEMENT

BOARD AND SUPERVISORY BOARD COMMIT TEES
The Management Board has not formed any committees.

The Supervisory Board has three committees: the Audit Commit-
tee, the Remuneration and Nomination Committee and the Science
and Technology Committee. The members of the three committees
formed by the Supervisory Board are professionally qualified.

G R O U P M A N A G E M E N T R E P O R T
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14 T A B L E

Participation of Supervisory Board Members

S U P E R V I S O R Y B O A R D M E E T I N G S

by phone

Strategy
Meeting

Name

01/16/2015

02/25/2015

03/18/2015

05/07/2015

05/08/2015

07/22/2015

07/23/2015

10/01/2015

12/03/2015

Dr. Gerald
Möller

Dr. Geoffrey
Vernon

Dr. Walter
Blättler

Dr. Daniel
Camus

Dr. Marc
Cluzel

Karin
Eastham

Dr. Frank
Morich

Klaus
Kühn

Wendy
Johnson

M E E T I N G S O F T H E A U D I T C O M M I T T E E

Name

02/25/2015

03/18/2015

04/29/2015

07/22/2015

10/01/2015

11/03/2015

12/03/2015

by phone

Dr. Daniel Camus

Dr. Geoffrey Vernon

Karin Eastham

Klaus Kühn

Wendy Johnson

M E E T I N G S O F T H E R E M U N E R A T I O N A N D N O M I N A T I O N C O M M I T T E E

Name

Dr. Gerald Möller

Dr. Marc Cluzel

Karin Eastham

by phone

02/20/2015

02/25/2015

03/03/2015

05/07/2015

12/02/2015

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

M E E T I N G S O F T H E S C I E N C E A N D T E C H N O L O G Y C O M M I T T E E

by phone

Name

02/25/2015

04/30/2015

05/07/2015

07/22/2015

09/15/2015

10/01/2015

11/09/2015

12/03/2015

Dr. Walter Blättler

Dr. Marc Cluzel

Wendy Johnson

Frank Morich

at t e n d e d i n p e r s o n
pa r t i c i pat e d b y p h o n e

–

SCIENCE AND TECHNOLOGY C OMMIT TEE
The Science and Technology Committee advises the Supervisory
Board on matters concerning proprietary drug and technology de-
velopment and prepares the relevant Supervisory Board resolutions.
The members of the Science and Technology Committee until May
8, 2015 were Dr. Walter Blättler (Chairman) and Dr. Marc Cluzel.
As of May 8, 2015, the members of the Science and Technology
Committee are Dr. Marc Cluzel (Chairman), Dr. Frank Morich and
Ms. Wendy Johnson.

The Supervisory Board members’ biographies can be found on the
MorphoSys website under Company – Management – Supervisory
Board.

AUDIT C OMMIT TEE
The main task of the Audit Committee is to support the Supervi-
sory Board in fulfilling its supervisory duties with respect to the
accuracy of the annual and consolidated financial statements, the
activities of the auditor and internal control functions, such as risk
management, compliance and internal auditing. The Audit Com-
mittee submits a recommendation to the Supervisory Board for the
election at the Annual General Meeting of an independent audi-
tor. The members of the Audit Committee until May 8, 2015, were
Dr. Daniel Camus (Chairman), Dr. Geoffrey Vernon and Karin
Eastham, who all fulfill the prerequisite of being independent
financial experts. The members of the Audit Committee as of May
8, 2015, were Klaus Kühn (Chairman), Karin Eastham and Wendy
Johnson. Klaus Kühn and Karin Eastham fulfill the prerequisite of
being independent financial experts.

REMUNER ATION AND NOMINATION C OMMIT TEE
The Remuneration and Nomination Committee is responsible for
preparing and reviewing the Management Board’s compensation
system annually before its final approval. When necessary, the
Committee searches for suitable candidates to appoint to the Man-
agement Board and Supervisory Board and submits appointment
proposals to the Supervisory Board. The Committee also prepares
the contracts made with Management Board members. The mem-
bers of the Remuneration and Nomination Committee are Dr. Gerald
Möller (Chairman until May 8, 2015), Dr. Marc Cluzel and Ms. Karin
Eastham (Chairperson as of May 8, 2015).

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

Corporate Governance Report

At MorphoSys, responsible, sustainable and value-oriented corpo-
rate governance assumes a high priority. Good corporate gover-
nance is an essential aspect of MorphoSys’s corporate manage-
ment and forms the framework for the Group’s management and
supervision, which includes the Group’s organization, commercial
principles and tools for its guidance and control.

The German Corporate Governance Code (“the Code”) provides a
standard for the transparent monitoring and management of com-
panies that strongly emphasizes shareholder interests. Many of
the corporate governance principles contained in the Code have
been practiced at MorphoSys for many years. Corporate gover-
nance issues at MorphoSys AG are detailed in the Statement on
Corporate Governance under Sec. 289a HGB. The statement also
contains the annual Declaration of Conformity, relevant informa-
tion on corporate governance practices and a description of the
Management Board and Supervisory Board’s working practices.
Additional information can be found in this Corporate Governance
Report.

COMMUNIC AT ION WI T H T HE C API TAL MARKE T S
At MorphoSys, a key corporate communication principle is to simul-
taneously and fully inform institutional investors, private share-
holders, financial analysts, employees and all other stakeholders of
the Company’s situation through regular, transparent and timely
communication. Shareholders have immediate access to the infor-
mation provided to financial analysts and similar recipients and
can obtain this information in both German and English. The Com-
pany is firmly committed to following a fair information policy.

Regular meetings with analysts and investors in the context of
road shows and individual meetings play a central role in investor
relations at MorphoSys. Conference calls accompany publications
of quarterly results and give analysts and investors an immediate
opportunity to ask questions about the Company’s development.
Company presentations for on-site events, visual and audio record-
ings of other important events as well as conference call tran-
scripts are also available on the Company’s website to all inter-
ested parties.

The Company’s website www.morphosys.com serves as a central
platform for current information on the Company and its develop-
ment. Financial reports, analyst meeting and conference presenta-
tions as well as press releases and ad hoc statements are also
available. The important regularly scheduled publications and
events (annual reports, interim reports, annual general meetings
and press and analyst conferences) are published in the Company’s
financial calendar well in advance.

ESTABLISHMENT OF SPECIFIC TARGETS FOR THE COMPOSITION

OF THE SUPERVISORY BOARD
MorphoSys AG’s Supervisory Board has a total of six members.
The Supervisory Board believes a ratio of at least two non-German
members, or at least two members having extensive international
experience, provides a fair share of diversity given the Company’s
international orientation. The Supervisory Board currently meets
this ratio.

The Supervisory Board also strives to have at least four indepen-
dent members. The Supervisory Board currently meets this ratio.
Material and lasting conflicts of interest should be avoided, partic-
ularly those arising from activities for major competitors. No such
conflict of interest currently exists.

The Supervisory Board has two female members and the Company
intends to maintain this ratio in the future.

The age limit of 75 years contained in the Supervisory Board’s
bylaws is respected but the Supervisory Board may make an ex-
ception to this provision in specific cases.

At the Annual General Meeting, the Supervisory Board intends to
propose an initial period of office of two years for Supervisory
Board members. The Supervisory Board still intends to allow reap-
pointment only once for an additional term of three years but re-
serves the right to make exceptions in specific cases and permit
members to be reappointed for a third or potentially fourth term of
three years each.

The Supervisory Board intends to respect the targets described in
future election proposals.

868

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

WOMEN’S QUO TA F OR T HE SUPERVISORY BOARD, MANAGE-

MEN T BOARD AND T HE T WO MANAGEMEN T L EVEL S BEL OW

T HE MANAGEMEN T BOARD
In July 2015, the Supervisory Board established a women’s quota
for the Supervisory Board and Management Board:

MorphoSys AG’s Supervisory Board has a total of six members.
Two of those members are women, which places the current ratio
of female members on the Company’s Supervisory Board above
30 %, at 33.33 %. The Supervisory Board intends to maintain this
ratio in the future.

MorphoSys AG’s Management Board has a total of four members.
One of those members is a woman, which places the current ratio
of female members on the Company’s Management Board below
30 %, at 25 %. The Supervisory Board intends to maintain this ratio
in the future.

In July 2015, the Management Board established a women’s quota
for the two management levels below the Management Board:

consists of a performance share plan and convertible bond pro-
grams from prior years. Management Board members also receive
fringe benefits in the form of non-cash benefits, mainly the use of
a company car and the payment of insurance premiums. All remu-
neration packages are reviewed annually for their scope and ap-
propriateness by the Remuneration and Nomination Committee
and compared to the results of an annual management board re-
muneration analysis. The amount of compensation paid to Man-
agement Board members highly depends on their individual areas
of responsibility, their personal achievement of goals, the Compa-
ny’s economic situation and success and the Company’s business
prospects versus its competition. All decisions concerning adjust-
ments to the remuneration package are made by the entire Super-
visory Board. The Management Board’s remuneration and in-
dex-linked pension scheme were last adjusted in July 2015.

OV ERV IE W
In the 2015 financial year, total benefits of € 4,464,154 (2014:
€ 5,065,240) were granted to the Management Board in accor-
dance with the provisions of the Corporate Governance Code.

At the time of the decision, the first management level below the
Management Board (the Senior Management Group) consisted of
20 members, seven of who were women, placing the level of female
representation above 30 %, at 35 %. The Management Board intends
to maintain a minimum ratio of 30 %.

Of the remuneration for the year 2015, € 2,613,470 was cash com-
pensation and € 1,850,684, or 41%, resulted from personnel ex-
penses for share-based compensation (performance share plan
and convertible bond plan) (remuneration with long-term incen-
tive – LTI).

At the time of the decision, the second management level below the
Management Board (executives outside of the Senior Management
Group) consisted of 48 members, 19 of who were women, placing
the level of female representation above 30 %, at 39.59 %. The Man-
agement Board intends to maintain a minimum ratio of 30 %.

REMUNERAT ION REP OR T
The Remuneration Report presents the principles, structure and
amount of Management Board and Supervisory Board remunera-
tion. The report complies with the legal provisions and gives con-
sideration to the Code’s recommendations.

MANAGEMENT BOARD REMUNER ATION
The Management Board’s remuneration system is intended to pro-
vide an incentive for performance-oriented and sustainable corpo-
rate management. Therefore, the aggregate remuneration of the
Management Board members consists of different components:
fixed components, an annual cash bonus based on the achievement
of individual and corporate targets (short-term incentive – STI), a
variable compensation component with a long-term incentive
(long-term incentive – LTI) and other remuneration components.
The variable remuneration component with long-term incentive

The total amount of benefits paid to the Management Board in the
2015 financial year was € 9,508,884 (2014: € 6,984,419). In addition
to cash compensation payments of € 2,869,901 (2014: € 2,893,199),
this amount includes the value of exercised convertible bonds and
the transfer of treasury shares from a performance-based share
plan (share-based compensation) amounting to € 6,638,983 (2014:
€ 4,091,220) relevant under German tax law.

Management Board members exercised 51,800 convertible bonds
in the course of 2015. On June 1, 2015 a total of 71,949 treasury
shares were transferred to the Management Board from the 2011
performance-based share plan because the vesting period for this
LTI program had expired. All transactions in MorphoSys shares
executed by members of the Management Board were reported as
required by law and published in the Corporate Governance Re-
port and on the Company’s website.

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

LONG -TERM INCENTIVE COMPENSATION (LONG -TERM INCENTIVE – LTI)
In 2011, MorphoSys introduced a new, long-term incentive com-
pensation plan (Performance Share Plan) for the Management
Board and members of the Senior Management Group. The LTI-pro-
gram is based on the allocation of shares linked to the achieve-
ment of predefined performance targets over a four-year period.

Each year, the Supervisory Board determines the number of shares
to be allocated to the Management Board. On April 1, 2015, the
Management Board was granted 21,948 shares. Each Management
Board member received an entitlement benefit for a specific num-
ber of shares. For more information, please refer to Item 8.2.5 in
the Notes to the Consolidated Financial Statements and the expla-
nation on share buybacks in the Corporate Governance Report.

The Supervisory Board sets the long-term performance targets
along with the allocation of shares for a given year. The target for
the 2015 LTI-program was the performance of the MorphoSys
share compared to a benchmark index consisting equally of the
Nasdaq Biotechnology Index and the TecDAX Index. LTI-program
participants are awarded shares annually based on the daily rela-
tive performance of the MorphoSys share versus the benchmark
index. There is a hurdle of 50 % and a cap of 200 % for the price
performance in any given year. For example, if the relative perfor-
mance of the MorphoSys shares versus the benchmark index is less
than 50 %, participants will not receive any entitlement benefits
for the relevant year. Participants also do not receive entitlement
benefits for additional shares when the share price performance
exceeds 200 %.

The ultimate number of performance shares allocated to the
LTI-program participants is determined at the completion of the
program, namely after four years. This calculation incorporates
the number of shares initially allocated after adjusting for the
share price development of the MorphoSys share versus the bench-
mark index and a “company factor” that is determined at the Su-
pervisory Board’s discretion. This company factor is a number be-
tween zero and two that is set by the Supervisory Board based on
the Company’s situation. The company factor’s predefined default
value is one.

MISCELL ANEO US
Management Board members were not granted any loans or simi-
lar benefits in the reporting year nor have they received any bene-
fits from third parties that were promised or granted based on
their position as a member of the Management Board.

In accordance with the requirements of Item 4.2.5, Para. 3 of the
Code, the following table provides detailed mandatory informa-
tion on the remuneration of the individual Management Board
members.

Please note that the following tables are provided in the context of
the Corporate Governance Report and differ from the information
on Management Board remuneration presented in the Notes of this
Annual Report (Item 7.4). These differences are due to the varying
presentation requirements under the Corporate Governance Code
and IFRS*.
*S E E G L O S S A R Y – page 142

FIXED REM UNER ATI ON AND FRIN G E B ENEFITS
The non-performance-related remuneration of the Management
Board consists of fixed remuneration and additional benefits, which
primarily include the use of company cars, as well as subsidies for
health, welfare and disability insurance. The Chief Financial Officer,
Mr. Jens Holstein, receives an additional expense allowance for
maintaining two households.

PENSI ON E X PENSES
The Company also provides payments to Management Board mem-
bers equal to a maximum of 10 % of the member’s fixed annual
salary plus any payable taxes. This compensation is intended for
the members’ individual retirement plans. Additionally, all Man-
agement Board members participate in a pension plan in the
form of a provident fund, which was introduced in cooperation
with Allianz Pensions-Management e.V. The pension obligations of
the provident fund are met by Allianz Pensions-Management e.V.

PERFORMANCE- BASED COMPENSATION (SHORT-TERM INCENTIVE – STI)
Each member of the Management Board receives performance-
based compensation in the form of an annual bonus of up to 70 % of
the gross base salary when 100 % of his or her goals have been
achieved. These bonus payments are dependent on the achieve-
ment of both corporate and personal goals specified by the Super-
visory Board at the start of each financial year. Corporate goals
comprise 80 % of performance-based compensation. These are
based on the Company’s performance measured by revenue, oper-
ating result, the progress of the partnered pipeline, the Company’s
proprietary portfolio and the achievement of technology targets.
Individual goals comprise 20 % of annual performance-based com-
pensation and include operating objectives that the respective
Management Board members are expected to fulfill. At the start of
the year, the Supervisory Board assesses the degree to which cor-
porate and personal goals were achieved in the prior year and uses
this information to determine the bonus. The bonus may not ex-
ceed 125 % of the target amount (corresponding to 87.5 % of gross
base salary). Performance-based compensation can be omitted if
the goals are not achieved. The bonus for the 2015 financial year
will be paid in February 2016.

870

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

TERMINATION OF MANAG EMENT B OARD EMPLOY MENT C ONTR AC TS/

CHAN G E OF C ON TROL
If a Management Board member’s employment contract termi-
nates due to member’s death, the member’s spouse or life partner
is entitled to the fixed monthly salary for the month of death and
the 12 months thereafter. In the event of a change in control, Man-
agement Board members are entitled to exercise their extraordi-
nary right to terminate their employment contracts and receive any
outstanding fixed salary for the remainder of the agreed contract

period. Moreover, in such a case, all convertible bonds and perfor-
mance shares granted will become vested immediately and can be
exercised after the expiration of the statutory vesting period. A
change of control has occurred when (i) MorphoSys transfers as-
sets or a substantial portion of its assets to unaffiliated third par-
ties, (ii) MorphoSys merges with an unaffiliated company or (iii) a
shareholder or third party holds 30 % or more of MorphoSys’s vot-
ing rights.

15 T A B L E

Compensation of the Management Board in 2015 and 2014 (Disclosure in Accordance with the German Corporate Governance Code)

B E N E F I T S G R A N T E D T O T H E M A N A G E M E N T B O A R D

in €

2014

2015

2015
(Mini-
mum)

2015
(Maxi-
mum)

2014

2015

2015
(Mini-
mum)

2015
(Maxi-
mum)

2014

2015

2014

2015

2014

2015

(Mini-

mum)

2015

(Maxi-

mum)

2015

(Mini-

mum)

2015

(Maxi-

mum)

Dr. Simon Moroney
Chief Executive Officer

Jens Holstein
Chief Financial Officer

Dr. Arndt Schottelius

Chief Development Officer

Dr. Marlies Sproll

Chief Scientific Officer

Fixed Compensation

Fringe Benefits

Total Fixed Compensation

One -Year Variable Compensation1

Multi-Year Variable Compensation:

2010 Convertible Bonds Program2
(Vesting Period 4 Years)

2013 Convertible Bonds Program2
(Vesting Period 4 Years)

2014 Long-Term Incentive Program3
(Vesting Period 4 Years)

2015 Long-Term Incentive Program3
(Vesting Period 4 Years)

Total Variable Compensation

Service Cost

Total Compensation

426,502

445,736

289,335

302,384

289,335

302,384

289,335

302,384

1,294,507

1,352,888

29,444

455,946

324,696

36,887

482,623

238,692

6,010

36,887

482,623

36,887

482,623

390,019

33,722

323,057

220,271

39,735

342,119

161,926

39,735

342,119

39,735

342,119

264,585

310,530

164,969

318,087

168,984

212,687

112,990

212,687

112,990

1,053,991

559,933

402,413

1,043,649

125,730

422,533

826,194

138,280

1,690,132

164,969

2,245,120

813,983

138,280

86,866

289,406

620,316

90,800

275,625

1,157,624

168,984

1,591,193

90,800

275,625

1,229,288

1,157,624

1,290,751

5,163,004

112,990

1,535,199

701,829

112,990

1,535,199

3,266,354

2,564,572

559,933

6,906,711

94,064

86,628

94,085

385,877

417,229

1,625,325

1,447,097

785,872

2,866,023

1,223,906

1,053,235

601,903

2,024,112

1,115,389

985,368

539,327

1,961,536

1,100,620

978,454

532,413

1,954,622

5,065,240

4,464,154

2,459,515

8,806,293

32,508

321,843

215,208

29,889

332,273

156,635

29,889

332,273

29,889

332,273

264,585

22,828

312,163

210,144

22,954

325,338

156,635

22,954

118,502

129,465

325,338

1,413,009

1,482,353

264,585

970,319

713,888

1,183,774

3,373

12,756

275,625

706,893

86,653

289,406

559,031

94,064

289,406

559,031

94,085

Total

2015

(Mini-

mum)

2015

(Maxi-

mum)

1 The one-year compensation granted for the 2015 financial year represents the bonus accrual for 2015 that will be paid in February 2016. The bonus granted for the 2014 financial year

was paid in February 2015.

2 Stock-based compensation plans not issued on an annual basis. The fair value was determined pursuant to the regulations of IFRS 2 “Share-based Payment.” For plans that are not

issued annually, the pro rata share of personnel expenses resulting from share-based payments is presented for each financial year.

3 Stock-based compensation plans issued annually. The fair value was determined pursuant to the regulations of IFRS 2 “Share-based Payment.” For plans issued annually, the personnel

expenses resulting from share-based payments are presented for the entire term at the time of issue.

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

in €

2014

2015

2014

2015

(Mini-

mum)

2015

(Maxi-

mum)

2015

(Mini-

mum)

2015

(Maxi-

mum)

2014

2015

2015
(Mini-
mum)

2015
(Maxi-
mum)

2014

2015

2015
(Mini-
mum)

2015
(Maxi-
mum)

2014

2015

2015
(Mini-
mum)

2015
(Maxi-
mum)

Dr. Simon Moroney

Chief Executive Officer

Jens Holstein

Chief Financial Officer

Dr. Arndt Schottelius
Chief Development Officer

Dr. Marlies Sproll
Chief Scientific Officer

Total

426,502

445,736

289,335

302,384

289,335

302,384

289,335

302,384

1,294,507

1,352,888

310,530

164,969

318,087

168,984

212,687

112,990

212,687

112,990

1,053,991

559,933

32,508

321,843

215,208

29,889

332,273

156,635

3,373

29,889

332,273

29,889

332,273

264,585

22,828

312,163

210,144

22,954

325,338

156,635

3,373

22,954

118,502

129,465

325,338

1,413,009

1,482,353

264,585

970,319

713,888

1,183,774

12,756

15 T A B L E

Compensation of the Management Board in 2015 and 2014 (Disclosure in Accordance with the German Corporate Governance Code)

B E N E F I T S G R A N T E D T O T H E M A N A G E M E N T B O A R D

Fixed Compensation

Fringe Benefits

Total Fixed Compensation

One -Year Variable Compensation1

Multi-Year Variable Compensation:

2010 Convertible Bonds Program2

(Vesting Period 4 Years)

2013 Convertible Bonds Program2

(Vesting Period 4 Years)

2014 Long-Term Incentive Program3

(Vesting Period 4 Years)

2015 Long-Term Incentive Program3

(Vesting Period 4 Years)

Total Variable Compensation

Service Cost

Total Compensation

was paid in February 2015.

6,010

29,444

455,946

324,696

36,887

482,623

238,692

36,887

482,623

36,887

482,623

390,019

33,722

323,057

220,271

39,735

342,119

161,926

39,735

342,119

39,735

342,119

264,585

1 The one-year compensation granted for the 2015 financial year represents the bonus accrual for 2015 that will be paid in February 2016. The bonus granted for the 2014 financial year

2 Stock-based compensation plans not issued on an annual basis. The fair value was determined pursuant to the regulations of IFRS 2 “Share-based Payment.” For plans that are not

issued annually, the pro rata share of personnel expenses resulting from share-based payments is presented for each financial year.

3 Stock-based compensation plans issued annually. The fair value was determined pursuant to the regulations of IFRS 2 “Share-based Payment.” For plans issued annually, the personnel

expenses resulting from share-based payments are presented for the entire term at the time of issue.

402,413

275,625

1,043,649

125,730

422,533

826,194

138,280

1,690,132

164,969

2,245,120

813,983

138,280

86,866

289,406

620,316

90,800

1,157,624

168,984

1,591,193

90,800

275,625

706,893

86,653

289,406

559,031

94,064

1,229,288

1,157,624

1,290,751

5,163,004

112,990

1,535,199

3,266,354

2,564,572

559,933

6,906,711

94,085

385,877

417,229

1,625,325

1,447,097

785,872

2,866,023

1,223,906

1,053,235

601,903

2,024,112

1,115,389

985,368

539,327

1,961,536

1,100,620

978,454

532,413

1,954,622

5,065,240

4,464,154

2,459,515

8,806,293

112,990

1,535,199

701,829

94,064

86,628

289,406

559,031

94,085

275,625

1,157,624

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

P A Y M E N T S D U R I N G T H E F I N A N C I A L Y E A R

Dr. Simon Moroney
Chief Executive Officer

Jens Holstein
Chief Financial Officer

Dr. Arndt Schottelius

Chief Development Officer

Dr. Marlies Sproll

Chief Scientific Officer

Total

2014

289,335

32,508

321,843

244,590

1,705,110

1,949,700

86,653

2,358,196

2015

302,384

29,889

332,273

215,208

1,036,320

1,251,528

94,064

1,677,865

2014

289,335

22,828

312,163

244,590

86,628

643,381

2015

302,384

22,954

325,338

210,144

1,036,320

2,526,294

94,085

2,945,717

2014

2015

1,294,507

118,502

1,413,009

1,094,313

5,185,533

385,877

6,984,419

1,352,888

129,465

1,482,353

970,319

4,622,005

7,609,302

417,229

9,508,884

1,279,830

4,091,220

2,016,978

in €

Fixed Compensation

Fringe Benefits

Total Fixed Compensation

One -Year Variable Compensation1

Multi-Year Variable Compensation:

2010 Convertible Bonds Program2
(Vesting Period 4 Years)

2011 Long-Term Incentive Program2
(Vesting Period 4 Years)

Other3

Total Variable Compensation

Service Cost

Total Compensation

2014

426,502

29,444

455,946

360,543

2015

445,736

36,887

482,623

324,696

2,386,110

737,148

2,746,653

125,730

3,328,329

1,513,045

2,574,889

138,280

3,195,792

2014

289,335

33,722

323,057

244,590

86,866

654,513

2015

302,384

39,735

342,119

220,271

1,036,320

1,256,591

90,800

1,689,510

1 The one-year variable compensation presented here represents the bonus paid in the respective financial year for the previous financial year.
2 The date and value of the payments is the date and value applicable under German tax law. Therefore, this table shows the non-cash benefits arising in the respective financial year

from the difference between the exercise or conversion price and the stock market price at the time of exercising the convertible bonds or at the time of transfer of own shares from a
performance share plan.

3 No compensation recovery claims against the Management Board existed in 2015 or 2014.

SUPERVISORY BOARD REMUNE R ATION
The remuneration of Supervisory Board members is governed by
the Company’s Articles of Association and a corresponding An-
nual General Meeting resolution on Supervisory Board remuner-
ation. In the 2015 financial year, Supervisory Board members
received fixed compensation, attendance fees and expense allow-
ances for their participation in Supervisory Board and committee
meetings. Since 2014, each Supervisory Board member has re-
ceived annual fixed compensation (€ 85,400 for Chairpersons,
€ 51,240 for Deputy Chairpersons and € 34,160 for all other mem-
bers) for their membership of the Supervisory Board. The Chair-
person receives € 4,000 for each Supervisory Board meeting
chaired and the other members receive € 2,000 for each Supervi-
sory Board meeting attended. For committee work, the committee
Chairperson receives € 12,000 and other committee members
each receive € 6,000. Committee members also receive € 1,200 for
their participation in a committee meeting. Compensation is paid
quarterly on a pro-rated basis. A resolution of the Annual General
Meeting on May 8, 2015 made two changes to the rules governing
Supervisory Board remuneration: Participation in a Supervisory
Board meeting by telephone or video conference results in a 50 %
reduction in compensation for meeting participation and, in cer-

tain cases, a fixed expense allowance is granted for travel time
when a meeting is personally attended. Therefore, Supervisory
Board members residing outside of Europe who personally take
part in a Supervisory Board or committee meeting are entitled to
a fixed expense allowance of € 2,000 (plus any sales tax due) for
additional travel time in addition to attendance fees and reim-
bursed expenses.

Supervisory Board members are also reimbursed for travel ex-
penses and value-added taxes (VAT) on their compensation.

In the 2015 financial year, Supervisory Board members received a
total of € 529,270 (2014: € 514,480) excluding the reimbursement
of travel expenses. This amount consists of fixed compensation
and attendance fees for participating in Supervisory Board and
committee meetings.

No loans were granted to Supervisory Board members by the
Company.

The table below details the Supervisory Board’s remuneration.

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

P A Y M E N T S D U R I N G T H E F I N A N C I A L Y E A R

in €

Fixed Compensation

Fringe Benefits

Total Fixed Compensation

One -Year Variable Compensation1

Multi-Year Variable Compensation:

2010 Convertible Bonds Program2

(Vesting Period 4 Years)

2011 Long-Term Incentive Program2

(Vesting Period 4 Years)

Other3

Total Variable Compensation

Service Cost

Total Compensation

2014

426,502

29,444

455,946

360,543

2,746,653

125,730

3,328,329

2015

445,736

36,887

482,623

324,696

1,513,045

2,574,889

138,280

3,195,792

2014

289,335

33,722

323,057

244,590

86,866

654,513

2015

302,384

39,735

342,119

220,271

1,036,320

1,256,591

90,800

1,689,510

1 The one-year variable compensation presented here represents the bonus paid in the respective financial year for the previous financial year.

2 The date and value of the payments is the date and value applicable under German tax law. Therefore, this table shows the non-cash benefits arising in the respective financial year

from the difference between the exercise or conversion price and the stock market price at the time of exercising the convertible bonds or at the time of transfer of own shares from a

performance share plan.

3 No compensation recovery claims against the Management Board existed in 2015 or 2014.

Dr. Simon Moroney

Chief Executive Officer

Jens Holstein

Chief Financial Officer

Dr. Arndt Schottelius
Chief Development Officer

Dr. Marlies Sproll
Chief Scientific Officer

Total

2014

289,335

32,508

321,843

244,590

2015

302,384

29,889

332,273

215,208

2,386,110

737,148

1,705,110

1,949,700

86,653

2,358,196

1,036,320

1,251,528

94,064

1,677,865

2014

289,335

22,828

312,163

244,590

86,628

643,381

2015

302,384

22,954

325,338

210,144

2014

2015

1,294,507

118,502

1,413,009

1,094,313

1,352,888

129,465

1,482,353

970,319

1,279,830

4,091,220

2,016,978

1,036,320

2,526,294

94,085

2,945,717

5,185,533

385,877

6,984,419

4,622,005

7,609,302

417,229

9,508,884

16 T A B L E

Compensation of the Supervisory Board in 2015 and 2014

in €

Dr. Gerald Möller

Dr. Walter Blättler1

Dr. Daniel Camus1

Dr. Marc Cluzel

Karin Eastham

Dr. Geoffrey Vernon1

Dr. Frank Morich2

Wendy Johnson2

Klaus Kühn2

Total

Fixed Compensation

Attendance Fees3

Total Compensation

2015

2014

2015

2014

2015

2014

93,521

16,188

50,089

20,073

37,324

30,099

97,400

46,160

57,240

–

36,200

13,000

8,400

28,000

36,800

8,400

14,200

26,400

14,200

38,000

25,200

23,200

32,400

24,000

–

129,721

135,400

29,188

24,588

78,089

86,889

28,473

51,524

56,499

44,299

71,360

69,360

78,560

81,240

–

343,670

339,280

185,600

175,200

529,270

514,480

1 Dr. Walter Blättler, Dr. Daniel Camus and Dr. Geoffrey Vernon left the Supervisory Board of MorphoSys AG on May 8, 2015.
2 Dr. Frank Morich, Wendy Johnson and Klaus Kühn joined the Supervisory Board of MorphoSys AG on May 8, 2015.
3 The attendance fee contains expense allowances for the attendance on Supervisory Board and committee meeting.

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

HOL DINGS OF MANAGEMEN T BOARD AND SUPERVIS ORY

BOARD MEMBERS
The members of the Management Board and the Supervisory
Board hold more than 1 % of the shares issued by the Company. All
shares, performance shares and convertible bonds held by each
member of the Management Board and the Supervisory Board are
listed below.

17 T A B L E

Directors’ Holdings

S H A R E S

MANAG EMENT BOARD

Dr. Simon Moroney

Jens Holstein

Dr. Arndt Schottelius

Dr. Marlies Sproll

TOTAL

SUPERVISORY BOARD

Dr. Gerald Möller

Dr. Walter Blättler1

Dr. Daniel Camus1

Dr. Marc Cluzel

Karin Eastham

Dr. Geoffrey Vernon1

Dr. Frank Morich2

Wendy Johnson 2, 3

Klaus Kühn 2

TOTAL

01/01/2015

Additions

Forfeitures

Sales

12/31/2015

452,885

2,000

28,620

485,505

9,000

2,019

500

1,000

–

42,353

16,132

49,132

123,749

2,000

1,000

12,519

4,000

14,132

16,132

27,000

57,264

495,238

4,000

2,000

50,752

551,990

11,000

–

500

2,000

–

1,000

500

15,000

1 Dr. Walter Blättler, Dr. Daniel Camus and Dr. Geoffrey Vernon left the Supervisory Board of MorphoSys AG on 08. May 2015.
2 Dr. Frank Morich, Wendy Johnson and Klaus Kühn joined the Supervisory Board of MorphoSys AG on 08. May 2015.
3 500 shares have been acquired by Wendy Johnson before joining the Supervisory Board of MorphoSys AG.

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

C O N V E R T I B L E B O N D S

MANAG EMENT B OARD

Dr. Simon Moroney

Jens Holstein

Dr. Arndt Schottelius

Dr. Marlies Sproll

TOTAL

P E R F O R M A N C E S H A R E S

MANAG EMENT BOARD

Dr. Simon Moroney

Jens Holstein

Dr. Arndt Schottelius

Dr. Marlies Sproll

TOTAL

01/01/2015

Additions

Forfeitures

Exercises

12/31/2015

107,186

90,537

60,537

93,537

351,797

18,800

33,000

51,800

88,386

90,537

60,537

299,997

01/01/2015

Additions

Forfeitures

Allocations

12/31/2015

54,655

37,434

166,957

13,062

8,946

39,900

23,553

16,132

71,949

44,164

30,248

134,908

DIREC T ORS’ DEAL INGS
Members of MorphoSys AG’s Management Board and Supervisory
Board and persons related to such members are required to dis-
close any trading in MorphoSys shares under Sec. 15a of the Ger-
man Securities Trading Act (WpHG).

During the reporting year, MorphoSys received the following noti-
fications under Sec. 15a WpHG listed in the table below.

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

18 T A B L E

Directors’ Dealings (2015)

Party Subject to
the Notification
Requirement

Date of
Transaction

Function

in 2015 Type of Transaction

Number of
Stocks/
Derivatives

Average
Share Price

Transaction
Volume

Dr. Simon
Moroney

Dr. Marlies
Sproll

Dr. Arndt
Schottelius

Dr. Marlies
Sproll

CEO

CSO

Purchase; convertible bonds were converted into
MorphoSys AG shares; Dr. Moroney is holding the
shares received

12/16/2015

Sale; convertible bonds were converted into
MorphoSys AG shares and subsequently sold

Purchase; convertible bonds were converted into
MorphoSys AG shares; Dr. Sproll is holding the
shares received

12/15/2015

Sale; convertible bonds were converted into
MorphoSys AG shares and subsequently sold

CDO

06/03/2015

CDO

06/03/2015

CDO

06/02/2015

CSO

06/04/2015

CSO

06/03/2015

CSO

06/02/2015

Jens Holstein

CFO

06/04/2015

Jens Holstein

CFO

06/03/2015

Jens Holstein

CFO

06/02/2015

Sale of MorphoSys AG shares; the shares were
granted on 06/01/2015 within MorphoSys’s long
term incentive (LTI) program 2011 after a four-year
waiting period. The shares were subsequently sold.

18,800

€ 16.79

€ 315,652.00

9,500

€ 56.1934

€ 533,837.30

14,000

€ 16.79

€ 235,060.00

9,500

€ 56.0253

€ 532,240.35

5,392

€ 66.1085

€ 356,457.03

5,370

€ 65.6735

€ 352,666.70

5,370

€ 66.0633

€ 354,759.92

2,667

€ 65.6343

€ 175,046.68

2,667

€ 65.8605

€ 175,649.95

2,666

€ 65.6746

€ 175,088.48

3,381

€ 65.6343

€ 221,909.57

5,381

€ 65.8605

€ 354,395.35

5,370

€ 65.6746

€ 352,672.60

Dr. Frank
Morich

Dr. Gerald
Möller

Karin
Eastham

Deputy Chairman
of the
Supervisory Board

Chairman of the
Supervisory Board

Member of the
Supervisory Board

05/12/2015

Purchase of MorphoSys AG shares

1,000

€ 63.51

€ 63,510.00

03/27/2015

Purchase of MorphoSys AG shares

2,000

€ 56.70

€ 113,400.00

03/27/2015

Purchase of MorphoSys AG shares

1,000

US$ 61.8129

US$ 61,812.90

AVOIDING CONFL IC T S OF IN T ERES T
Management Board and Supervisory Board members are required
to refrain from any actions that could lead to a conflict of interest
with their duties at MorphoSys AG. Such transactions or the sec-
ondary employment of Management Board members must be dis-
closed immediately to the Supervisory Board and are subject to the
Board’s approval. The Supervisory Board, in turn, must inform the
Annual General Meeting of any conflicts of interest and their han-
dling. There were no conflicts of interest in the 2015 financial year.

S T OCK REPURCHASES
By resolution of the Annual General Meeting on May 19, 2011 and
superseded by the Annual General Meeting resolution on May 23,
2014, MorphoSys is authorized in accordance with Sec. 71 Para. 1
no. 8 AktG to repurchase its own shares in an amount of up to 10 %
of the existing common stock. This authorization can be exer-
cised in whole or in part, once or several times by the Company or
a third party on the Company’s behalf for the purposes specified
in the authorizing resolution. It is at the Management Board’s
discretion to decide whether to carry out a repurchase on a stock
exchange, via a public offer or through a public invitation to sub-
mit a bid.

In April 2015, MorphoSys repurchased a total of 88,670 of its own
shares based on the authorization from the year 2014. The Com-
pany plans to use these shares for a long-term incentive program
for the Management Board and Senior Management Group. The
authorization also permits the shares to be used for other lawful
purposes.

INF ORMAT ION T ECHNOL OGY
During the 2015 financial year, the Information Technology de-
partment focused on IT security and optimizing the IT infrastruc-
ture. The entire IT infrastructure was tested for vulnerabilities
and threat vectors allowing cyber-attacks using a detailed, multi-
stage safety check by external IT experts. The results confirmed
that MorphoSys has a state-of-the-art IT security system. The
potential for optimization that was identified prompted further
improvements.

A decisive factor for maintaining comprehensive IT security is not
only technical security testing but also the behavior of employees.
As part of an IT security campaign called the “IT Security Aware-
ness Campaign,” employees were made more aware of IT security
through a variety of activities.

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

In the R&D area, the software and databases that support com-
pany-specific processes and technologies in antibody selection,
characterization and production were developed further during
the reporting year. The software used in this area is based on the
GeneData Biologics software which is used throughout the indus-
try and allows MorphoSys to quickly and reliably identify the most
promising and differentiated drug candidates from the high num-
ber of antibody molecules technically available.

INF ORMAT ION ON T HE IN T ERNAL CON T ROL AND RISK MAN -

AGEMEN T SY S T EM CONCERNING T HE ACCOUN T ING PROCESS

UNDER SEC . 289 PARA. 5 AND SEC . 315 PARA. 2 NO. 5 HGB
In the 2015 financial year, MorphoSys completed a routine update
of the documentation for its existing internal control and risk man-
agement system. This update serves to maintain adequate internal
control over financial reporting and to ensure the availability of
all controls so that financial figures can be reported as precisely
and accurately as possible. The COSO (Committee of Sponsoring
Organizations of the Treadway Commission) defines the corre-
sponding COSO framework (“Internal Control – Integrated Frame-
work”). This is the framework used by MorphoSys and is the most
commonly used for the internal control of financial reporting.

System constraints make it impossible to give absolute assurance
that internal controls will always prevent or completely detect all
misrepresentations made in the context of financial reporting. In-
ternal controls can only provide reasonable assurance that finan-
cial reporting is reliable and verify that the financial statements
were prepared in accordance with the IFRS standards for external
purposes adopted by the European Union.

The consolidated financial statements are subjected to a number of
preparation, review and control processes so that the statements
can be reported promptly to the market and shareholders. To ac-
complish this, the Company’s executives have a coordinated plan
for which all internal and external resources are made available.
MorphoSys also uses a strict four-eye principle to ensure the accu-
racy of the key financial ratios reported and the underlying execu-
tion of all accounting processes. Numerous rules and guidelines
are also followed to ensure the strict separation of the planning,
posting and execution of financial transactions. This functional
separation of processes is ensured by all of the Company’s operat-
ing IT systems through the appropriate assignment of rights. Ex-
ternal service providers routinely review the implementation of
and compliance with these guidelines as well as the efficiency of
the accounting processes. The reporting year’s most recent review
showed insignificant cause for action. The appropriate corrective
actions are being planned, and their implementation will be re-
viewed again in the following year.

878

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

Predicting future events is not the purpose of MorphoSys’s inter-
nal control and risk management system. The Company’s risk
management system does, however, ensure that business risks are
detected and assessed as soon as possible. The risks identified are
eliminated or at least brought to an acceptable level using appro-
priate corrective measures. Special attention is given to risks that
could jeopardize the Company.

COMPL IANCE MANAGEMEN T SY S T EM
The basic mechanisms of the compliance management system at
MorphoSys are presented in the section entitled “Relevant Infor-
mation on Corporate Governance Practices” on page 62. In addi-
tion to this information, the responsibilities within the compliance
organization are shown in Figure 17.
›› S E E F I G U R E 17 – Compliance Management System (CMS)

The Management Board ensures that risks are always dealt with
responsibly and keeps the Supervisory Board informed of any
risks and their development. Detailed information on the risks and
opportunities encountered by MorphoSys can be found in the
“Risk and Opportunity Report” (page 53).

ACCOUN T ING AND EX T ERNAL AUDI T
MorphoSys AG prepares its financial statements in accordance
with the provisions of the German Commercial Code (HGB) and
the Stock Corporation Act (AktG). The consolidated financial state-
ments are prepared in accordance with the International Financial
Reporting Standards (IFRS), as applicable in the European Union.

For the election of the Company auditor, the Audit Committee of
the Supervisory Board submits a nomination proposal to the Su-
pervisory Board. At the 2015 Annual General Meeting, Pricewater-
houseCoopers AG Wirtschaftsprüfungsgesellschaft was appointed
auditor for the 2015 financial year. As proof of its independence,
the auditor submitted a Declaration of Independence to the Super-
visory Board. Lead auditors of these consolidated financial state-
ments were Mr. Dietmar Eglauer and Mr. Bodo Kleinschrod. Infor-
mation on other consulting, audit and valuation services provided
by PricewaterhouseCoopers AG to MorphoSys AG during the 2015
financial year can be found in the Notes (Item 7.1).

INTERNAL AUDIT DEPAR TMENT
The Internal Audit Department is a key component of the Company’s
compliance management system whose main duty is to provide
the MorphoSys Group with a systematic and uniform approach for
evaluating and improving the effectiveness of risk management
and supporting the management and monitoring activities when
meeting set targets. The audit and consulting firm KPMG was re-
appointed in 2015 to act as a co-sourcing partner in the internal
auditing process.

Internal auditing is based on a risk-oriented internal audit plan
that is largely based on the results of the most recent risk surveys.
The Management Board and Supervisory Board Audit Committee’s
audit requirements and recommendations are included in the au-
dit plan.

The Internal Audit Department reports regularly to the Manage-
ment Board. The Head of Internal Audit and the Chief Executive
Officer both report to the Supervisory Board’s Audit Committee
twice annually or on an ad hoc basis when necessary.

Four audits were conducted successfully in the course of 2015. A
few areas requiring action were identified, and corrections were
initiated or performed. Appropriate corrective action was initiated
during the reporting year for any complaints. The Internal Audit
Department is planning to carry out four audits in 2016.

F I G U R E

Compliance Management System (CMS)

Disclosures under Sec. 289 Para. 4,
Sec. 315 Para. 4 HGB and Explanatory
Report of the Management Board un-
der Sec. 176 Para. 1 Sentence 1 AktG

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

extensions in the term of office are allowed for a maximum term
of five years in each case. The Supervisory Board may revoke the
appointment of a Management Board member or the nomination of
a Chief Executive Officer for good cause within the meaning of
Sec. 84 Para. 3 AktG. If a required member of the Management
Board is absent, one will be appointed by the court in cases of ur-
gency under Sec. 85 AktG.

COMP OSI T ION OF COMMON S T OCK
As of December 31, 2015, the Company’s statutory common stock
amounted to € 26,456,834.00 and was divided into 26,456,834
no-par-value bearer shares. Except for the 434,670 treasury shares
held by the Company, the shares concerned are bearer shares with
voting rights with each share carrying one vote at the Annual Gen-
eral Meeting.

C O M P L I A N C E
O F F I C E R

reports to

RESTRIC T IONS AFFEC T ING VO T ING RIGHT S OR THE TRANSFER

manages the interfaces between the diff erent compliance streams

OF SHARES
The Management Board is not aware of any restrictions that may
affect voting rights, the transfer of shares or those that may emerge
from agreements between shareholders.

Voting right restrictions may also arise from the provisions of
the German Stock Corporation Act (AktG), such as those under
Sec. 136 AktG, or the provisions for treasury shares under Sec. 71b
AktG.

I N T E R N A L A U D I T

SHAREHOL DINGS IN COMMON S T OCK EXCEEDING 10 %

C O D E O F C O N D U C T
C O M M I T T E E

OF VO T ING RIGH T S
We have not been notified of or are aware of any direct or indirect
interests in the Company’s common stock that exceed 10 % of the
voting rights.

SHARES WI T H SPEC IAL RIGH T S CONFERRING P OWERS

OF CON T ROL
Shares with special rights conferring powers of control do not exist.

CMS

C H I E F E X E C U T I V E
O F F I C E R

As a rule, the Articles of Association can only be amended by a
resolution of the Annual General Meeting in accordance with
Sec. 179 Para. 1 sentence 1 AktG. Under Sec. 179 Para. 2 sentence 2
AktG in conjunction with Sec. 20 of the Articles of Association,
MorphoSys’s Annual General Meeting resolves amendments to the
Articles of Association generally through a simple majority of the
votes cast and a simple majority of the common stock represented.
If the law stipulates a higher mandatory majority of votes or capi-
tal, this shall be applied. Amendments to the Articles of Associa-
tion that only affect their wording can be resolved by the Supervi-
sory Board in accordance with Sec. 179 Para. 1 sentence 2 AktG in
conjunction with Sec. 12 Para. 3 of the Articles of Association.

P OWER OF T HE MANAGEMEN T BOARD T O ISSUE SHARES
The Management Board’s power to issue shares is granted under
Sec. 5 Para. 5 through Para. 6e of the Company’s Articles of Asso-
ciation as of December 31, 2015 and the following statutory
provisions:

Q U A L I T Y
A S S U R A N C E

Quality Management
System (GCP, GMP, GLP)

1. Authorized Capital
a. According to Sec. 5 Para. 5 of the Articles of Association, with
the Supervisory Board’s consent, the Management Board is
authorized to increase the Company’s common stock on one
or more occasions by up to € 10,584,333.00 for cash contri-
butions or contributions in kind by issuing up to 10,584,333
new, no-par-value bearer shares until and including April 30,
2020 (Authorized Capital 2015-I).

I N T E R N A L
C O N T R O L S Y S T E M

CON T ROL OVER VO T ING RIGH T S WI T H REGARD T O EMPL O YEE

OWNERSHIP OF C API TAL
Employees who hold shares in the Company exercise their voting
rights directly in accordance with the statutory provisions and the
Articles of Association as do other shareholders.

L E G A L

APP OIN T MEN T AND DISMISSAL OF MANAGEMEN T BOARD

MEMBERS AND AMENDMEN T S T O T HE AR T ICL ES OF

ASSOC IAT ION
The number of Management Board members, their appointment
and dismissal and the nomination of the Chief Executive Officer
are determined by the Supervisory Board in accordance with Sec. 6
of the Articles of Association and Sec. 84 AktG. The Company’s
Management Board currently consists of the Chief Executive Offi-
cer and three other members. Management Board members may
be appointed for a maximum term of five years. Reappointments or

R I S K M A N A G E M E N T
S Y S T E M

Shareholders are principally entitled to subscription rights.
One or more credit institutions may also subscribe to the
shares with the obligation to offer the shares to shareholders
for subscription. With the Supervisory Board’s consent, the
Management Board is, however, authorized to exclude share-
holder subscription rights:

aa) in the case of a capital increase for cash contribution, to
the extent necessary to avoid fractional shares; or
bb) in the case of a capital increase for contribution in kind;

cc) in the case of a capital increase for cash contribution
when the new shares are placed on a foreign stock ex-
change in the context of a public offering.

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

aa) in the case of a capital increase for cash contribution, to
the extent necessary to avoid fractional shares; or
bb) in the case of a capital increase for contribution in kind;

cc) in the case of a capital increase for cash contribution
when the new shares are placed on a foreign stock ex-
change in the context of a public offering.

Disclosures under Sec. 289 Para. 4,
Sec. 315 Para. 4 HGB and Explanatory
Report of the Management Board un-
der Sec. 176 Para. 1 Sentence 1 AktG

RESTRIC T IONS AFFEC T ING VO T ING RIGHT S OR THE TRANSFER

OF SHARES
The Management Board is not aware of any restrictions that may
affect voting rights, the transfer of shares or those that may emerge
from agreements between shareholders.

Voting right restrictions may also arise from the provisions of
the German Stock Corporation Act (AktG), such as those under
Sec. 136 AktG, or the provisions for treasury shares under Sec. 71b
AktG.

SHAREHOL DINGS IN COMMON S T OCK EXCEEDING 10 %

OF VO T ING RIGH T S
We have not been notified of or are aware of any direct or indirect
interests in the Company’s common stock that exceed 10 % of the
voting rights.

SHARES WI T H SPEC IAL RIGH T S CONFERRING P OWERS

OF CON T ROL
Shares with special rights conferring powers of control do not exist.

CON T ROL OVER VO T ING RIGH T S WI T H REGARD T O EMPL O YEE

APP OIN T MEN T AND DISMISSAL OF MANAGEMEN T BOARD

MEMBERS AND AMENDMEN T S T O T HE AR T ICL ES OF

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

The total shares to be issued via a capital increase against
contribution in cash and/or in kind, excluding pre-emptive
rights and based on the authorizations mentioned above,
shall not exceed 20 % of the common stock. The calculation
used is based on either the effective date of the authorizations
or the exercise of the authorizations, whichever amount is
lower. The 20 % limit mentioned above shall take into account
(i) treasury shares sold excluding pre-emptive rights after
the effective date of these authorizations (unless they service
the entitlements of members of the Management Board and/
or employees under employee participation programs), (ii)
shares that are issued from other authorized capital existing
on the effective date of these authorizations and excluding
pre-emptive rights during the effective period of these autho-
rizations, and (iii) shares to be issued during the effective
period of these authorizations to service convertible bonds
and/or bonds with warrants whose basis for authorization ex-
ists on the effective date of these authorizations provided that
the convertible bonds and/or bonds with warrants have been
issued with the exclusion of the pre-emptive rights of share-
holders (unless they service the entitlements of members of
the Management Board and/or employees under employee
participation programs).

With the Supervisory Board’s consent, the Management Board
is authorized to determine the further details of the capital
increase and its implementation.

b. According to Sec. 5 Para. 6 of the Articles of Association, with
the Supervisory Board’s consent, the Management Board is
authorized to increase the Company’s common stock on one
or more occasions by up to € 2,622,088.00 for cash contribu-
tions by issuing up to 2,622,088 new, no-par-value bearer
shares until and including April 30, 2019 (Authorized Capital
2014-I).

aa) to the extent necessary to avoid fractional shares; or
bb) if the issue price of the new shares is not significantly
below the market price of shares of the same class al-
ready listed at the time of the final determination of the
issue price and the total number of shares issued against

contribution in cash, excluding subscription rights during
the term of this authorization, does not exceed 10 % of the
common stock on the date this authorization takes effect
or at the time it is exercised, in accordance with or in the
respective application of Sec. 186 Para. 3 sentence 4 AktG.

With the Supervisory Board’s consent, the Management Board
is authorized to determine the further details of the capital
increase and its implementation.

2. Conditional Capital
a. The previous Conditional Capital 1999-I under Sec. 5 Para. 6a
of the Articles of Association was canceled by a resolution of
the Annual General Meeting on May 23, 2014.

b. According to Sec. 5 Para. 6b of the Articles of Association, the
Company’s common stock is conditionally increased by up to
€ 6,600,000.00, divided into a maximum of 6,600,000 no-par-
value bearer shares (Conditional Capital 2011-I). The condi-
tional capital increase will only be executed to the extent that
the holders of warrants or conversion rights resulting from
convertible bonds or bonds with warrants, which were con-
ferred by the Company until April 30, 2016 under the autho-
rization of the Annual General Meeting of May 19, 2011, make
use of their subscription rights or that the holders of con-
vertible bonds, issued by the Company or one of its direct or
indirect domestic or foreign wholly owned subsidiaries until
April 30, 2016 and who are subject to a conversion obligation,
meet their obligation to convert. The new shares participate
in the Company’s profits from the beginning of the financial
year in which they were created through the exercise of con-
version rights or the fulfillment of conversion obligations.
c. According to Sec. 5 Para. 6c of the Articles of Association, the
Company’s common stock is conditionally increased by up to
€ 116,848.00 through the issue of up to 116,848 new no-par-
value bearer shares of the Company (Conditional Capital
2003-II). The conditional capital increase will only be exe-
cuted to the extent that holders of convertible bonds exercise
their conversion rights for conversion into ordinary shares of
the Company. The new shares are first entitled to dividends
for the financial year for which there was no resolution of
the Annual General Meeting at the time of issuance as to the
appropriation of accumulated income. With the Supervisory
Board’s consent, the Management Board is authorized to de-
termine the further details of the capital increase and its im-
plementation.

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

d. The previous Conditional Capital 2008-II under Sec. 5 Para. 6d
of the Articles of Association was canceled by a resolution of
the Annual General Meeting on May 23, 2014.

d. The shares may be used to fulfill subscription or conversion
rights resulting from the exercise of options and/or conversion
rights or conversion obligations for Company shares.

e. The shares may be offered or transferred to employees of the
Company and those of affiliated companies, members of the
Company’s management and those of affiliated companies and/
or used to meet commitments or obligations to purchase Com-
pany shares that were or will be granted to employees of the
Company or those of affiliated companies, members of the Com-
pany’s management or managers of affiliated companies. The
shares may also be used to fulfill obligations or rights to pur-
chase Company shares that are agreed with the employees,
members of the senior management of the Company and its af-
filiates in the context of employee participation programs.

If shares are used for the purposes mentioned above, shareholder
subscription rights are excluded, with the exception of share
redemptions.

MAT ERIAL AGREEMEN T S MADE BY T HE COMPANY T HAT FAL L

UNDER T HE CONDI T ION OF A CHANGE OF CON T ROL AF T ER A

TAKEOVER BID
In 2012, MorphoSys and Novartis Pharma AG extended their
original cooperation agreement. Under this agreement, in specific
cases of a change of control, Novartis Pharma AG is entitled but
not obliged to take various measures that include the partial or
complete termination of the collaboration agreement.

Under Sections 29 and 30 of the German Securities Acquisition
and Takeover Act (WpÜG), a change of control applies when 30 % or
more of the Company’s voting rights are acquired.

e. According to Sec. 5 Para. 6e of the Articles of Association,
the Company’s common stock is conditionally increased by
up to € 450,000.00 through the issue of up to 450,000 new
no-par- value bearer shares of the Company (Conditional Cap-
ital 2008-III). The conditional capital increase will only be
executed to the extent that holders of the convertible bonds
exercise their conversion rights for conversion into ordinary
shares of the Company. The new shares participate in the
Company’s profits from the start of the financial year, for
which there was no resolution at the time of issuance on the
appropriation of accumulated income. With the Supervisory
Board’s consent, the Management Board is authorized to de-
termine the further details of the capital increase and its
implementation.

P OWER OF MANAGEMEN T BOARD T O REPURCHASE SHARES
The Management Board’s power to repurchase the Company’s own
shares is granted in Sec. 71 AktG and by the authorization of the
Annual General Meeting of May 23, 2014:

Until and including the date of April 30, 2019, the Company is au-
thorized to repurchase its own shares in an amount of up to 10 % of
the common stock existing at the time of the resolution (or possi-
bly a lower amount of common stock at the time of exercising this
authorization) for any purpose permitted under the statutory lim-
its. The repurchase takes place at the Management Board’s discre-
tion on either the stock exchange, through a public offer or public
invitation to submit a bid. The authorization may not be used for
the purpose of trading in the Company’s own shares. The intended
use of treasury shares acquired under this authorization may be
found under agenda item 9 of the Annual General Meeting of May
23, 2014. These shares may be used as follows:

a. The shares may be redeemed without the redemption or its exe-
cution requiring a further resolution of the Annual General
Meeting.

b. The shares may be sold other than on the stock exchange or
shareholder offer if the shares are sold for cash at a price that is
not significantly below the market price of the Company’s
shares of the same class at the time of the sale.

c. The shares may be sold for contribution in kind, particularly in
conjunction with company mergers, acquisitions of companies,
parts of companies or interests in companies.

882

G R O U P M A N A G E M E N T R E P O R T
Statement on Corporate Governance and Corporate Governance Report

COMPENSAT ION AGREEMEN T S CONCL UDED BY T HE COMPANY

WI T H MANAGEMEN T BOARD MEMBERS AND EMPL O YEES IN

T HE EVEN T OF A TAKEOVER BID
Following a change of control, Management Board members may
terminate their employment contract and demand the fixed salary
still outstanding until the end of the contract period. Moreover,
in such a case, all stock options, convertible bonds and perfor-
mance shares granted will become vested immediately and can be
exercised after the expiration of the statutory vesting or blackout
periods.

Following a change of control, Senior Management Group mem-
bers may also terminate their employment contract and demand a
severance payment equal to one annual gross fixed salary. More-
over, in such a case, all stock options, convertible bonds and per-
formance shares granted will become vested immediately and can
be exercised after the expiration of the statutory vesting or black-
out periods.

The following cases constitute a change of control: (i) MorphoSys
transfers all or a material portion of the Company’s assets to an
unaffiliated entity, (ii) MorphoSys merges with an unaffiliated en-
tity or (iii) a shareholder or third party directly or indirectly holds
30 % or more of MorphoSys’s voting rights.

G R O U P M A N A G E M E N T R E P O R T
Subsequent Events

Subsequent Events

There have been no significant changes in the industry environ-
ment since the end of the 2015 financial year. Other events having
a material impact on the net assets, financial position and results
of operations have also not occurred after the end of the financial
year.

F I N A N C I A L S T A T E M E N T S
Contents

Financial
Statements

F I N A N C I A L S T A T E M E N T S
Contents

86
Consolidated Statement of Income (IFRS)
87
Consolidated Statement of Comprehensive Income (IFRS)
Consolidated Balance Sheet (IFRS)
88
Consolidated Statement of Changes in Stockholders’ Equity (IFRS) 90
92
Consolidated Statement of Cash Flows (IFRS)

n o t e s
General Information
Summary of Significant Accounting Policies
Segment Reporting
Business Combinations
Notes to the Income Statement
Notes to the Assets of the Balance Sheet
Notes to Equity and Liabilities of the Balance Sheet
Remuneration System for the Management Board
and Employees of the Group
Additional Notes

94
94
106
108
109
112
118

120
129

F I N A N C I A L S T A T E M E N T S
Consolidated Statement of Income (IFRS)

Consolidated Statement of Income
(IFRS)

in €

Revenues

Operating Expenses

Research and Development

General and Administrative

Total Operating Expenses

Other Income

Other Expenses

Earnings before Interest and Taxes (EBIT)

Finance Income

Finance Expenses

Income Tax (Expenses)/Income

Consolidated Net Profit/(Loss)

Basic Net Profit/(Loss) per Share

Diluted Net Profit/(Loss) per Share

Shares Used in Computing Basic Net Result per Share

Shares Used in Computing Diluted Net Result per Share

Note

2015

2014

2.7.1, 5.1

106,222,897

63,977,978

2.7.2, 5.2.1

2.7.2, 5.2.2

2.7.3, 5.3

2.7.4, 5.3

2.7.5, 5.3

2.7.6, 5.3

2.7.7, 5.4

2.7.8, 5.5

78,655,788

15,072,046

93,727,834

5,498,041

758,772

55,962,693

14,146,042

70,108,735

782,273

550,084

17,234,332

(5,898,568)

3,827,177

435,941

(5,724,800)

14,900,768

0.57

26,019,855

26,244,292

1,809,751

219,879

1,296,067

(3,012,629)

(0.12)

25,903,995

26,190,314

F I N A N C I A L S T A T E M E N T S
Consolidated Statement of Comprehensive Income (IFRS)

Consolidated Statement of
Comprehensive Income (IFRS)1

in €

Consolidated Net Profit/(Loss)

Change in Unrealized Gains and Losses on Available-for-sale Financial Assets and Bonds

(Thereof Reclassifications of Unrealized Gains and Losses to Profit and Loss)

Change of Current Tax Effects presented in Other Comprehensive Income on Available-for-sale
Financial Assets and Bonds

Deferred Taxes

Change in Unrealized Gains and Losses on Available-for-sale Financial Assets and Bonds, Net of Tax Effects

Foreign Currency (Losses)/Gains from Consolidation

Comprehensive Income

Total Comprehensive Income

2015

2014

14,900,768

(3,012,629)

(268,749)

14,500

53,497

17,736

(197,516)

(293,846)

(491,362)

(347,517)

318,957

244,151

(141,657)

(245,023)

101,290

(143,733)

14,409,406

(3,156,362)

1 In financial years 2015 and 2014, the statement of comprehensive income only comprised components, which will be reclassified in terms of IAS 1.82A(b) to profit and loss in subsequent

periods when specific conditions are met.

F I N A N C I A L S T A T E M E N T S
Consolidated Balance Sheet (IFRS)

Consolidated Balance Sheet (IFRS)

in €

AS SE TS

Current Assets

Cash and Cash Equivalents

Available-for-sale Financial Assets

Bonds, Available-for-sale

Financial Assets classified as Loans and Receivables

Accounts Receivable

Tax Receivables

Other Receivables

Inventories, Net

Prepaid Expenses and Other Current Assets

Total Current Assets

Non-current Assets

Property, Plant and Equipment, Net

Patents, Net

Licenses, Net

In-process R&D Programs

Software, Net

Goodwill

Financial Assets classified as Loans and Receivables, Net of Current Portion

Shares Available-for-sale, Net of Current Portion

Deferred Tax Asset

Prepaid Expenses and Other Assets, Net of Current Portion

Total Non-current Assets

TOTAL AS SE TS

Note

12/31/2015

12/31/2014

2.8.1, 6.1

2.8.1, 6.2

2.8.2, 6.3

2.8.2, 6.5

2.8.2, 6.4

2.8.3, 6.5

2.8.4, 6.5

2.8.5, 6.6

2.8.6, 6.7.1

2.8.6, 6.7.2

2.8.6, 6.7.3

2.8.6, 6.7.4

2.8.6, 6.7.5

2.8.1, 6.2

2.8.7, 6.8

2.9.6, 5.4

2.8.8, 6.9

90,927,673

64,292,830

33,120,117

94,587,528

11,442,059

826,102

1,324,236

368,782

3,227,008

32,238,161

106,039,373

7,488,259

156,993,068

14,990,532

1,120,563

100,194

556,171

2,869,067

300,116,335

322,395,388

3,474,018

6,141,061

3,244,800

60,959,887

1,936,268

7,364,802

15,510,989

381,949

949,381

3,557,729

6,987,910

1,343,188

28,254,201

2,042,206

7,352,467

50,030,000

1,726,633

1,737,387

1,050,864

99,963,155

104,082,585

400,079,490

426,477,973

F I N A N C I A L S T A T E M E N T S
Consolidated Balance Sheet (IFRS)

in €

Note

12/31/2015

12/31/2014

LIAB ILITIES AND STO CKHOLDERS’ EQUIT Y

Current Liabilities

Accounts Payable and Accrued Expenses

Tax Provisions

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

Total Liabilities

Stockholders’ Equity

Common Stock

Ordinary Shares Issued (26,537,682 and 26,456,834 for 2015 and 2014, respectively)

Ordinary Shares Outstanding (26,103,012 and 26,005,944 for 2015 and 2014, respectively)

Treasury Stock (434,670 and 450,890 shares for 2015 and 2014, respectively), at Cost

Additional Paid-in Capital

Revaluation Reserve

Translation Reserve

Accumulated Income

Total Stockholders’ Equity

TOTAL LIAB ILITIES AND STO CKHOLDERS’ EQUIT Y

2.9.1, 7.1

2.9.2, 7.2

2.9.1, 7.2

2.9.3, 7.3

2.9.1, 7.2

2.9.4, 7.3

2.9.5

2.9.6, 5.4

22,341,663

17,830,792

1,698,276

1,436,384

1,994,120

27,470,443

43,344

2,512,666

225,000

7,092,030

9,873,040

37,343,483

777,281

19,541

14,075,166

32,702,780

43,344

44,677,035

251,679

44,972,058

77,674,838

2.9.7, 7.4.1

26,537,682

26,456,834

2.9.7, 7.4.4

2.9.7, 7.4.5

2.9.7, 7.4.6

2.9.7, 7.4.7

2.9.7, 7.4.8

(15,827,946)

319,394,322

(202,158)

32,834,107

362,736,007

(14,251,962)

318,375,720

(4,642)

293,846

17,933,339

348,803,135

400,079,490

426,477,973

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)

Consolidated Statement of Changes in
Stockholders’ Equity (IFRS)

BAL ANCE AS OF JANUARY 1, 2014

Compensation Related to the Grant of Convertible Bonds and Performance Shares

Exercise of Convertible Bonds Issued to Related Parties

Repurchase of Treasury Stock in Consideration of Bank Fees

Reserves:

Change in Unrealized Gain on Available-for-sale Financial Assets and Bonds, Net of Tax Effects

Foreign Currency Gains from Consolidation

Consolidated Net Loss

Total Comprehensive Income

BAL ANCE AS OF DECEMBER 31, 2014

BAL ANCE AS OF JANUARY 1, 2015

Compensation Related to the Grant of Convertible Bonds and Performance Shares

Exercise of Convertible Bonds Issued to Related Parties

Repurchase of Treasury Stock in Consideration of Bank Fees

Transfer of Treasury Stock for Long-Term Incentive Program

Reserves:

Change in Unrealized Gain on Available-for-sale Financial Assets and Bonds, Net of Tax Effects

Foreign Currency Losses from Consolidation

Consolidated Net Profit

Total Comprehensive Income

BAL ANCE AS OF DECEMBER 31, 2015

Common Stock

€

26,220,882

235,952

26,456,834

80,848

26,456,834

80,848

26,537,682

434,670

(15,827,946)

319,394,322

32,834,107

362,736,007

Treasury Stock

Additional

Revaluation

Translation

Accumulated

Total Stock-

Paid-in Capital

Reserve

Income

holders’ Equity

339,890

(6,418,018)

310,963,651

240,381

192,556

20,945,968

352,145,420

111,000

(7,833,944)

3,686,387

3,725,682

€

(245,023)

(4,642)

(197,516)

(202,158)

€

3,686,387

3,961,634

(7,833,944)

(245,023)

101,290

(3,012,629)

(3,156,362)

348,803,135

3,558,960

1,357,437

(5,392,931)

(197,516)

(293,846)

14,900,768

14,409,406

101,290

293,846

(3,012,629)

17,933,339

(293,846)

14,900,768

€

450,890

(14,251,962)

88,670

(104,890)

(5,392,931)

3,816,947

318,375,720

3,558,960

1,276,589

(3,816,947)

€

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)

Consolidated Statement of Changes in

Stockholders’ Equity (IFRS)

BAL ANCE AS OF JANUARY 1, 2014

Compensation Related to the Grant of Convertible Bonds and Performance Shares

Exercise of Convertible Bonds Issued to Related Parties

Repurchase of Treasury Stock in Consideration of Bank Fees

Reserves:

Change in Unrealized Gain on Available-for-sale Financial Assets and Bonds, Net of Tax Effects

Foreign Currency Gains from Consolidation

Consolidated Net Loss

Total Comprehensive Income

BAL ANCE AS OF DECEMBER 31, 2014

BAL ANCE AS OF JANUARY 1, 2015

Compensation Related to the Grant of Convertible Bonds and Performance Shares

Exercise of Convertible Bonds Issued to Related Parties

Repurchase of Treasury Stock in Consideration of Bank Fees

Transfer of Treasury Stock for Long-Term Incentive Program

Reserves:

Change in Unrealized Gain on Available-for-sale Financial Assets and Bonds, Net of Tax Effects

Foreign Currency Losses from Consolidation

Consolidated Net Profit

Total Comprehensive Income

BAL ANCE AS OF DECEMBER 31, 2015

Common Stock

235,952

26,456,834

80,848

€

26,220,882

339,890

(6,418,018)

310,963,651

240,381

192,556

20,945,968

352,145,420

Treasury Stock

Additional
Paid-in Capital

Revaluation
Reserve

Translation
Reserve

Accumulated
Income

Total Stock-
holders’ Equity

€

3,686,387

3,725,682

111,000

(7,833,944)

450,890

(14,251,962)

318,375,720

88,670

(104,890)

(5,392,931)

3,816,947

3,558,960

1,276,589

(3,816,947)

26,537,682

434,670

(15,827,946)

319,394,322

(245,023)

(4,642)

(197,516)

(202,158)

101,290

293,846

(293,846)

(3,012,629)

17,933,339

14,900,768

3,686,387

3,961,634

(7,833,944)

(245,023)

101,290

(3,012,629)

(3,156,362)

348,803,135

3,558,960

1,357,437

(5,392,931)

(197,516)

(293,846)

14,900,768

14,409,406

32,834,107

362,736,007

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)

Consolidated Statement of Cash Flows
(IFRS)

in €

OPER ATING AC TIVITIES:

Consolidated Net Profit/(Loss)

Adjustments to Reconcile Net Profit/(Loss) to Net Cash
Provided by/(Used in) Operating Activities:

Impairment of Assets

Depreciation and Amortization of Tangible and Intangible Assets

Net Gain on Sales of Available-for-sale Financial Assets

Purchase of Derivative Financial Instruments

Proceeds from Derivative Financial Instruments

Net (Gain)/Loss on Derivative Financial Instruments

(Gain)/Loss on Sale of Property, Plant and Equipment

(Gain)/Loss from Liquidation of Subsidiaries

Recognition of Deferred Revenue

Stock-based Compensation

Income Tax Expenses/(Income)

Gain from Revaluation of Participations

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

Income Taxes Paid

Note

2015

2014

14,900,768

(3,012,629)

3,723,736

3,454,842

1,016

858,768

(1,539,207)

27,710

(295,124)

4,117,590

4,134,479

(727,979)

(15,820)

9,503

(38,189)

(7,269)

76,489

(72,378,320)

(33,546,601)

3,558,960

5,724,801

(4,495,020)

3,635,172

(3,892,870)

7,454,023

584,104

18,132,906

(2,970,114)

3,959,340

(1,296,067)

(4,720,210)

1,670,253

101,378

156,411

17,863,327

(2,942,362)

6.6, 6.7

6.2

6.4

7.3

5.2.3, 8

5.4

6.3

6.4, 6.5

7.1, 7.2

7.1

7.3

Net Cash Provided by/(Used in) Operating Activities

(23,513,849)

(14,218,356)

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 €

Note

2015

2014

INVESTING AC TIVITIES:

Purchase of Available-for-sale Financial Assets

Proceeds from Sales of Available-for-sale Financial Assets

Purchase of Bonds, Available-for-sale

Proceeds from Sales of Bonds, Available-for-sale

Purchase of Financial Assets Classified as Loans and Receivables

Proceeds from Sales of Financial Assets Classified as Loans and Receivables

Acquisitions, Net of Cash Acquired

Purchase of Property, Plant and Equipment

Proceeds from Disposals of Property, Plant and Equipment

Purchase of Intangible Assets

Proceeds from Closing of an Escrow Account

Interest Received

Net Cash Provided by/(Used in) Investing Activities

FINANC ING AC TIVITIES:

Repurchase of Treasury Stock in Consideration of Bank Fees

7.4.4

Proceeds from the Exercise of Convertible Bonds Granted to Related Parties

Interest Paid

Net Cash Provided by/(Used in) Financing Activities

Effect of Exchange Rate Differences on Cash

Increase/(Decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents at the Beginning of the Period

Cash and Cash Equivalents at the End of the Period

6.2

6.6

6.7

(25,600,000)

(149,061,725)

67,505,472

(27,681,550)

1,621,000

(31,592,379)

127,482,204

(18,169,658)

(1,386,639)

3,050

231,934,641

(7,571,909)

11,156,203

(241,635,544)

148,703,792

(2,899,662)

5,000

(7,378,758)

(17,579,001)

1,466,156

86,268,898

(5,392,931)

1,330,758

(3,433)

(4,065,606)

58,689,512

32,238,161

90,927,673

4,686,883

762,680

(21,498,642)

(7,833,944)

4,032,078

(117,371)

(3,919,237)

700

(39,635,535)

71,873,696

32,238,161

F I N A N C I A L S T A T E M E N T S
Notes

Notes

1 General Information

BUSINE SS AC T IVI T IE S AND T HE COMP ANY
MorphoSys AG (“the Company” or “MorphoSys”) is a leader in the develop-
ment of highly efficient technologies for generating therapeutic antibod-
ies. The Company’s proprietary portfolio of compounds and the pipeline of
compounds co-developed with partners from the pharmaceutical and bio-
technology industry is one of the broadest in the industry. The Group was
founded as a German limited liability company in July 1992. In June 1998,
MorphoSys became a German stock corporation. In March 1999, the Com-
pany completed its initial public offering on Germany’s “Neuer Markt”: the
segment of the Deutsche Börse designated for high-growth companies. On
January 15, 2003, MorphoSys AG was admitted to the Prime Standard seg-
ment of the Frankfurt Stock Exchange.

2 Summary of Significant Accounting

Policies

2.1 B ASI S OF AND CHANGE S IN ACCOUN T ING S TANDARD S

2 .1.1 B ASIS OF APPLICATION
These consolidated financial statements were prepared in accordance
with the International Financial Reporting Standards (IFRS) as published
by the International Accounting Standards Board (IASB), London. The
statements take into account the recommendations of the International
Financial Reporting Standards Interpretations Committee (IFRS IC), as
applicable in the European Union (EU) and also give consideration to the
supplementary German commercial law provisions, applicable in accor-
dance with Sec. 315a Para. 1 of the German Commercial Code (HGB).

In preparing the consolidated financial statements in accordance with
IFRS, the Management Board is required to make certain estimates and
assumptions, which have an effect on the amounts recognized in the con-
solidated financial statements and the accompanying notes. The actual
results may differ from these estimates. The estimates and the underlying
assumptions are subject to continuous review. Any changes in estimates
are recognized in the period in which the changes are made and in all
relevant future periods.

The consolidated financial statements were prepared in euro – the
MorphoSys Group’s functional currency. Statements are prepared on the
basis of historical cost, except for derivative financial instruments and
available-for-sale financial assets, which are recognized at their respec-
tive fair value. All figures in this report are rounded to the nearest euro,
thousand euros or million euros.

Financial assets classified as loans and receivables were presented sepa-
rately in 2015 for better transparency of the consolidated balance sheet.
In the 2014 consolidated financial statements, these financial assets were
included in other receivables. The prior year’s consolidated balance sheet
was adjusted accordingly to ensure comparability.

In the consolidated statement of cash flows, interest paid and interest re-
ceived were reclassified from operating activities into investing activities
and financing activities. The prior year’s amounts were adjusted accord-
ingly to ensure comparability.

For better transparency, the presentation of reserves in the balance sheet
is divided into “Revaluation Reserve” and “Translation Reserve”.

These consolidated financial statements as of December 31, 2015 com-
prise MorphoSys AG and its subsidiaries (collectively referred to as the
“MorphoSys Group” or the “Group”).

Unless stated otherwise, the accounting policies set out below have been
applied consistently to all periods presented in these consolidated finan-
cial statements.

F I N A N C I A L S T A T E M E N T S
Notes

2 .1.2 C HANGES IN AC C OUNTING P OLICIES AND DISCLOSURES
The accounting principles applied generally correspond to the policies
used in the prior year.

The following new and revised standards and interpretations were applied
for the first time in the financial year.

Standard/Interpretation

IFRIC 21

Levies

Mandatory
application for
financial years
starting on

06/17/2014

Improvements to International Financial Reporting Standards,
2011 – 2013 cycle

01/01/2015

Adopted by the
European Union

Impact on
MorphoSys

yes

none

The following new and revised standards and interpretations, which were
not yet mandatory for the financial year or were not yet adopted by the
European Union, were not applied. Standards with the remark “yes” are
likely to have an impact on the consolidated financial statements, and
their impact is currently being assessed by the Group. Standards with the
remark “none” are not likely to have a material impact on the consolidated
financial statements.

Standard/Interpretation

IFRS 9
IFRS 14
IFRS 15
IFRS 16
IFRS 10/12 and IAS 28 (A)
IFRS 11 (A)
IAS 1 (A)
IAS 16 and IAS 38 (A)
IAS 16 and IAS 41 (A)
IAS 19 (A)
IAS 27 (A)

Financial Instruments
Regulatory Deferral Accounts
Revenue from Contracts with Customers
Leases
Investment Entities – Applying the Consolidation Exception
Accounting for Acquisitions of Interests in Joint Operations
Disclosure Initiative
Clarification of Acceptable Methods of Depreciation and Amortization
Bearer Plants
Defined Benefit Plans: Employee Contributions
Equity Method in Separate Financial Statements

Improvements to International Financial Reporting Standards,
2010 – 2012 cycle

Improvements to International Financial Reporting Standards,
2012 – 2014 cycle

(A) Amended

Mandatory
application for
financial years
starting on

Adopted by the
European Union

Possible
impact on
MorphoSys

01/01/2018
01/01/2016
01/01/2018
01/01/2019
01/01/2016
01/01/2016
01/01/2016
01/01/2016
01/01/2016
02/01/2015
01/01/2016

02/01/2015

01/01/2016

no
no
no
no
no
yes
yes
yes
yes
yes
yes

yes

yes
none
yes
yes
none
none
yes
none
none
none
none

none

F I N A N C I A L S T A T E M E N T S
Notes

The new IFRS 15 standard on revenue recognition was reviewed for its
potential impact on the revenue recognition of existing contracts and
future contracts with partners and/or licensees. The review for the exist-
ing contractual arrangements revealed that no material quantitative ef-
fects on the consolidated financial statements compared to the provision
currently applied are to be expected. Qualitative adjustments of the re-
quired disclosures in the Notes under IFRS 15 will be expected, however
they will not be made until the standard’s first-time application as of
January 1, 2018.

2.2 CO NS OL IDAT ION PRINC IPL E S
Intercompany balances and transactions and any unrealized gains arising
from intercompany transactions are eliminated when preparing consoli-
dated financial statements pursuant to IFRS 10.B86. Unrealized losses are
eliminated in the same manner as unrealized gains but are considered
an indication of the transferred asset’s possible impairment. Accounting
policies have been applied consistently for all subsidiaries.

For all contracts and business transactions between group entities the
arm’s length principle was applied.

2 .2 .1 C ONSOLIDATE D C OMPANIES AND SC OPE OF C ONSOLIDATION
MorphoSys AG as ultimate parent company of the Group is located in
Martinsried near Munich. MorphoSys AG has two wholly owned subsid-
iaries (collectively referred to as the “MorphoSys Group” or the “Group”):
Sloning BioTechnology GmbH (Martinsried) and, as of May 7, 2015, Lanthio
Pharma B.V. (Groningen, The Netherlands; see also Item 4* of these Notes).
Additionally, MorphoSys AG’s investment in Lanthio Pharma B.V. indirectly
gives it 100 % ownership in LanthioPep B.V. (Groningen, The Netherlands).
*C R O S S - R E F E R E N C E to page 108

2 .2 .2 C ONSOLIDATION ME THODS
The following Group subsidiaries are included in the scope of consolida-
tion as shown in the following table.

Company

Established in/
Purchase of
Shares

Included in Basis
of Consolidation
since

Sloning BioTechnology GmbH
Lanthio Pharma B.V.
LanthioPep B.V.

October 2010
May 2015
May 2015

10/07/2010
05/07/2015
05/07/2015

These subsidiaries are fully consolidated because they are either directly
or indirectly wholly owned. MorphoSys controls these subsidiaries be-
cause it possesses full power over the investees. Additionally, MorphoSys
is subject to risk exposure or has rights to variable returns from its in-
volvement with the investees. MorphoSys also has unlimited capacity to
exert power over the investees to influence their returns.

The Group does not have any entities consolidated as joint ventures by
using the equity method as defined by IFRS 11 “Joint Arrangements” nor
does it exercise a controlling influence as defined by IAS 28 “Investments
in Associates and Joint Ventures”. Interests in such entities would be mea-
sured at fair value or historic cost in accordance with IAS 39.

Assets and liabilities of fully consolidated domestic and international enti-
ties are recognized using Group-wide uniform accounting and valuation
methods. The consolidation methods applied have not changed from the
previous year.

Poole Real Estate Ltd., Oxford, UK, was liquidated during the financial
year 2015. The remaining assets were distributed to MorphoSys AG as the
sole shareholder.

Receivables, liabilities, expenses and income among consolidated entities
are eliminated in the consolidated financial statements.

S COPE OF CONS OL IDAT ION A S OF DEC EMBER 31, 2015

Company name and registered office

COMPANY CONSOLIDATED
(APART FROM PARENT COMPANY)
Sloning BioTechnology GmbH, Martinsried, Germany
Lanthio Pharma B.V., Groningen, The Netherlands
LanthioPep B.V., Groningen, The Netherlands1

1 Indirect subsidiary via Lanthio Pharma B.V.

Share of

Capital %

100
100
100

2 .2 .3 B ASIS OF FORE IGN CURRE NCY TR ANSL ATION
IAS 21 “The Effects of Changes in Foreign Exchange Rates” governs the
accounting for transactions and balances denominated in foreign curren-
cies. Transactions denominated in foreign currencies are translated at the
exchange rates prevailing on the date of the transaction. Any resulting
translation differences are recognized in profit and loss. On the reporting
date, assets and liabilities are translated at the closing rate, and income
and expenses are translated at the average exchange rate for the financial
year. Any foreign exchange rate differences derived from these transla-
tions are recognized in the consolidated statement of income. Any other
foreign exchange rate differences at the Group level are recognized in the
“Translation Reserve” (stockholders’ equity).

The consolidated financial statements for the year ended December 31, 2015
were prepared and approved by the Management Board in its meeting on
February 16, 2016 by a resolution of the Management Board. The Manage-
ment Board members are Dr. Simon Moroney (Chief Executive Officer),
Jens Holstein (Chief Financial Officer), Dr. Marlies Sproll (Chief Scientific
Officer), and Dr. Arndt Schottelius (Chief Development Officer). The Super-
visory Board is authorized to amend the financial statements after their
approval by the Management Board. MorphoSys Group’s headquarters are
located at Lena-Christ-Straße 48, 82152 Martinsried, Germany.

F I N A N C I A L S T A T E M E N T S
Notes

2.3

FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

2 .3.1 C RE DIT RISK AND LIQUIDIT Y RISK
Financial instruments that could subject the Group to a concentration of
credit and liquidity risk consist primarily of cash, cash equivalents, mar-
ketable securities, derivative financial instruments and receivables. The
Group’s cash and cash equivalents are principally denominated in euros.
Marketable securities represent investments in high-quality securities.
Cash, cash equivalents, and marketable securities are held at several re-
nowned financial institutions in Germany. The Group continuously moni-
tors its positions with financial institutions that are counterparts to its
financial instruments and these institutions’ credit ratings and does not
expect any risk of non-performance.

One of the Group’s policies requires all customers who wish to transact
business on credit terms to undergo a credit assessment based on external
ratings. Nevertheless, the Group’s revenues and accounts receivable are
still subject to credit risk from customer concentration. The Group’s most
significant single customer accounted for € 8.3 million of trade receivables
as of December 31, 2015 (December 31, 2014: € 9.3 million). This customer
accounted for 73 % of the Group’s accounts receivable at the end of 2015.
Three individual customers of the Group accounted for 56 %, 39 %, and 2 %
of the total revenues in 2015. On December 31, 2014, one customer had
accounted for 62 % of the Group’s accounts receivable and three customers
had individually accounted for 68 %, 21 %, and 3 % of the Group’s revenues
in 2014. Based on the Management Board’s assessment, no allowances
were required in the financial years 2015 and 2014. The carrying amounts
of financial assets represent the maximum credit risk.

The table below shows the credit risk of trade receivables by region as of
the reporting date.

in €

12/31/2015

12/31/2014

Europe and Asia
USA and Canada
Other

TOTAL

10,809,051
633,008
0
11,442,059

10,264,935
4,725,597
0
14,990,532

The following table shows the term structure of trade receivables as of the
reporting date.

in €; A/R are due since

Accounts Receivable
Write-off
Accounts Receivable, Net of Allowance for Impairment

in €; A/R are due since

Accounts Receivable
Write-off
Accounts Receivable, Net of Allowance for Impairment

12/31/2015
0 – 30 days

12/31/2015
30 – 60 days

12/31/2015
60+ days

12/31/2015

Total

11,442,059
0
11,442,059

0
0
0

11,442,059
0
11,442,059

12/31/2014
0 – 30 days

12/31/2014
30 – 60 days

12/31/2014
60+ days

14,666,085
0
14,666,085

324,447
0
324,447

0
0
0

12/31/2014
Total

14,990,532
0
14,990,532

F I N A N C I A L S T A T E M E N T S
Notes

As of December 31, 2015 and December 31, 2014, the Group was not ex-
posed to a credit risk from derivative financial instruments. The maxi-
mum credit risk of financial guarantees (rent deposits) on the reporting
date amounted to € 0.6 million (December 31, 2014: € 0.6 million).

The contractually agreed maturities and the corresponding cash out-
flows of accounts payable are within one year. Convertible bonds issued
to related parties mature on March 31, 2020 (maximum cash outflow:
€ 0.2 million).

2 .3.2 MA RKE 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
results of operations or the value of the financial instruments held. The
Group is exposed to currency and interest rate risks.

C U RREN CY RISK
The consolidated financial statements are prepared in euros. Whereas
MorphoSys’s expenses are predominantly incurred in euros, a portion of
the revenue is dependent on the prevailing exchange rate of the US dollar.
Throughout the year, the Group monitors the need to hedge foreign ex-
change rates to minimize currency risk and addresses this risk by using
derivative financial instruments.

The table below shows the Group’s exposure to foreign currency risk
based on the items’ carrying amounts.

as of December 31, 2015; in €

EUR

USD

Cash and Cash Equivalents
Available-for-sale Financial Assets
Bonds, Available-for-sale
Financial Assets classified as Loans and Receivables
Financial Assets classified as Loans and Receivables, Net of Current Portion
Accounts Receivable
Accounts Payable and Accrued Expenses

TOTAL

90,206,933
64,292,830
33,120,117
94,587,528
15,510,989
11,365,659
(22,308,082)
286,775,974

720,740
0
0
0
0
76,400
(28,548)
768,592

Other

0
0
0
0
0
0
(5,033)
(5,033)

Total

90,927,673
64,292,830
33,120,117
94,587,528
15,510,989
11,442,059
(22,341,663)
287,539,533

as of December 31, 2014; in €

EUR

USD

Other

Total

TOTAL

32,130,970
106,039,373
7,488,259
156,993,068
50,030,000
14,887,707
(17,763,146)
349,806,231

107,191
0
0
0
0
102,825
(67,646)
142,370

0
0
0
0
0
0
0
0

32,238,161
106,039,373
7,488,259
156,993,068
50,030,000
14,990,532
(17,830,792)
349,948,601

F I N A N C I A L S T A T E M E N T S
Notes

MorphoSys uses the following hierarchy for determining and disclosing
the fair value of financial instruments:
Level 1:

Quoted (unadjusted) prices in active markets for identical as-
sets or liabilities to which the Company has access.
Inputs other than quoted prices included within Level 1 that
are observable for the assets or liabilities, either directly (i.e.,
as prices) or indirectly (i.e., derived from prices).
Inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs).

Level 2:

Level 3:

The carrying amounts of financial assets and liabilities, such as cash and
cash equivalents, marketable securities, accounts receivable and accounts
payable approximate their fair value because of their short-term maturities.

HIER A RC H Y LE V EL 1
The fair value of financial instruments traded in active markets is based
on the quoted market prices on the reporting date. A market is considered
active if quoted prices are available from an exchange, dealer, broker,
industry group, pricing service or regulatory body that is easily and regu-
larly accessible and prices reflect current and regularly occurring market
transactions at arm’s length conditions. For assets held by the Group, the
appropriate quoted market price is the buyer’s bid price. These instruments
fall under Level 1 of the hierarchy (see also Item 6.2* of these Notes).
*C R O S S - R E F E R E N C E to page 113

HIER A RC H Y LE V EL 2
The fair value of financial instruments not traded in active markets can be
determined using valuation methods. In this case, fair value is estimated
using the results of a valuation method that makes maximum use of
market data and relies as little as possible on entity-specific inputs. If all
inputs required for measuring fair value are observable, the instrument is
allocated to Level 2. If important inputs are not based on observable mar-
ket data, the instrument is allocated to Level 3.

Hierarchy level 2 contains the forward exchange contracts used for hedg-
ing. Future cash flows for these forward exchange contracts are based on
forward curves. The fair value of these instruments is determined using
discounted cash flows.

There were no financial assets or liabilities allocated to hierarchy level 3.

There were no transfers from one fair value hierarchy level to another in
2015 or 2014.

Various foreign exchange rates and their impact on assets and liabilities
were simulated in an in-depth sensitivity analysis to determine the effects
on income. A 10 % increase in the euro versus the US dollar as of Decem-
ber 31, 2015 would have reduced the Group’s income (assuming stable in-
terest rates) by € 0.1 million. A 10 % decline in the euro versus the US dol-
lar would have increased the Group’s income by € 0.1 million.

A 10 % increase in the euro versus the US dollar as of December 31, 2014
would have reduced the Group’s income by less than € 0.1 million (assum-
ing stable interest rates). A 10 % decline in the euro versus the US dollar
would have increased the Group’s income by less than € 0.1 million.

If the foreign exchange rates for the US dollar versus the euro had re-
mained at the prior year’s average rate, the Group’s revenues would have
been € 0.1 million lower. In 2014, Group revenues would have been
€ 0.1 million higher.

IN T EREST R AT E RISK
The Group’s risk exposure to changes in interest rates mainly relates to
available-for-sale securities/investments. Changes in the general level of
interest rates may lead to an increase or decrease in the fair value of these
securities/investments. The Group’s investment focus places the safety of
an investment ahead of its return. Interest rate risk is limited because all
securities/investments can be liquidated within a maximum of two years.

The Group is not subject to significant interest rate risks from the liabili-
ties currently reported in the balance sheet.

2 .3.3 F AIR VALUE HIE R ARCHY AND ME ASURE ME NT PRO CE DURES
The IFRS 13 “Fair Value Measurement” guidelines must always be applied
when measurement at fair value is required or permitted or disclosures
regarding measurement at fair value are required based on another IAS/
IFRS guideline. The fair value is the price that would be achieved for the
sale of an asset in an arm’s length transaction between independent mar-
ket participants or the price to be paid for the transfer of a liability (dis-
posal or exit price). Accordingly, the fair value of a liability reflects the
default risk (i.e., own credit risk). Measurement at fair value requires that
the sale of the asset or the transfer of the liability takes place on the prin-
cipal market or, if no such principal market is available, on the most advan-
tageous market. The principal market is the market a company has access
to that has the highest volume and level of activity.

Fair value is measured by using the same assumptions and taking into
account the same characteristics of the asset or liability as would an inde-
pendent market participant. Fair value is a market-based, not an entity-
specific measurement. The fair value of non-financial assets is based on
the best use of the asset by a market participant. For financial instru-
ments, the use of bid prices for assets and ask prices for liabilities is per-
mitted but not required if those prices best reflect the fair value in the
respective circumstances. For simplification, mean rates are also permit-
ted. Thus, IFRS 13 not only applies to financial assets but all assets and
liabilities.

100

F I N A N C I A L S T A T E M E N T S
Notes

The table below shows the fair values of financial assets and liabilities and
the carrying amounts presented in the consolidated balance sheet.

December 31, 2015 (in 000’s €)

Cash and Cash Equivalents

Financial Assets classified as Loans
and Receivables
Accounts Receivable

Forward Exchange Contracts Used
for Hedging
Other Receivables

Financial Assets classified as Loans and
Receivables, Net of Current Portion
Available-for-sale Financial Assets
Bonds, Available-for-sale

TOTAL
Convertible Bonds - Liability Component
Accounts Payable and Accrued Expenses

Forward Exchange Contracts Used
for Hedging

TOTAL

* Declaration waived in line with IFRS 7.29 (a)

December 31, 2014 (in 000’s €)

Cash and Cash Equivalents

Financial Assets classified as Loans
and Receivables
Accounts Receivable
Other Receivables

Financial Assets classified as Loans and
Receivables, Net of Current Portion

Shares Available-for-sale,
Net of Current Portion
Available-for-sale Financial Assets
Bonds, Available-for-sale

TOTAL
Convertible Bonds - Liability Component
Accounts Payable and Accrued Expenses

TOTAL

* Declaration waived in line with IFRS 7.29 (a)

Loans and

Note

Receivables

Available-
for-sale

Other Financial

Liabilities

Total Carrying
Amount

Fair value

6.1

6.2
6.3

6.4
6.4

6.2
6.2
6.2

8.1
7.1

6.4

90,928

94,588
11,442

750
574

15,511
0
0
213,793
0
0

0
0

0
64,293
33,120
97,413
0
0

0
0

0
0
0
0
(225)
(22,342)

(25)
(22,592)

90,928

94,588
11,442

750
574

15,511
64,293
33,120
311,206
(225)
(22,342)

(25)
(22,592)

90,928

94,588
*

0
574

15,511
64,293
33,120
299,014
(225)
*

(25)
(250)

Loans and

Note

Receivables

Available-
for-sale

Other Financial

Liabilities

Total Carrying
Amount

Fair value

6.1

6.2
6.3
6.4

6.2

6.8
6.2
6.2

8.1
7.1

32,238

156,993
14,991
100

50,030

0
0
0
254,352
0
0
0

0
0
0

1,727
106,039
7,488
115,254
0
0
0

0
0
0

0
0
0
0
(252)
(17,831)
(18,083)

32,238

156,993
14,991
100

156,993
*
100

50,030

1,727
106,039
7,488
369,606
(252)
(17,831)
(18,083)

*
106,039
7,488
352,888
(252)
*
(252)

2.4

IMP AIRMEN T S

2 .4.1 N ON - DE RIVATIVE FINANCIAL INSTRUME NTS
A financial instrument not carried at fair value through profit or loss is
assessed at each reporting date to determine if there is objective evidence
for impairment. A financial instrument is impaired if objective evidence
indicates that an event has occurred after the initial recognition of the
asset that could result in a loss and whether that event could have a
negative effect on the asset’s estimated future cash flows, which can be
assessed reliably.

Objective evidence that financial instruments (including equity securi-
ties) are impaired can include the default or delinquency of a debtor, indi-
cations that a debtor or issuer will enter insolvency, adverse changes in
the payment status of borrowers or issuers in the Group as well as eco-
nomic conditions that correlate with defaults or the disappearance of
an active market for a security. A significant or prolonged decline in an
equity security’s fair value below its acquisition cost is objective evidence
of impairment.

F I N A N C I A L S T A T E M E N T S
Notes

101

2 .4.2 RECE IVABLES
The Group considers evidence of the impairment of receivables both on an
individual and a collective level. All individually significant receivables
are tested specifically for impairment. All individually significant receiv-
ables found not to be expressly impaired are then collectively tested for
any impairment that occurred but was not yet identified. Individually
non-significant receivables are collectively tested for impairment by
grouping together receivables with similar risk characteristics.

In assessing collective impairment, the Group uses historical trends of
default probabilities of the timing of impairment reversals and the amount
of loss incurred. These are then adjusted to management’s assessment of
whether current economic and credit conditions are such that the actual
losses are likely to be greater or less than those suggested by historical
trends.

For a financial instrument measured at amortized cost less impairment,
impairment is calculated as the difference between its carrying amount
and the present value of the estimated future cash flows. Cash flows are
discounted at the asset’s initial effective interest rate. Losses are recog-
nized in profit or loss and reflected in an allowance account against receiv-
ables. Interest on the impaired asset continues to be recognized. When a
subsequent event (e.g., repayment by a debtor) causes the amount of im-
pairment to decrease, the impairment is reversed through profit and loss.

2 .4.3 A VAIL ABLE - FOR - SALE FINANCIAL AS SE TS
Impairment of available-for-sale financial assets is recognized by reclassi-
fying the accumulated losses from the revaluation reserve in equity to
profit and loss. The amount of the accumulated loss to be reclassified from
equity to profit and loss is the difference between the acquisition cost less
amortization and any principal repayment and the current fair value less
any impairment previously recognized in profit or loss. If in a subsequent
period the fair value of an impaired available-for-sale financial asset in-
creases and this increase can be objectively linked to an event occurring
after the impairment was recognized in profit or loss, then the impairment
loss is reversed, and the amount of the reversal is recognized in profit or
loss. Any subsequent increase in the fair value of an available-for-sale fi-
nancial instrument is recognized under equity in other comprehensive
income.

2 .4.4 N ON - FINANCIAL AS SE TS
The carrying amounts of the Group’s non-financial assets, inventories and
deferred tax assets are reviewed at each reporting date for any indication
of impairment. The asset’s recoverable amount is estimated if such indica-
tion exists. For goodwill and intangible assets that have indefinite useful
lives or are not yet available for use, the recoverable amount is estimated
at the same time each year. Impairment is recognized if the carrying
amount of an asset or the cash-generating unit (CGU) exceeds its esti-
mated recoverable amount.

The recoverable amount of an asset or CGU is the greater of its value-in-
use or its fair value less costs of disposal. In assessing value-in-use, the
estimated future pre-tax cash flows are discounted to their present value
using a pre-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
purposes of impairment testing, assets that cannot be tested individually
are grouped into the smallest group of assets that generates cash flows
from ongoing use that are largely independent of the cash flows of other
assets or CGUs. A ceiling test for the operating segment must be carried

out for goodwill impairment testing. CGUs that have been allocated good-
will aggregated so that the level at which impairment testing is performed
reflects the lowest level at which goodwill is monitored for internal report-
ing purposes. Goodwill acquired in a business combination is allocated
to groups of CGUs that are expected to benefit from the combination’s
synergies.

The Group’s corporate assets do not generate separate cash flows and are
utilized by more than one CGU. Corporate assets are allocated to CGUs on
a reasonable and consistent basis and are tested for impairment as part of
the impairment testing of the CGU that was allocated the corporate asset.

Impairment losses are recognized in profit and loss. Goodwill impairment
cannot be reversed. For all other assets, impairment recognized in prior
periods is assessed on each reporting date for any indications that the
losses decreased or no longer exist. Impairment is reversed when there
has been a change in the estimates used to determine the recoverable
amount. Impairment losses can only be reversed to the extent that the as-
set’s carrying amount does not exceed the carrying amount net of depre-
ciation or amortization that would have been determined if an impairment
had not been recognized.

2.5 AD DI T IONAL INF ORMAT ION

2 .5.1 K E Y ESTIMATES AND AS SUMP TIONS
Estimates and judgments are continually evaluated and based on histori-
cal experience and other factors that include expectations of future events
that are believed to be realistic under the prevailing circumstances.

The Group makes estimates and assumptions concerning the future. The
resulting accounting-related estimates will, by definition, seldom corre-
spond to the actual results. The estimates and assumptions that carry a
significant risk of causing material adjustments to the carrying amounts
of assets and liabilities in the next financial year are addressed below.

G O O DW ILL
The Group performs a yearly test to determine whether goodwill is subject
to impairment in accordance with the accounting policies discussed in
Item 2.4.4*. The recoverable amounts from cash-generating units have
been determined using value-in-use calculations and are subjected to a
sensitivity analysis. These calculations require the use of estimates (see
also Item 6.7.5* of the Notes).
*C R O S S - R E F E R E N C E to page 101 and page 117

IN C O ME TA X ES
The Group is subject to income taxes in a number of tax jurisdictions. Due
to the increasing complexity of the income tax law and the corresponding
uncertainty regarding the legal interpretation by the fiscal authority tax
calculations are generally subject to an increasing amount of uncertainty.
Where necessary, possible tax risks are taken into account in the form of
a provision.

As of December 31, 2015, deferred tax assets on tax loss carryforwards in
the amount of € 1.2 million (December 31, 2014: € 1.8 million) were recog-
nized as a result of profits expected from Sloning BioTechnology GmbH in
financial years 2016 to 2020.

As of December 31, 2015, no deferred tax assets on tax loss carryforwards
in the amount of € 8.6 million were recognized as a result of losses ex-
pected from the Lanthio Group in financial years 2016 to 2020.

102

F I N A N C I A L S T A T E M E N T S
Notes

2 .5.2 C APITAL MANAGE ME NT
The Management Board’s policy for capital management is to preserve a
strong and sustainable capital base in order to maintain the confidence of
investors, business partners, and the market and to support future busi-
ness development. As of December 31, 2015, the equity ratio was 90.7 %
(December 31, 2014: 81.8 %; see also the following overview). The Group
does not currently have any financial debt.

Under the respective incentive plans resolved by the Annual General
Meeting, the Management Board and employees may participate in the
Group’s performance through long-term performance-related remunera-
tion consisting of convertible bonds. MorphoSys also established long-
term incentive programs (LTI plan) in 2011, 2012, 2013, 2014 and 2015.
These programs are based on the performance-related issue of shares, or
“performance shares”, which are granted when certain predefined success
criteria have been achieved (for more information, please refer to Item 8.2*
of the Notes). There were no changes in the Group’s approach to capital
management during the year.
*C R O S S - R E F E R E N C E to page 122

in 000’ €

12/31/2015

12/31/2014

Stockholders’ Equity
In % of Total Capital
Debt
In % of Total Capital

TOTAL CAPITAL

362,736
90.7 %
37,343
9.3 %
400,079

348,803
81.8 %
77,675
18.2 %
426,478

2.6 U SE OF IN T ERE S T RAT E S F OR VAL UAT ION
The Group uses interest rates to measure fair value. When calculating stock-
based compensation, MorphoSys uses interest rates on German government
bonds with maturities of five or seven years on the date they were granted
to determine the fair value of convertible bonds.

2.7 ACCOUN T ING P OL IC IE S APPL IED T O L INE I T EMS OF T HE

INCOME S TAT EMEN T

2 .7.1 R E VE NUES AND RE VE NUE REC O GNITION
The Group’s revenue includes license fees, milestone payments, service
fees and revenues from the sale of goods. Under IAS 18.9, revenues are
measured at the fair value of the consideration received or receivable. In
accordance with IAS 18.20b, revenues are recognized only to the extent
that it is sufficiently probable that the Company will receive the economic
benefits associated with the transaction.

LI C ENSE FEES A ND MILESTO NE PAY MEN TS
Revenues related to non-refundable fees for providing access to technolo-
gies, fees for the use of technologies and license fees are recognized on a
straight-line basis over the period of the agreement unless a more appro-
priate method of revenue recognition is available. The period of the agree-
ment usually corresponds to the contractually agreed term of the research
project or, in the case of contracts without an agreed project term, the ex-
pected term of the collaboration. If all IAS 18.14 criteria are met, revenue
is recognized immediately and in full. Revenues from milestone payments
are recognized upon achievement of certain contractual criteria.

SERV I C E FEES
Service fees from research and development collaborations are recognized
in the period the services are provided.

Discounts that are likely to be granted and whose amount can be reliably
determined are recognized as a reduction in revenue at the time of reve-
nue recognition. The timing of the transfer of risks and rewards varies
depending on the terms of the sales contract. In accordance with IAS 18.21
and 18.25, revenue from multiple-component contracts is recognized by
allocating the total consideration to the separately identifiable compo-
nents based on their respective fair values and by applying IAS 18.20. The
applicable revenue recognition criteria are assessed separately for each
component.

Deferred revenue consist of customer payments that were not yet recog-
nized as revenue because the related services specified in the contract
were not yet rendered.

2 .7.2 O PE R ATING E XPE NSES

PERSO NN EL E X PENSES RESU LT IN G FRO M STO C K O P T I O NS
The Group applies the provisions of IFRS 2 “Share-based Payment”, which
require the Group to recognize as a compensation expense share-based
payments at their fair value on the value date for the period in which the
beneficiaries provide the services related to granting the share-based
payments.

RESE A RC H A ND DE V ELO PMEN T
Research costs are expensed in the period they occur. Development costs
are generally expensed as incurred in accordance with IAS 38.5 and
IAS 38.11 to 38.23. Development costs are recognized as an intangible
asset when the criteria of IAS 38.21 (probability of expected future eco-
nomic benefits, reliability of cost measurement) are met and if the Group
can provide proof under IAS 38.57.

G ENER A L A N D A DM INIST R AT I V E
This line item contains personnel expenses, consumables, operating costs,
amortization of intangible assets, expenses for external services, infra-
structure costs and depreciation.

O PER AT IN G LE ASE PAY MEN TS
Payments made under operating leases are recognized in the income
statement on a straight-line basis over the term of the lease. According to
SIC-15, all incentive agreements in the context of operating leases are rec-
ognized as an integral part of the net consideration agreed for the use of
the leased asset. The total amount of income from incentives is recognized
as a reduction in lease expenses on a straight-line basis over the term of
the lease.

All of the Group’s lease agreements are classified exclusively as operating
leases. The Group did not engage in any finance lease arrangements in
which the Group, as lessee, capitalized the assets at the start of the lease
at the lower of fair value or the net present value of the minimum-lease
payments and then depreciated the assets on a straight-line basis over
their economic life.

F I N A N C I A L S T A T E M E N T S
Notes

103

2 .7.3 O THE R INC OME

G OV ERNMEN T G R A N TS
Grants received from government agencies to fund specific research and
development projects are recognized in the income statement in the sepa-
rate line item “other income” to the extent that the related expenses have
already occurred. Under the terms of the grants, government agencies
generally have the right to audit the use of the funds granted to the Group.

Basically, government grants are cost subsidies, and their recognition
through profit and loss is limited to the corresponding costs. No payments
were granted in the 2015 financial year that are required to be classified
as investment subsidies.

2 .7.8 E ARNINGS PE R SHARE
The Group reports basic and diluted earnings per share. Basic earnings
per share is computed by dividing the net profit or loss attributable to
parent company shareholders by the weighted average number of ordi-
nary shares outstanding during the reporting period. Diluted earnings
per share is calculated in the same manner with the exception that the net
profit or loss attributable to parent company shareholders and the weighted
average number of ordinary shares outstanding are adjusted for any dilu-
tive effects resulting from convertible bonds granted to the Management
Board and employees.

2.8 A CCOUN T ING P OL IC IE S APPL IED T O T HE ASSE T S OF T HE

2 .7.4 O THE R E XPE NSES
The line item “other expenses” consists mainly of currency losses from
the operating business.

2 .7.5 F INANCE INC OME
Interest income is recognized in the income statement as it occurs and
takes into account the asset’s effective interest rate.

2 .7.6 F INANCE E XPE NSES
Borrowing costs are expensed in the period they occur and included in
finance expenses in the income statement.

2 .7.7 I NC OME TA X E XPE NSES/INC OME
Income taxes consist of current and deferred taxes and are recognized in
the income statement unless they relate to items recognized directly in
equity or other comprehensive income.

Current taxes are the taxes expected to be payable on the year’s taxable
income based on prevailing tax rates on the reporting date and any adjust-
ments to taxes payable in previous years.

The calculation of deferred taxes is based on the balance sheet liability
method and results in temporary differences between the carrying amounts
of assets and liabilities and the amounts used for taxation purposes. The
method of calculating deferred taxes depends on how the asset’s carrying
amount is expected to be realized and how the liabilities will be repaid.
The calculation is based on the prevailing tax rates or those adopted on the
reporting date.

Deferred tax assets and liabilities are offset when there is a legally en-
forceable right to offset current tax liabilities and assets and when they
relate to income taxes imposed on the same taxable entity by the same tax
authority or on different tax entities that intend to settle the balance of
current tax assets and liabilities on a net basis or when the tax assets and
liabilities are to be realized simultaneously.

Deferred tax assets are recognized only to the extent that it is likely that
there will be future taxable income to offset. Deferred tax assets are re-
duced by the amount that the related tax benefit is no longer expected to
be realized.

BAL ANCE SHEE T

2 .8.1 LIQUIDIT Y

LI Q U ID AS S E TS
The Group defines liquid assets as all cash at banks and on hand and all
short-term deposits with an original maturity of three months or less. The
Group invests most of its liquid assets at several major financial institu-
tions: Commerzbank, UniCredit, Bayern LB, LBBW, BNP Paribas, Deutsche
Bank and Rabobank.

The Group recognizes liquid assets at their nominal value. Securities are
recognized and measured at fair value. Any fluctuations in the fair value
of securities consisting mainly of money market funds are directly recog-
nized in equity. Permanent impairment is recognized in profit and loss.

N O N - DERI VAT I V E FIN A N C I A L INST RU M EN T
Depending on how they are classified, existing financial instruments are
either measured at amortized cost (category “loans and receivables”) or
fair value (category “available-for-sale financial assets”). The amortized
cost of current receivables and current liabilities generally corresponds to
either the nominal amount or repayment amount.

All non-derivative financial instruments are initially recognized at fair
value, which is defined as the fair value of the consideration provided net
of transaction costs.

The Group applies IAS 39 for financial instruments in the form of debt and
equity instruments. At the time of purchase, the Management Board de-
termines the financial instrument’s classification and reviews this classi-
fication at each reporting date. The classification depends on the purpose
of acquiring the financial instrument. As of December 31, 2015 and De-
cember 31, 2014, some financial instruments held by the Group were clas-
sified as “available-for-sale”. These financial instruments are recognized
or derecognized as of the date on which the Group commits to the financial
instrument’s purchase or sale. Following their initial recognition, avail-
able-for-sale financial assets are measured at fair value, and any resulting
gain or loss is reported directly in the revaluation reserve within equity
until the financial instruments are sold, redeemed, otherwise disposed of
or considered impaired, at which time the accumulated loss is reported in
profit and loss.

Guarantees granted for rent deposits that have been collateralized with
available-for-sale securities and obligations from convertible bonds issued
to employees are recorded under other assets as restricted cash since they
are not available for use in the Group’s operations.

104

F I N A N C I A L S T A T E M E N T S
Notes

DER I VAT I V E FIN A N C I A L INST RU MEN TS
The Group uses derivative financial instruments to hedge its exposure to
foreign exchange rate risk. In accordance with IAS 39.9, all derivative fi-
nancial instruments are held exclusively for trading and are initially rec-
ognized at fair value. After their initial recognition, derivative financial
instruments are measured at fair value, which is defined as their quoted
market price on the reporting date. Any resulting gain or loss from deriva-
tives is recognized in profit and loss because the Group currently does not
apply hedge accounting. According to the Group’s foreign currency hedging
policy, the Group only hedges highly probable future cash flows and clearly
identifiable receivables that can be collected within a 24-month period.

The use of derivative financial instruments is subject to a Group policy
that is a written guideline approved by the Management Board for dealing
with derivative financial instruments. Any changes in the fair value of
derivative financial instruments are documented.

2 .8.2 A C C OUNTS RECE IVABLE , INC OME TA X RECE IVABLES AND OTHE R

RECE IVABLES

Accounts receivable are measured at amortized cost less any impairment;
for example, allowances for doubtful accounts (see Items 2.4.2* and 6.3*
of the Notes).
*C R O S S - R E F E R E N C E to page 101 and page 114

Income tax receivables mainly include receivables due from tax authori-
ties in the context of capital gain taxes withheld.

Other non-derivative financial instruments are measured at amortized
cost using the effective interest method less any impairment.

2 .8.3 INVE NTORIES
Inventories are measured at the lower value of production or acquisition
cost and net realizable value under the FIFO method. Acquisition costs
comprise all costs of purchase and those incurred in bringing the invento-
ries into operating condition while taking into account purchase price re-
ductions, such as bonuses and discounts. Net realizable value is the esti-
mated selling price less the estimated expenses necessary for completion
and sale. Inventories are divided into the categories of raw materials and
supplies.

2 .8.4 P RE PAID E XPE NSES AND OTHE R CURRE NT AS SE TS
Prepaid expenses include expenses resulting from an outflow of liquid
assets prior to the reporting date that are only recognized as expenses in
the subsequent financial year. Such expenses usually involve mainte-
nance contracts, sublicenses and prepayments for external laboratory ser-
vices not yet performed. Other current assets primarily consist of receiv-
ables from tax authorities resulting from value-added taxes. This item is
recognized at nominal value.

2 .8.5 PR OPE R T Y, PL ANT AND EQUIPME NT
Property, plant and equipment is recorded at historical cost less accumu-
lated depreciation (see also Item 6.6* of the Notes) and any impairment
(see Item 2.4.4* of the Notes). Historical cost includes expenditures di-
rectly related to the purchase at the time of the acquisition. Replacements
purchases, building alterations and improvements are capitalized while
repair and maintenance expenses are charged as expenses as they are

incurred. Property, plant and equipment is depreciated on a straight-line
basis over its useful life (see table below). Leasehold improvements are
depreciated on a straight-line basis over the asset’s estimated useful life.
*C R O S S - R E F E R E N C E to page 115 and page 101

Asset Class

Computer Hardware

Low-value Laboratory and Office
Equipment below € 410

Permanent Improvements to
Property/Buildings
Office Equipment
Laboratory Equipment

Useful Life

3 years

Immediately

10 years
8 years
4 years

Depreciation
Rates

33 %

100 %

10 %
13 %
25 %

Asset’s residual values and useful lives are reviewed at the end of each
reporting period and adjusted if appropriate.

Borrowing costs that can be directly attributed to the acquisition, con-
struction or production of a qualifying asset are not included in the acqui-
sition or production costs because the Group finances the entire operating
business with equity.

2 .8.6 I NTANGIBLE AS SE TS
Purchased intangible assets are capitalized at acquisition cost and exclu-
sively amortized on a straight-line basis over their useful lives. Internally
generated intangible assets are recognized to the degree the recognition
criteria set out in IAS 38 are met.

Development costs are capitalized as intangible assets when the capital-
ization criteria described in IAS 38 have been met, namely, clear specifi-
cation of the product or procedure, technical feasibility, intention of com-
pletion, use, commercialization, coverage of development costs through
future free cash flows, reliable determination of these free cash flows and
availability of sufficient resources for completion of development and sale.
Amortization is recorded in research and development expenses.

Expenses to be classified as research expenses are allocated to research
and development expenses as defined by IAS 38.

Subsequent expenditures for capitalized intangible assets are capitalized
only when they substantially increase the future economic benefits of the
specific asset to which they relate. All other expenditures are expensed as
incurred.

PAT EN TS
Patents obtained by the Group are recorded at acquisition cost less accu-
mulated amortization (see below) and any impairment (see Item 2.4.4* of
the Notes). Patent costs are amortized on a straight-line basis over the
lower of the estimated useful life of the patent (ten years) or the remaining
patent term. Amortization starts when the patent is issued. Technology
identified in the purchase price allocation for the acquisition of Sloning
BioTechnology GmbH is recorded at the fair value at the time of acquisi-
tion, less accumulated amortization (useful life of ten years).
*C R O S S - R E F E R E N C E to page 101

F I N A N C I A L S T A T E M E N T S
Notes

105

LI C ENSE RI G H TS
The Group has acquired license rights from third parties by making up-
front license payments, paying annual fees to maintain the license and
paying fees for sub-licenses. The Group amortizes upfront license pay-
ments on a straight-line basis over the estimated useful life of the ac-
quired license (eight to ten years). The amortization period and method
are reviewed at the end of each financial year under IAS 38.104. Annual
fees to maintain a license are amortized over the term of each annual
agreement. Sub-license fees are amortized on a straight-line basis over
the term of the contract or the estimated useful life of the collaboration for
contracts without a set duration.

IN - PRO C ES S R&D PRO G R A MS
This line item contains capitalized upfront payments from the in-licensing
of two compounds for the Proprietary Development segment as well as a
milestone payment for one of these compounds which was paid at a later
time. Additionally, two compounds are included resulting from an acquisi-
tion. The assets are recorded at acquisition cost and are not yet available
for use and therefore not subject to amortization. The assets were tested
for impairment on the reporting date as required by IAS 36.

SO F T WA RE
Software is recorded at acquisition cost less accumulated amortization
(see below) and any impairment (see Item 2.4.4* of the Notes). Amortiza-
tion is recognized in profit and loss on a straight-line basis over the esti-
mated useful life of three to five years. Software is amortized from the
date the software is operational.
*C R O S S - R E F E R E N C E to page 101

GO ODWILL
Goodwill is recognized for expected synergies from business combina-
tions and the skills of the acquired workforce. Goodwill is tested annually
for impairment as required by IAS 36 (see also Item 6.7.5* of the Notes).
*C R O S S - R E F E R E N C E to page 117

Intangible Asset Class

Useful Life

Patents
License Rights
In-process R&D Programs
Software
Goodwill

10 years
8 –10 years
Not yet amortized
3 – 5 years
Impairment Only

Amortisation
Rates

10 %
13 % – 10 %
–
33 % – 20 %
–

2 .8.7 S HARES AVAIL ABLE - FOR - SALE
The 19.98 % interest in Dutch Lanthio Pharma B.V. was recognized at
amortized cost and recorded as a financial instrument under the category
“available-for-sale” in the prior year. Following the acquisition of all out-
standing shares of Lanthio Pharma B.V. on May 7, 2015, the entity was
fully included in MorphoSys’ consolidated financial statements.

2 .8.8 PREPAID E XPENSES AND OTHER ASSETS, NET OF CURRENT PORTION
The non-current portion of expenses that occurred prior to the reporting
date but to be recognized in subsequent financial years is also recorded
under prepaid expenses. This line item contains maintenance contracts
and sublicenses.

This line item also includes other non-current assets, which are recog-
nized at fair value. Other non-current assets consist mainly of restricted
cash, such as rent deposits.

2.9 A CCOUN T ING P OL IC IE S APPL IED T O EQUI T Y AND L IABIL I T Y

I T EMS OF T HE BAL ANCE SHEE T

2 .9.1 A CCOUNTS PAYABLE , OTHER LIABILITIES AND OTHER PROVISIONS
Trade payables and other liabilities are recognized at amortized cost. Lia-
bilities with a term of more than one year are discounted to their net pres-
ent value. Liabilities with uncertain timing or amount are recorded as
provisions.

IAS 37 requires the recognition of provisions for obligations to third par-
ties arising from past events. Furthermore, provisions are only recognized
for legal or factual obligations to third parties if the event’s occurrence is
more likely than not. Provisions are recognized at the amount required
to settle the respective obligation and discounted to the reporting date if
the interest effect is material. The amount required to meet the obligation
also includes expected price and cost increases. The interest portion of the
added provisions is recorded in the finance result. The measurement of
provisions is based on past experience and considers the circumstances in
existence on the reporting date.

2 .9.2 T A X PROVISIONS
Tax liabilities are recognized and measured at their nominal value. Tax
liabilities contain obligations from current taxes, excluding deferred taxes.
Provisions for trade taxes, corporate taxes and similar taxes on income are
determined based on the taxable income of the consolidated companies
less any prepayments made.

2 .9.3 C URRE NT P OR TION OF DE FE RRE D RE VE NUE
Upfront payments from customers for services to be rendered by the
Group are recognized as deferred revenue in accordance with IAS 18.13
and measured at the lower of fair or nominal value. The corresponding
rendering of services and revenue recognition occurs within the 12-month
period following the reporting date.

2 .9.4 D E FE RRE D RE VE NUE
This line item includes the non-current portion of deferred upfront pay-
ments from customers in accordance with IAS 18.13, which are measured
at the lower of fair or nominal value. Due to its low materiality, this line
item is not discounted to its present value in the financial year despite its
long-term maturity.

2 .9.5 C ONVE R TIBLE BONDS DUE TO RE L ATE D PAR TIES
The Group issued convertible bonds to the Group’s Management Board and
employees. In accordance with IAS 32.28, the equity component of a con-
vertible bond must be recorded separately under additional paid-in capital.
The equity component is determined by deducting the separately deter-
mined amount of the liability component from the fair value of the convert-
ible bond. The effect of the equity component is recognized in profit and
loss in personnel expenses from share-based payments, whereas the ef-
fect on profit and loss from the liability component is recognized as inter-
est expense. The Group applies the provisions of IFRS 2 “Share-based
Payments” for all convertible bonds granted to the Management Board and
the Group’s employees.

106

F I N A N C I A L S T A T E M E N T S
Notes

2 .9.6 D E FE RRE D TA XES
The recognition and measurement of deferred taxes are based on the pro-
visions of IAS 12. Deferred tax assets and liabilities are calculated using
the liability method, which is common practice internationally. Under this
method, taxes expected to be paid or recovered in subsequent financial
years are based on the applicable tax rate at the time of recognition.

Deferred tax assets and liabilities are recorded separately in the balance
sheet. Deferred tax liabilities take into account the future tax effects of
temporary differences between the value of assets and liabilities in the
balance sheet and tax loss carryforwards.

Deferred tax assets are offset against deferred tax liabilities if the taxes
are levied by the same taxation authority and have matching terms. Pur-
suant to IAS 12, deferred tax assets and liabilities may not be discounted.

2 .9.7 ST O CKHOLDE RS ’ EQUIT Y

C O M M O N STO C K
Ordinary shares are classified as stockholders’ equity. Incremental costs
directly attributable to the issue of ordinary shares and stock options are
recognized as a deduction from stockholders’ equity, net of any tax effects.
When common stock that was recorded as stockholders’ equity is repur-
chased, the amount of consideration paid, including directly attributable
costs, is recognized as a deduction from stockholders’ equity net of taxes
and is classified as treasury shares. When treasury shares are subse-
quently sold or reissued, the proceeds are recognized as an increase in
stockholders’ equity, and the profit or loss resulting from the transaction
is offset against accumulated income.

T RE ASU RY STO C K
Repurchases of the Company’s own shares at prices quoted on an ex-
change or at market value are recorded in this line item.

A D DIT I O N A L PA ID - IN CA PITA L
Additional paid-in capital mainly consists of personnel expenses resulting
from the grant of convertible bonds and performance shares and the pro-
ceeds from newly created shares in excess of their nominal value.

RE VA LUAT I O N RESERV E
The revaluation reserve mainly consists of unrealized gains and losses on
available-for-sale securities that are measured directly in equity until
they are sold.

T R A NS L AT I O N RESERV E
The translation reserve comprises all foreign exchange differences that
are not recognized in profit and loss.

AC C U M U L AT ED IN C O ME
The “accumulated income” line item consists of the Group’s accumulated
consolidated net profits/losses. A separate measurement of this item is
not made.

Segment Reporting

MorphoSys Group applies IFRS 8 “Segment Reporting”. An operating
segment is defined as a division of an entity that engages in business ac-
tivities from which it can earn revenues and incur expenses and whose
operating results are regularly reviewed by the entity’s chief operating
decision maker and for which discrete financial information is available.

Segment information is provided for the Group’s operating segments
based on the Group’s management and internal reporting structures. The
segment results and segment assets include items that can be either di-
rectly attributed to the individual segment or allocated to the segments on
a reasonable basis.

The Management Board evaluates a segment’s economic success using
selected key figures so that all income and expenses are included. Operat-
ing earnings before interest and taxes, or EBIT, is the key benchmark for
measuring and evaluating the operating results. The EBIT margin reflects
the ratio of EBIT to revenues.

The Group consists of the following operating segments.

3.1 PR OPRIE TARY DEVEL OPMEN T
This segment comprises all activities related to the proprietary develop-
ment of therapeutic antibodies and peptides. The activities of this segment
currently comprise 14 antibodies and peptides in total, including the clin-
ical development of the proprietary programs MOR208, MOR209/ES414
and MOR202. The MOR202 cooperation with Celgene was terminated as of
March 26, 2015. MOR202 is continued by MorphoSys. The proprietary pro-
gram MOR103, which is also included in this segment, was out-licensed to
GSK with all activities now conducted by GSK. MorphoSys is also pursuing
other programs that are either at an early stage of proprietary develop-
ment or fall under co-development agreements. This includes since May
2015 the MOR107 preclinical program (formerly LP2) resulting from the
acquisition of Lanthio Pharma B.V. The program MOR106, a cooperation
with the partner Galapagos, is also in pre-clinical development. A further
eight programs are in the pre-clinical search.

3.2 P AR T NERED DI S COVERY
MorphoSys possesses one of the leading technologies for generating ther-
apeutics based on human antibodies. The Group markets this technology
commercially through its partnerships with numerous pharmaceutical
and biotechnology companies. The Partnered Discovery segment encom-
passes all operating activities relating to these commercial agreements
and most of the Company’s technological development.

F I N A N C I A L S T A T E M E N T S
Notes

107

3.3 C RO SS -SEGMEN T DI S CL O SURE
The information on segment assets is based on the assets’ respective
locations.

For the 12-month
Period Ended
31 December (in 000’s €)

External Revenues
Other Operating Expenses
Other Income
Other Expenses

SEG MENT EB IT
Finance Income
Finance Expenses

PROFIT BEFORE TA XES

Income Tax
(Expenses)/Income

NE T PROFIT/(LOS S)
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

Proprietary Development

Partnered Discovery

Unallocated

Group

2015

2014

2015

2014

2015

2014

2015

2014

59,939
54,057
4,849
8
10,723
0
0
10,723

0
10,723
6,789
69,353
76,142
16,975
7,037
0

24,012
7,487
858

15,041
33,535
105
0
(18,389)
0
0
(18,389)

0
(18,389)
6,200
30,079
36,279
25,343
40,414
0

65,757
17,335
1,149

46,284
25,918
5
2
20,369
0
0
20,369

0
20,369
17,840
11,269
29,109
3,382
2,568
0

5,950
995
2,243

48,937
23,041
22
0
25,918
0
0
25,918

0
25,918
25,887
17,347
43,234
2,558
4,263
0

6,821
2,512
2,621

0
13,753
644
749
(13,858)
3,827
436
(10,467)

(5,725)
(16,191)
275,487
19,341
294,828
7,113
268
362,736

370,117
284
354

0
13,533
655
550
(13,428)
1,810
220
(11,838)

1,296
(10,542)
290,308
56,657
346,965
4,802
295
348,803

353,900
631
364

106,223
93,728
5,498
759
17,234
3,827
436
20,625

(5,725)
14,901
300,116
99,963
400,079
27,470
9,873
362,736

400,079
8,766
3,455

63,978
70,109
782
550
(5,899)
1,810
220
(4,309)

1,296
(3,013)
322,395
104,083
426,478
32,703
44,972
348,803

426,478
20,478
4,134

The segment result is defined as a segment’s revenue less the segment’s
operating expenses. In the 2015 financial year, impairments totaling
€ 3.7 million were recognized in the Partnered Discovery segment (2014:
impairments of € 2.1 million were attributable to the Proprietary Develop-
ment segment and € 2.0 million to the Partnered Discovery segment).

The Group’s key customers are allocated to the Partnered Discovery seg-
ment and Proprietary Development segment. As of December 31, 2015, the
single most important customer represented accounts receivables of a car-
rying amount of € 8.3 million (December 31, 2014: € 9.3 million). Three of
the Group’s individual customers contributed € 59.3 million, € 41.5 mil-
lion and € 1.9 million to total revenues in 2015, respectively. The largest
customer was allocated to the Proprietary Development segment and the
other two customers to the Partnered Discovery segment. In 2014, three
customers mainly assigned to the Partnered Discovery segment accounted
for € 43.2 million, € 13.5 million and € 2.0 million of the Group’s total
revenues.

The following overview shows the Group’s regional distribution of revenue.

in 000’ €

Germany
Europe and Asia
USA and Canada

TOTAL

2015

2,183
41,800
62,240
106,223

2014

733
44,628
18,617
63,978

A total of € 67.5 million (December 31, 2014: € 102.3 million) and € 32.1 mil-
lion (December 31, 2014: € 0) of the Group’s non-current assets, excluding
deferred tax assets, are located in Germany and the Netherlands, respec-
tively. The Group’s total investments of € 8.7 million (December 31, 2014:
€ 20.5 million) were made in Germany, except for € 0.1 million (Decem-
ber 31, 2014: € 0), which were made in the Netherlands. In accordance
with internal definitions, investments only include additions to property,
plant and equipment as well as intangible assets which are not related to
business combinations.

108

F I N A N C I A L S T A T E M E N T S
Notes

4 Business Combinations

On May 7, 2015, MorphoSys acquired all outstanding shares of the Dutch
biopharmaceutical company Lanthio Pharma B.V. for a one-time payment
of € 20.0 million. Since this date, Lanthio Pharma B.V.’s activities have
been fully included in MorphoSys’s consolidated financial statements. Prior
to the acquisition, MorphoSys held 19.98 % of Lanthio Pharma B.V. The
transaction added Lanthio Pharma’s leading LP2 program – a novel lanthi-
peptide currently in development for diabetic nephropathy and possibly
other fibrotic diseases – to MorphoSys’s growing proprietary portfolio.

In accordance with IFRS 3, this business combination is accounted for ac-
cording to the acquisition method under which the acquired identifiable
assets and liabilities are recognized at their fair value as of the acquisition
date. The positive difference between the business combination’s acquisi-
tion costs and the share in the net fair value of the assets, liabilities and
contingent liabilities identified during the acquisition is separately recog-
nized as goodwill and allocated to the respective cash-generating unit.

The fair value of the acquired receivables was € 0.5 million. This amount
corresponded to the gross amount of the receivables.

In the period from May 7, 2015 to December 31, 2015, the acquired com-
pany contributed a net loss of € 2.2 million to the Group’s net profit. Group
revenues were not affected by the acquisition.

Had the acquisition occurred on January 1, 2015, management estimates
that the Group’s net profit as of December 31, 2015, would have amounted
to € 14.1 million.

The cash consideration paid for all outstanding shares was € 20,000,000.
Furthermore, the conversion right included in the loan (€ 0.7 million) was
exercised in exchange for shares in the company. As a result, the share in
the company temporarily increased to 25.63 %.

The earnings effect resulting from the measurement of the initial interest
in Lanthio Pharma B.V. at fair value amounted to € 4.5 million and was
recognized in “other operating income”.

As of May 7, 2015, the acquired and identifiable assets and liabilities re-
sulting from the acquisition included the following items:

in 000’ €

Fair value

Cash and Cash Equivalents
Trade and Other Receivables
Prepaid Expenses and Other Current Assets
Property, Plant and Equipment
In-process R&D Programs
Software
Deferred Tax Asset
Other Non-current Assets
Accounts Payable and Accrued Expenses and Provisions
Deferred Tax Liabilities
Fair Value of Net Assets and Liabilities
Goodwill on Acquisition
Fair Value of Investment (25.63 %)
Consideration Paid
Cash (acquired)
Net Cash Outflow

1,830
537
144
127
28,211
1
124
29
(752)
(7,047)
23,204
3,689
6,893
20,000
(1,830)
18,170

The following amount of goodwill was recognized as a result of the
acquisition:

Consideration Paid
Fair Value of Investment (25.63 %)
Fair Value of Identifiable Net Assets and Liabilities
Goodwill

20,000
6,893
(23,204)
3,689

Goodwill is primarily attributable to synergy effects expected from the
entities’ integration into the Group’s Proprietary Development segment
and partially attributable to the know-how of the employees acquired.

The Company incurred transaction-related costs of € 0.2 million that
mainly related to fees for external legal advice, valuations in the context of
the purchase price allocation and notary costs. All transaction-related
costs are included in the consolidated income statement under “general
and administrative expenses”.

F I N A N C I A L S T A T E M E N T S
Notes

109

5 Notes to the Income Statement

5.1 REVENUE S
In 2015, revenues consisted of license fees and milestone payments total-
ing € 85.4 million (2014: € 43.5 million). The Proprietary Development
segment contributed revenue of € 59.2 million (2014: € 14.4 million), and
the Partnered Discovery segment contributed revenue of € 26.2 million
(2013: € 29.1 million).

Of the service fees totaling € 20.8 million (2014: € 20.5 million), € 0.7 mil-
lion (2014: € 0.6 million) were attributable to the Proprietary Development
segment and € 20.1 million (2014: € 19.9 million) to the Partnered Discovery
segment.

5.2 O PERAT ING EXPENSE S

5.2 .1 R ESE ARCH AND DE VE LOPME NT E XPE NSES
Research and development expenses consist of the items below.

2015

25,557
2,971
3,352

7,177
34,411

5,188
78,656

in 000’ €

Personnel Expenses
Consumable Supplies
Other Operating Expenses

Amortization and Other Costs
of Intangible Assets
External Services

Depreciation and Other Costs
for Infrastructure

TOTAL

in million €

R&D Expenses on behalf of Partners
Proprietary Development Expenses
Technology Development Expenses

R&D TOTAL

2014

21,048
2,327
2,863

8,050
17,549

4,126
55,963

2015

22.1
54.1
2.5
78.7

2014

19.5
33.6
2.9
56.0

2013

17.5
27.5
4.2
49.2

5.2 .2 G E NE R AL AND ADMINISTR ATIVE E XPE NSES
General and administrative expenses include the items below.

5.2 .3 PE RSONNE L E XPE NSE S
Personnel expenses include the items below.

in 000’ €

Personnel Expenses
Consumable Supplies
Other Operating Expenses
Amortization of Intangible Assets
External Services

Depreciation and Other Costs
for Infrastructure

TOTAL

2015

10,354
77
913
109
2,643

976
15,072

2014

in 000’ €

9,612
77
835
129
2,685

808
14,146

Wages and Salaries
Social Security Contributions

Stock-based Compensation
Expense
Temporary Staff (External)
Other

TOTAL

2012

16.0
18.1
3.6
37.7

2015

26,559
4,271

3,559
610
912
35,911

2011

19.1
33.9
2.9
55.9

2014

22,353
3,689

3,959
200
459
30,660

In 2015 and 2014, other personnel expenses consisted mainly of recruit-
ment costs.

110

F I N A N C I A L S T A T E M E N T S
Notes

The average number of employees in the 2015 financial year was 356
(2014: 315). Of the 365 employees on December 31, 2015 (December 31,
2014: 329), 305 were active in research and development (December 31,
2014: 274) and 60 were engaged in general and administrative functions
(December 31, 2014: 55 employees). As of December 31, 2015, there were
132 employees in the Proprietary Development segment and 176 employ-
ees in the Partnered Discovery segment; 57 employees were not allocated
to any specific segment (December 31, 2014: 105 in the Proprietary Devel-
opment segment, 169 employees in the Partnered Discovery segment and
55 employees were unallocated). Costs for defined-contribution plans
amounted to € 0.5 million in 2015 (2014: € 0.4 million).

5.3 O T HER INCOME AND EXPENSE S, F INANC E INCOME AND

F INANC E EXPENSE S

The line items “other income and expenses” and “finance income and finance
expenses” include the following items:

in 000’ €

2015

2014

Gain from Revaluation
of Participations
Grant Income
Gain on Exchange

Appreciation of Accounts Receivable
Previously Deemed Impaired
Miscellaneous Income
Other Income
Loss on Exchange
Impairment of Other Receivables
Miscellaneous Expenses
Other Expenses
Gain on Marketable Securities
Interest Income
Gain on Derivatives
Finance Income
Interest Expenses
Loss on Derivatives
Bank Fees
Loss on Marketable Securities
Finance Expenses

TOTAL

4,495
359
306

0
338
5,498
(460)
(214)
(85)
(759)
94
1,907
1,826
3,827
(20)
(287)
(34)
(95)
(436)
8,130

0
127
422

202
31
782
(449)
0
(101)
(550)
761
1,004
45
1,810
(118)
(6)
(63)
(33)
(220)
1,822

I NCOME TAX EXPENSE S / INCOME

5.4
MorphoSys AG and its German subsidiary Sloning BioTechnology GmbH
are subject to corporate taxes, the solidarity surcharge and trade taxes.
The Company’s corporate tax rate of 15.0 %, the solidarity surcharge of 5.5 %
and the effective trade tax rate of 10.5 % have all remained unchanged. In
the 2016 financial year, the effective trade tax rate will increase to 10.85 %.

The Dutch entities Lanthio Pharma B.V. and LanthioPep B.V. are subject to
an income tax rate of 25 % on annual income exceeding € 200,000; annual
income below € 200,000 is subject to a tax rate of 20 %. Subject to certain
conditions, a tax rate of 5 % may be applicable under what is known as the
“Innovation Box”.

Income taxes for the past financial year consist of the items listed below.

in 000’ €

2015

2014

Current Tax Expense (Thereof
Regarding Prior Years: k€ 3; 2014:
2014: k€ 6)
Deferred Tax Income/(Expenses)
Total Income Tax Income/(Expense)

Total Amount of Current Taxes
Resulting from Entries Directly
Recognized in Equity

Total Amount of Current Taxes
Resulting from Entries Directly
Recognized in Other
Comprehensive Income

Total Amount of Deferred Taxes
Resulting from Entries Directly
Recognized in Other
Comprehensive Income

Total Amount of Tax-Effects
Resulting from Entries Directly
Recognized in Equity or Other
Comprehensive Income

(4,182)
(1,543)
(5,725)

(1)

(283)
1,579
1,296

(15)

The following table reconciles the expected income tax expense with the
actual income tax expense as presented in the consolidated financial state-
ments. The combined income tax rate of 26.33 % in the 2015 financial year
(2014: 26.33 %) was applied to profit before taxes to calculate the statutory
income tax expense. This rate consisted of a corporate income tax of 15.0 %,
a solidarity surcharge of 5.5 % on the corporate tax and an average trade
tax of 10.5 % applicable to the Group.

in 000’ €

Profit Before Income Taxes
Expected Tax Rate
Expected Income Tax
Tax Effects Resulting from:

Deferred Tax Asset on Tax Loss
Carryforwards
Stock-based Compensation
Non-Tax-Deductible Items

Differences in Profit and Loss
Neutral Adjustments

Non-Recognition of Deferred Tax
Assets on Current Year Tax Losses

Tax Rate Differences to
Local Tax Rates
Effect of Tax Rate Changes
Prior Year Taxes
Other Effects
Actual Income Tax

2015

20,626
26.33 %
(5,431)

0
(221)
(1,039)

1,689

(684)

(28)
(4)
(3)
(4)
(5,725)

2014

(4,309)
26.33 %
1,134

629
(424)
(179)

107

0
0
(6)
35
1,296

F I N A N C I A L S T A T E M E N T S
Notes

111

As of December 31, 2015, deferred tax assets on tax loss carryforwards of
€ 1.2 million were recognized as a result of the profit expected from Slon-
ing BioTechnology GmbH for financial years 2016 to 2020 (December 31,
2014: € 1.8 million). The tax loss carryforwards may be carried forward
indefinitely and in unlimited amounts. Since 2004, German tax law re-
stricts the offsetting of taxable income against existing tax loss carryfor-
wards up to an amount of € 1.0 million plus 60 % of taxable income exceed-
ing € 1.0 million.

As of December 31, 2014, deferred tax assets on tax loss carryforwards of
€ 1.2 million were recognized as a result of the profits expected from
MorphoSys AG for financial years 2015 to 2019. The tax loss carryforwards
were fully utilized in 2015.

Deferred tax assets and liabilities are composed as follows.

in 000’s €, as of December 31

Intangible Assets
Receivables and Other Assets
Prepaid Expenses and Deferred Charges
Short-term Securities Investments
Provisions
Tax Losses

TOTAL

in 000’s €, as of December 31

Intangible Assets
Receivables and Other Assets
Prepaid Expenses and Deferred Charges
Short-term Securities Investments
Provisions
Tax Losses

TOTAL

Deferred Tax
Asset 2015

Deferred Tax
Asset 2014

Deferred Tax
Liabillty 2015

Deferred Tax
Liability 2014

0
0
0
90
921
1,222
2,233

0
0
0
54
533
3,023
3,610

8,685
200
4
54
0
0
8,943

1,829
0
7
37
0
0
1,873

Changes in Deferred Taxes in 2015

Recognized in
Profit and Loss

Income/(Expense)

Recognized in
Other Comprehensive
Income

First-time Recognition
of Deferred Taxes from
Business Combination

197
(206)
3
0
263
(1,801)
(1,544)

0
0
0
19
0
0
19

(7,053)
6
0
0
125
0
(6,922)

As of December 31, 2015, temporary differences existed in connection
with investments in subsidiaries (known as outside basis differences) of
€ 0.3 million for which no deferred tax liabilities were recognized.

5.5
E ARNINGS ( L O SS ) /CONS OL IDAT ED NE T PROF I T PER SHARE
Basic earnings (loss) per share is computed by dividing the 2015 consoli-
dated net profit of € 14,900,768 (2014: consolidated net loss of € 3,012,629)
by the weighted average number of ordinary shares outstanding during
the respective year (2015: 26,019,855; 2014: 25,903,995).

112

F I N A N C I A L S T A T E M E N T S
Notes

The table below shows the calculation of the weighted average number of
ordinary shares.

The following table shows the reconciliation of basic earnings per share
with diluted earnings per share (in €, except for disclosures per share).

2015

2014

2015

2014

SHARES IS SUED ON JANUARY 1
Effect of Treasury Shares Held

26,456,834
(450,890)

26,220,882
(339,890)

Effect of Repurchase of
Treasury Stock

Effect of Transfer of Treasury Stock
to Management Board and Senior
Management Group
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

WEIG HTED - AVER AG E NUMBER
OF SHARES OF C OMMON STO CK

(63,054)

(88,492)

60,894
975
2,650
1,578
0
0
3,875
3,208
1,021
0
0
629
2,135

0
0
0
0
58,746
2,198
37,063
0
2,122
4,030
1,781
4,936
619

26,019,855

25,903,995

Diluted earnings (loss) per share is calculated by taking into account the
potential increase in the Group’s ordinary shares as the result of granted
convertible bonds.

Numerator
Consolidated Net Profit/(Loss)
Denominator

Weighted-average Shares
Used for Basic EPS

Dilutive Shares Arising from
Convertible Bonds

TOTAL DENOMINATOR
Earnings per Share (in €)
Basic
Diluted

14,900,768

(3,012,629)

26,019,855

25,903,995

224,437
26,244,292

286,319
26,190,314

0.57
0.57

(0.12)
(0.12)

6 Notes to the Assets of the Balance

Sheet

6.1

C ASH AND C ASH EQUIVAL EN T S

in 000’ €

12/31/2015

12/31/2014

Bank Balances and Cash in Hand
Term Deposits
Restricted Cash
Cash and Cash Equivalents

90,928
631
(631)
90,928

32,238
573
(573)
32,238

The increase in cash and cash equivalents resulted mainly from the matu-
rity of term deposits close to the balance sheet date that will be reinvested
in 2016.

Restricted cash of € 0.6 million mainly consisted of rent deposits (2014:
€ 0.6 million).

F I N A N C I A L S T A T E M E N T S
Notes

113

F INANC IAL ASSE T S/SECURI T IE S

6.2
As of December 31, 2015 and December 31, 2014, available-for-sale finan-
cial assets consisted of the items below.

in 000’ €

DECEMBER 31, 2015
Money Market Funds
Restricted Cash

TOTAL
DECEMBER 31, 2014
Money Market Funds
Restricted Cash

TOTAL

Maturity

Cost

Gains

Losses

Market Value

Gross Unrealized

daily

64,089

daily

105,961

204

142

64,293
0
64,293

106,039
0
106,039

The Group’s gross unrealized gain from available-for-sale money market
funds in the amount of € 203,738 as of December 31, 2015, the gross unre-
alized gain of € 141,640 and the unrealized loss of € 64,291 as of Decem-
ber 31, 2014 were recorded as a separate item within equity (revaluation
reserve). In 2015, the Group recorded a net gain of € 32,539 from the dis-
posal of financial assets contained in the income statement. This gain was
previously recognized in stockholders’ equity (2014: € 710,518).

As of December 31, 2015 and December 31, 2014, bonds available-for-sale
consisted of the items below.

in 000’ €

DECEMBER 31, 2015
Bonds

TOTAL
DECEMBER 31, 2014
Bonds

TOTAL

Maturity

daily

Cost

33,599

7,572

Gross Unrealized

Gains

Losses

Market Value

480

33,120
33,120

7,488
7,488

The Group’s gross unrealized gain from available-for-sale bonds in the
amount of € 1,050, the gross unrealized loss of € 479,837 as of Decem-
ber 31, 2015 and the gross unrealized loss of € 83,650 as of December 31,
2014 were recognized as a separate item within equity (revaluation re-
serve). In 2015, the Group recorded a net loss of € 33,555 from the disposal
of financial assets contained in the income statement that were previously
recognized in stockholders’ equity (2014: net gain of € 17,460). The bonds
were purchased at a price above their nominal value. The loss that resulted
from the product-specific price development is offset by the bond’s interest
income and results in a positive overall result.

with IAS 39 “Financial Instruments”. These financial assets consisted
mainly of term deposits with fixed or variable interest rates. The carrying
amounts included interest receivables of € 1.2 million (December 31, 2014:
€ 0.4 million).

Interest income from financial assets under “loans and receivables”
amounted to € 1,858,793 (2014: € 914,140) and was recorded in the finance
result. The risk associated with these financial instruments primarily re-
sult from bank credit risks. There was no indication of impairment in the
financial year 2015.

As of December 31, 2015, the Company held current financial assets of
€ 94.6 million (December 31, 2014: € 157.0 million) and non-current
financial assets of € 15.5 million (December 31, 2014: € 50.0 million),
which were allocated to the “loans and receivables” category in accordance

Further information on accounting for financial assets is provided in
Item 2.8.1* of the Notes.
*C R O S S - R E F E R E N C E to page 103

114

F I N A N C I A L S T A T E M E N T S
Notes

6.3 A CCOUN T S RECEIVABL E
All accounts receivable are non-interest bearing and generally have pay-
ment terms of between 30 and 45 days. As of December 31, 2015 and
December 31, 2014, accounts receivable included unbilled receivables
amounting to € 3,878,771 and € 3,649,124, respectively.

Based on the Management Board’s estimate, no net loss for allowances for
doubtful receivables was recognized in profit and loss in 2015 and 2014.

6.5

I NCOME TAX RECEIVABL E S, INVEN T ORIE S, PREP AID
EXPENSE S AND O T HER CURREN T ASSE T S

As of December 31, 2015, tax receivables amounted to € 2.7 million (De-
cember 31, 2014: € 2.8 million) and consisted of receivables due from tax
authorities for value-added taxes payable in the amount of € 1.8 million
(December 31, 2014: € 1.7 million) and receivables from capital gain taxes
withheld and taxes for prior years in the amount of € 0.8 million (Decem-
ber 31, 2014: € 1.1 million).

6.4 O T HER REC EIVABL E S
Under the Group’s hedging policy, highly probable cash flows and definite
foreign-currency receivables collectable within a 24-month period are
tested to determine if they should be hedged. MorphoSys began using for-
eign currency options and forwards to hedge its foreign exchange risk
against US dollar receivables in 2003. These derivatives are recorded at
their fair values under “other receivables”.

As of December 31, 2015, there were 15 unsettled forward rate agreements
with terms ranging from one to 12 months (December 31, 2014: 24 unset-
tled forward rate agreements). The resulting unrealized gain of € 749,929
(December 31, 2014: € 44,506) and unrealized loss of € 24,984 (Decem-
ber 31, 2014: €0) as of December 31, 2015 were recorded in the finance
result.

Impairments of € 0.2 million were taken into account for other receivables,
as there is a doubt on the enforcement of the claims.

Inventories amounting to € 0.4 million as of December 31, 2015 were
stored at the Martinsried location and consisted of raw materials and sup-
plies. As in the previous year, no inventories were carried at fair value less
selling costs as of December 31, 2015.

As of December 31, 2014, inventories amounting to € 0.6 million were
stored at the Martinsried location and consisted of raw materials and
supplies.

As of December 31, 2015, prepaid expenses and other current assets
mainly consisted of prepaid fees for external laboratory services of
€ 0.6 million (December 31, 2014: € 0.5 million), prepaid fees for subli-
censes of € 0.3 million (December 31, 2014: € 0.2 million) and other pre-
payments amounting to € 0.5 million (December 31, 2014: € 0.5 million).

F I N A N C I A L S T A T E M E N T S
Notes

115

Office and
Laboratory
Equipment

Furniture

and Fixtures

13,963
1,372
126
(421)
15,040

10,560
1,497
25
(391)
11,691

3,403
3,349

12,161
2,864
(1,062)
13,963

10,173
1,386
57
(1,056)
10,560

1,988
3,403

1,765
15
0
0
1,780

1,610
45
0
0
1,655

155
125

1,867
35
(137)
1,765

1,687
60
0
(137)
1,610

180
155

Total

15,728
1,387
126
(421)
16,820

12,170
1,542
25
(391)
13,346

3,558
3,474

14,028
2,899
(1,199)
15,728

11,860
1,446
57
(1,193)
12,170

2,168
3,558

Depreciation is included in the following line items of the income
statement.

6.6 PR OPER T Y, PL AN T AND EQUIPMEN T

in 000’ €

Cost
JANUARY 1, 2015
Additions
Additions from business combination
Disposals
DECEMBER 31, 2015

Accumulated Depreciation
JANUARY 1, 2015
Depreciation Charge for the Year
Write-offs for the Year
Disposals
DECEMBER 31, 2015

Carrying Amount
JANUARY 1, 2015
DECEMBER 31, 2015

Cost
JANUARY 1, 2014
Additions
Disposals
DECEMBER 31, 2014

Accumulated Depreciation
JANUARY 1, 2014
Depreciation Charge for the Year
Write-offs for the Year
Disposals
DECEMBER 31, 2014

Carrying Amount
JANUARY 1, 2014
DECEMBER 31, 2014

Impairment of property, plant and equipment was immaterial in the 2015
financial year. In 2014, impairment of property, plant and equipment
amounted to € 0.1 million and mainly related to laboratory equipment in
the Partnered Discovery segment. The impairment occurred because an
economic benefit is no longer expected from these assets.

No borrowing costs were capitalized during the reporting period. There
were neither restrictions on retention of title nor property, plant and
equipment pledged as security for liabilities. There were no material con-
tractual commitments for the purchase of property, plant and equipment
as of the reporting date.

Research and Development

Research and Development
(Write-off)
General and Administrative

TOTAL

in 000’ €

2015

1,295

25
247
1,567

2014

1,208

57
238
1,503

116

F I N A N C I A L S T A T E M E N T S
Notes

6.7

I N TANGIBL E ASSE T S

in 000’ €

Patents

License Rights

R&D Programs

Software

Goodwill

Total

In-process

Cost
JANUARY 1, 2015
Additions

Additions from business
combination
DECEMBER 31, 2015

Accumulated Depreciation
JANUARY 1, 2015
Depreciation Charge for the Year
Write-offs for the Year
DECEMBER 31, 2015

Carrying Amount
JANUARY 1, 2015
DECEMBER 31, 2015

Cost
JANUARY 1, 2014
Additions
Disposals
DECEMBER 31, 2014

Accumulated Depreciation
JANUARY 1, 2014
Depreciation Charge for the Year
Write-offs for the Year
Disposals
DECEMBER 31, 2014

Carrying Amount
JANUARY 1, 2014
DECEMBER 31, 2014

15,743
321

0
16,064

8,755
1,145
23
9,923

6,988
6,141

15,470
273
0
15,743

7,635
1,120
0
0
8,755

7,835
6,988

21,896
2,000

0
23,896

20,553
98
0
20,651

1,343
3,245

25,001
815
(3,920)
21,896

19,604
824
4,045
(3,920)
20,553

5,397
1,343

28,254
4,495

28,211
60,960

0
0
0
0

28,254
60,960

12,808
15,446
0
28,254

0
0
0
0
0

12,808
28,254

5,180
563

1
5,744

3,138
670
0
3,808

2,042
1,936

4,376
1,045
(241)
5,180

2,619
744
16
(241)
3,138

1,757
2,042

7,352
0

3,689
11,041

0
0
3,676
3,676

7,352
7,365

7,352
0
0
7,352

0
0
0
0
0

7,352
7,352

78,425
7,379

31,901
117,705

32,446
1,913
3,699
38,058

45,979
79,647

65,007
17,579
(4,161)
78,425

29,858
2,688
4,061
(4,161)
32,446

35,149
45,979

Impairment of patents and licenses was immaterial in the 2015 financial
year. In 2014, impairment totaled € 4.1 million. Of this amount, € 2.1 million
was recognized in the Proprietary Development segment and € 2.0 million
in the Partnered Discovery segment. These impairments were incurred
because these assets were no longer expected to generate economic bene-
fits. Further detail information concerning the goodwill impairment can
be taken from number 6.7.5* of these notes.
*C R O S S - R E F E R E N C E to page 117

As of December 31, 2015 in-process research and development programs
were subject to an impairment test as required by IAS 36. This test did not
reveal any impairment.

Amortization is included in the following line items of the income
statement.

in 000’ €

Research and Development

Research and Development
(Write-off)
General and Administrative

General and Administrative
(Write-Off)

TOTAL

2015

1,806

3,699
107

0
5,612

2014

2,562

4,058
126

3
6,749

F I N A N C I A L S T A T E M E N T S
Notes

117

As of September 30, 2015, goodwill of € 3.7 million from the Lanthio Group
acquisition on May 7, 2015 was tested for impairment. The recoverable
amount of the cash-generating unit Lanthio Group, which is part of the
Proprietary Development segment, was determined on the basis of value-
in-use calculations. The value-in-use was higher than the carrying
amount of the cash-generating unit. The cash-flow forecasts included
planned cash inflows from the potential sale of compounds based on lan-
thipeptides expected to achieve market approval. These cash inflows are
offset by expected operating expenses for compound development and
clinical trials as well as sales and administrative expenses. The duration
and likelihood of individual stages of the study were taken into consider-
ation. Cash-flow forecasts are based on a period of 30 years because the
Management Board believes that after the successful approval of com-
pounds, the drugs that follow can generate free cash flows within that
period of time. The values of the underlying assumptions were determined
using both internal (past experience) and external sources of information
(market information). On the basis of the updated cash-flow forecast, the
value-in-use was determined as follows: A beta factor of 1.2 and WACC of
13.6 %. A detailed sensitivity analysis was also performed on the compo-
nents of cash flow and discount rate. This analysis did not reveal any need
for impairment. The values ascribed to the assumptions correspond to the
Management Board’s forecasts for future development and are based on
internal planning scenarios as well as external sources of information.

6.8 S HARE S, AVAIL ABL E-F OR-SAL E
Shares available-for-sale as of December 31, 2014 consisted of the 19.98 %
interest in Dutch Lanthio Pharma B.V. On May 7, 2015, MorphoSys ac-
quired all of the company’s outstanding shares. The business combination
is accounted for according to IFRS 3 (see Item 4* of the Notes).
*C R O S S - R E F E R E N C E to page 108

6.9 P REP AID EXPENSE S AND O T HER ASSE T S, NE T OF CURREN T

P OR T ION

This line item included the non-current portion of prepaid expenses and
other assets. The Group has classified certain line items under other assets
as “restricted cash” that are not available for use in the Group’s operations
(see Items 2.8.1*, 6.1*, and 6.2* of the Notes). As of December 31, 2015 and
December 31, 2014, the Group disposed of restricted cash in the amount of
€ 0.6 million for issued rent guarantees in each case and in the amount of
€ 0.2 million and € 0.3 million for convertible bonds granted to employees,
respectively.
*C R O S S - R E F E R E N C E to page 103 and page 112–113

The table below shows the breakdown of this line item.

in 000’ €

12/31/2015

12/31/2014

Prepaid Expenses,
Net of Current Portion
Other Current Assets

TOTAL

67
882
949

183
868
1,051

6.7.1 PATE NTS
In the 2015 financial year, the carrying amount of patents declined by
€ 0.9 million from € 7.0 million to € 6.1 million. This was the result of
additions amounting to € 0.3 million for patent applications, particularly
for proprietary programs and technologies, which were mainly offset by
straight-line amortization of € 1.1 million.

6.7.2 LICE NSES
The carrying amount of licenses increased by € 1.9 million rising from
€ 1.3 million to € 3.2 million in 2015. Additions during the financial year
included one-time payments totaling € 2.0 million for access to target
molecules and technologies. Amortization was € 0.1 million.

6.7.3 I N - PRO CES S R&D PRO GR AMS
The carrying amount of in-process R&D programs increased from
€ 28.3 million to € 61.0 million in 2015. This increase was primarily the
result of the preclinical programs purchased as part of the Lanthio Pharma
B.V. acquisition and a milestone payment to Emergent. The MOR107 pre-
clinical program (formerly known as LP2) obtained in the acquisition of
Lanthio Pharma B.V. has been included in the proprietary portfolio of
MorphoSys since May 2015.

6.7.4 SOF T WARE
In the 2015 financial year, additions to this line item totaled € 0.6 million.
The carrying amount decreased by € 0.1 million from € 2.0 million in
2014 to € 1.9 million in 2015. Additions were offset by amortization of
€ 0.7 million.

6.7.5 GO ODWILL
As of September 30, 2015, goodwill of € 7.4 million from the 2010 acquisi-
tion of Sloning BioTechnology GmbH was subject to an impairment test as
required by IAS 36. The recoverable amount of the cash-generating unit
Slonomics technology, which is part of the Partnered Discovery segment,
was determined on the basis of value-in-use calculations. The calculation
showed that the recoverable amount was lower than the carrying amount
of the cash-generating unit and resulted in a goodwill impairment of
€ 3.7 million. The cash-flow forecasts took into account the payments ex-
pected under existing contracts as well as the future free cash flows from
the contribution of the Slonomics technology to partnered programs and
was offset by expected personnel and administrative expenses. Cash-flow
forecasts are based on a period of ten years because the Management
Board believes that commercialization through licensing agreements, up-
front payments, milestone payments, funded development services and
royalties is only feasible by means of medium- to long-term contracts. For
this reason, a planning horizon of ten years is considered appropriate for
the value-in-use calculation. The comparably lower cash-flow forecasts are
largely the result of weaker business expectations. The values of the un-
derlying assumptions were determined using both internal (past experi-
ence) and external sources of information (market information). Based on
the updated ten-year cash-flow forecast, the value-in-use was determined
as follows: A beta factor of 1.2 (2014: 1.2), WACC of 12.7 % (2014: 11.5 %) and
a perpetual growth rate of 1 % (2014: 1 %). A detailed sensitivity analysis
was performed for the cash-flow components, the growth rate and the dis-
count rate for calculating value-in-use. This analysis did not reveal any
additional need for impairment. The values ascribed to the assumptions
correspond to the Management Board’s forecasts for future development
and are based on internal planning scenarios as well as external sources
of information.

In the 2015 financial year, PwC AG received compensation from MorphoSys
in the amount of € 264,001, which included audit fees of € 188,495, fees for
other audit-related and valuation services of € 36,506 (review of the half-
year-report) as well as fees for other services of € 39,000. PwC AG did not
provide any tax advisory services in 2015.

T AX PROVI SIONS AND O T HER PROVI SIONS

7.2
As of December 31, 2015, the Group recorded tax provisions and other
provisions of € 3.1 million (2014: € 0.8 million for the entire Group).

Tax provisions mainly consisted of income tax expenses and other provi-
sions included provisions for onerous contracts and lease obligations for
office premises, which will not be used anymore in the future.

As of December 31, 2015, tax provisions and other provisions were uncer-
tain in their amount and are expected to be utilized in 2016.

118

F I N A N C I A L S T A T E M E N T S
Notes

7 Notes to Equity and Liabilities of the

Balance Sheet

7.1 ACCOUN T S P AYABL E AND ACC RUED EXPENSE S
Accounts payable are non-interest-bearing and under normal circum-
stances have payment terms of no more than 30 days.

Accounts payable are listed in the table below.

in 000’ €

12/31/2015

12/31/2014

Trade Accounts Payable
Licenses Payable
Accrued Expenses
Other Liabilities

TOTAL

237
158
20,275
1,672
22,342

569
89
16,101
1,072
17,831

Accrued expenses include accrued personnel expenses for payments to
employees and management amounting to € 3.1 million (December 31,
2014: € 3.1 million), provisions for outstanding invoices in the amount of
€ 2.7 million (December 31, 2014: € 2.0 million), external laboratory ser-
vices in the amount of € 13.9 million (December 31, 2014: € 10.5 million),
license payments in the amount of € 0.1 million (December 31, 2014:
€ 0.4 million), audit fees and other audit-related costs in the amount of
€ 0.1 million (December 31, 2014: € 0.1 million) and expenses for legal
advice in the amount of € 0.4 million (December 31, 2014: insignificant).

At the Company’s Annual General Meeting in May 2015, the Supervisory
Board was authorized to appoint PricewaterhouseCoopers AG Wirtschafts-
prüfungsgesellschaft (PwC AG), Munich, as the auditor.

F I N A N C I A L S T A T E M E N T S
Notes

119

The table below shows the development of tax provisions and other provi-
sions in the 2015 financial year.

in 000' €

Tax Provisions
Provisions

TOTAL

01/01/2015

Additions

Utilized

Released

12/31/2015

777
63
840

1,603
1,445
3,048

679
20
699

3
8
11

1,698
1,480
3,178

7.3 D EF ERRED REVENUE S
Deferred revenues are payments received from customers for which the
services have not been rendered. The table below shows the development
of this line item.

in 000’ €

OPENING BAL ANCE

Prepayments Received in the
Fiscal Year

Revenue Recognised through
Release of Prepayments in line
with Services Performed in the
Fiscal Year

CLOSING BAL ANCE
thereof short-term
thereof long-term

2015

58,752

18,133

(72,378)
4,507
1,994
2,513

2014

74,435

17,863

(33,546)
58,752
14,075
44,677

7.4

S T O C KHOL DERS’ EQUI T Y

7.4.1 C OMMON STO CK
As of December 31, 2015, the Company’s common stock, including trea-
sury stock, had increased by € 80,848 to € 26,537,682 from its level of
€ 26,456,834 as of December 31, 2014. Each no-par value bearer share is
entitled to one vote. Common stock increased by € 80,848 or 80,848 shares
as a result of the exercise of 80,848 convertible bonds granted to the Man-
agement Board and the Senior Management Group. The weighted-average
exercise price for each convertible bond exercised amounted to € 16.79.

As of December 31, 2015, the Company held 434,670 shares of treasury
stock amounting to € 15,827,946 which represents an increase of
€ 1,575,984 compared to December 31, 2014 (450,890 shares, € 14,251,962).
This increase was mainly the result of MorphoSys’s repurchase of 88,670
of its own shares on the stock exchange. The repurchase totaling
€ 5,389,984 was carried out at a weighted-average share price of € 60.79.
Brokerage fees for the repurchase totaled € 2,947. Shares of treasury stock
can be used for the purposes named in the authorizations of the Annual
General Meetings on May 19, 2011 and May 23, 2014, and particularly for
any existing or future employee participation schemes and/or to finance
acquisitions. The shares may also be redeemed. The rise in treasury stock
mentioned above was offset by the transfer of 104,890 own shares to the
Management Board and Senior Management Group from the 2011 long-
term incentive plan (LTI plan), totaling € 3,816,947. The four-year vesting
period for this LTI program expired on June 1, 2015. As a result, the num-
ber of treasury shares as of December 31, 2015 amounted to 434,670.

7.4.2 A UTHORIZE D CAPITAL
Compared to December 31, 2014, the number of authorized ordinary
shares increased from 4,957,910 to 13,206,421. This resulted from the
cancelation of Authorized Capital 2013-I totaling € 2,335,822 and the
creation of new Authorized Capital 2015-I of € 10,584,333 at the Annual
General Meeting on May 8, 2015. With the Supervisory Board’s consent,
the Management Board is authorized under Authorized Capital 2015-I to
increase the Company’s common stock on one or more occasions by up to
€ 10,584,333 by issuing up to 10,584,333 new, no-par value bearer shares
until and including the date of April 30, 2020.

7.4.3 C ONDITIONAL CAPITAL
Compared to December 31, 2014, the number of ordinary shares of condi-
tional capital decreased from 7,166,848 to 7,086,000 as a result of the ex-
ercise of 80,848 conversion rights in 2015. Entry in the commercial regis-
ter of the reduction in Conditional Capital through the exercise of 80,848
conversion rights was applied for in January 2016.

7.4.4 T RE ASURY STO CK
In the years 2014 and 2015, the Group repurchased own shares. The com-
position and development of this line item is listed in the following table.

As of 12/31/2010
Purchase in 2011
As of 12/31/2011
Purchase in 2012
As of 12/31/2012
Purchase in 2013
As of 12/31/2013
Purchase in 2014
As of 12/31/2014
Purchase in 2015
Transfer in 2015
As of 12/31/2015

Number of
Shares

79,896
84,019
163,915
91,500
255,415
84,475
339,890
111,000
450,890
88,670
(104,890)
434,670

Value

9,774
1,747,067
1,756,841
1,837,552
3,594,393
2,823,625
6,418,018
7,833,944
14,251,962
5,392,931
(3,816,947)
15,827,946

The weighted average share price was € 60.79 per share (2014: € 70.53 per
share) at the time of the repurchases in 2015. Treasury shares are recog-
nized at acquisition cost.

120

F I N A N C I A L S T A T E M E N T S
Notes

7.4.5 A DDITIONAL PAID - IN CAPITAL
As of December 31, 2015, additional paid-in capital amounted to
€ 319,394,322 (December 31, 2014: € 318,375,720). The total increase of
€ 1,018,602 resulted from the exercise of convertible bonds granted, total-
ing € 1,276,590. Personnel expenses resulting from share-based pay-
ments increased additional paid-in capital by € 3,558,959. The reclassifi-
cation of treasury shares of € 3,816,947 in the context of the allocation of
shares under the 2011 performance-based share plan had a compensat-
ing effect.

In 2014, additional paid-in capital increased by € 7,412,069 and stemmed
from the exercise of convertible bonds granted (€ 3,725,682) as well as from
personnel expenses resulting from share-based payments (€ 3,686,387).

IFRS 2 “Share-based Payment” requires the consideration of the effects
of share-based payments if the Group acquires goods or services in ex-
change for shares or stock options (“settlement in equity instruments”) or
other assets that represent the value of a specific number of shares or
stock options (“cash settlement”). The key impact of IFRS 2 on the Group
is the expense resulting from the use of an option pricing model in rela-
tion to share-based incentives for employees and the Management Board.
Additional information can be found under Items 7.1*, 7.2* and 7.3* of
the Notes.
*C R O S S - R E F E R E N C E to page 118 and page 118–119

7.4.6 RE VALUATION RESE RVE
As of December 31, 2015, the revaluation reserve amounted to € -202,158
(December 31, 2014: € -4,642). The reduction amounting to a total of
€ 197,516 arose from a change in the unrealized gain on available-for-sale
securities and bonds of € 268,749, which was partly offset by the equity-re-
lated recognition of deferred taxes of € 71,233.

7.4.7 T R ANSL ATION RE SE RVE
The translation reserve decreased by € 293,846 from € 293,846 on Decem-
ber 31, 2014 to € 0 on December 31, 2015. This item included exchange rate
differences from the revaluation of financial statements of Group entities
prepared in foreign currencies as well as differences between the ex-
change rates used in the balance sheet and the income statement. As of
December 31, 2015, the Group consisted exclusively of entities preparing
their financial statements in euro.

7.4.8 A C CUMUL ATE D INC OME
The consolidated net profit of € 14,900,768 is reported in accumulated in-
come, causing a rise in accumulated income from € 17,933,339 in 2014 to
€ 32,834,107 in 2015.

8 Remuneration System for the

Management Board and Employees
of the Group

8.1

C ONVER T IBL E B OND S

8.1.1 2010 PRO GR AM
On April 1, 2010, a total of 352,800 convertible bonds were granted to
members of the Management Board and Senior Management Group. The
exercise price of the convertible bonds was € 16.79 and equaled the Com-
pany’s share price in the XETRA closing auction of the Frankfurt Stock
Exchange on the trading day preceding the convertible bonds’ issue. Each
convertible bond had a value of € 0.33 and was converted into one no-par
value bearer share of the Group against payment of the exercise price. The
beneficiaries were only permitted to exercise their conversion rights after
a vesting period of four years beginning after the grant date. Exercise of
the conversion rights was only possible if, on one trading day during the
lifetime of the convertible bond, the share price reached at least 110 % of
the exercise price as of the grant date.

In the 2015 financial year, a total of 80,848 convertible bonds were exer-
cised at a weighted-average share price of € 59.86 (2014: 235,952 convert-
ible bonds at a weighted-average share price of € 69.69).

8.1.2 2 013 PRO GR AM
On April 1, 2013, MorphoSys AG granted the Management Board and
members of the Senior Management Group convertible bonds with a total
nominal value of € 225,000 and divided into 449,999 bearer bonds with
equal rights from “Conditional Capital 2008-III”. The beneficiaries have
the right to convert the bonds into Company shares. Each convertible bond
can be exchanged for one of the Company’s bearer shares equal to the
proportional amount of common stock, which currently stands at € 1. Ex-
ercise of the convertible bonds is subject to several conditions, such as the
achievement of performance targets, the expiration of vesting periods, the
exercisability of the conversion rights, the existence of an employment or
service contract that is not under notice and the commencement of the
exercise period.

The conversion price amounted to € 31.88 and was derived from the Com-
pany’s share price in the XETRA closing auction of the Frankfurt Stock
Exchange on the trading day preceding the issue of the convertible bonds.
The exercise of the conversion rights is admissible if, on at least one trad-
ing day during the lifetime of the convertible bonds, the share price of the
Company has risen to more than 120 % of the price in the XETRA closing
auction of the Frankfurt Stock Exchange on the trading day preceding the
issue of the convertible bonds.

The exercise of the conversion rights is only admissible after the expira-
tion of a four-year vesting period from the grant date. In the event of a
change of control, the vesting period is shortened to two years from the
grant date. For every year without a notice of termination of the employ-
ment relationship with the Company or an affiliated company, 25 % of the
conversion rights become vested. In the event of a change of control, all
unvested conversion rights become vested.

F I N A N C I A L S T A T E M E N T S
Notes

121

If an employment or service contract of a beneficiary is terminated without
notice, no further conversion rights can be vested under the above men-
tioned vesting scheme. Thus, upon rendition of the notice, all conversion
rights still unvested by this time will expire without substitution. In the
event of a contractual notice of termination of such employment or service
contract with the beneficiary or a mutually agreed dissolution contract,
the previous sentence applies and becomes effective as of the date of ter-
mination of the employment or service contract.

The following table shows the development of the convertible bond plans
for Group employees in the 2015 and 2014 financial years.

Convertible

Bonds

Weighted-
average
Price (€)

OU TSTANDING ON
JANUARY 1, 2014
Granted
Exercised
Forfeited
Expired

OU TSTANDING ON
DECEMBER 31, 2014

OU TSTANDING ON
JANUARY 1, 2015
Granted
Exercised
Forfeited
Expired

OU TSTANDING ON
DECEMBER 31, 2015

766,799
0
(235,952)
0
0

530,847

530,847
0
(80,848)
0
0

449,999

25.65
0.00
16.79
0.00
0.00

29.58

29.58
0.00
16.79
0.00
0.00

31.88

As of December 31, 2015, the number of vested convertible bonds totaled
225,000 shares (December 31, 2014: 193,348 shares).

The following overview includes the weighted-average exercise price as
well as information on the contract duration of significant groups of con-
vertible bonds as of December 31, 2015.

Range of Exercise Prices

€ 25.00 – € 40.00

Number

Outstanding

Remaining
Contractual Life
(in Years)

Weighted-
average Exercise
Price (€)

Number

Exercisable

Weighted-
average Exercise
Price (€)

449,999
449,999

4.25
4.25

31.88
31.88

225,000
225,000

31.88
31.88

The Group recognizes personnel expenses resulting from convertible
bonds in accordance with IFRS 2 and IAS 32.28. The equity component of
the convertible bonds is presented separately under additional paid-in cap-
ital. The corresponding amount is recognized as personnel expenses from
convertible bonds. In 2015 and 2014, compensation expenses related to
convertible bonds amounted to € 839,906 and € 1,609,086, respectively.

122

F I N A N C I A L S T A T E M E N T S
Notes

8.2

L ONG -T ERM INCEN T IVE PRO GRAMS

8.2 .1 2 011 LONG -TE RM INCE NTIVE PRO GR AM
On June 1, 2011, MorphoSys established a long-term incentive plan (LTI
plan) for the Management Board and the Senior Management Group. Ac-
cording to IFRS, this program is considered a share-based payment pro-
gram with settlement in equity instruments and is accounted for accord-
ingly. The LTI plan is a performance-related share plan and is paid out in
ordinary shares of MorphoSys AG if predefined key performance criteria
are achieved. These criteria are assessed and approved annually by the
Supervisory Board and include revenue, EBIT and the number of projects
in the R&D portfolio. The fulfillment of these criteria is set at 100 % for
three years and 110 % for one year. The Supervisory Board set the “com-
pany factor” at 1.3, meaning the number of shares to be allocated is scaled
by a factor of 1.3. This factor also resulted in additional personnel ex-
penses of € 0.5 million in the 2015 financial year. Previously, personnel
expenses resulting from the 2011 LTI program were recognized based on
the assumption of a company factor of 1.0. Based on these terms and the
company factor, a total of 104,890 ordinary shares of MorphoSys AG was
allocated to beneficiaries on June 1, 2015 after the expiration of the four-
year vesting period. The Management Board received 71,949 shares (for
further information, please see the tables titled “Shares” and “Perfor-
mance Shares” in Item 8.3* “Related Parties”), and the Senior Manage-
ment Group received 32,941 shares.
*C R O S S - R E F E R E N C E to page 125

In 2015, personnel expenses from stock options under the Group’s 2011
LTI plan amounted to € 558,740 (2014: € 172,311).

8.2 .2 2 012 LONG -TE RM INCE NTIVE PRO GR AM
On April 1, 2012, MorphoSys established a second long-term incentive
plan (LTI plan) for the Management Board and the Senior Management
Group. According to IFRS 2, this program is considered a share-based
payment program with settlement in equity instruments and is accounted
for accordingly. The LTI plan is a performance-related share plan and will
be paid out in ordinary shares of MorphoSys AG if predefined key perfor-
mance criteria are achieved. These criteria are approved annually by the
Supervisory Board.

The grant date was April 1, 2012 and the vesting period is four years. One
fourth of the performance shares will become vested in each year of the
four-year vesting period, provided that the performance criteria set for the
respective period were met in full. The annual number of vested shares
will be reduced to the extent that the performance criteria of the relevant
year have been fulfilled between only 50 % and 99 %, and increased to the
extent that the performance criteria were met by more than 100 % (maxi-
mum 200 %). If in one year the specified performance criteria are achieved
by less than 50 %, no shares will become vested in that year. In any case,
the maximum pay-out at the end of the four-year period is limited by a
factor determined by the Group which generally amounts to 1. However, in
justified cases, the Supervisory Board may set this factor freely between 0
and 2, for example, if the level of payment seems unreasonable with re-
gard to the general development of the Company. The right to receive a
certain allocation of shares under the LTI plan, however, occurs only at the
end of the four-year vesting period.

If the number of repurchased shares is not sufficient for servicing the LTI
plan, MorphoSys reserves the right to pay a certain amount of the LTI plan
in cash in the amount of the performance shares at the end of the vesting
period, provided the cash amount does not exceed 200 % of the fair value
of the performance shares on the grant date.

If a member of the Management Board prematurely ceases to hold an office
at the MorphoSys Group before expiration of the four-year performance
period, this member (or the member’s heirs) is entitled to performance
shares determined on a precise daily pro rata basis. If a Management
Board member prematurely ceases to hold an office at the MorphoSys
Group for good reason as defined by Sec. 626 Para. 2 of the German Civil
Code (BGB) before expiration of the four-year performance period, the ben-
eficiary will not be entitled to an allocation of performance shares. If a
change of control occurs during the four-year vesting period, all perfor-
mance shares will be considered fully vested. In each case above, the right
to receive a certain allocation of shares under the LTI plan only occurs at
the end of the four-year vesting period.

In April 2012, MorphoSys repurchased 91,500 of its own shares on the
stock exchange at an average price of € 20.08 per share for the 2012 LTI
plan. The repurchased shares may be used for all purposes named in the
authorization of the Annual General Meetings on May 19, 2011 and May
23, 2014, particularly for any existing or future employee participation
schemes and/or to finance acquisitions. The shares may also be redeemed.

These 91,500 shares were allocated to the beneficiaries retroactively on
April 1, 2012 and included 57,967 shares for the Management Board (for
further information, please see the table titled “Performance Shares” in
Item 8.3* “Related Parties”) and 33,533 shares for the Senior Management
Group. The number of shares allocated is based on the full achievement of
performance criteria and a company factor of 1. The fair value of the per-
formance shares was € 19.24 per share on the grant date (April 1, 2012).
No dividends were considered in determining the fair value of the repur-
chased shares because the Group does not intend to distribute any divi-
dends in the foreseeable future. From the grant date until December 31,
2015, two beneficiaries left MorphoSys and, therefore, 4,051 performance
shares were forfeited.
*C R O S S - R E F E R E N C E to page 125

On October 1, 2012, MorphoSys established another long-term incentive
plan (LTI plan) for Senior Management Group members. The terms of this
plan were identical to the April 1, 2012 plan. A total of 2,292 shares was
allocated. The fair value was € 24.00 per share on the grant date.

In 2015, personnel expenses from stock options under the Group’s 2012
LTI plan amounted to € 108,619 (2014: € 293,904).

F I N A N C I A L S T A T E M E N T S
Notes

123

8.2 .3 2 013 LONG -TE RM INCE NTIVE PRO GR AM
On April 1, 2013, MorphoSys established another long-term incentive plan
(LTI plan) for the Management Board and the Senior Management Group.
According to IFRS 2, this program is considered a share-based payment
program with settlement in equity instruments and is accounted for ac-
cordingly. The LTI plan is a performance-related share plan and will be
paid out in ordinary shares of MorphoSys AG if predefined key perfor-
mance criteria are achieved. These criteria are evaluated annually by the
Supervisory Board. The grant date was April 1, 2013 and the vesting/
performance period is four years. If the predefined key performance crite-
ria for the respective period are fully met, 25 % of the performance shares
become vested in each year of the four-year vesting period. The number of
shares vested each year will be reduced or increased to the extent that the
performance criteria of the respective year have been achieved between
only 50 % and 99.9 % (<100 %) or the achievement of the performance crite-
ria has exceeded 100 % (maximum 200 %). If in one year the performance
criteria are achieved by less than 50 %, no shares will become vested in
that year. In any case, the maximum pay-out at the end of the four-year
period is limited by a factor determined by the Group, which generally
amounts to 1. However, in justified cases, the Supervisory Board may set
this factor freely between 0 and 2, for example, if the level of payment is
considered unreasonable in view of the Company’s general development.
The right to receive a certain allocation of shares under the LTI plan oc-
curs only at the end of the four-year vesting period.

If a member of the Management Board prematurely ceases to hold an office
at the MorphoSys Group before expiration of the four-year performance
period, the member (or the member’s heirs) is entitled to performance
shares determined on a precise daily pro rata basis. If a Management
Board member prematurely ceases to hold an office at the MorphoSys
Group for good reason as defined by Sec. 626 Para. 2 of the German Civil
Code (BGB) before expiration of the four-year performance period, the
beneficiary will not be entitled to an allocation of performance shares. If a
change of control occurs during the four-year vesting period, all perfor-
mance shares will be considered fully vested. In each case above, the right
to receive a certain allocation of shares under the LTI plan only occurs at
the end of the four-year vesting period.

In April and May of 2013, MorphoSys repurchased 84,475 of its own shares
on the stock exchange at an average price of € 33.43 per share. The repur-
chased shares can be used for all purposes named in the authorizations of
the Annual General Meetings on May 19, 2011 and on May 23, 2014 and
particularly for any existing or future employee participation schemes
and/or to finance acquisitions. The shares may also be redeemed.

Of these shares, 61,600 were allocated to beneficiaries retroactively effec-
tive April 1, 2013. This included 36,729 shares for the Management Board
(for further information, please see the table titled “Performance Shares”
in Item 8.3* “Related Parties”) and 24,871 shares for the Senior Manage-
ment Group. The number of shares allocated is based on the full achieve-
ment of performance criteria and a company factor of 1. On the grant date
(April 1, 2013), the fair value of the performance shares was € 31.88 per

share. No dividends were included in the determination of the fair value of
the repurchased shares since the Group does not intend to distribute any
dividends in the foreseeable future. From the grant date until Decem-
ber 31, 2015, one beneficiary left MorphoSys and, therefore, 772 perfor-
mance shares were forfeited. For the calculation of the personnel expenses
resulting from share-based payments under the 2013 LTI plan, it was as-
sumed that one beneficiary will leave the Company during the four-year
period.
*C R O S S - R E F E R E N C E to page 125

On October 1, 2013, MorphoSys established another long-term incentive
plan (LTI plan) for Senior Management Group members. The terms of the
plan were identical to the April 1, 2013 plan. A total of 549 shares was
allocated, and the fair value on the grant date was € 57.39 per share.

In 2015, personnel expenses from stock options under the Group’s 2013
LTI plan amounted to € 299,024 (2014: € 594,309).

8.2 .4 2 014 LONG -TE RM INCE NTIVE PRO GR AM
On April 1, 2014, MorphoSys established a fourth long-term incentive plan
(LTI plan) for the Management Board and the Senior Management Group.
According to IFRS 2, this program is considered a share-based payment
program with settlement in equity instruments and is accounted for ac-
cordingly. The LTI plan is a performance-related share plan and will be
paid out in ordinary shares of MorphoSys AG if predefined key perfor-
mance criteria are achieved. These criteria are evaluated annually by the
Supervisory Board. The grant date was April 1, 2014 and the vesting/
performance period is four years. If the predefined key performance crite-
ria for the respective period are fully met, 25 % of the performance shares
become vested in each year of the four-year vesting period. The number of
shares vested each year will be reduced or increased to the extent that the
performance criteria of the respective year have been achieved between
only 50 % and 99.9 % (<100 %) or the achievement of the performance crite-
ria has exceeded 100 % (maximum 200 %). If in one year the performance
criteria are met by less than 50 %, no shares will become vested in that
year. In any case, the maximum pay-out at the end of the four-year period
is limited by a factor determined by the Group, which generally amounts
to 1. However, in justified cases, the Supervisory Board may set this factor
freely between 0 and 2, for example, if the level of payment is regarded as
unreasonable in view of the general development of the Company. The
right to receive a certain allocation of shares under the LTI plan, however,
occurs only at the end of the four-year vesting period.

If a member of the Management Board ceases to hold an office at the
MorphoSys Group because of termination (or if the Management Board
member terminates the employment contract), resignation, death, injury,
disability, by reaching retirement age (receipt of a normal retirement
pension, early-retirement pension or disability pension, as long as the re-
quirements for the disability pension entitlement are met) or under other
circumstances subject to the Supervisory Board’s discretion, the Manage-
ment Board member (or the member’s heirs) is entitled to performance
shares determined on a precise daily pro rata basis.

124

F I N A N C I A L S T A T E M E N T S
Notes

If a member of the Management Board ceases to hold an office at the
MorphoSys Group for good reason as defined by Sec. 626 Para. 2 of the
German Civil Code (BGB) and/or as defined by Sec. 84 Para. 3 of the Ger-
man Stock Corporation Act (AktG), the beneficiary will not be entitled to
performance shares.

However, in justified cases, the Supervisory Board may set this factor
freely between 0 and 2, for example, if the level of payment is regarded as
unreasonable in view of the general development of the Company. The
right to receive a certain allocation of shares under the LTI plan only oc-
curs at the end of the four-year vesting period.

If a change of control occurs during the four-year vesting period, all per-
formance shares will become fully vested. In this case, the right to receive
a certain allocation of shares under the LTI plan occurs only at the end of
the four-year vesting period.

In March 2014, MorphoSys repurchased 111,000 of its own shares on the
stock exchange at an average price of € 70.53 per share. The repurchased
shares may be used for all purposes named in the authorizations of the
Annual General Meetings on May 19, 2011 and May 23, 2014 and particu-
larly for any existing or future employee participation schemes and/or to
finance acquisitions. The shares may also be redeemed.

A total of 32,513 of these shares were allocated to beneficiaries on April 1,
2014 with 18,264 allocated to the Management Board (further details may
be found in the table titled “Performance Shares” in Item 8.3* “Related
parties”) and 14,249 shares to the Senior Management Group. The number
of shares allocated is based on the full achievement of performance crite-
ria and a company factor of 1. The fair value of the performance shares on
the grant date (April 1, 2014) was € 67.30 per share. This price was equiv-
alent to the share price on the Frankfurt Stock Exchange (Xetra) on the
trading day preceding the grant date. No dividends were included in the
determination of the fair value of the repurchased shares because the
Group does not intend to distribute any dividends in the foreseeable fu-
ture. From the grant date until December 31, 2015, one beneficiary left
MorphoSys and, therefore, 608 performance shares were forfeited. For the
calculation of the personnel expenses from share-based payments under
the 2014 LTI plan, it was assumed that one beneficiary will leave the Com-
pany during the four-year period.
*C R O S S - R E F E R E N C E to page 125

In 2015, personnel expenses resulting from stock options under the
Group’s 2014 LTI plan amounted to € 647,941 (2014: € 1,016,776).

8.2 .5 2 015 LONG -TE RM INCE NTIVE PRO GR AM
On April 1, 2015, MorphoSys established a fifth long-term incentive plan
(LTI plan) for the Management Board and the Senior Management Group.
According to IFRS 2, this program is considered a share-based payment
program with settlement in equity instruments and is accounted for ac-
cordingly. The LTI plan is a performance-related share plan and will be
paid out in ordinary shares of MorphoSys AG if predefined key perfor-
mance criteria are achieved. These criteria are evaluated annually by the
Supervisory Board. The grant date was April 1, 2015 and the vesting/
performance period is four years. If the predefined key performance crite-
ria for the respective period are fully met, 25 % of the performance shares
become vested in each year of the four-year vesting period. The number of
shares vested each year is reduced or increased to the extent that the
performance criteria of the respective year have been achieved between
only 50 % and 99.9 % (<100 %) or the achievement of the performance crite-
ria exceeded 100 % (maximum 200 %). If in one year the performance crite-
ria are met by less than 50 %, no shares will become vested in that year. In
any case, the maximum pay-out at the end of the four-year period is lim-
ited by a factor determined by the Group, which generally amounts to 1.

If a member of the Management Board ceases to hold an office at the
MorphoSys Group because of termination (or if the Management Board
member terminates the employment contract), resignation, death, injury,
disability, by reaching the retirement age (receipt of a normal retirement
pension, early-retirement pension or disability pension, as long as the re-
quirements for the disability pension entitlement are met) or under other
circumstances subject to the Supervisory Board’s discretion, the Manage-
ment Board member (or the member’s heirs) is entitled to performance
shares determined on a precise daily pro rata basis.

In April 2015, MorphoSys repurchased 88,670 of its own shares on the
stock exchange at an average price of € 60.79 per share for a total amount
of € 5,389,984. The repurchased shares may be used for all purposes
named in the authorization of the Annual General Meeting on May 23,
2014 and particularly for any existing or future employee participation
schemes and/or to finance acquisitions. The shares may also be redeemed.

A total of 40,425 of these shares were allocated to beneficiaries on April 1,
2015: 21,948 were allocated to the Management Board (further details may
be found in the table titled “Performance Shares” in Item 8.3* “Related
parties”) and 18,477 shares to the Senior Management Group. The number
of shares allocated is based on the 100 % achievement of the performance
criteria and a company factor of 1. The fair value of the performance shares
as of the grant date (April 1, 2015) was € 58.81 per share. No dividends
were considered in the determination of the fair value of the repurchased
shares since the Group does not intend to distribute any dividends in the
foreseeable future. From the grant date until December 31, 2015, no bene-
ficiary left MorphoSys, and no performance shares have been forfeited. For
the calculation of the personnel expenses from share-based payments un-
der the 2015 LTI plan, it was assumed that one beneficiary will leave the
Company during the four-year period.
*C R O S S - R E F E R E N C E to page 125

In 2015, personnel expenses from stock options under the Group’s 2015
LTI plan amounted to € 1,104,730.

F I N A N C I A L S T A T E M E N T S
Notes

125

8.3 R EL AT ED P AR T IE S
Related parties that can be influenced by the Group or can have a signifi-
cant influence on the Group can be divided into subsidiaries, members of
management in key positions and other related entities.

The Group engages in business relationships with members of the Man-
agement Board and Supervisory Board as related parties responsible for
the planning, management and monitoring of the Group. In addition to
cash compensation, the Group has granted the Management Board con-
vertible bonds and performance shares. The tables below show the shares,
convertible bonds and performance shares held by the members of the
Management Board and Supervisory Board, as well as the changes in their
ownership during the 2015 financial year.

MANAG EMENT B OARD
Dr. Simon Moroney
Jens Holstein
Dr. Arndt Schottelius
Dr. Marlies Sproll

TOTAL

SUPERVISORY B OARD
Dr. Gerald Möller
Dr. Walter Blättler 1
Dr. Daniel Camus1
Dr. Marc Cluzel
Karin Eastham
Dr. Geoffrey Vernon1
Dr. Frank Morich 2
Wendy Johnson 2, 3
Klaus Kühn 2

TOTAL

01/01/2015

Additions

Forfeitures

Sales

12/31/2015

452,885
2,000
2,000
28,620
485,505

9,000
2,019
0
500
1,000
0
–
–
–
12,519

42,353
16,132
16,132
49,132
123,749

2,000
0
0
0
1,000
0
1,000
0
0
4,000

0
0
0
0
0

0
0
0
0
0
0
0
0
0
0

0
14,132
16,132
27,000
57,264

0
0
0
0
0
0
0
0
0
0

495,238
4,000
2,000
50,752
551,990

11,000
–
–
500
2,000
–
1,000
500
0
15,000

126

F I N A N C I A L S T A T E M E N T S
Notes

CONVER T IBL E B OND S

MANAG EMENT B OARD
Dr. Simon Moroney
Jens Holstein
Dr. Arndt Schottelius
Dr. Marlies Sproll

TOTAL

PERF ORMANC E SHARE S

MANAG EMENT B OARD
Dr. Simon Moroney
Jens Holstein
Dr. Arndt Schottelius
Dr. Marlies Sproll

TOTAL

01/01/2015

Additions

Forfeitures

Exercises

12/31/2015

107,186
90,537
60,537
93,537
351,797

0
0
0
0
0

18,800
0
0
33,000
51,800

88,386
90,537
60,537
60,537
299,997

01/01/2015

Additions

Forfeitures

Allocations

12/31/2015

54,655
37,434
37,434
37,434
166,957

13,062
8,946
8,946
8,946
39,900

0
0
0
0
0

23,553
16,132
16,132
16,132
71,949

44,164
30,248
30,248
30,248
134,908

MANAGEMEN T B OARD REMUNERAT ION F OR T HE Y EARS 2015 AND 2014 ( IA S 24) :

Dr. Simon Moroney
Chief Executive Officer

Jens Holstein
Chief Financial Officer

Dr. Arndt Schottelius

Chief Development Officer

Dr. Marlies Sproll

Chief Scientific Officer

Total

2014

2015

2014

2015

2014

2015

2014

2015

2014

2015

Fixed Compensation
Fringe Benefits
One-Year Variable Compensation
Total Short-Term Employee Benefits (IAS 24.17 (a))
Service Cost
Total Benefit Expenses – Post-Employment Benefits (IAS 24.17 (b))
Multi-Year Variable Compensation1:

426,502
29,444
324,696
780,642
125,730
125,730

445,736
36,887
238,692
721,315
138,280
138,280

289,335
33,722
220,271
543,328
86,866
86,866

302,384
39,735
161,926
504,045
90,800
90,800

2010 Convertible Bonds Program
(Vesting Period 4 Years)

2013 Convertible Bonds Program
(Vesting Period 4 Years)

2011 Long-Term Incentive Program
(Vesting Period 4 Years)

2012 Long-Term Incentive Program
(Vesting Period 4 Years)

2013 Long-Term Incentive Program
(Vesting Period 4 Years)

2014 Long-Term Incentive Program
(Vesting Period 4 Years)

2015 Long-Term Incentive Program
(Vesting Period 4 Years)
Total Stock-Based Compensation (IAS 24.17 (e))
Total Compensation

6,010

3,373

12,756

310,530

164,969

318,087

168,984

212,687

112,990

212,687

112,990

1,053,991

559,933

40,060

62,218

113,270

129,900

22,755

57,029

27,439

42,615

77,583

186,964

119,143

128,057

88,974

15,585

39,061

81,605

0
719,052
1,625,424

196,345
690,141
1,549,736

0
593,781
1,223,975

134,483
528,692
1,123,537

289,335

32,508

215,208

537,051

86,653

27,439

42,615

77,583

128,057

491,754

1,115,458

302,384

29,889

156,635

488,908

94,064

88,974

15,585

39,061

81,605

134,483

472,698

1,055,670

289,335

22,828

210,144

522,307

86,628

27,439

42,615

77,583

128,057

491,754

1,100,689

302,384

22,954

156,635

481,973

94,085

88,974

15,585

39,061

81,605

1,294,507

118,502

970,319

2,383,328

385,877

1,352,888

129,465

713,888

2,196,241

417,229

122,377

396,822

190,063

69,510

346,019

174,212

571,135

363,958

134,483

472,698

1,048,756

2,296,341

5,065,546

599,794

2,164,229

4,777,699

1 The fair value was determined pursuant to the regulations of IFRS 2 “Share-based Payments”. This table shows the pro-rata share of personnel expenses resulting from

stock-based compensation for the respective financial year. Further details can be found in Sections 8.1* and 8.2*.
*C R O S S - R E F E R E N C E to page 120 and page 121

F I N A N C I A L S T A T E M E N T S
Notes

127

The Supervisory Board of MorphoSys AG does not hold any convertible
bonds or performance shares.

The total remuneration of the Management Board consists of several com-
ponents, including fixed compensation, an annual cash bonus that is de-
pendent upon the achievement of corporate and personal targets (short-
term incentives – STI), variable compensation components with long-term
incentives (LTI) and other remuneration components. Following the expi-
ration of the relevant contract term, the service contracts of the Manage-
ment Board members stipulate a non-competition clause for a period of
six months. During this period, the Management Board member is entitled
to compensation payments amounting to 100 % of the pro rata fixed com-
pensation.

In 2015, the total remuneration of the Supervisory Board, excluding reim-
bursement for travel costs, amounted to € 529,270 (2013: € 514,480).

While the remuneration of the Management Board and the Supervisory
Board as members in key management positions is presented in accordance
with the provisions of the Corporate Governance Code in the management
report, the following tables show the expense-based view in accordance
with IAS 24.

MANAGEMEN T B OARD REMUNERAT ION F OR T HE Y EARS 2015 AND 2014 ( IA S 24) :

Dr. Simon Moroney

Chief Executive Officer

Jens Holstein

Chief Financial Officer

Dr. Arndt Schottelius
Chief Development Officer

Dr. Marlies Sproll
Chief Scientific Officer

Total

2014

2015

2014

2015

2014

2015

2014

2015

2014

2015

289,335
32,508
215,208
537,051
86,653
86,653

302,384
29,889
156,635
488,908
94,064
94,064

289,335
22,828
210,144
522,307
86,628
86,628

302,384
22,954
156,635
481,973
94,085
94,085

1,294,507
118,502
970,319
2,383,328
385,877
385,877

1,352,888
129,465
713,888
2,196,241
417,229
417,229

6,010

3,373

12,756

310,530

164,969

318,087

168,984

212,687

112,990

212,687

112,990

1,053,991

559,933

27,439

42,615

77,583

128,057

0
491,754
1,115,458

88,974

15,585

39,061

81,605

134,483
472,698
1,055,670

27,439

42,615

77,583

128,057

0
491,754
1,100,689

88,974

15,585

39,061

81,605

122,377

396,822

190,063

69,510

346,019

174,212

571,135

363,958

134,483
472,698
1,048,756

0
2,296,341
5,065,546

599,794
2,164,229
4,777,699

Fixed Compensation

Fringe Benefits

One-Year Variable Compensation

Total Short-Term Employee Benefits (IAS 24.17 (a))

Service Cost

Total Benefit Expenses – Post-Employment Benefits (IAS 24.17 (b))

Multi-Year Variable Compensation1:

2010 Convertible Bonds Program

(Vesting Period 4 Years)

2013 Convertible Bonds Program

(Vesting Period 4 Years)

2011 Long-Term Incentive Program

(Vesting Period 4 Years)

2012 Long-Term Incentive Program

(Vesting Period 4 Years)

2013 Long-Term Incentive Program

(Vesting Period 4 Years)

2014 Long-Term Incentive Program

(Vesting Period 4 Years)

2015 Long-Term Incentive Program

(Vesting Period 4 Years)

Total Stock-Based Compensation (IAS 24.17 (e))

Total Compensation

426,502

29,444

324,696

780,642

125,730

40,060

62,218

113,270

445,736

36,887

238,692

721,315

138,280

129,900

22,755

57,029

289,335

33,722

220,271

543,328

86,866

27,439

42,615

77,583

302,384

39,735

161,926

504,045

90,800

88,974

15,585

39,061

81,605

186,964

119,143

128,057

719,052

1,625,424

196,345

690,141

1,549,736

593,781

1,223,975

134,483

528,692

1,123,537

1 The fair value was determined pursuant to the regulations of IFRS 2 “Share-based Payments”. This table shows the pro-rata share of personnel expenses resulting from

stock-based compensation for the respective financial year. Further details can be found in Sections 8.1* and 8.2*.

*C R O S S - R E F E R E N C E to page 120 and page 121

128

F I N A N C I A L S T A T E M E N T S
Notes

SUPERVI S OR Y B OARD REMUNERAT ION F OR T HE Y EARS 2015 AND 2014 :

Fixed Compensation

Attendance Fees3

Total Compensation

in €

2015

2014

2015

2014

2015

2014

Dr. Gerald Möller
Dr. Walter Blättler 1
Dr. Daniel Camus1
Dr. Marc Cluzel
Karin Eastham
Dr. Geoffrey Vernon1
Dr. Frank Morich 2
Wendy Johnson 2
Klaus Kühn 2

TOTAL

93,521
16,188
16,188
50,089
50,089
20,073
37,324
30,099
30,099
343,670

97,400
46,160
46,160
46,160
46,160
57,240
–
–
–
339,280

36,200
13,000
8,400
28,000
36,800
8,400
14,200
26,400
14,200
185,600

38,000
25,200
23,200
32,400
32,400
24,000
–
–
–
175,200

129,721
29,188
24,588
78,089
86,889
28,473
51,524
56,499
44,299
529,270

135,400
71,360
69,360
78,560
78,560
81,240
–
–
–
514,480

1 Dr. Walter Blättler, Dr. Daniel Camus and Dr. Geoffrey Vernon left the Supervisory Board of MorphoSys AG on 08. May 2015.
2 Dr. Frank Morich, Wendy Johnson and Klaus Kühn joined the Supervisory Board of MorphoSys AG on 08. May 2015.
3 The attendance fee contains expense allowances for the attendance at Supervisory Board and Committee meetings.

In the years 2015 and 2014, there were no other long-term benefits in ac-
cordance with IAS 24.17 (c) or benefits upon termination of employment
in accordance with IAS 24.17 (d) accruing to the Management Board or
Supervisory Board.

There are presently no other agreements with current or former members
of the Supervisory Board.

As of December 31, 2015, the Senior Management Group held 150,002 con-
vertible bonds (December 31, 2014: 169,050 units) and 85,542 perfor-
mance shares (December 31, 2014: 91,807), which were granted by the
Company. In 2015, an additional long-term incentive program was allo-
cated to the Management Board and Senior Management Group. As part of
this program, the Senior Management Group was allocated 18,477 perfor-
mance shares. On June 1, 2015, a total of 29,360 shares under the 2011 LTI
plan were granted to the Senior Management Group, reducing the number
of performance shares. A total of 19,048 convertible bonds were exercised
in 2015 (2014: 130,952) while no stock appreciation rights were exercised
during the same period (2014: 15,000). In 2015, a total of 1,380 perfor-
mance shares forfeited because one beneficiary had left MorphoSys.

F I N A N C I A L S T A T E M E N T S
Notes

129

9 Additional Notes

9.1 O BL IGAT IONS ARI SING F ROM OPERAT ING L EA SE S, REN TAL

AND O T HER CON T RAC T S

The Group leases facilities and equipment under long-term operating
leases. In financial years 2015 and 2014, leasing expenses amounted to
€ 2,978,254 and € 1,939,537. The 2015 amount includes the recognition of
a provision for onerous contracts from rent obligations for office premises.
Leasing expenses for 2015 and 2014 include expenses for company cars
and machinery totaling € 229,153 and € 192,597, respectively. The major-
ity of these contracts can be renewed on a yearly or quarterly basis. Some
of these agreements may be terminated prematurely.

The components of future minimum payments under non-terminable oper-
ating leases, insurance contracts are shown in the following table.

in 000’ €

Leasing 2015

Leasing 2014

Other 2015

Other 2014

Total 2015

Total 2014

Rent and

Up to One Year
Between One and Five Years
More than Five Years

TOTAL

2,349
13,438
13,875
29,662

2,415
3,142
0
5,557

840
5
0
845

1,057
5
0
1,062

3,189
13,443
13,875
30,507

3,472
3,147
0
6,619

Compared to the previous year, the increase in the category “Rent and
Leasing” mainly resulted from a new rental contract for a building signed
in December 2015 and the related perennial obligations.

The Management Board is unaware of any proceedings that may result in
a significant obligation for the Group and may lead to a material adverse
effect on the Group’s net assets, financial position or results of operations.

Additionally, the future payments shown in the table below may become
due from currently active, terminable contracts for outsourced studies.
These amounts can be substantially lower because of the respective con-
tractual clauses if the study is terminated prematurely.

If certain milestones are achieved in the Proprietary Development seg-
ment, for example, filing an application for an investigational new drug
(IND) for specific target molecules, this may trigger milestone payments
to licensors. However, no further details can be published since the timing
and the achievement of such milestones are uncertain.

in 000’ €

Up to One Year
Between One and Five Years
More than Five Years

TOTAL

Total 2015

46,735
114,227
0
160,962

If a partner achieves certain milestones in the Partnered Discovery seg-
ment, for example, filing an application for an investigational new drug
(IND) for specific target molecules or the transfer of technology, this may
trigger milestone payments to MorphoSys. However, no further details can
be published since the timing, and the achievement of such milestones are
uncertain.

9.2 CO N T INGEN T A SSE T S /CON T INGEN T L IABIL I T IE S
Contingent liabilities are potential obligations from past events that exist
only when the occurrence of one or more uncertain future events – beyond
the Company’s control – is confirmed. Current obligations can represent a
contingent liability if it is not probable enough that an outflow of resources
justifies the recognition of a provision. Moreover, it is not possible to make
a sufficiently reliable estimate of the amount of the obligations.

Obligations may arise from enforcing the Company’s patents against
third parties. It is also conceivable that competitors challenge patents
of MorphoSys Group companies or that MorphoSys concludes that
MorphoSys’s patents or patent families are infringed by competitors,
which may prompt MorphoSys to take legal action against competitors. At
present, there are no specific indications for the occurrence of liabilities as
described above.

130

F I N A N C I A L S T A T E M E N T S
Notes

9.3 CO RP ORAT E G OVERNANC E
The Group has submitted the Declaration of Conformity with the recom-
mendations of the Government Commission on the German Corporate
Governance Code for the 2015 financial year under Sec. 161 of the German
Stock Corporation Act (AktG). This declaration was published on the
Group’s website (www.morphosys.com) on December 3, 2015 and made
permanently available to the public.

9.4 R E SEARCH AND DEVEL OPMEN T AGREEMEN T S
The Group has entered numerous research and development agreements
as part of its proprietary research and development activities and its part-
nered research strategy.

9.4.1 P ROPRIE TARY DE VE LOPME NT SEGME NT
In the Proprietary Development segment, partnerships are entered into
as part of the Group’s strategy to develop its own drugs in its core
areas of oncology and inflammatory diseases. Our partners include (in
alphabetical order): Emergent BioSolutions, G7 Therapeutics, Galapagos,
GlaxoSmithKline, Immatics Biotechnologies, Merck Serono, Temple Uni-
versity and Xencor.

In August 2014, MorphoSys and Emergent BioSolutions announced a
co-development and co-promotion agreement for MOR209/ES414. This
compound is a bispecific anti-PSMA/anti-CD3 antibody targeting pros-
tate cancer that was developed by Emergent based on its proprietary
ADAPTIR™ platform (modular protein technology). In early March 2015,
MorphoSys and its development partner Emergent BioSolutions an-
nounced the commencement of a phase 1 clinical study with MOR209/
ES414 in up to 130 patients suffering from metastatic castration-resistant
prostate cancer (mCRPC). The study’s launch triggered a milestone pay-
ment to Emergent of € 4.7 million. The existing cooperation agreement
was updated in the past financial year. After a joint examination of the
clinical results, the companies decided to adjust the dosing regimen and
administration of MOR209/ES414. Clinical development will continue in
2016 with an adapted clinical development plan. A change in the contrac-
tual agreement brought down MorphoSys’s share in the costs for the years
2016 through 2018 and lowers MorphoSys’s potential milestone payment
to Emergent to a maximum of US$ 74 million. There were no changes
made to the remaining financial agreements or the division of commer-
cial rights.

In August 2015, MorphoSys and Swiss-based G7 Therapeutics AG an-
nounced a new collaboration to develop novel antibody therapeutics
targeting G protein-coupled receptors (GPCRs) and other potentially dis-
ease-related transmembrane proteins, such as ion channels. Under this
agreement, G7 Therapeutics will give MorphoSys a choice of various re-
ceptors that can be linked to the emergence of a variety of diseases.
MorphoSys will use its proprietary Ylanthia antibody library to identify
and develop antibody compounds directed against these receptors.
MorphoSys has the right to sublicense to partners access to these target
molecules in conjunction with therapeutic antibody programs.

In November 2008, MorphoSys and Galapagos announced a long-term
drug discovery and co-development cooperation aimed at exploring novel
mechanisms for the treatment of inflammatory diseases and developing
antibody therapies against these diseases. The agreement covers all activ-
ities ranging from the probing of target molecules to the completion of
clinical trials for novel therapeutic antibodies. After demonstrating clini-
cal efficacy in humans, the programs may be out-licensed to partners for
further development, approval, and commercialization. Both companies
contributed their core technologies and expertise to the alliance. Along
with the use of its adenovirus-based platform for the exploration of new
target molecules for the development of antibodies, Galapagos provided
access to target molecules already identified that are associated with bone
and joint diseases. MorphoSys provided access to its antibody technolo-
gies used for generating fully human antibodies directed against these
target molecules. Under the terms of the agreement, Galapagos and
MorphoSys will share the research and development costs. In July 2014,
the collaboration advanced into the preclinical development of MOR106,
an antibody from MorphoSys’ next-generation library Ylanthia directed
against a novel Galapagos target molecule. The antibody will be co-devel-
oped in the area of inflammatory diseases.

In June 2013, MorphoSys announced it had entered into a global agree-
ment with GlaxoSmithKline (GSK) for the development and commercial-
ization of MOR103. MOR103/GSK3196165 is MorphoSys’s proprietary
HuCAL antibody against the GM-CSF target molecule. Under the agree-
ment, GSK assumes responsibility for the compound’s entire develop-
ment and commercialization. MorphoSys received an immediate upfront
payment of € 22.5 million as part of this agreement. Depending on the
achievement of certain developmental stages and regulatory, commercial
and revenue-related milestones, MorphoSys is eligible to receive addi-
tional payments from GSK in the amount of up to € 423 million, as well as
tiered double-digit royalties on net sales. In the third quarter of 2015,
GlaxoSmithKline announced the initiation of a phase 2 study with MOR103/
GSK3196165 for rheumatoid arthritis. GSK also plans to initiate a second
phase 2 study in osteoarthritis of the hand during the 2016 financial year.

In August 2015, MorphoSys announced a strategic alliance in the field of
immuno-oncology with the German company Immatics Biotechnologies
GmbH. The alliance was formed to develop novel antibody-based therapies
against a variety of cancer antigens that are recognized by T cells. The
alliance agreement gives MorphoSys access to several of Immatics’s pro-
prietary tumor-associated peptides (TUMAPs). In return, Immatics re-
ceives the right to develop MorphoSys’s Ylanthia antibodies against sev-
eral TUMAPs. The companies will pay each other milestone payments and
royalties on commercialized products based on the companies’ develop-
ment progress.

In June 2014, MorphoSys and Merck KGaA announced an agreement to
identify and develop therapeutic antibodies against target molecules of
the class of immune checkpoints. Under this agreement, both MorphoSys
and Merck Serono, the biopharmaceutical division of Merck, will co-de-
velop therapies intended to trigger the immune system to attack tumors.
MorphoSys will use its proprietary Ylanthia antibody library and other
technology platforms to generate antibodies directed against the selected
target molecules. Merck Serono is contributing its broad portfolio and
expertise in the field of immuno-oncology and clinical development and
will assume full project responsibility starting with phase 1 of clinical
development.

In April 2014, MorphoSys agreed to a strategic partnership with the
Moulder Center for Drug Discovery Research, a division of the School of
Pharmacy at Temple University, USA, to discover new therapeutic anti-
bodies. Under this cooperation, the Moulder Center receives access to
MorphoSys’s Ylanthia technology for validating new disease-related tar-
get molecules and generating therapeutic antibodies directed against
these molecules. MorphoSys receives an exclusive option to further de-
velop each antibody resulting from the cooperation. The department for
new bio-therapeutic compound discovery at the Moulder Center deals with
the compound’s design and optimization of lead candidates in various dis-
ease areas, including cancer, Alzheimer’s disease, cardiovascular, meta-
bolic and viral diseases.

In June 2010, MorphoSys AG and the US-based biopharmaceutical com-
pany Xencor signed an exclusive global licensing and cooperation agree-
ment under which MorphoSys receives exclusive global licensing rights to
the XmAb5574/MOR208 antibody for the treatment of cancer and other
indications. The companies jointly conducted a phase 1/2a trial in the US
in patients with chronic lymphocytic leukemia. MorphoSys is solely re-
sponsible for further clinical development after the successful comple-
tion of the phase 1 clinical trial. Xencor received an upfront payment of
US$ 13 million (approx. € 10.5 million) from MorphoSys, which was capi-
talized under in-process R&D programs. Xencor is entitled to development,
regulatory, and commercially-related milestone payments as well as tiered
royalties on product sales.

In May 2015, MorphoSys acquired the Dutch company Lanthio Pharma
B.V., which specializes in research and development of lanthipeptides.
MorphoSys had initially acquired almost a 20% interest in the biopharma-
ceutical company in 2012 as part of its Innovation Capital initiative before
acquiring the remaining shares in the past financial year. Lanthipeptides
are a novel class of therapeutics demonstrating high target molecule selec-
tivity and improved compound properties. This transaction adds MOR107
(formerly LP2) to MorphoSys’s proprietary portfolio. MOR107 is a novel
lanthipeptide in development for diabetic nephropathy and fibrotic diseases.

F I N A N C I A L S T A T E M E N T S
Notes

131

9.4.2 P AR TNE RE D DISC OVE RY SEGME NT
Commercial partnerships in the Partnered Discovery segment provide
MorphoSys with various types of payments that are spread over the dura-
tion of the agreements or recognized in full as revenue when reaching a
predefined target or milestone. These payments include upfront payments
upon signature, annual license fees in exchange for access to MorphoSys’s
technologies and payments for funded research to be performed by
MorphoSys on behalf of the partner. In addition, MorphoSys is entitled to
development-related milestone payments and royalties on product sales
for specific antibody programs.

Prior to the 2015 financial year, active collaborations with a number of
partners had already ended because the agreements had expired. How-
ever, drug development programs initiated in the active phase are de-
signed so that they can be continued by the partner and, therefore, still
result in performance-based payments for the achievement of the defined
milestones. For more detailed information on individual drug candidates
within the various alliances – limited to information available to the pub-
lic – please refer to the section “Research and Development” contained in
this annual report and the overview of the Group’s drug pipeline. Detailed
information on the Group’s individual research alliances is available on
the Group’s website.

Partnerships in the Partnered Discovery segment that ended before the
beginning of 2015 but where drug development programs were still being
pursued, include (in alphabetical order): Astellas, Bayer Healthcare Phar-
maceuticals, Boehringer Ingelheim, ContraFect, Daiichi-Sankyo, F. Hoff-
mann-La Roche, GPC Biotech, Immunogen, Janssen Biotech, Merck & Co.,
OncoMed Pharmaceuticals, Pfizer, Fibron Ltd. (transfer of the contract from
Prochon Biotech Ltd.) and Schering-Plough (a subsidiary of Merck & Co.).

Partnerships that were still active in 2015 include (in alphabetical order):
GeneFrontier Corporation/Kaneka, Heptares and Novartis.

The Group’s most comprehensive alliance is with Novartis AG. Both com-
panies started working together in 2004, which has led to the creation of
several ongoing therapeutic antibody programs against a number of dis-
eases. In December 2007, MorphoSys and Novartis significantly expanded
their previous relationship and forged one of the most comprehensive stra-
tegic alliances in the discovery and development of biopharmaceuticals.
The contractually guaranteed annual payments for technology access, in-
ternalization charges, and R&D services amount to more than € 400 mil-
lion over the contract term of ten years. The total amount of guaranteed
payments and probability-weighted performance-based milestones, con-
tingent upon the successful clinical development and regulatory approval
of several products, could exceed € 650 million by the expiration of the
contract underlying the collaboration. In addition to these payments,
MorphoSys is also entitled to royalties on any future product sales.

In November 2012, MorphoSys and Novartis entered into a cooperation
agreement for the use of the new Ylanthia technology platform. This was
an extension of the existing strategic cooperation.

132

F I N A N C I A L S T A T E M E N T S
Notes

9.5 S UBSEQUEN T EVEN T S
There have been no significant changes in the industry environment since
the end of the 2015 financial year. Other events having a material impact
on the net assets, financial position and results of operations have also not
occurred after the end of the financial year.

9.6 R E SP ONSIBIL I T Y S TAT EMEN T
We confirm to the best of our knowledge and in accordance with applicable
reporting principles that the consolidated financial statements give a true
and fair view of the Group’s assets, liabilities, financial position and re-
sults of operations and that the Group Management Report provides a fair
review of the Group’s business development, results and position as well
as a description of the principal opportunities and risks associated with its
expected development.

Martinsried, February 16, 2016

Dr. Simon Moroney
Chief Executive Officer

Jens Holstein
Chief Financial Officer

Dr. Arndt Schottelius
Chief Development Officer

Dr. Marlies Sproll
Chief Scientific Officer

A D D I T I O N A L I N F O R M A T I O N
Auditor’s Report

133

Board of Managing Directors, as well as evaluating the overall pre-
sentation of the consolidated financial statements and the group
management report. We believe that our audit provides a reason-
able 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 IFRS as adopted by the EU, the
additional requirements of German commercial law pursuant to
Article 315a Section 1 German Commercial Code and supplemen-
tary provisions of the articles of incorporation and give a true and
fair view of the net assets, financial position and results of opera-
tions of the Group in accordance with these requirements. The
group management report is consistent with the consolidated fi-
nancial 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 17, 2016

PricewaterhouseCoopers
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft

Dietmar Eglauer
Wirtschaftsprüfer
(German Public Auditor)

ppa. Bodo Kleinschrod
Wirtschaftsprüfer
(German Public Auditor)

Auditor’s Report

We have audited the consolidated financial statements prepared by
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,
together with the group management report for the business year
from January 1, 2015 to December 31, 2015. The preparation of the
consolidated financial statements and the group management re-
port in accordance with IFRS, 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 are the responsibility of the Parent
Company'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 Ger-
man generally accepted standards for the audit of financial state-
ments 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 consoli-
dated financial statements in accordance with the applicable finan-
cial 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 ac-
count in the determination of audit procedures. The effectiveness
of the accounting-related internal control system and the evidence
supporting the disclosures in the consolidated financial state-
ments and the group management report are examined primarily
on a test basis within the framework of the audit. The audit in-
cludes assessing the annual financial statements of those entities
included in consolidation, the determination of the entities to be
included in consolidation, the accounting and consolidation prin-
ciples used and significant estimates made by the Company´s

134

A D D I T I O N A L I N F O R M A T I O N
Report of the Supervisory Board

Report of the Supervisory Board

COOPERAT ION OF T HE MANAGEMEN T BOARD AND

SUPERVISORY BOARD
During the 2015 financial year, the Supervisory Board comprehen-
sively performed the duties assigned to it by law, the Articles of
Association, its own Rules of Procedure and – with a few excep-
tions – the recommendations of the German Corporate Governance
Code (the “Code”). We regularly advised and continually oversaw
the Management Board in its management of the Company and
dealt extensively with the operational and strategic development
of the Group. The Management Board fulfilled its duty to inform
and furnish us with periodic written and verbal reports contain-
ing timely and detailed information on all business transactions
and events of significant relevance to the Company. The Manage-
ment Board prepared these reports in collaboration with the re-
spective departments. In our committee meetings and plenary
sessions, we had the opportunity to fully discuss the Management
Board’s reports and the proposed resolutions. The Management
Board answered our questions on strategic topics affecting the
Company with a great level of detail and submitted the relevant
documents in a timely manner. Any deviations from the business
plan were thoroughly explained to us, and we were directly in-
volved at an early stage in all decisions relevant to the Company.

A corresponding resolution was passed if the Supervisory Board’s
approval for individual actions was required by law, the Articles of
Association or by the Rules of Procedure. The Supervisory Board
members regularly prepared resolutions for Management Board
actions requiring Supervisory Board approval based on the docu-
mentation provided in advance by the Management Board. If nec-
essary, the Supervisory Board received the support of the relevant
committees and, together with the Management Board, discussed
any projects pending decision. All matters requiring approval
were submitted for review to the Supervisory Board on a timely
basis.

Outside of the meetings of the Supervisory Board plenum and the
committees, the chairperson of the Supervisory Board regularly
exchanged information and ideas with the Management Board
and especially the Chief Executive Officer, Dr. Simon Moroney. The
Supervisory Board chairperson was also kept informed of the cur-
rent business situation and any significant business transactions.
Discussions also took place between the chairperson of the Super-
visory Board and members of the Senior Management Group in

consultation with the Management Board. The other Supervisory
Board members also had regular contact with the individual Man-
agement Board members.

KEY I T EMS OF DISCUSSION AT T HE SUPERVISORY BOARD

MEE T INGS IN T HE 2015 F INANC IAL YEAR
A total of eight Supervisory Board meetings were held in the
2015 financial year, two of which were conducted by telephone. All
Supervisory Board members were present at all meetings. In ur-
gent cases occurring outside of the meetings, the Supervisory
Board passed resolutions by written procedure.

In addition to the above, a one-day strategy meeting took place in
July 2015 between the Management Board and the Supervisory
Board that primarily addressed the following topics:
• the Company’s strategic focus; and
• the further development of the Company’s product portfolio and
the related impact on the net assets and results of operations.

During the 2015 financial year, the Supervisory Board paid partic-
ular attention to the following topics and passed resolutions on
these topics after thorough examination and discussion:
• the Company’s achievement of the 2014 financial year targets,
the corporate objectives for the 2015 financial year and setting
the corporate objectives for the 2016 financial year;

• the agenda and proposed resolutions for the 2015 Annual Gen-
eral Meeting; specifically the nominations to the 2015 Annual
General Meeting of Wendy Johnson, Klaus Kühn and Dr. Frank
Morich as new candidates for the Supervisory Board;

• termination of the collaboration with Celgene Corporation to

develop MOR202;

• purchase of all remaining shares in the biopharmaceutical com-

pany Lanthio Pharma B.V.;

• the conclusion of the cooperation with G7 Therapeutics AG for

developing innovative antibody compounds;

• the formation of a strategic alliance in the field of immuno-

oncology with Immatics Biotechnologies GmbH;

• the new resolution on the composition of the Supervisory Board
and the level of female representation on the Management Board
and Supervisory Board;

• review and revision of schedule of responsibilities for the Man-

agement Board; and

• the budget for the 2016 financial year.

A D D I T I O N A L I N F O R M A T I O N
Report of the Supervisory Board

135

We also passed a resolution in the Supervisory Board plenum on
the remuneration of Management Board members for the period
from July 1, 2015 to June 30, 2016 taking external benchmarking
into consideration. We also evaluated the achievement of individ-
ual bonus targets for 2014 agreed with the members of the Man-
agement Board and dealt with the bonus targets with these mem-
bers for both 2015 and 2016. We had the appropriateness of the
Management Board’s compensation and its comparison to the re-
muneration of various levels of employees confirmed by an inde-
pendent remuneration consultant and discussed and adopted the
key performance indicators for the long-term incentive plans for
both the Management Board and the Senior Management Group.

Furthermore, we approved the financial statements for the 2014
financial year and the Management Board’s proposal for the appro-
priation of profits. We also dealt with the Corporate Governance
Report as well as the Statement on Corporate Governance.

The focus of our regular discussions in the Supervisory Board’s
plenary meetings were MorphoSys’s revenue and earnings devel-
opment, the financial reports, the progress of the two business
segments Partnered Discovery and Proprietary Development, the
results and progress of the clinical programs for the development
of proprietary drugs, the future development strategy and the de-
velopment of new technologies. In addition, we discussed the re-
sults of the efficiency review of the Supervisory Board’s work
carried out in 2015 by an external consultant and evaluated possi-
bilities for improvement. Finally, we have kept ourselves regularly
informed with respect to risk management, the internal control
system and of the results of the internal audit.

CONFL IC T S OF IN T ERES T IN T HE SUPERVISORY BOARD
In the 2015 financial year, no conflicts of interest occurred within
the Supervisory Board.

AC T IVI T IES AND MEE T INGS OF SUPERVISORY BOARD

COMMI T T EES
In order to perform its duties efficiently, the Supervisory Board
has established three committees that prepare the issues falling
within their respective areas of competence for the Supervisory
Board plenum: the Audit Committee, the Remuneration and Nomi-
nation Committee and the Science and Technology Committee. In
each Supervisory Board meeting, the committee chairs report to
the Supervisory Board on the work of the committees and the min-
utes of the committee meetings are made available to all Supervi-
sory Board members. The composition of these committees can be
found in the “Statement on Corporate Governance,” which is avail-
able on the Company’s website under the heading “Media & Inves-
tors > Corporate Governance > Statement on Corporate Gover-
nance,” and in the Annual Report on pages 61 to 66. All members
attended all committee meetings, except for one meeting.

The Audit Committee met on seven occasions in the 2015 finan-
cial year (of those meeting, three were by telephone). The Commit-
tee dealt mainly with accounting issues, the quarterly reports and
the financial statements and consolidated financial statements.
The Committee discussed these topics with the Management
Board and recommended the approval of these statements to the
Supervisory Board. The auditor took part in three Audit Commit-
tee meetings and informed its members of the audit results. The
Audit Committee also made a recommendation to the Supervisory
Board for its proposal at the Annual General Meeting for the elec-
tion of the independent auditor. The Committee deliberated on the
risk management system and the results of the internal audit car-
ried out in the 2015 financial year. The Committee regularly ad-
vised on the Company’s cash investment policy and the invest-
ment recommendations of the Management Board. Additionally,
the Committee was informed of improvements in IT security.

For efficiency reasons, there is a common Remuneration and
Nomination Committee, which meets in its respective role. This
Committee met on five occasions in the 2015 financial year (includ-
ing twice by telephone) and, in its function as Remuneration Com-
mittee, mainly dealt with the Management Board’s remuneration
system and the level of the Management Board’s compensation. In
this context, the Committee also commissioned an independent
remuneration expert with the task of preparing a Management
Board remuneration report to verify the appropriateness of the
Management Board’s remuneration. Based on this report, the Com-
mittee prepared a recommendation as to the future structure of
the Management Board’s compensation and submitted this to the
Supervisory Board for approval. The Committee also dealt with
the ratio of compensation between the Management Board and the
Senior Management Group and the staff overall and had this ratio
reviewed by the commissioned remuneration expert. This expert
confirmed the appropriateness of the “vertical” compensation ra-
tios. The Committee also dealt with the individual bonus targets of
the Management Board members and the Company’s targets and
offered recommendations to the Supervisory Board for approval.
The Committee discussed the key performance indicators for the
Management Board’s and Senior Management Group’s long-term
incentive plans. In its function as Nomination Committee, the
Committee dealt with the preparations for the required election of
all Supervisory Board members in the context of the 2015 Annual
General Meeting. In coordination with the Supervisory Board, the
Committee prepared the required profiles for the Supervisory
Board candidates up for election, conducted the corresponding
interviews with the Supervisory Board candidates and submitted
its recommendation to the Supervisory Board for its proposals to
the Annual General Meeting for the election of Supervisory Board
members. In this context, the Committee commissioned a person-
nel consulting firm for professional support in the Committee’s
search for suitable new Supervisory Board candidates.

136

A D D I T I O N A L I N F O R M A T I O N
Report of the Supervisory Board

The Science and Technology Committee met on eight occasions
during the 2015 financial year (three of these meetings were by
telephone). This Committee dealt mainly with the progress and
expansion of the Company’s portfolio, the development of new
technologies and the Company’s drug development plans includ-
ing the required budget resources. The discussions focused on the
start of new development programs, the results of ongoing clinical
studies for the development of proprietary drug candidates, devel-
opment plans for current and planned clinical studies as well as
the development strategy. The Committee addressed the produc-
tion of clinical trial materials for the Company’s proprietary drug
candidates, the competitive and patent situations of the Company’s
proprietary product candidates and discussed the Management
Board’s recommendations on strengthening the portfolio.

CORP ORAT E GOVERNANCE
The Supervisory Board dealt with the further development of
MorphoSys’s corporate governance keeping in mind the amend-
ments made in the Code in May 2015 by the Government Commis-
sion German Corporate Governance Code. The detailed Corporate
Government Report, including the Corporate Governance Statement
according to Sec. 289a HGB (German Commercial Code), may be
found on the Company’s website under the heading “Media & In-
vestors > Corporate Governance > Corporate Governance Report”
and can also be found in the Annual Report on pages 61 – 82.

We also discussed with the Management Board the Company’s
compliance with the Code’s recommendations and, in justified
cases, approved a few exceptions to the Code’s recommendations.
Based on this consultation, the Management Board and the Super-
visory Board submitted the annual Declaration of Conformity on
December 3, 2015. The current version of the annual Declaration of
Conformity can be found in this Annual Report and is perma-
nently available to MorphoSys’s shareholders on the Company’s
website under the heading “Media & Investors > Corporate Gover-
nance > Declaration of Conformity.”

CHANGES IN T HE COMP OSI T ION OF T HE MANAGEMEN T BOARD

AND SUPERVISORY BOARD
There were no changes in the composition of the Management
Board in the reporting period.

The changes made to the Supervisory Board’s composition during
the reporting period are listed below. The terms of office of all
Supervisory Board members ended with the conclusion of the
2015 Annual General Meeting. Supervisory Board members
Dr. Geoffrey Vernon, Dr. Daniel Camus and Dr. Walter Blättler
departed from the Supervisory Board at the conclusion of the
2015 Annual General Meeting. Newly appointed in their place
were Dr. Frank Morich, Klaus Kühn and Wendy Johnson. The Su-
pervisory Board members Dr. Gerald Möller, Dr. Marc Cluzel and

Karin Eastham were up for reappointment and were reappointed
to the Supervisory Board at the Annual General Meeting. In its
constituent meeting following the 2015 Annual General Meeting,
Dr. Gerald Möller was reappointed as chairman of the Supervisory
Board and Dr. Frank Morich was appointed as deputy chairman of
the Supervisory Board.

AUDI T OF T HE F INANC IAL S TAT EMEN T S
For the 2015 financial year, the Company commissioned Price-
waterhouseCoopers AG Wirtschaftsprüfungsgesellschaft, Munich
(“PwC”) as its auditor. The audit contract was awarded by the Su-
pervisory Board in accordance with the resolution of the Annual
General Meeting on May 8, 2015. In accordance with Item 7.2.1 of
the Code, the Supervisory Board obtained a declaration of indepen-
dence from the auditor in advance.

The financial statements and the consolidated financial statements
of MorphoSys AG, as well as the Management Report and Group
Management Report for the 2015 financial year were properly
audited by PwC and issued with an unqualified Auditor’s Report.
The key topics of the audit for the consolidated and separate finan-
cial statements for the 2015 financial year were the presentation
and valuation of cash investments, the valuation of the carrying
amounts of goodwill and intangible assets with indefinite useful
lives, the presentation and valuation of the stock option programs,
the calculation of current and deferred taxes, the revenue recogni-
tion and the completeness and accuracy of the Notes.

In addition, the auditor confirmed that the Management Board
has established an appropriate reporting and monitoring system
that is suitable in terms of its design and administration for the
early detection of developments that could threaten the Company’s
existence.

The audit reports and documents relating to the financial state-
ments and consolidated financial statements were provided on a
timely basis to all Supervisory Board members for review. The
audit report, the consolidated financial statements and the Man-
agement Report of the MorphoSys Group were discussed in detail
at the Audit Committee meeting on February 24, 2016 and the
subsequent meeting of the Supervisory Board on the same day.
The audit report, the financial statements and the Management
Report of MorphoSys AG were discussed in detail at the Audit
Committee meeting on March 16, 2016 and the subsequent meet-
ing of the Supervisory Board on the same day. The auditor attended
all meetings concerning the financial statements and reported on
the key results of his audit. He also explained the scope and fo-
cus of the audit and was available to both the Audit Committee and
the Supervisory Board to answer questions and provide further
information.

A D D I T I O N A L I N F O R M A T I O N
Report of the Supervisory Board

137

The Audit Committee discussed the audit results in detail and rec-
ommended to the Supervisory Board that it approve the financial
statements prepared by the Management Board. The Supervisory
Board also took note of the audit results and, in turn, reviewed the
financial statements and management reports in accordance with
the statutory provisions. Following its own examination, the Super-
visory Board also determined that it sees no cause for objection.
The financial statements and consolidated financial statements
prepared by the Management Board and reviewed by the auditor,
as well as the Management Report and Group Management Report,
were subsequently approved by the Supervisory Board. Thus, the
financial statements were adopted. The Supervisory Board also
reviewed the Management Board’s proposal for the appropriation
of profits and agreed to this proposal.

RECOGNI T ION F OR DEDIC AT ED SERVICE
On behalf of the entire Supervisory Board, I would like to thank
the members of the Management Board and the employees of
MorphoSys for their achievements, their dedicated service and the
inspirational work environment witnessed during this past finan-
cial year. Through their efforts, MorphoSys’s portfolio has contin-
ued to mature and expand, and important milestones have been
achieved.

The Supervisory Board would also like to thank our longstanding
Supervisory Board members Dr. Geoffrey Vernon, Dr. Daniel
Camus and Dr. Walter Blättler, whose term of office ended in 2015,
for their dedication and constructive cooperation.

Martinsried/Planegg, March 16, 2016
Dr. Gerald Möller
Chairman of the Supervisory Board

138

A D D I T I O N A L I N F O R M A T I O N
Supervisory Board of MorphoSys AG

Supervisory Board of MorphoSys AG

DR. GERALD MÖLLER
Chairman
Heidelberg, Germany

DR. FRANK MORICH
Deputy Chairman
Berlin, Germany

DR. MARC CLUZEL
Board Member
Montpellier, France

no other supervisory board memberships

member of the supervisory board of:
• Moleac Pte. Ltd.*, Singapore

(Member of the Board of Directors)

member of the supervisory board of:
• 4sigma, Inc.*, Bermuda

(Chairman of the Board of Directors)

• Adrenomed AG, Germany

(Member of the Supervisory Board)
• Ayoxxa Biosystems GmbH*, Germany
(Chairman of the Advisory Board)

• Genticel SA*, France

(Deputy Chairman of the Supervisory Board)

• Invendo Medical GmbH*, Germany
(Chairman of the Advisory Board)

* Membership in comparable domestic and foreign

supervisory boards of commercial enterprises

A D D I T I O N A L I N F O R M A T I O N
Supervisory Board of MorphoSys AG

139

KARIN EASTHAM
Board Member
Rancho Santa Fe, CA, USA

WENDY JOHNSON
Board Member
San Diego, CA, USA

KLAUS KÜHN
Board Member
Grevenbroich, Germany

member of the supervisory board of:
• Geron Corp.*, USA

(Member of the Board of Directors)

member of the supervisory board of:
• AmpliPhi Biosciences Corp.*, USA
(Member of the Board of Directors)

• Illumina, Inc.*, USA

(Member of the Board of Directors)

• Veracyte, Inc.*, USA

(Member of the Board of Directors)

member of the supervisory board of:
• Flossbach von Storch AG, Germany
(Chairman of the Supervisory Board)
• Hella KGaA Hueck & Co.*, Germany

(Member of the Supervisory Board, Member
of the Shareholders’ Committee)

140

A D D I T I O N A L I N F O R M A T I O N
Senior Management Group of MorphoSys AG

Senior Management Group
of MorphoSys AG

SASCHA ALILOVIC
Head of Corporate Finance &
Corporate Development

MARTIN CLARK
Head of Central Purchasing & Logistics

KLAUS DE WALL
Head of Accounting & Tax

SILVIA DERMIETZEL
Head of Human Resources

DR. GABRIELE ELBL
Head of Regulatory Affairs

DR. MARKUS ENZELBERGER
Head of Discovery Alliances &
Technologies

DR. CLAUDIA GUTJAHR-LÖSER
Head of Corporate Communications &
Investor Relations

DR. STEFFEN HEEGER
Head of Clinical Development

DR. BERND HUT TER
Head of Intellectual Property

DR. BARBARA KREBS-POHL
Head of Business Development

DR. MARKUS LANG
Head of Project Management

CHARLOT TE LOHMANN
General Counsel

A D D I T I O N A L I N F O R M A T I O N
Senior Management Group of MorphoSys AG

141

DR. RALF OSTENDORP
Head of Protein Sciences & CMC

STEFFEN POHLENZ
Head of IT

LARA SMITH WEBER
Head of Controlling

DR. STEFAN STEIDL
Head of Preclinical Development

DR. HARALD WATZKA
Head of Alliance Management

DR. ARMIN WEIDMANN
Head of Compliance &
Quality Assurance

DR. DOMINIKA WEINELT
Head of Drug Safety &
Pharmacovigilance

DR. GÜNTER WELLNHOFER
Head of Technical Operations

142

A D D I T I O N A L I N F O R M A T I O N
Glossary

Glossary

ADC – Antibody drug conjugate; a tumor growth-inhibit-
ing substance (cytostatic) that is coupled to an antibody
to attack tumors in an even more targeted manner

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

CAR-T technology – New therapeutic approach in
which immune cells are reprogrammed

Diabetic nephropathy – Kidney disease due to dia-
betes mellitus

Cash flow – Key performance indicator in the cash
flow statement used to assess the financial and earning
capacity

Discounted cash flow model – Method of valuing
assets, especially for due diligence

CD3 – Surface antigen on T cells

DLBCL – Diffuse large B cell lymphoma, a subform of
›› NHL

ADCP – Antibody-dependent cellular phagocytosis

CD19 – Therapeutic target for the treatment of B cell
lymphomas and leukemias

ALL – Acute lymphoblastic leukemia; a form of cancer
of the white blood cells characterized by excess lympho-
blasts

CD20 – Therapeutic target for the treatment of B cell
lymphomas and leukemias

Antibody – Proteins of the immune system that
recognize antigens, thereby triggering an immune
response

CD38 – Therapeutic target for the treatment of multiple
myeloma and certain leukemias

Antibody library – A collection of genes that encode
corresponding human antibodies

Antigen – Foreign substance stimulating antibody pro-
duction; binding partner of antibody

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

Autoimmune disease – Disease caused by an im-
mune response by the body against one of its own
tissues, cells or molecules

CLL – Chronic lymphocytic leukemia; most common type
of cancer of the blood and bone marrow, affecting the
B cells

EGFR – Epidermal growth factor receptor; cell-surface
receptor for members of the epidermal growth factor
family (EGF-family) of extracellular protein ligands; the
epidermal growth factor receptor is a receptor tyrosine
kinase

EMA – European Medicines Agency

ESCC – ›› SQUAMOUS-CELL CARCINOMA; malignant
skin or mucous tumor

B-ALL – Acute lymphoblastic B cell leukemia, blood
cancer affecting white blood cells, subform of ›› ALL

Biosimilars – Term used to describe officially approved
new versions of innovator biopharmaceutical products,
following patent expiration

Bispecific – Antibody consisting of parts from two
different antibodies

COPD – Chronic obstructive pulmonary disease

CRO – Contract research organization

Fab format – The antigen binding fragment of the
antibody

Fc part – Constant part of an antibody known as the Fc
(fragment, crystallizable) region

FDA – Food and Drug Administration; US federal agency
for the supervision of food and drugs

FL – Follicular lymphoma, a subform of ›› NHL

A D D I T I O N A L I N F O R M A T I O N
Glossary

143

GCP – Good clinical practice; an inter national ethical
and scientific quality standard for designing, conduct-
ing, recording and reporting trials that involve the par-
ticipation of human subjects

GLP – Good laboratory practice; a formal framework for
the implementation of safety tests on chemical products

GM-CSF – Granulocyte-macrophage colony-stimulating
factor; underlying target molecule of MOR103 program

GMP – Good manufacturing practice; term for the control
and management of manufacturing and quality control
testing of pharmaceutical products and medical devices

IFRS – International Financial Reporting Standards;
future EU-wide standards produced by the IASB

Nasdaq Biotech Index – Stock market index made up
of biotechnological or pharmaceutical companies list ed
at the US stock exchange NASDAQ

Immuno-oncology – New class of compounds that
stimulate the immune system to attack tumors

Inclusion body myositis – Inflammatory muscle
disease (›› sIBM)

Innovation Capital – Investments in start-ups with
technologies and product candidates being close to
MorphoSys’s areas of interest

NHL – Non-Hodgkin’s lymphomas; diverse group of
blood cancers that include any kind of lymphoma except
Hodgkin’s lymphomas

NK cells – Natural killer cells of the body’s immune sys-
tem; cells capable of recognizing and killing abnormal
cells, e.g. tumor cells

GPCR – G protein-coupled receptor; receptors in the cell
membrane that transfers signals to the cell interior

Lanthipeptides – Novel class of
therapeutics
with high target selectivity and improved drug-like
properties

HER3 – Human epidermal growth factor receptor 3;
member of the epidermal growth factor receptor (EGFR/
ERBB) family of receptor tyrosine kinases

Pediatric study – A study conducted in the area of
children and adolescent medicine

Pharmacodynamics – Study of the effects of drugs
on the body

Pharmacokinetics – Determination of the fate of sub-
stances administered externally to a living organism

Preclinic – Preclinical stage of drug development; tests
in animal models as well as in laboratory essays

HuCAL – Human Combinatorial Antibody Library; pro-
prietary antibody library enabling rapid generation of
specific human antibodies for all applications

Human – Of human origin

Market capitalization – Value of a com pany’s out-
standing shares, as measured by shares times current
price

Protein – Polymer consisting of amino acids, e. g. anti-
bodies and enzymes

MCL – Mantle cell lymphoma, a subform of ›› NHL

Psoriasis – A chronic, non-contagious autoimmune
disease which affects the skin and joints

mCRPC – Metastatic castration-resistant prostate cancer

Monoclonal antibody – Homogeneous antibody
origin ating from a single clone, produced by a hybrid-
oma cell

Multiple myeloma – Type of cancer that develops in a
subset of white blood cells called plasma cells formed in
the bone marrow

144

A D D I T I O N A L I N F O R M A T I O N
Glossary

Rheumatoid arthritis – Inflammatory disease of the
joints; abbreviation: RA

Target – Target molecule for therapeutic intervention,
e.g. on the surface of diseased cells

Ylanthia – The novel next-generation antibody plat-
form of MorphoSys

Richter’s transformation – the (often rapid) transi-
tion of chronic lymphatic leukemia (›› CLL) in a higher
malignant, diffuse form

Target molecule selectivity – Criteria to describe to
what degree an antibody binds to other structures be-
sides its target molecule

Royalties – Percentage share of ownership of the rev-
enue generated by drug products

Target product profile (TPP) – Summary of specifi-
cations on a planned therapeutic product

T cells – An abbreviation for T-lymphocytes; a sub type
of white blood cells that together with B-lympho cytes
are responsible for the body’s immune defense

TecDAX – Index of the 30 largest technology companies
listed on the Frankfurt Stock Exchange

Scaffolds – Proteins with antibody - like capabilities

Toxicity – Poisonousness

sIBM – Sporadic ›› inclusion body myositis,
inflammatory muscle disease

Slonomics – DNA engineering and protein library
gene ration platform acquired by MorphoSys in 2010

Small molecules – Low molecular compounds

SOP system – SOP = standard operating procedure

Squamous-cell carcinoma – malignant skin or
mucous tumor

A D D I T I O N A L I N F O R M A T I O N
List of Figures and Tables

145

List of Figures and Tables

Figures

01 Revenues of the MorphoSys Group by Segment
02 MorphoSys’s Product Pipeline
03 Active Clinical Studies with MorphoSys Antibodies
04 Headcount of the MorphoSys Group
05 Revenue of the MorphoSys Group by Region
06 Revenues Proprietary Development and Partnered

Discovery
07
Selected R&D Expenses
08 Distribution of R&D Expenses
09 Performance of the MorphoSys Share in 2015

Tables

01 Development of Financial Performance Indicators
02

Sustainable Development of Key Performance Indicators
(SD KPIs) at MorphoSys

03 Market Data from Selected Phase 3 Partnered Programs
04 Multiple-Year Overview – Income Statement
05 Multiple-Year Overview – Financial Situation
06 Multiple-Year Overview – Balance Sheet Structure
07 Comparison of Actual Business Results to Forecasts
08 Key Data for the MorphoSys Share
09 Analyst Recommendations
10 Summary of Key Short- and Medium-Term Risks at

MorphoSys

22
22
27
30
33

33
34
34
45

21
25
35
36
38
39
46
47

10 Comparison of the MorphoSys Share Price Development

between 2011 and 2015

11 Occupational Safety at MorphoSys
12 Quality Management System at MorphoSys
13 Employees by Gender
14
15
16 The Risk and Opportunity Management System at

Seniority
Labor Turnover Rate

MorphoSys

17 Compliance Management System (CMS)

11
Summary of Key Long-Term Risks at MorphoSys
12 Composition of the Supervisory Board until Termination

of the 2015 Annual General Meeting

13 Composition of the Supervisory Board since Termination

of the 2015 Annual General Meeting
14 Participation of Supervisory Board Members
15 Compensation of the Management Board in 2015 and 2014
16 Compensation of the Supervisory Board in 2015 and 2014
17 Directors’ Holdings
18 Directors’ Dealings

45
50
50
51
51
52

54
78

63
65
70
73
74
76

146

A D D I T I O N A L I N F O R M A T I O N
Imprint

Imprint

MorphoSys AG
Lena-Christ-Str. 48
82152 Martinsried/Planegg
Germany
Phone: +49-89-89927-0
Fax:
Email: info@morphosys.com
www.morphosys.com

+49-89-89927-222

Corporate Communications and
Investor Relations
Phone: +49-89-89927-404
Fax:
Email:

+49-89-89927-5404
investors@morphosys.com

This financial report is also published
in German and is available for download
from our website (PDF, HTML).

HuCAL®, HuCAL GOLD®, HuCAL PLATINUM®,
CysDisplay®, RapMAT®, arYla®, Ylanthia®, 100 billion
high potentials®, Slonomics®, Lanthio Pharma®
and LanthioPep® are registered trademarks of the
MorphoSys Group.

Concept and Design
3st kommunikation GmbH, Mainz

Photography/Picture Credits
Andreas Pohlmann, München
Matthias Haslauer, Hamburg
Getty Images: Martin Barraud, Alfred Pasieka,
Hero Images

Translation
Klusmann Communications, Niedernhausen

Editorial Office
Apostroph, Hamburg

Typesetting and Lithography
Knecht GmbH, Ockenheim

Printer
Woeste Druck + Verlag GmbH & Co. KG,
Essen-Kettwig

Copy Deadline
March 16, 2016
(except financial statements)

Key Figures (IFRS)

MorphoSys Group (in million €, if not stated otherwise)

12/31/15

12/31/14

12/31/13

12/31/12

12/31/11

12/31/10

12/31/09

12/31/08

12/31/07

12/31/06

RESULTS1

Revenues

Cost of Goods Sold

R&D Expenses

SG&A Expenses

Personnel Expenses (Excluding
Stock-Based Compensation)

Capital Expenditure

Depreciation of Tangible Assets

Amortization of Intangible Assets

EBIT

Net Proﬁ t/(Loss)

Net Proﬁ t/(Loss) from
Discontinued Operations

BAL ANCE SHEE T

Total Assets

Cash, Marketable Securities and
Other Financial Assets

Intangible Assets

Total Liabilities

Stockholders’ Equity

Equity Ratio (in %)

MORPHOSYS SHARE

106.2

0.0

78.7

15.1

32.4

8.8

1.5

1.9

17.2

14.9

64.0

0.0

56.0

14.1

26.7

20.5

1.4

2.7

(5.9)

(3.0)

78.0

0.0

49.2

18.8

51.9

0.0

37.7

12.1

82.1

0.0

55.9

14.9

27.4

24.1

27.7

5.6

1.5

3.3

9.9

13.3

1.8

1.7

3.5

2.5

1.9

2.9

1.7

3.8

9.8

8.2

0.0

87.0

7.3

46.9

23.2

29.6

13.8

2.1

4.0

13.1

9.2

81.0

6.7

39.0

23.9

26.1

3.8

1.6

3.8

12.8

9.0

71.6

7.1

27.6

20.5

21.5

3.8

1.5

4.8

16.5

13.2

62.0

7.9

22.2

24.8

18.8

12.0

1.5

3.7

8.3

11.5

–

53.0

8.0

17.5

21.4

18.1

4.0

1.5

3.4

5.4

6.0

–

6.0

(0.4)

400.1

426.5

447.7

224.3

228.4

209.8

206.1

203.3

184.7

127.8

298.4

79.6

37.3

362.7

91 %

352.8

46.0

77.7

348.8

82 %

390.7

35.1

95.5

352.1

79 %

135.7

35.0

22.3

202.0

90 %

134.4

66.0

31.3

197.1

86 %

108.4

69.2

23.9

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 %

Number of Shares Issued

26,537,682 26,456,834 26,220,882 23,358,228 23,112,167 22,890,252 22,660,557 22,478,787 22,160,259 20,145,966

Group Earnings/(Loss) per Share,
Diluted (in €)

Dividend (in €)

Share Price (in €)

PERSONNEL DATA

0.57

–

(0.12)

–

57.65

76.63

0.54

–

55.85

0.08

–

29.3

0.36

–

17.53

0.4

–

0.4

–

18.53

17.04

0.59

–

18.75

0.53

–

16.1

0.31

–

18.12

Total Group Employees (Number2)

365

329

299

421

446

464

404

334

295

279

1 Due to the agreement between Bio-Rad and MorphoSys, signed in December 2012, to acquire substantially
all of the AbD Serotec segment, for the years 2013, 2012 and 2011, revenues, income and expenses in
connection with the transaction are shown in the line item “Net Proﬁ t/(Loss) from Discontinued Operations.”
All other line items consist of amounts from continuing operations.

2 2005 to 2012 including employees from the discontinued operations of AbD Serotec.

Financial Calendar
2016

2 March
p u b l i c at i o n o f 2 0 1 5
y e a r - e n d r e s u lt s

3 May
p u b l i c at i o n o f 2 0 1 6
t h r e e m o n t h s ’ r e p o r t

2 June
2 0 1 6 a n n u a l g e n e r a l
m e e t i n g i n m u n i c h

1 August
p u b l i c at i o n o f 2 0 1 6
s i x m o n t h s ’ r e p o r t

7 November
p u b l i c at i o n o f 2 0 1 6
n i n e m o n t h s ’ r e p o r t

MorphoSys AG
Lena-Christ-Str. 48
82152 Martinsried / Planegg
Germany
Phone: +49-89-89927- 0
Fax:
www.morphosys.com

+49-89-89927-222