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MorphoSys AG
Semmelweisstrasse 7
82152 Planegg
Germany
Phone: +49-89-89927-0
Fax: +49-89-89927-222
www.morphosys.com
Product Pipeline
MorphoSys’s Product Pipeline (December 31, 2018)
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
Tremfya®* (guselkumab) / Janssen/J&J
Psoriasis
Gantenerumab / Roche
Alzheimer’s disease
MOR208 / not partnered
Hematological malignancies
Anetumab ravtansine (BAY94-9343) / Bayer
Solid tumors
BAY1093884 / Bayer
Hemophilia
BHQ880 / Novartis
Multiple myeloma
Bimagrumab ( BYM338) / Novartis
Metabolic disease
CNTO6785 / Janssen/J&J
Inflammation
Ianalumab (VAY736) / Novartis
Inflammation
MOR103 (GSK3196165) / GlaxoSmithKline
Inflammation
MOR106 / Novatis/Galapagos
Inflammation
MOR202 / I-Mab Biopharma**
Multiple myeloma
NOV-12 (MAA868) / Novartis
Prevention of thrombosis
Setrusumab (BPS804) / Mereo/Novartis
Brittle bone syndrome
Tesidolumab (LFG316) / Novartis
Eye diseases
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
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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
Utomilumab (PF-05082566) / Pfizer
Cancer
Xentuzumab (BI-836845) / BI
Solid tumors
BAY2287411 / Bayer
Cancer
Elgemtumab (LJM716) / Novartis
Cancer
MOR107*** (LP2-3) / not partnered
Not disclosed
NOV-7 (CLG561) / Novartis
Eye diseases
NOV-8 / Novartis
Inflammation
NOV-9 (LKA651) / Novartis
Diabetic eye diseases
NOV-10 (PCA062) / Novartis
Cancer
NOV-11 / Novartis
Blood disorders
NOV-13 (HKT288) / Novartis
Cancer
NOV-14 / Novartis
Asthma
PRV-300 (CNTO3157) / ProventionBio
Inflammation
Vantictumab (OMP-18R5) / OncoMed
Solid tumors
* We still consider Tremfya® a phase 3 compound due to ongoing studies in various indications.
** For development in China, Hong Kong, Taiwan, Macao.
*** A phase 1 study in healthy volunteers was completed. MOR107 is currently in preclinical
investigation with a focus on oncology indications.
phase 1
phase 2
phase 3
12
Programs
14
Programs
3
Programs*
In addition, 6 proprietary programs and 56 partnered discovery
programs are in discovery stage, 1 proprietary and 24 partnered
discovery programs are in preclinic.
MorphoSys at a Glance
Figures, data, facts (December 31, 2018)
employees
329
34
nations
pro gr ams in
discovery
62
pro gr ams in
preclinic
25
pro gr ams in
phase 1
More than
70
active clinical studies with
MorphoSys antibodies
* We still consider Tremfya® a phase 3 compound due to ongoing studies in various indications.
** For development in China, Hong Kong, Taiwan, Macao.
*** A phase 1 study in healthy volunteers was completed. MOR107 is currently in preclinical
investigation with a focus on oncology indications.
pro gr ams in
phase 2
12
14
pro gr ams in
phase 3
3
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MOR Programs
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2008
2018
ENG INEERING THE MEDICINES OF TOMORROW
Our mission is to make exceptional,
innovative biopharmaceuticals to
improve the lives of patients suffering
from serious diseases. Our focus is
on cancer. Innovative technologies and
smart development strategies are
central to our approach. Success is
created by our employees, who focus
on excellence in all they do and col-
laborate closely across disciplines.
S
T
N
E
T
N
O
C
FINANCIAL STATEMENTSGROUP MANAGEMENT REPORT Please find additional
information in our
online magazine.
https://reports.morphosys.com/2018/
Contents
t h e c o m pa n y
06
10
12
14
16
Roadmap
Clinical Development at MorphoSys
MorphoSys – A Strong Development Partner
Research at MorphoSys
Letter to the Shareholders
g r o u p m a n ag e m e n t r e p o r t
25
49
63
67
71
76
84
Operations and Business Environment
Operating and Financial Review and Prospects
Outlook and Forecast
Shares and the Capital Market
Sustainable Business Development
Risk and Opportunity Report
Statement on Corporate Governance,
Group Statement on Corporate Governance
and Corporate Governance Report
113
Subsequent Events
f i n a n c i a l s tat e m e n t s
116
117
118
120
122
124
176
Consolidated Statement of Profit or Loss (IFRS)
Consolidated Statement of Comprehensive
Income (IFRS)
Consolidated Balance Sheet (IFRS)
Consolidated Statement of Changes in
Stockholders’ Equity (IFRS)
Consolidated Statement of Cash Flows (IFRS)
Notes
Responsibility Statement
a d d i t i o n a l i n f o r m at i o n
177
182
186
188
191
192
Independent Auditor’s Report
Report of the Supervisory Board
Supervisory Board of MorphoSys AG
Glossary
List of Figures and Tables
Imprint
FINANCIAL STATEMENTSGROUP MANAGEMENT REPORT Maga zine
4
Roadmap
As a fully inte-
grated biopharma-
ceutical company,
we are driven by
a desire to develop
the medicines of
tomorrow. The jour-
ney towards this
goal has been and
continues to be
exciting.
Roadmap
Maga zine
5
FINANCIAL STATEMENTSGROUP MANAGEMENT REPORT Maga zine
6
1992
the beginning: The company was
founded in Martinsried near Munich.
Roadmap
first ipo: MorphoSys AG goes public on the
Frankfurt Stock Exchange in 1999. On September
6, 2004, the Company entered into the TecDAX
and in 2018 to the MDAX.
Since late 2016 the
headquarters is located in
Planegg near Munich
o n l i n e r e p o r t
https://www.morphosys.com/
company/history#roadmap
antibody technology: In 2000, MorphoSys presented
its HuCAL antibody library. This was followed by the HuCAL
Gold antibody library (2001) and the HuCAL PLATINUM an-
tibody library (2008). Ylanthia, the next generation of anti-
body technologies, was launched in 2011. Slonomics, which
has been part of the MorphoSys technology portfolio since
2010, enables the precise optimization of antibodies from
the Ylanthia library.
a novel agent against alzheimer’s: In 2006
Partner Roche starts clinical development of a HuCAL anti-
body against Alzheimer’s disease (gantenerumab). Six years
later, gantenerumab became the fi rst MorphoSys antibody
to enter late stage clinical development (phase 3). In 2018,
new phase 3 trials where initiated to evaluate and approve
gantenerumab in an optimized dosage regimen.
22
Total Partnerships
(as of Dec. 2018)
new partnerships for proprietary
development: MorphoSys is increasingly entering
into development and marketing partnerships with
other biotech and pharmaceutical companies in order
to advance its proprietary drug candidates. These in-
clude partnerships with GSK (2013 for MOR103), Merck
(2014 for immunoncology), I-Mab Biopharma (2017 for
MOR202 and 2018 for MOR210), Novartis (2018 for
MOR106, together with Galapagos).
service and discovery partnerships: Initia-
tion of a strategic partnership with Novartis in 2004,
which expands into one of the largest antibody research
collaborations in biotech and pharmaceuticals in 2007.
MorphoSys has been researching and discovering anti-
bodies on behalf of pharmaceutical partners since 1997.
These include further partnerships with Bayer (1999),
Roche (2000), Centocor (today: Janssen, 2000), Schering
(2001) and Pfi zer (2003).
development of mor208: In 2010, MorphoSys signs
a license agreement with Xencor Inc. for MOR208. In the
same year, MorphoSys starts clinical development of the
antibody. The fi rst positive data on MOR208 where presen-
ted in 2012. In 2017, the U.S. Food and Drug Administra-
tion awarded MOR208 breakthrough therapy designation
in the blood cancer indication of diffuse large B cell lym-
phoma (DLBCL). MorphoSys intends to develop MOR208
toward regulatory approval as soon as possible.
proprietary drug development: The fi rst
proprietary antibody MOR103 enters clinical develop-
ment in 2008. In 2012, MorphoSys publishes positive
study results with MOR103 in rheumatoid arthritis. The
following year, MorphoSys signs a license agreement
with GlaxoSmithKline for MOR103. In 2018, GlaxoSmith-
Kline presents positive data from a phase 2 trial in
rheumatoid arthritis patients.
first approval: In 2017, MorphoSys’s licensing
partner Janssen receives approval for Tremfya®
(guselkumab) for the treatment of moderate to severe
plaque psoriasis in the United States, Europe and
Canada. Approvals in other countries to follow.
a novel agent against alzheimer’s: In 2006
Partner Roche starts clinical development of a HuCAL anti-
body against Alzheimer’s disease (gantenerumab). Six years
later, gantenerumab became the fi rst MorphoSys antibody
to enter late stage clinical development (phase 3). In 2018,
new phase 3 trials where initiated to evaluate and approve
gantenerumab in an optimized dosage regimen.
22
Total Partnerships
(as of Dec. 2018)
new partnerships for proprietary
development: MorphoSys is increasingly entering
into development and marketing partnerships with
other biotech and pharmaceutical companies in order
to advance its proprietary drug candidates. These in-
clude partnerships with GSK (2013 for MOR103), Merck
(2014 for immunoncology), I-Mab Biopharma (2017 for
MOR202 and 2018 for MOR210), Novartis (2018 for
MOR106, together with Galapagos).
service and discovery partnerships: Initia-
tion of a strategic partnership with Novartis in 2004,
which expands into one of the largest antibody research
collaborations in biotech and pharmaceuticals in 2007.
MorphoSys has been researching and discovering anti-
bodies on behalf of pharmaceutical partners since 1997.
These include further partnerships with Bayer (1999),
Roche (2000), Centocor (today: Janssen, 2000), Schering
(2001) and Pfi zer (2003).
development of mor208: In 2010, MorphoSys signs
a license agreement with Xencor Inc. for MOR208. In the
same year, MorphoSys starts clinical development of the
antibody. The fi rst positive data on MOR208 where presen-
ted in 2012. In 2017, the U.S. Food and Drug Administra-
tion awarded MOR208 breakthrough therapy designation
in the blood cancer indication of diffuse large B cell lym-
phoma (DLBCL). MorphoSys intends to develop MOR208
toward regulatory approval as soon as possible.
proprietary drug development: The fi rst
proprietary antibody MOR103 enters clinical develop-
ment in 2008. In 2012, MorphoSys publishes positive
study results with MOR103 in rheumatoid arthritis. The
following year, MorphoSys signs a license agreement
with GlaxoSmithKline for MOR103. In 2018, GlaxoSmith-
Kline presents positive data from a phase 2 trial in
rheumatoid arthritis patients.
first approval: In 2017, MorphoSys’s licensing
partner Janssen receives approval for Tremfya®
(guselkumab) for the treatment of moderate to severe
plaque psoriasis in the United States, Europe and
Canada. Approvals in other countries to follow.
Roadmap
Maga zine
9
Our Goal: Is to
develop MorphoSys
into a Fully Integrated
Biopharmaceutical
Company.
Nasdaq
2018
nasdaq ipo and establishment of
us presence: With the listing and IPO at Nasdaq in
2018, MorphoSys gains numerous new investors and
strengthens its capital base (gross proceeds USD 239
million). In addition, the US subsidiary MorphoSys US
Inc. is established to prepare the Company’s planned
commercialization for MOR208 subject to FDA approval.
Maga zine
10
Clinical Development at Mor phoSys
o n l i n e r e p o r t
https://reports.morphosys.com/2018/
magazine/hitting-the-home-stretch/
Clinical Development at Mor phoSys
Maga zine
11
Clinical Development at MorphoSys:
Hitting the
home stretch
With the development of the antibody MOR208, MorphoSys
has reached the most advanced development stage as a bio-
techpharmaceutical company. Originally, we started out as
explorers and service providers. We have identified thousands
of antibodies for our pharma partners, the most promising of
which are in development (see following pages). Today, MOR208
is the first antibody from our proprietary pipeline that we
intend to develop to market approval on our own account.
MOR208 is being investigated for the treatment of blood
cancer, such as diffuse large cell B cell lymphoma (DLBCL),
an aggressive cancer of the lymphatic system. With this,
MOR208 gives hope to patients by addressing a high unmet
medical need. For those DLBCL patients who do not respond
to standard therapies, current treatment options are very
limited. We carry out multiple clinical studies and, by now,
can see the home stretch. In October 2017, the U.S. Food and
Drug Administration (FDA) granted breakthrough therapy
designation for MOR208 in combination with lenalidomide.
As we intend to apply for FDA approval by the end of 2019,
we have already started setting up a commercial organization
in the U.S. Prospectively, the development of proprietary drug
candidates up to market approval will be a central pillar of
MorphoSys’s business model.
FINANCIAL STATEMENTSGROUP MANAGEMENT REPORT Maga zine
12
Mor phoSys – A Strong Development Par tner
MD Anderson
Cancer Center
Together with the renowned MD Anderson
Cancer Center at the Universit y of Texas, we
work on the research and development of
therapeutic antibodies against cancer. Based
on our Ylanthia plat form, we will identif y
antibody candidates for jointly selected target
molecules.
GlaxoSmithKline
With GlaxoSmithKline we have entered into
an agreement for the development and com -
mercialization of MOR103. This antibody is
currently in development for the treatment of
patients with rheumatoid ar thritis. Under
the license agreement, we will receive poten -
tial payments totaling 445 million euros and
double - digit royalties on net sales.
MorphoSys – A Strong Development Par tner
Strong partners,
joint success
MorphoSys is a well-respected development partner for
renowned pharmaceutical and biotechnology companies
worldwide. This is not limited to the discovery of compounds,
where we have excellent expertise and experience. We are
also involved in a variety of partnerships that cover the
complete development range – from the identification of
target molecules to later stages of development and all the
way to market approval.
The antibody MOR106 is a good example how to advance the
development successfully with partners. We discovered and
developed MOR106 together with the Belgian company Galapagos
N.V. While Galapagos has identified the target molecule, we have
identified the antibody. Preclinical studies have shown that
MOR106 plays an important role in certain inflammatory skin
diseases. MOR106 is currently in clinical development for the
treatment of atopic dermatitis.
In July 2018, we, together with Galapagos, signed an exclusive
global licensing agreement with the pharmaceutical company
Novartis. Should MOR106 be approved for such a broad indication
as atopic dermatitis, the partner Novartis will bring in the respec-
tive necessary commercial and marketing power. The agreement
includes an upfront and potential success-based milestone pay-
ments. In addition, Novartis will take over all future cost for re-
search and development. In summary, this partnership has created
a network resulting in benefits for all stakeholders: First and
foremost as we hope for the patients, but also for the companies
in terms of joint research and the later commercialization as well
as revenue generation.
Mor phoSys – A Strong Development Par tner
Maga zine
13
Leo Pharma
Dermatolog y: Together with Leo Pharma we have
an ongoing collaboration working on antibody-
based therapies. In 2018 we extended this par tner-
ship to also develop peptide - based therapeutics.
Using their broad experience in dermatolog y, Leo
Pharma selects target molecules and we identif y
suitable drug candidates. In addition, we have the
option to develop resulting drug candidates in
cancer indications ourselves up to market approval.
I-Mab
I - Mab and MorphoSys signed a strategic
collaboration and regional licensing agreement
for the preclinical antibody MOR210 in Novem -
ber 2018. MOR210 has the potential for de -
velopment in the innovative field of immuno -
oncolog y. I - Mab will have exclusive rights to
develop and commercialize MOR210 in China,
Hong Kong, Macao, Taiwan and South Korea,
while we retain the rights in the rest of the
world.
Galapagos
& Novartis
Together with Galapagos, we have entered into
a global licensing agreement with Novar tis
for the development of MOR106 for the treat-
ment of atopic dermatitis. The agreement in -
cludes an upfront payment of 95 million euros,
potential milestone payments of up to 850 mil -
lion euros as well as royalties.
o n l i n e r e p o r t
https://reports.morphosys.com/2018/
magazine/partners/
FINANCIAL STATEMENTSGROUP MANAGEMENT REPORT Maga zine
14
Research at Mor phoSys
there are currently more than 100 anti
body programs in the morphosys pipe
line. i hope that many of these will make
it to the market and that many patients
will benefit from our work.
Stefan Schmidt, Chemical -Technical Assistant at MorphoSys
o n l i n e r e p o r t
https://reports.morphosys.com/2018/
magazine/searching-and-finding/
Research at Mor phoSys
Maga zine
15
Research at MorphoSys
Searching and
Finding the
Right Antibody
MorphoSys identifies the right antibodies for
interesting therapeutic targets in partnerships
with biotech and pharmaceutical companies.
This business model brought success to
MorphoSys, and antibody discovery remains a
pillar of the Company until today. Tremfya® has
now been approved for the treatment of patients
with psoriasis, as the first antibody based on
our technology. Stefan Schmidt was involved in
the discovery of the antibody in the laboratory
in 2003.
Mr. Schmidt, can you still remember how you
and your colleagues discovered Tremfya®?
Stefan Schmidt — We performed several lab exper-
iments to find an antibody for Janssen that is directed
against a subunit of the newly discovered IL-23
molecule. IL-23 is an endogenous messenger sub-
stance that plays a role in the development of psori-
asis. In hindsight, it was pure coincidence that I, of
all people, was involved in the experiment that
eventually lead to the discovery of Tremfya® - it could
have been anyone of our team.
Following the discovery, MorphoSys transferred
Tremfya® to Janssen for further development.
Have you been following this?
Stefan Schmidt — As far as possible, I try to follow
the development of all antibodies we have discovered
for other companies. When the news came out that
Tremfya® was approved in the U.S. – and later also
in other countries such as the EU and Japan – was
just fantastic. Knowing thatpatients now benefit
from what we originally discovered in the laboratory
is very rewarding.
Is there still a need for antibody discovery efforts
today?
Stefan Schmidt — In my opinion, the need for
specific antibodies is greater than ever, as the med-
icine of today moves towards so-called personalized
treatments tailored for specific disease variants or
target molecules. Antibodies are ideal candidates
for such targeted therapies due to their specificity
and selectivity, thereby avoiding unnecessary treat-
ments and side effects.
Besides Tremfya®, are there any other antibod-
ies from MorphoSys’s laboratories that are close
to approval?
Stefan Schmidt — There are currently more than
100 antibody programs in the MorphoSys pipeline.
I hope that many of them will make it to the market,
in the U.S., in Europe, worldwide, and that many
patients will benefit from our work. That’s why we
go to work every day.
FINANCIAL STATEMENTSGROUP MANAGEMENT REPORT T he C ompany
16
Let ter to the Shareholder s
The year 2018 was an outstanding one for MorphoSys. Our achievements in
R&D, corporate development and in strengthening the company’s finances
combine to take us significantly closer to our objective of making MorphoSys
a fully integrated biopharmaceutical company.
All stakeholders in MorphoSys as well as many qualified observers were
deeply impressed by the progress made with our lead investigational pro-
gram, MOR208, in 2018. By year-end, this program had emerged as one
of the most interesting new cancer drug candidates
in the pharmaceutical industry. We also made excel-
lent progress elsewhere in our Proprietary Develop-
ment segment, with deals on MOR106 and MOR210
and encouraging developmental advances for
MOR202 and MOR103. The potential in our Part-
nered Discovery segment was highlighted by the
commercial success of Janssen’s drug Tremfya®,
which reached over half a billion U.S. dollars in
sales in its first full year on the market. We expect
this segment to become an increasingly lucrative
source of income, which we will use to grow our
business, with a clear focus on our Proprietary
Development programs, particularly MOR208.
we are committed to creating
new treatments for patients
suffering from serious diseases –
and thereby building value
for all of our stakeholders.
D r. Simon Moroney, Chief E xecutive Of ficer
Let ter to the Shareholder s
T he C ompany
17
With compelling
clinical data, break-
through therapy desig-
nation from the FDA
and a clear view of the
path to market, we de-
cided to commercialize
MOR208 in the U.S.
and to build an orga-
nization there for this
purpose.
In April, we completed a highly successful listing of the company’s shares on
the Nasdaq stock exchange. We made the decision to list on Nasdaq to en-
sure we make the most of the enormous opportunity that MOR208 represents
for MorphoSys. With maturing clinical data, breakthrough therapy designa-
tion from the FDA and a clear view of the path to market, we are planning to
commercialize MOR208 in the U.S. and are building an organization there
for this purpose. This plan resonated well with investors, leading to an over-
subscribed Nasdaq offering with gross proceeds of US$ 239 million. We are
establishing our commercial organization in the U.S. and the first senior execu-
tives have now been recruited. We are building with a very clear goal in
mind: to ensure that the market launch of MOR208, subject of course to regu-
latory approval, will be a success. If all goes according to plan, this could
happen as early as mid-2020.
All of us here at MorphoSys are very excited about the potential opportunity
to bring MOR208 to market and to help patients suffering from a particularly
aggressive form of cancer, diffuse large B-cell lymphoma (DLBCL). We are
very encouraged by the most recent clinical data from our ongoing study of
MOR208 in combination with lenalidomide (L-MIND) in relapsed or refrac-
tory DLBCL. These data, which we presented in December at the American
Society of Hematology (ASH) Annual Meeting, were superior to the results
that we had published previously in respect of response rates and especially
progression-free survival. One third of all patients who participated in the
study have experienced complete regression of their tumors, and several are
still in remission after two years. If approved, the combination of MOR208
and lenalidomide could provide a new chemotherapy-free regimen to patients
who are in urgent need of more therapeutic options. Ultimately, we believe
that MOR208-based therapies have the potential to become a treatment alter-
native for patients with a variety of B-cell malignancies, and our goal is to
FINANCIAL STATEMENTSGROUP MANAGEMENT REPORT T he C ompany
18
Let ter to the Shareholder s
we will work closely with the fda
to develop our blood cancer
antibody mor208 towards approval
as fast as possible.
D r. Malte Peters, Chief Development Of ficer
make these available to as many patients as possible. To that end, we already
announced plans to bring MOR208 into front-line development in DLBCL
later this year.
Over the course of the year, we also made outstanding progress with the other
programs in our Proprietary Development segment. In July, we were delighted
to announce that, together with our partner Galapagos, we had entered an
exclusive global license agreement with Novartis for MOR106. We are develop-
ing this antibody as a potential treatment for atopic dermatitis, a debilitating
skin disease that affects over 80 million people across the world’s seven largest
markets for pharmaceuticals. Bringing medicines to such a large patient
population is extremely challenging, which is why it made sense for us to secure
the cooperation of a large partner. The deal with Novartis will enable us to
advance MOR106 as quickly and broadly as possible while allowing us to allo-
cate more resources elsewhere, in particular, to the development of MOR208.
Another important partnership is our exclusive strategic collaboration and
regional licensing agreement with I-Mab Biopharma for MOR202. I-Mab is
Our partnerships
should provide a grow-
ing revenue stream
in the years ahead,
they allow us to enter
new territories and
they enable us to ex-
ploit the full potential
of products based on
our technology.
Let ter to the Shareholder s
T he C ompany
19
moving forward with the development of MOR202 as planned and expects
to initiate pivotal clinical trials in multiple myeloma during 2019. In Novem-
ber 2018, we expanded our agreement with I-Mab to include a pre-clinical
program, MOR210. Our relationship with I-Mab takes our product candidates
into territories, most importantly China, that it would be difficult for us to
target ourselves, while allowing us to retain rights in the rest of the world –
a true win-win outcome. We will continue to pursue our own development
plans for MOR202 and aim to start a clinical trial in an autoimmune disease
later this year.
Rounding out the progress in our Proprietary Development segment in 2018
was the confirmation from GSK that they intend to continue developing
MOR103 in rheumatoid arthritis. We look
forward to the start of a phase 3 clinical
trial during 2019.
While our intense focus on MOR208 demands
the majority of our investment, it is important
to acknowledge the solid foundation that our
Partnered Discovery segment provides for
our business. Partnerships in this segment
provide value on several fronts: they should
provide a growing revenue stream in the years
we have a very solid financial
position that allows us to
fully explore the value of our
proprietary therapeutic
candidates.
J ens Holstein, Chief Financial Of ficer
FINANCIAL STATEMENTSGROUP MANAGEMENT REPORT
T he C ompany
20
Let ter to the Shareholder s
ahead, they allow us to enter territories that it
would be difficult for us to reach on our own
and they enable us to exploit the full potential
of products discovered using our technology.
A great example is Janssen’s Tremfya®, the first
therapeutic agent based on MorphoSys’s pro-
prietary technology to gain market approval.
Tremfya® was first approved in 2017 in the
U.S. for the treatment of plaque psoriasis. Other
countries followed shortly thereafter. In 2018,
its first full year on the market, total sales were
US$ 544 million, meaning that Tremfya® is
well on its way to becoming a blockbuster. In its
core indication of psoriasis, Janssen reported
new clinical data in 2018 demonstrating supe-
riority over competitor Cosentyx® in a head-to-
head clinical study, based on a very important clinical metric, the PASI 90
score at week 48. Janssen is conducting 12 late-stage clinical trials of
Tremfya® in a variety of settings, illustrating the advantage for us of working
with a committed partner. We expect sales of Tremfya® to continue to grow
strongly in the years to come, from which MorphoSys will benefit through our
royalty participation.
in order to further strengthen
our pipeline, we bring new
innovative product candidates
into clinical development.
D r. Markus Enzelberger, Chief Scientific Of ficer
To conclude, I would like to mention two critical factors that have contributed
to MorphoSys’s success and our ability to grow. First, our technologies, on
which our extraordinarily rich product pipeline is based. Second, our dedicated
and highly capable people, without whom none of our achievements would
Let ter to the Shareholder s
T he C ompany
21
have been possible. On behalf of MorphoSys’s Management Board, I would
like to express our deep gratitude to all of them for their ongoing efforts,
creativity and commitment to our company’s success.
I would also like to thank you, our shareholders, for your continued support
and for your belief in the company.
Allow me to conclude with a few words on my own behalf. On February 19,
2019, I informed the Supervisory Board of MorphoSys that I will not renew
my contract as a member of the company's Management Board. As a result
of this decision, I will step down as CEO on expiry of my current contract
on June 30, 2020, or when a successor is appointed, whichever comes sooner.
I am immensely proud of everything we have achieved over the past 27 years
since MorphoSys was founded. MorphoSys today is stronger than it has
ever been and I have every confidence in its future. There is only one reason
for my decision: after dedicating such a long time to MorphoSys, I am
looking forward to having more time for other interests, and to exploring
new opportunities.
In the meantime, it’s business as usual. We look forward to another exciting
year ahead as we advance to the next stage in our growth – becoming an
integrated commercial biopharmaceutical company.
MorphoSys is stronger
than it has ever been.
We look forward to
another exciting year
ahead as we advance
to the next stage in our
growth – becoming an
integrated commercial
biopharmaceutical
company.
dr. simon morone y
C H I E F E X E C U T I V E O F F I C E R
FINANCIAL STATEMENTSGROUP MANAGEMENT REPORT G roup Management Repor t
22
C ontents
Group
Management
Report
C ontents
G roup Management Repor t
23
T
R
O
P
E
R
T
N
E
M
E
G
A
N
A
M
P
U
O
R
G
25
49
63
67
71
76
84
Operations and Business Environment
Operating and Financial Review and Prospects
Outlook and Forecast
Shares and the Capital Market
Sustainable Business Development
Risk and Opportunity Report
Statement on Corporate Governance, Group Statement on
Corporate Governance and Corporate Governance Report
113
Subsequent Events
FINANCIAL STATEMENTS
G roup Management Repor t
24
O per ations and B usiness Env ironment
The year 2018 was a successful one for MorphoSys. Our goal is to discover,
develop and commercialize outstanding, innovative therapies for critically ill
patients. The focus of our business activities is on cancer. Working toward
this goal, we made good progress in advancing product candidates at various
stages of development during the year under review. In 2018, we announced
positive data from two ongoing clinical studies on MOR208, our antibody for
the treatment of blood cancer. We have established a wholly-owned subsidi-
ary to build a strong U.S. presence to prepare for the planned commercializa-
tion of MOR208 pending FDA approval. Furthermore, we entered into or
expanded several important partnerships. We and our partner Galapagos
entered into a worldwide, exclusive agreement with Novartis Pharma AG
covering the development and commercialization of our joint program MOR106.
This collaboration will enable us to accelerate and broaden the development
of MOR106 beyond the current focus on atopic dermatitis and to fully exploit
the potential of this drug candidate. Building on our existing collaboration
with I-Mab Biopharma for MOR202 in Greater China, we entered into an
exclusive strategic collaboration and regional licensing agreement for
MOR210, a preclinical-stage antibody directed against C5aR, which has
potential to be developed as an immuno-oncology agent.
We were also pleased to report successes of our partners. Tremfya®, devel-
oped by our partner Janssen and the first approved and marketed therapeutic
antibody based on MorphoSys’s proprietary technology, was granted market-
ing authorization in several countries during 2018, including Japan. Janssen
continued to explore the use of Tremfya® in additional indications and re-
ported positive long-term data in plaque psoriasis. Royalty payments showed
strong year-on-year growth in 2018 which we reinvested in the development
of our proprietary drug programs and in building a commercial organization.
We aim to become a fully integrated biopharmaceutical company, developing
and commercializing our own drugs, and during 2018 we were able to take
important steps towards achieving that goal.
O per ations and B usiness Env ironment
G roup Management Repor t
25
Operations and
Business Environment
Strategy and Group Management
S T RAT EGY AND OBJEC T IVES
MorphoSys intends to discover, develop and commercialize
innovative therapies for patients suffering from serious dis-
eases, with a focus on oncology. Having successfully transi-
tioned from a technology provider to a drug development orga-
nization over the past years, we now, as the next step of our
corporate development path, aim to transform into an inte-
grated commercial biopharmaceutical company. Based on our
leading expertise in antibody, protein and peptide technolo-
gies, we have created, together with our partners, more than
100 therapeutic product candidates, of which 29 are currently
in clinical development. Our main value drivers are our propri-
etary drug candidates, led by our investigational antibody*
MOR208, which is being developed for the treatment of blood
cancers. Guselkumab (Tremfya®), marketed by Janssen, is the
first commercial product based on MorphoSys’s proprietary
technology and is approved in the United States, Canada, Euro-
pean Union, Japan and a number of other countries worldwide.
This antibody, like the majority of our development programs,
is the result of a partnership with a pharmaceutical company.
MorphoSys intends to use the revenues generated from these
partnerships to advance its proprietary development portfolio
which currently comprises 12 programs, one of which is in piv-
otal development.
The Proprietary Development segment focuses on the develop-
ment of therapeutic agents based on our proprietary technology
platforms, candidates in-licensed from other companies and
programs co-developed with partners. During clinical develop-
ment, we determine whether and at which point to pursue a
partnership for later development and commercialization. The
drug candidate can then be either completely out-licensed or
developed further in cooperation with a pharmaceutical or bio-
technology company (co-development). Alternatively, individ-
ual projects may be developed on a proprietary basis until they
reach the market, with MorphoSys commercializing a product
in selected regions.
In the Partnered Discovery segment, MorphoSys generates an-
tibody candidates for partners in the pharmaceutical and bio-
technology industries. We receive contractual payments, which
include 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
support our long-term business model and help fund our propri-
etary development activities.
Both segments are almost exclusively based on MorphoSys’s
innovative technologies, which include HuCAL*, our antibody
library* which is the basis for more than 20 product candidates
currently in clinical development, and the next-generation anti-
body platform Ylanthia*. In addition, over recent years we have
established two types of stabilized peptides: our lanthipeptide
platform, which we gained access to with the acquisition of
Lanthio Pharma B.V. in May 2015, and our HTH* peptide plat-
form, which we developed ourselves. We continue to apply our
resources and expertise to expand and deepen our technolo-
gies. In addition, we added the compounds MOR208 and MOR107
to our portfolio which have been in-licensed and acquired,
respectively.
*S E E G L O S S A R Y – page 188
Our goal is to maximize the portfolio’s value by investing in the
development and, if appropriate, the commercialization of our
proprietary drug candidates while maintaining financial disci-
pline and strict cost control.
GROUP MANAGEMEN T AND PERF ORMANCE INDIC AT ORS
MorphoSys pays equal attention to financial and non-financial
indicators to steer the Group. These indicators help to monitor
the success of strategic decisions and give the Company the
opportunity to take quick corrective action when necessary.
The Company’s management also follows and evaluates selected
early indicators so that it can thoroughly assess a project’s prog-
ress and act promptly should a problem occur.
FINANCIAL STATEMENTS G roup Management Repor t
26
O per ations and B usiness Env ironment
FINANCIAL PERFORMANCE INDICATORS
Our financial performance indicators are described in detail in
the section entitled “Operating and Financial Review and Pros-
pects.” Earnings before interest and taxes (EBIT – defined as
earnings before finance income, finance expenses, impairment
losses on financial assets and income taxes), revenues, operat-
ing expenses, segment results and liquidity (liquidity is pre-
sented in the following balance sheet items: as of December 31,
2018 “cash and cash equivalents”, “financial assets at fair
value, with changes recognized in profit or loss” as well as
“financial assets at amortized cost”; as of December 31, 2017
“cash and cash equivalents”, “available-for-sale financial as-
sets” as well as “financial assets classified as loans and re-
ceivables”) are the key financial indicators we use to measure
our operating performance. Segment indicators are reviewed
monthly, and the budget for the current financial year is re-
vised and updated on a quarterly basis. Each year, the Com-
pany prepares a mid-term plan for the subsequent three years.
A thorough cost analysis is prepared regularly and used to
monitor the Company’s adherence to financial targets and
make comparisons to previous periods.
MorphoSys’s business performance is influenced by factors
such as royalty, milestone and license payments, research and
development expenses, other operating cash flows, existing li-
quidity resources, expected cash inflows and working capital.
These indicators are also routinely analyzed and evaluated
with special attention given to the Statement of profit or loss,
existing and future liquidity and available investment opportu-
nities. The net present value of investments is calculated using
discounted cash flow models*.
T A B L E 0 1
Development of Financial Performance Indicators1
in million €
MORPHOSYS G ROUP
Revenues
Operating expenses
EBIT2
Liquidity3
PROPRIE TARY DE VELOPMENT
Segment revenues
Segment EBIT
PARTNERED DISC OVERY
Segment revenues
Segment EBIT
2018
2017
2016
2015
2014
76.4
(136.5)
(59.1)
454.7
53.6
(53.3)
22.8
13.3
66.8
(133.8)
(67.6)
312.2
17.6
(81.3)
49.2
30.2
49.7
(109.8)
(59.9)
359.5
0.6
(77.6)
49.1
31.0
106.2
(93.7)
17.2
298.4
59.9
10.7
46.3
20.4
64.0
(70.1)
(5.9)
352.8
15.0
(18.4)
49.0
25.9
1 Differences may occur due to rounding.
2 Contains unallocated expenses (see also Item 3.3 of the Notes): 2018: € 19.2 million, 2017: € 16.5 million, 2016: € 13.4 million, 2015: € 13.9 million, 2014: € 13.4 million).
3 Liquidity presented in the following balance sheet items: as of December 31, 2018 “cash and cash equivalents”, “financial assets at fair value, with changes recognized in profit
or loss” as well as “other financial assets at amortized cost”; as of December 31, 2017, 2016, 2015, 2014 “cash and cash equivalents”, “available-for-sale financial assets and
bonds” as well as “financial assets classified as loans and receivables”.
NON - FINANCIAL PERFORMANCE INDICATORS
To secure and expand its position in the therapeutics market,
MorphoSys relies on the steady progress of its product pipeline,
not only in terms of the number of therapeutic product candi-
dates (115 at the end of the reporting year) but also based on the
progress of its development pipeline and prospective market
potential. Innovative technologies, when applied appropriately,
can be used to generate superior product candidates and there-
fore a further key performance indicator is the progress of the
Company’s technology development. In addition to the quality
of our research and development, our professional management
of partnerships is also a core element of our success, as demon-
strated by new contracts and the ongoing progress made within
existing alliances. Details on these performance indicators can
be found in the section entitled “Research and Development
and Business Performance” (page 31).
O per ations and B usiness Env ironment
G roup Management Repor t
27
The non-financial performance indicators described in the sec-
tion “Sustainable Business Development” (page 71) are also
used to manage the MorphoSys Group successfully.
For reporting purposes, MorphoSys uses the Sustainable Devel-
opment Key Performance Indicators (SD KPIs*) recommended by
the SD KPI standard. These indicators are used as benchmarks
for the commercialization rate (SD KPI 2) and include the suc-
cess of proprietary research and development (SD KPI 1) and
partnered programs. In the past five years, there have been no
product recalls, fines or settlements as the result of product
safety or product liability disputes (SD KPI 3).
*S E E G L O S S A R Y – page 188
T A B L E 0 2
Sustainable Development 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 11
Programs in Phase 22
Programs in Phase 3
TOTAL1
PARTNERED DISC OVERY (NUMBER OF INDIVIDUAL ANTIBODIES)
Programs in Discovery
Programs in Preclinic
Programs in Phase 1
Programs in Phase 2
Programs in Phase 33
Programs Launched3
TOTAL
2018
2017
2016
2015
2014
6
1
1
3
1
12
55
24
11
11
2
1
7
1
2
2
1
13
54
24
11
10
2
1
8
1
2
3
0
14
54
22
10
12
2
0
103
101
100
8
2
1
3
0
14
43
25
9
9
3
0
89
5
2
1
2
0
10
40
25
8
8
3
0
84
1 Including MOR107, for which a phase 1 study in healthy volunteers was completed; the compound is currently in preclinical investigation.
2 Thereof two fully out-licensed programs: MOR103/GSK3196165, out-licensed to GSK; MOR106, out-licensed to Novartis; MOR202 is out-licensed to I-Mab Biopharma
for the development in China, Hong Kong, Macao and Taiwan.
3 We still consider Tremfya® as a phase 3 compound due to ongoing studies in various indications. Therefore the number of “Programs in Phase 3” as well as the
“Programs Launched” both include Tremfya®. Regarding the total number of programs in the pipeline, however, we only count it as one program.
LE ADING INDICATORS
MorphoSys follows a variety of leading indicators to monitor
the macroeconomic environment, the industry and the Com-
pany 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 and external
financial reports to acquire information on leading macroeco-
nomic indicators such as industry transactions, changes in the
legal environment and the availability of research funds and
reviews these data carefully.
For active collaborations, there are joint steering committees
that meet regularly to update and monitor the programs’ prog-
ress. These ongoing reviews give the Company a chance to in-
tervene at an early stage if there are any negative develop-
ments and provide it with information about expected interim
goals and related milestone payments well in advance. Partners
in non-active collaborations regularly provide MorphoSys with
written reports so that it can follow the progress of therapeutic
programs.
FINANCIAL STATEMENTS
G roup Management Repor t
28
O per ations and B usiness Env ironment
The business development area uses market analyses to get an
early indication of the market’s demand for new technologies.
By continuously monitoring the market, MorphoSys can quickly
respond to trends and requirements and initiate its own activi-
ties or partnerships.
Organizational Structure
ORGANIZAT ION OF T HE MORPHOSY S GROUP
The MorphoSys Group, consisting of MorphoSys AG and its sub-
sidiaries, develops and commercializes antibodies* and pep-
tides for therapeutic applications. The activities of the Group’s
two business segments are based on its proprietary technolo-
gies. The Proprietary Development segment combines all of the
Company’s proprietary research and development of thera-
peutic compounds. MorphoSys, alone or with partners, devel-
ops its proprietary and in-licensed compounds with the option
to bring them into partnerships, out-license them or market
them in selected regions and therapeutic settings. The develop-
ment of proprietary technologies is also conducted in this seg-
ment. The second business segment, Partnered Discovery,
uses MorphoSys’s technologies to make human* antibody-
based therapeutics on behalf of partners in the pharmaceutical
industry. All business activities within the scope of these col-
laborations are reflected in this segment.
MorphoSys AG is located at its registered office in Planegg near
Munich. MorphoSys AG’s subsidiary Lanthio Pharma B.V. and
its subsidiary LanthioPep B.V. are located in Groningen, the
Netherlands. In order to provide the organizational framework
for a potential future commercialization of our lead compound
MOR208 in the United States, MorphoSys US Inc. was founded
in July 2018. The wholly owned subsidiary of MorphoSys AG
was established in Princeton, New Jersey, USA. In the future, it
is planned to locate the subsidiary in Boston, Massachusetts,
USA. MorphoSys AG’s central corporate functions such as ac-
counting, controlling, human resources, legal, patent, purchas-
ing, corporate communications and investor relations, as well
as the two segments Proprietary Development and Partnered
Discovery, are all located in Planegg. The subsidiaries MorphoSys
US Inc., Lanthio Pharma B.V. and its subsidiary LanthioPep B.V.,
are largely autonomous and independently managed. These sub-
sidiaries generally have their own management and adminis-
tration, as well as human resources, accounting and business
development departments. The subsidiaries Lanthio Pharma
B.V. and LanthioPep B.V. have their own research and develop-
ment laboratories as well. In June 2018, the subsidiary Sloning
BioTechnology GmbH, located in Planegg, Germany, was merged
into MorphoSys AG.
Additional information about the Group’s structure can be
found in the Notes (Item 2.2.1).
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 as well as
on the Nasdaq Global Market, is the parent company of the
MorphoSys Group. In accordance with the German Stock Cor-
poration Act, the Company has a dual management structure
with the Management Board as the governing body with its
four members appointed and overseen 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 Corpo-
rate Governance Report. The Senior Management Group sup-
ports the Management Board of the Company. At the end of
the reporting year, the Senior Management Group consisted of
24 managers from various departments.
Business Activities
DRUG DEVEL OPMEN T
MorphoSys develops drugs using its own research and develop-
ment (R&D) and by collaborating with partners from the phar-
maceutical and biotechnology industry or with academic insti-
tutions. Our core business activity is developing new treatments
for patients suffering from serious diseases. We have a very
broad pipeline, which comprised a total of 115 therapeutic pro-
grams at the end of 2018, 29 of which are in clinical develop-
ment. The first therapeutic agent based on MorphoSys’s propri-
etary technology, which was developed by one of our licensees,
is approved in the United States, Canada, European Union, Japan
and a number of other countries worldwide. Figure 1 shows the
revenue development of the MorphoSys Group divided into our
two business segments Proprietary Development and Part-
nered Discovery, which are described in more detail in the
Strategy and Group Management and Organizational Structure
sections above.
Our Proprietary Development programs are critical to our goal
of becoming a fully integrated biopharmaceutical company that
develops and commercializes its own drugs. We are focusing
our development activities on cancer treatments, but also have
selected programs in inflammatory diseases.
The ability of monoclonal antibodies* to bind to specific anti-
gens* on tumors or activate the immune system against cancer
to unleash a therapeutic effect in patients has led to their dom-
inant role in targeted cancer therapies. According to a report
from the IQVIA Institute, global spending on cancer medicines
rose to approximately US$ 133 billion in 2017. Overall, the
global market for oncology medicines is predicted to reach as
much as US$ 200 billion by 2022. Chronic inflammatory and
O per ations and B usiness Env ironment
G roup Management Repor t
29
01
Revenues of the
MorphoSys Group by
Segment (in million €)1
1 Diff erences due to
rounding.
64.0
106.2
49.7
66.8
76.4
49.0
46.3
49.1
49.2
53.6
59.9
15.0
0.6
17.6
22.8
2014
2015
2016
2017
2018
partnered disc ov ery
pro prie tary de v elo pment
autoimmune diseases* affect millions of patients worldwide and
impose an enormous social and economic burden. The Quin-
tilesIMS Institute estimates the global market for the treatment
of autoimmune diseases will be in the range of US$ 75 billion
to US$ 90 billion in the year 2021.
MorphoSys’s most advanced Proprietary Development programs
are highlighted below in the Research and Development and
Business Performance section on page 31.
Our clinical stage Partnered Discovery programs are developed
entirely under the control of our partners. They comprise not
only programs in our core area of oncology, but also in indica-
tions where we have not established proprietary expertise. The
most advanced Partnered Discovery programs are highlighted
below in the Research and Development and Business Perfor-
mance section on page 31.
technology. Ylanthia is based on an innovative concept for gen-
erating highly specific and fully human antibodies. We expect
Ylanthia to set a new standard for the pharmaceutical indus-
try’s development of therapeutic antibodies in this decade and
beyond. Slonomics* is the Company’s patented, fully automated
technology for gene synthesis and modification, which is used
to generate highly diverse gene libraries in a controlled pro-
cess to be used, for example, for the improvement of antibody
properties. The lanthipeptide technology developed by Lanthio
Pharma B.V., a wholly owned MorphoSys subsidiary, is a valu-
able addition to our existing library of antibodies and opens up
new possibilities for discovering potential drugs based on sta-
bilized peptides. The newest addition to the technology port-
folio is our proprietary Helix-Turn-Helix (HTH) peptide technol-
ogy. In contrast to the lanthipeptides* that are stabilized by a
specific amino acid modification, the HTH peptides are endowed
with an inherent stability by their structure.
T ECHNOL OGIES
MorphoSys has developed a number of technologies that pro-
vide direct access to human antibodies for treating diseases,
which we utilize for both our Proprietary Development and
Partnered Discovery programs. One of the most widely known
MorphoSys technologies is HuCAL, which is a collection of bil-
lions of fully human antibodies and a system for their optimiza-
tion. Another fundamental platform is Ylanthia, a large anti-
body library representing the next generation of antibody
COMMERC IAL
In July 2018, we established a wholly owned subsidiary,
MorphoSys US Inc. The subsidiary focuses on building a strong
U.S. presence to prepare for the planned commercialization of
MOR208 subject to FDA* approval.
*S E E G L O S S A R Y – page 188
›› S E E F I G U R E 01 – Revenues of the MoprhoSys Group by Segment (page 29)
›› S E E F I G U R E 0 2 – MorphoSys’s Product Pipeline (page 30)
›› S E E F I G U R E 0 3 – Active Clinical Studies with MorphoSys Antibodies (page 30)
FINANCIAL STATEMENTS O per ations and B usiness Env ironment
P R O G R A M / P A R T N E R
I N D I C AT I O N
PH AS E
1 2 3 M 1
P R O G R A M / P A R T N E R
I N D I C AT I O N
PH AS E
1 2 3 M 1
Tremfya® (guselkumab) / Janssen/J&J
Psoriasis
Gantenerumab / Roche
Alzheimer’s disease
MOR208 / not partnered
Hematological malignancies
Utomilumab (PF-05082566) / Pfi zer
Cancer
Xentuzumab (BI-836845) / BI
Solid tumors
BAY2287411 / Bayer
Cancer
Anetumab ravtansine (BAY94-9343) / Bayer
Solid tumors
Elgemtumab ( L JM716) / Novartis
Cancer
BAY109388 4 / Bayer
Hemophilia
BHQ880 / Novartis
Multiple myeloma
Bimagrumab (BYM338) / Novartis
Metabolic diseases
CNTO6785 / Janssen/J&J
Infl ammation
Ianalumab (VAY736) / Novartis
Infl ammation
MOR107 3 ( L P2-3) / nicht in Partnerschaft
Not disclosed
NOV-7 (CLG561) / Novartis
Eye diseases
NOV-8 / Novartis
Infl ammation
NOV-9 (LKA651) / Novartis
Diabetic eye diseases
NOV-10 (PCA062) / Novartis
Cancer
MOR103 ( GSK3196165) / GlaxoSmithKline
Infl ammation
NOV-11 / Novartis
Blood disorders
MOR106 / Novartis/Galapagos
Infl ammation
MOR202 / I-Mab Biopharma2
Multiple myeloma
Nov-12 (MAA868) / Novartis
Prevention of thrombosis
NOV-13 (HKT288) / Novartis
Cancer
NOV-14 / Novartis
Asthma
PRV-300 (CNTO3157) / ProventionBio
Infl ammation
Setrusumab (BPS804) / Mereo/Novartis
Brittle bone syndrome
Vantictumab (OMP-18R5) / OncoMed
Solid tumors
Tesidolumab (LFG316) / Novartis
Eye diseases
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
P H A S E
1
2
3
24
27
8
29
19
12
29
25
10
27
31
14
26
32
15
G roup Management Repor t
30
02
MorphoSys’s
Product Pipeline
(December 31, 2018)
1 Market
2 For development in
China, Hongkong,
Taiwan, Macao
3 A phase 1 study in
healthy volunteers was
completed. MOR107 is
currently in preclinical
investigation with a
focus on oncology
indications.
03
Active Clinical Studies*
with MorphoSys Anti-
bodies (December 31)
* S E E G L O S S A R Y :
page 188
2014
2015
2016
2017
2018
O per ations and B usiness Env ironment
G roup Management Repor t
31
INF LUENC ING FAC T ORS
A political goal of many countries is to provide cost-effective
medical care for its citizens as demographic change drives the
need for new forms of therapy. Cost-cutting could slow the in-
dustry’s development. As part of their austerity measures, gov-
ernments in Europe, the United States and Asia have tightened
their healthcare restrictions and are closely monitoring drug
pricing and reimbursement.
The regulatory approval processes in the U.S., Europe and else-
where are lengthy, time-consuming and unpredictable. It typi-
cally takes many years from the start of human clinical testing
to obtain marketing approval of a drug, which depends upon
numerous factors, including the substantial discretion of the
regulatory authorities. Approval laws, regulations, policies or
the type and amount of information necessary to gain approval
may change during the course of a product candidate’s clinical
development and may vary among jurisdictions.
Generic competition, which is already common in the field of
small molecule* drugs, now poses an increasing challenge to
the biotechnology industry due to drug patent expiries. The
technological barriers for generic biopharmaceuticals, or bio-
similars*, are expected to remain high. Nevertheless, many
drug manufacturers, particularly those from Europe and Asia,
are now entering this market and placing more competitive
pressure on established biotechnology companies. In the U.S.,
the approval of biosimilars as an alternative form of treatment
has been very slow; they are, however, gaining more attention
because of increasing pressure in the healthcare sector to reduce
costs. According to the Allied Market Research information
service, the global market for biosimilars will reach US$ 27 bil-
lion in 2020.
Research and Development and
Business Performance
2018 BUSINESS PERF ORMANCE
MorphoSys’s business is strongly focused on advancing our
therapeutic programs in research and development to benefit
patients suffering from serious diseases and to increase
MorphoSys’s value. The clinical development of proprietary
programs with the goal of advancing them toward regulatory
approval and commercialization is our focal point. We strive to
gain access to novel disease-specific target* molecules, product
candidates and innovative technology platforms to advance our
Proprietary Development portfolio. MorphoSys also continues
to participate in the advancements of our partners’ therapeutic
programs through success-based milestone payments and roy-
alties. The first antibody based on MorphoSys’s technology has
been on the market in the U.S. since mid-2017.
The key measures of success of MorphoSys’s research and de-
velopment include:
• the initiation of projects and the progress of individual devel-
opment programs,
• collaborations and partnerships with other companies to
broaden our technology base and pipeline of compounds and
to commercialize our therapeutic programs,
• clinical and preclinical* research results,
• regulatory guidance of health authorities to pursue approval
of individual therapeutic programs,
• robust patent protection to secure MorphoSys’s market position.
PROPRIE TARY DEVEL OPMEN T
On December 31, 2018, the number of Proprietary Development
programs totaled 12, three of which were out-licensed, either
fully or for certain regions only. Five of these programs are in
clinical development, one is in preclinical development, and six
are in the discovery stage. Our Proprietary Development activ-
ities are currently focused on the five clinical candidates:
• MOR208 – an antibody for the treatment of hematological
(blood) cancers for which MorphoSys holds exclusive world-
wide commercial rights
• MOR202 – an antibody for the treatment of multiple myeloma*
and other cancers as well as certain autoimmune diseases for
which we have signed a regional licensing agreement with
I-Mab Biopharma for development and commercialization in
China, Hong Kong, Taiwan and Macao
• MOR106 – an antibody for the treatment of inflammatory dis-
eases for which MorphoSys and Galapagos entered into an
exclusive license agreement with Novartis in July 2018
• MOR103/GSK3196165 – an antibody that we have fully out-
licensed to GlaxoSmithKline (GSK) and which is currently in
clinical development at GSK for the treatment of rheumatoid
arthritis*
• MOR107 – a lanthipeptide developed by our subsidiary Lanthio
Pharma which is currently in preclinical testing in oncology
settings.
*S E E G L O S S A R Y – page 188
In addition to the programs listed above, we are pursuing sev-
eral proprietary programs in earlier-stage research and devel-
opment, including MOR210, a preclinical antibody that was
licensed to I-Mab in November 2018 for China and certain other
territories in Asia.
MOR208
OV ERV I E W
MOR208 is an investigational monoclonal antibody* directed
against the target molecule CD19*. CD19 is broadly expressed
on the surface of B cells*, a type of white blood cell. CD19 en-
hances B cell receptor signaling, an important factor in B cell
survival, making CD19 a potential target for the treatment of
B cell malignancies, including DLBCL* (diffuse large B cell
FINANCIAL STATEMENTS G roup Management Repor t
32
O per ations and B usiness Env ironment
lymphoma) and CLL* (chronic lymphocytic leukemia), indications
for which MOR208 is being developed. The market research
firm Global Data expects the therapeutic market for non-
Hodgkin’s lymphoma (NHL*), a type of B cell malignancy that
includes DLBCL and CLL, to reach approximately US$ 5.5 bil-
lion in 2024.
L-MIND is a phase 2 open-label, single-arm trial evaluating
MOR208 plus lenalidomide (LEN) in patients with r/r DLBCL
who are ineligible for HDCT and ASCT. The study enrolled pa-
tients after up to three prior lines of therapy, with at least one
prior therapy including an anti-CD20* targeting therapy, such
as rituximab (Rituxan®).
Collectively, lymphomas represent approximately 4 % of all can-
cers diagnosed in the United States. NHL is the most prevalent
of all lymphoproliferative diseases, with the National Cancer
Institute estimating that 74,680 new cases occurred in the
United States in 2018. Worldwide, 385,741 new cases per year
were estimated in 2012. DLBCL is the most frequent type of
malignant lymphoma worldwide and accounts for approxi-
mately one-third of all NHLs globally. First-line treatment of
B cell malignancies, including DLBCL, most commonly con-
sists of a combination chemotherapy regimen plus the antibody
rituximab (Rituxan®), also referred to commonly as R-CHOP*
(R, rituximab; CHOP, cyclophosphamide, doxorubicin, vincris-
tine and the corticosteroid prednisone). Yet, despite the thera-
peutic success of first-line R-CHOP in DLBCL, up to 40 % of pa-
tients become refractory to or relapse after initial treatment
with fast progression of disease.
We are developing MOR208 pursuant to a collaboration and
license agreement that we entered into in June 2010 with
Xencor, Inc. (Xencor), under which Xencor granted us an exclu-
sive worldwide license to MOR208 for all indications. Pursuant
to this agreement, except for the phase 1 clinical trial of MOR208
in CLL, which was completed in January 2013, we are responsi-
ble for all development and commercialization activities in con-
nection with MOR208.
O N G O I N G C L I N I CA L T RI A LS A N D C L I N I CA L DATA PRESEN T ED
There are currently three clinical trials* ongoing with MOR208 –
L-MIND* (phase 2 trial in relapsed/refractory DLBCL (r/r* DLBCL)),
B-MIND* (phase 2/3 trial in r/r DLBCL) and COSMOS* (phase 2
trial in r/r CLL and small lymphocytic lymphoma (SLL*). The
main focus of the current MOR208 development program is on
r/r DLBCL. Two of the three ongoing MOR208 clinical studies,
namely the L-MIND and B-MIND trials, are being conducted in
this indication. Both trials are focusing on r/r DLBCL patients
who are not eligible for high-dose chemotherapy (HDCT*) and
autologous stem cell transplantation (ASCT*). The available
therapy options for this group of patients are currently very
limited, thus we see a high unmet medical need for new treat-
ment alternatives.
Important new data from two of our three current studies with
MOR208 were presented during 2018.
Updated interim data from the study were presented in Decem-
ber 2018 at the American Society of Hematology (ASH) Annual
Meeting . These interim data (cut-off date June 5, 2018) had a
median observation time of 12 months, and efficacy results
were based on assessment by the investigators for all 81 pa-
tients enrolled in the study. Patients enrolled had a median age
of 72 years and had received a median of two prior lines of
treatment.
The data showed a response in 47 out of 81 patients (overall
response rate, or ORR*, 58 %) with complete responses (CR*) in
27 (33 %) and partial responses (PR*) in 20 (25 %) patients. The
median progression-free survival (mPFS) was 16.2 months
(95 % confidence interval (CI*) 6.3 months – not reached). Re-
sponses were durable with a median duration of response
(DoR*) not reached (95 % CI: NR – NR), and 70 % of responding
patients were without progression at 12 months (12-month DoR
rate: 70 %, Kaplan-Meier estimate). A significant proportion of
patients (37/81; 46 %) were still on study treatment at data cut-
off, with 19 treated for over 12 months. Median overall survival
(OS*) was not reached (95 % CI: 18.6 months – NR); the 12-month
OS rate was 73 % (95 % CI: 63 % – 85 %).
Response rates and median PFS* similar to those seen overall
were observed in most patient subgroups of interest, including
by Ann Arbor stage, or those patients who were primary refrac-
tory, refractory to last prior therapy, or refractory to rituximab
(Rituxan®).
No unexpected toxicities were observed for the treatment com-
bination and no infusion-related reactions (IRRs*) were reported
for MOR208. The most frequent treatment-emergent adverse
events (TEAEs) with a toxicity* grading of 3 or higher were
neutropenia in 35 (43 %), thrombocytopenia in 14 (17 %), and
anemia in 7 (9 %) patients. Treatment-related serious adverse
events (SAEs*) occurred in 16 (20 %) patients, the majority of
which were infections or neutropenic fever. Forty-one (51 %) pa-
tients required dose reduction of LEN; 58 patients (72 %) could
stay on a daily LEN dose of 20 mg or higher.
We are continuing our discussions with the U.S. Food and Drug
Administration (FDA) to evaluate possible paths to market, in-
cluding the possibility of an expedited regulatory submission
and potential approval based primarily on the L-MIND study. In
October 2017, MOR208, in combination with LEN, was granted
O per ations and B usiness Env ironment
G roup Management Repor t
33
U.S. FDA breakthrough therapy designation (BTD*) for the treat-
ment of r/r DLBCL patients ineligible for HDCT or ASCT based
on preliminary data from the L-MIND study. BTD is intended to
expedite development and review of drug candidates, alone or
in combination with other drugs. It is granted if preliminary
clinical evidence indicates that the drug candidate may provide
substantial improvement over existing therapies in the treat-
ment of a serious or life-threatening disease.
A key goal of the Company is to work towards the submission of
a regulatory filing for MOR208 in r/r DLBCL to the FDA for the
U.S. and possibly to EMA* for submission of a regulatory filing
in Europe, primarily based on data from the L-MIND study.
In parallel, the process is underway to conduct and complete
data collection for the CMC* (chemistry, manufacturing and con-
trols) package required for the regulatory filing and potential
market supply thereafter. The purpose of the CMC package is to
prove a safe and stable commercial-scale production and man-
ufacturing process of the drug.
B-MIND is a phase 2/3 randomized, multi-center trial evalu-
ating MOR208 plus bendamustine compared to rituximab
(Rituxan®) plus bendamustine in patients with r/r DLBCL who
are ineligible for HDCT and ASCT. This ongoing trial is sched-
uled to enroll patients in centers across Europe, the Asia/Pacific
region and the United States. The study is currently in its phase 3
part. In 2018, recruitment and treatment of patients continued
as planned.
COSMOS is a phase 2, two-cohort open-label, multi-center study
evaluating the preliminary safety and efficacy of MOR208
combined with idelalisib (cohort A) or venetoclax (cohort B) in
patients with r/r CLL or SLL previously treated with Bruton’s
tyrosine kinase inhibitor (BTKi) ibrutinib.
Preliminary safety and efficacy data on all 11 patients enrolled
in cohort A (cut-off date: January 29, 2018) were presented at
the European Hematological Association (EHA) Annual Con-
gress in June 2018. Patients enrolled had received a median of
five prior treatment lines (range: 2 – 9). Nine out of the 11 pa-
tients enrolled (82 %) had discontinued prior ibrutinib treatment
due to progressive disease and two patients (18 %) due to toxicity.
The most common TEAEs of grade 3 or higher were hemato-
logic, with neutropenia observed for four patients (36 %) and
anemia for three patients (27 %) being the most common re-
ported events. Eleven treatment-emergent SAEs were reported
in five patients (45 %), none of them being fatal. All five patients
recovered. Six treatment-related SAEs were reported in three
patients (27 %). All except one were suspected to be related to
idelalisib; the other was assessed as being attributable to both
study drugs.
According to the preliminary efficacy analysis conducted by
the investigators, the ORR was 82 %, including one CR (9 %) con-
firmed by bone marrow biopsy and eight PRs (73 %). In addition,
two patients (18 %) showed stable disease (SD). The median ob-
servation time at cut-off was 4.2 months. At the time of data
cut-off, six patients were still on treatment. One patient with a
very good partial response (VGPR*) according to response crite-
ria was taken off the study to receive stem cell transplantation.
Two previously responding patients had to discontinue the
study due to progressive disease. Two patients (one PR, one SD)
discontinued due to adverse events.
At the ASH Annual Meeting in December 2018, preliminary
safety and efficacy data on all 13 patients enrolled into cohort B
(cut-off date: October 15, 2018) were presented. Patients enrolled
had received a median of three prior treatment lines (range:
1 – 4). Nine out of the 13 patients enrolled (69 %) had discontin-
ued prior ibrutinib treatment due to progressive disease, three
patients (23 %) due to toxicity and for one patient the reason was
unknown (8 %).
The most common hematological TEAE was neutropenia, ob-
served for six patients (46 %). Twelve treatment-emergent SAEs
were reported in nine patients (69 %), none of them fatal, and all
were resolved.
According to the preliminary efficacy analysis conducted by
the investigators, ten out of 13 patients enrolled showed an ob-
jective response (ORR 77 %), including three CRs (23 %) con-
firmed by bone marrow biopsy and seven PRs (54 %). Three pa-
tients discontinued study participation in the first cycle without
undergoing a response assessment, two patients thereof due to
IRRs and one patient due to withdrawal of informed consent. No
patients had progressive disease. Five patients showed mini-
mal residual disease (MRD*) negativity, which means that no
tumor cells were detectable in the peripheral blood. The median
observation time was 8.3 months. At the time of data cut-off, all
ten patients who had initially shown a response continued
treatment, and one CR confirmation was pending from bone
marrow for one patient.
MOR202
OV ERV I E W
MOR202 is a recombinant human IgG1 HuCAL monoclonal an-
tibody directed against the target molecule CD38*. CD38 is a
highly expressed and clinically validated target in multiple
myeloma (MM). Scientific research suggests that an anti-CD38
antibody also may have therapeutic activity in solid tumors or
autoimmune and other diseases driven by autoantibodies, such
as light chain amyloidosis or systemic lupus erythematosus.
*S E E G L O S S A R Y – page 188
FINANCIAL STATEMENTS G roup Management Repor t
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O per ations and B usiness Env ironment
MM is a hematological (blood) cancer that develops in the ma-
ture plasma cells in the bone marrow. MM is the second most
common blood cancer worldwide. Development of MOR202 in
MM is currently focused on China, where the patient number
has gradually increased in recent years due to an aging popu-
lation. Yet there are no effective biologics approved in China for
this indication, and current therapies have been associated
with serious side effects and limited treatment efficacy.
We are currently conducting a phase 1/2a trial in MM. During
2018, we announced our decision not to continue development
of MOR202 in MM beyond completion of the currently ongoing
trial. This is in line with previous announcements that we
would not continue to develop MOR202 in MM without having
a suitable partner. However, we continue to support our partner
I-Mab in the development of MOR202 with the aim to gain ap-
proval in MM for the greater Chinese market as planned.
Also during 2018, we made the decision not to start clinical
development of MOR202 in NSCLC as we had originally
planned. This was due to Genmab and Janssen discontinuing a
clinical study of the anti-CD38 antibody daratumumab in com-
bination with a checkpoint inhibitor for the treatment of NSCLC
based on an analysis of interim clinical data and serious safety
findings.
We are continuing to evaluate the development of MOR202
in other indications outside of cancer, including certain auto-
immune diseases.
REG I O N A L AG REEM EN T W I T H I - M A B B I O PH A RM A
We have an exclusive regional licensing agreement for MOR202
with I-Mab Biopharma. Under the terms of the agreement
signed in November 2017, I-Mab has the exclusive rights to de-
velop and commercialize MOR202 in China, Taiwan, Hong Kong
and Macao. At the signing, MorphoSys received an immediate
upfront payment of US$ 20 million. We are also entitled to re-
ceive additional success-based clinical and commercial mile-
stone payments from I-Mab of up to US$ 100 million, as well as
tiered double-digit royalties on net sales of MOR202 in the
agreed regions. In August 2018, we announced that I-Mab had
submitted an investigational new drug (IND*) application to
the Chinese authorities for MOR202 (called TJ202 by I-Mab) for
the treatment of MM.
C L I N I CA L DATA PRESEN T ED
Data from our phase 1/2a study in MM were presented in De-
cember 2018 at the ASH Annual Meeting. The data were based
on the most recent data cut-off after the primary analysis of the
study in r/r MM. The dose escalation trial comprises three
arms: MOR202, MOR202 in combination with the immunomod-
ulatory drug (IMiD) lenalidomide (LEN), and MOR202 in combi-
nation with the IMiD pomalidomide (POM), in each case with
low-dose dexamethasone (DEX).
In total, 56 patients were evaluable for safety and efficacy anal-
ysis in the clinically relevant dose cohorts of MOR202 (4 mg/
kg, 8 mg/kg, 16 mg/kg) by the time of the data cut-off on Octo-
ber 16, 2018. At data cut-off, 10 patients remained in the study.
Of the 56 evaluable patients, 18 received MOR202 plus DEX,
21 received the combination of MOR202 and POM/DEX, and
17 received MOR202 plus LEN/DEX.
MOR202 was given as a two-hour infusion up to the highest
dose of 16 mg/kg. IRRs occurred in 7 % of patients in the clini-
cally relevant dose cohorts of MOR202 and were limited to
grades 1 or 2. Further, the infusion time could be shortened to
30 minutes in the majority of patients still on study treatment
at the data cut-off date.
The most frequent adverse events of grade 3 or higher were
neutropenia, lymphopenia and leukopenia in 52 %, 52 % and
39 % of patients, respectively. No unexpected safety signals
were observed.
Patients treated with MOR202 in combination with LEN/DEX
had a median of two prior treatment lines, 59 % being refractory
to at least one prior therapy. Median PFS was not yet reached.
With five of the 17 patients in this cohort still on study at data
cut-off, the median time on study was 11.8 months. An objec-
tive response was observed in 11 out of 17 patients (65 %), with
two CRs, two VGPRs and seven PRs.
Patients receiving MOR202 with POM/DEX, had a median of
three prior treatment lines, and all were refractory to prior LEN
therapy. Median PFS was 15.9 months. With five out of 21 pa-
tients in this cohort still on study at data cut-off, the median
time on study was 13.4 months. An objective response was ob-
served in ten out of 21 patients (48 %), with two patients achiev-
ing a CR, six patients with a VGPR and two PRs.
Patients treated with MOR202 plus DEX had a median of three
prior treatment regimens, with 67 % being refractory to any
prior therapy. Median PFS in this cohort was 8.4 months. All
patients had discontinued the study before data cut-off; fol-
low-up for this cohort is therefore completed. An objective re-
sponse was observed in five out of 18 patients (28 %); median
time on study was 3.8 months.
O per ations and B usiness Env ironment
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MOR106
MOR106 is an investigational fully human IgG1 monoclonal an-
tibody derived from our Ylanthia library and designed to selec-
tively target IL-17C. MOR106 came from the strategic discovery
and co-development alliance between Galapagos and MorphoSys,
in which both companies contributed their core technologies
and expertise. It is the first publicly disclosed monoclonal anti-
body targeting IL-17C in clinical development worldwide. In
preclinical studies, MOR106 has been shown to inhibit the
binding of IL-17C to its receptor, thus abolishing its biological
activity. Results from rodent inflammatory skin models of
atopic dermatitis (AD*) and psoriasis* support clinical develop-
ment of MOR106 for the treatment of inflammatory diseases. In
July 2018, we announced with Galapagos that we had entered
into a worldwide exclusive development and commercialization
agreement with Novartis Pharma AG (Novartis) for MOR106.
AD, the most severe and common type of eczema, is a chronic
relapsing inflammatory skin disease that causes severe itch,
dry skin and rashes, predominantly on the face, inner side of
the elbows and knees, and on hands and feet. Scratching of the
affected skin leads to a vicious cycle causing redness, swelling,
cracking, scaling of the skin and an increased risk of bacterial
infections. Lichenification, thickening of the skin, is character-
istic in older children and adults. The National Eczema Associ-
ation estimates that AD affects over 30 million Americans, and
up to 25 % of children and 2-3 % of adults. As many as 50 % of AD
patients are diagnosed in the first year of life, and 85 % of pa-
tients have a disease onset before age five. Symptoms commonly
fade during childhood; however, up to 30 % of the patients will
suffer from AD for life. A smaller percentage first develops
symptoms as adults.
WO RL DW I D E E XC LUS I V E D E V ELO PM EN T A N D C O M M ERC I A L IZ AT I O N
AG REEM EN T W I T H N OVA RT IS
Our agreement with Novartis was announced in July 2018, and
received U.S. anti-trust clearance in September 2018. Under the
terms of the agreement, the parties (Galapagos, MorphoSys,
Novartis) will cooperate to execute and broaden the existing
development plan for MOR106 in AD. Novartis holds exclusive
rights for commercialization of any products resulting from the
agreement. All current and future research, development, man-
ufacturing and commercialization costs for MOR106 will be
covered by Novartis. This includes the ongoing phase 2 IGUANA
trial in AD patients, as well as the phase 1 bridging study to
evaluate the safety and efficacy of a subcutaneous formulation
of MOR106 in healthy volunteers and AD patients. MorphoSys
and Galapagos will conduct additional trials to support develop-
ment of MOR106 in AD. Under the terms of the agreement,
Novartis will also explore the potential of MOR106 in indica-
tions beyond AD.
In addition to the funding of the current and future MOR106
program by Novartis, MorphoSys and Galapagos jointly received
an upfront payment of € 95 million. Pending achievement of
certain developmental, regulatory, commercial and sales-based
milestones, MorphoSys and Galapagos are jointly eligible to re-
ceive significant milestone payments, potentially amounting to
up to approximately € 850 million, in addition to tiered royal-
ties on net commercial sales in the low-teens to low-twenties
percent. Under the terms of their agreement from 2008, Galapa-
gos and MorphoSys share all payments equally (50/50).
C L I N I CA L DATA PRESEN T ED
In February 2018, more detailed clinical results from a phase 1
trial with MOR106 in patients with moderate to severe AD were
presented at the American Academy of Dermatology (AAD) con-
ference after initial study data were reported in September
2017. MOR106 showed first signs of activity as well as durable
responses and was generally well tolerated in patients with AD.
This randomized, double-blind, placebo-controlled phase 1 trial
evaluated single ascending doses (SAD) of MOR106 in healthy
volunteers and multiple ascending doses (MAD) in patients
with moderate-to-severe AD. In the MAD part, 25 patients re-
ceived four infusions once-weekly of either MOR106 (at the
doses of 1, 3 and 10 mg/kg body weight) or placebo in a 3:1 ra-
tio. Patients were followed for 10 weeks after the end of the
treatment period. In the MAD part of the study, all adverse
drug reactions observed were mild to moderate and transient in
nature. No SAEs and no IRRs were recorded. MOR106 exhibited
a favorable pharmacokinetic (PK) profile with dose-dependent
exposure.
At the highest dose level of MOR106 (10 mg/kg body weight), in
83 % of patients (5/6) an improvement of at least 50 % in signs
and extent of AD, as measured by the Eczema Area and Sever-
ity Index (EASI*)-50, was recorded at week 4. The onset of activ-
ity occurred within two to four weeks, depending on the dose
administered. Pooled data across all dose cohorts showed that
patients treated with MOR106 achieved an EASI improvement
compared to baseline of 58 %, 62 %, 72 % and 64 % at week 4, 8,
12 and 14, respectively. For patients receiving placebo, the
EASI improvement was 32 %, 40 %, 38 % and 50 %, respectively.
*S E E G L O S S A R Y – page 188
C L I N I CA L T R I A LS I N I T I AT ED
IGUANA phase 2 study in AD: In May 2018, we announced
with Galapagos that the first patient had been enrolled in
IGUANA, a phase 2 study of MOR106 in patients with AD. The
placebo-controlled, double-blind study will evaluate the effi-
cacy, safety and PK of MOR106.
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At least 180 patients with moderate-to-severe AD are planned
to be treated over a 12-week period with one of three different
doses of intravenously (iv) administered MOR106 (1, 3 or 10 mg/
kg) or placebo using two different dosing regimens in multiple
centers across Europe. Dosing at two- or four-week intervals
will be evaluated over the 12-week treatment period, followed
by a 16-week observation period. The primary objective will be
assessed by the percentage change from baseline in EASI score
at week 12.
Phase 1 bridging study. In September 2018, we announced
with Galapagos the initiation of a phase 1 bridging study test-
ing a subcutaneous (sc*) formulation of MOR106. This bridging
study is a parallel-design phase 1 clinical trial being conducted
in two parts. Part 1 is a single center, randomized, open-label
study in healthy volunteers who will be treated with different
single-dose levels of MOR106 administered subcutaneously or
intravenously. Part 2 is a multiple-center, randomized, placebo-
controlled, multiple-dose study in patients with moderate to
severe AD who will be treated subcutaneously for 12 weeks.
Safety and tolerability, PK and occurrence of anti-drug-anti-
bodies after administration of MOR106 will be assessed as
endpoints. In addition, the efficacy of MOR106 will be explored
in subjects with moderate-to-severe AD.
MOR103/GSK3196165
OV ERV I E W
MOR103/GSK3196165 is a fully human HuCAL antibody directed
against the granulocyte-macrophage colony-stimulating factor
(GM-CSF*). Due to its diverse functions in the immune system,
GM-CSF can be considered a target for a broad spectrum of
anti-inflammatory therapies, such as rheumatoid arthritis* (RA),
a chronic inflammatory disorder that affects the lining of joints,
causing a painful swelling that can eventually result in bone
erosion and joint deformity.
The overall market for RA drugs is growing steadily, and GBI
Research expects it will reach US$ 19 billion in the year 2020.
MorphoSys estimates that MOR103/GSK3196165 has the poten-
tial to be the first marketed anti-GM-CSF antibody in RA.
We discovered and advanced MOR103/GSK3196165 into clini-
cal development, before out-licensing it to GlaxoSmithKline
(GSK) in 2013. GSK is now developing the antibody inde-
pendently for RA and bears all of the related costs. MorphoSys
participates in the program’s development and commercializa-
tion through milestone payments up to a total of € 423 million
and through tiered, double-digit royalties on net sales. In 2013,
MorphoSys received an upfront payment of € 22.5 million.
C L I N I CA L DATA PRESEN T ED
GSK conducted a phase 2b study in patients with RA and a
phase 2a study in patients with inflammatory hand osteoarthri-
tis (OA). The corresponding study data were presented at the
2018 American College of Rheumatology (ACR) Annual Meet-
ing in October 2018. GSK has announced that it does not intend
to pursue further development in hand osteoarthritis.
Furthermore, results from the phase 2 dose-ranging study of
MOR103/GSK3196165 in patients with moderate-to-severe RA
who have an inadequate response to methotrexate (MTX) were
presented at the ACR Annual Meeting in October 2018.
The primary objective of this double-blind, placebo-controlled,
dose-ranging study was to assess the efficacy of MOR103/
GSK3196165 in adult patients with active, moderate-to-severe
RA. A total of 222 patients were randomized equally to receive
placebo or MOR103/GSK3196165 (37 patients per arm) at doses
of 22.5 mg, 45 mg, 90 mg, 135 mg or 180 mg, starting with an
induction regimen of five weekly subcutaneous injections fol-
lowed by every other week (EOW) injections until week 50.
Study results from the 180 mg dose arm of MOR103/GSK3196165
were as follows:
Efficacy was shown in the majority of patients, as measured by
a Disease Activity Score taking into account the C-reactive pro-
tein*, (DAS28(CRP*)) of less than 2.6 at week 24 (the primary
endpoint of the study), although this did not reach statistical
significance (week 24: 16 % for MOR103/GSK3196165 180 mg vs
3 % for placebo, p = 0.134).
For DAS28(CRP) change from baseline, there was a rapid on-
set of efficacy, as early as week 1, for all doses of MOR103/
GSK3196165 above 22.5 mg. This improvement continued
throughout the weekly dosing phase and was statistically sig-
nificant at week 12 (–1.27 difference for MOR103/GSK3196165
180 mg from placebo, 95 % CI: –1.91, –0.63; p<0.001).
An improvement in efficacy was maintained through the
EOW dosing phase and was statistically significant at week 24
(DAS28(CRP): –1.82 difference for MOR103/GSK3196165 180 mg
from placebo, 95 % CI: –2.05, –0.23; p < 0.001).
Major secondary endpoints including a number of traditional
measures to assess the efficacy of MOR103/GSK3196165 were
also improved in line with the DAS28(CRP) reduction. The mag-
nitude of improvement in patient-based measures (swollen and
tender joint counts, pain and clinical disease activity index
(CDAI)) was particularly marked.
O per ations and B usiness Env ironment
G roup Management Repor t
37
The safety profile of MOR103/GSK3196165 was similar to that
reported in previous studies. All doses of MOR103/GSK3196165
were well tolerated, and adverse events (AEs), including SAEs,
were reported similarly across treatment groups. The percent-
age of patients experiencing any AE or SAE respectively, was
49 % and 0 % for placebo, 51 % and 5 % for 22.5 mg MOR103/
GSK3196165, 65 % and 3 % for 45 mg MOR103/GSK3196165,
59 % and 5 % for 90 mg MOR103/GSK3196165, 51 % and 3 % for
135 mg MOR103/GSK3196165, and 65 % and 0 % for 180 mg
MOR103/GSK3196165. There were no treatment-limiting safety
findings including serious infections, injection site reactions,
or laboratory abnormalities, all of which were closely monitored
throughout the study. No pulmonary toxicity, including pulmo-
nary alveolar proteinosis, was observed.
In another phase 2a mechanistic 12-week study with 180 mg
MOR103/GSK3196165 presented at the same meeting, a similar
clinical efficacy profile with, in addition, synovitis reduction,
was observed in patients with RA.
MOR107
Lanthipeptides are a class of modified peptides that have been
engineered for improved stability and selectivity. MOR107 is
based on the proprietary technology platform of our Dutch sub-
sidiary Lanthio Pharma B.V. This compound has demonstrated
angiotensin II type 2 (AT2) receptor-dependent activity in pre-
clinical in vivo studies and may have the potential to treat a
variety of diseases. After we had successfully completed a first-
in-human phase 1 study in healthy volunteers in 2017, we con-
tinued our preclinical investigations with MOR107 during 2018,
focusing on oncology indications. In the fourth quarter of 2018,
updated study data led to the need for further studies, and the
existing development plan was adjusted accordingly. This re-
sulted in the expectation of a delayed market entry and a delay
in the occurrence of future cash flows compared to previous
assumptions, which led to an impairment. Further details can
be found in the Notes (Item 5.7.5).
MOR210
OV ERV I E W
MOR210 is a human antibody directed against C5aR* derived
from our HuCAL technology. C5aR, the receptor of the comple-
ment factor C5a*, is being investigated as a potential new drug
target in the field of immuno-oncology* and autoimmune dis-
eases. Tumors have been shown to produce high amounts of
C5a which, by recruiting and activating myeloid-derived sup-
pressor cells (MDSCs), is assumed to contribute to an immune-
suppressive pro-tumorigenic microenvironment. MOR210 is
intended to block the interaction between C5a and its receptor,
thereby being expected to neutralize the immune-suppressive
function of the MDSCs and to enable immune cells to attack the
tumor. MOR210 is currently in preclinical development.
REG I O N A L AG REEM EN T W I T H I - M A B B I O PH A RM A
In November 2018 , we announced that we had entered into an
exclusive strategic collaboration and regional licensing agree-
ment for MOR210 with I-Mab Biopharma. Under the agreement,
I-Mab has exclusive rights to develop and commercialize
MOR210 in China, Hong Kong, Macao, Taiwan and South Korea,
while we retain rights in the rest of the world. The agreement
deepens our existing partnership with I-Mab, building upon
the ongoing collaboration for MOR202.
Under the terms of the agreement, I-Mab will exercise its exclu-
sive license rights for development and commercialization of
MOR210 in its territories. With our support, I-Mab will perform
and fund all global development activities for MOR210, includ-
ing clinical trials in China and the U.S., towards clinical proof-
of-concept (PoC*) in oncology.
We received an upfront payment of US$ 3.5 million from I-Mab
and are eligible to receive development and commercial mile-
stone payments of up to US$ 101.5 million, as well as tiered,
mid-single-digit royalties on net sales of MOR210 in I-Mab’s
territories. In return for the execution of a successful clinical
PoC study, I-Mab is eligible to receive low-single-digit royalties
on net sales generated with MOR210 outside its territories and
a tiered percentage of sub-licensing revenue.
PAR T NERED DIS COVERY
At the end of 2018, we had one Partnered Discovery program on
the market, 24 in clinical development, 24 partnered product
candidates in preclinical development and 55 in discovery. Be-
low, we highlight our most advanced programs and a recently
expanded strategic alliance.
Guselkumab (Tremfya®) – a HuCAL antibody targeting IL-23*
that is being developed and commercialized by our partner
Janssen in plaque psoriasis and other indications. Guselkumab
(Tremfya®) is approved in the United States, Canada, European
Union, Japan and a number of other countries worldwide.
Gantenerumab – a HuCAL antibody targeting amyloid beta*
that is in phase 3 clinical testing by our partner Roche for the
treatment of Alzheimer’s disease.
*S E E G L O S S A R Y – page 188
Other programs – in addition to the two programs above, we
have a large number of programs in various stages of research
and development from our partnerships with major pharmaceu-
tical companies.
LEO Pharma – we have a strategic alliance with LEO Pharma
for the discovery and development of therapeutic antibodies for
the treatment of skin diseases. This agreement was expanded
in 2018 to include peptides.
FINANCIAL STATEMENTS G roup Management Repor t
38
O per ations and B usiness Env ironment
GUSELKUMAB ( TREMF YA®)
OV ERV I E W
Guselkumab (Tremfya®) is a human HuCAL antibody targeting
IL-23 that is being developed and commercialized by Janssen. It
is the first commercial product based on our proprietary tech-
nology. It is approved in the United States, Canada, the Euro-
pean Union and several other countries for the treatment of
moderate-to-severe plaque psoriasis and in Japan for the treat-
ment of various forms of psoriasis, psoriatic arthritis* and pal-
moplantar pustulosis*. IL-23 is a pro-inflammatory protein
which has been identified as a cytokine in autoimmune dis-
eases and is found in the skin of patients with psoriasis and
other inflammatory diseases. It is therefore considered to be a
potential treatment target for inflammatory diseases. The anti-
body binds to the so-called p19 subunit unique to IL-23. Anti-
bodies that bind to IL-23’s p40 subunit will also neutralize
IL-12* and are therefore less specific. Guselkumab (Tremfya®)
is the first approved antibody binding the p19 subunit of IL-23.
Psoriasis is a chronic, autoimmune inflammatory disorder of
the skin characterized by abnormal itching and physically
painful skin areas. It is estimated that about 125 million people
worldwide have psoriasis, with approximately 25 % suffering
from cases that are considered moderate to severe. The inde-
pendent market experts Transparency Market Research fore-
cast the market for psoriasis to grow from € 7.5 billion in 2014
to € 12 billion in the year 2024.
In addition to plaque psoriasis, Janssen is developing gusel-
kumab (Tremfya®) for the treatment of Crohn’s disease*, pediat-
ric psoriasis, psoriatic arthritis, palmar/plantar pustulosis and
a few other indications.
MorphoSys receives royalties on net sales of guselkumab
(Tremfya®) and is eligible to receive milestone payments for
selected future development activities.
A D D I T I O N A L M A RK E T I N G A PPROVA LS REC EI V ED
Building on the first approvals for guselkumab (Tremfya®),
which occurred in 2017 in the U.S., Europe and Canada, during
2018 Janssen received marketing approvals in several addi-
tional countries as follows:
Australia: In April 2018, Janssen’s country subsidiary reported
that guselkumab (Tremfya®) had been approved for the treat-
ment of adults living with moderate-to-severe plaque psoriasis
in Australia.
Brazil: In April 2018, Janssen’s country subsidiary reported
that guselkumab (Tremfya®) had been approved for the treat-
ment of adults living with moderate-to-severe plaque psoriasis
in Brazil.
Japan: In April 2018, we announced that Janssen had reported
that guselkumab (Tremfya®) had received marketing approval
in Japan for the treatment of three forms of psoriasis (plaque,
pustular and erythrodermic psoriasis) and psoriatic arthritis in
patients with moderate-to-severe disease for whom other exist-
ing treatments have failed.
Additionally, in November 2018, Janssen reported that gusel-
kumab (Tremfya®) had been approved in Japan for the treat-
ment of patients with palmoplantar pustulosis who are not
responding to, or are refractory to, existing treatments. Palmo-
plantar pustulosis is a debilitating, chronic skin disease that
causes pustules and inflammation to appear mainly on the
palms of the hands and soles of the feet, greatly affecting pa-
tients’ quality of life. According to a press release issued by
Janssen on November 21, 2018, guselkumab (Tremfya®) was
the first and only biologic treatment available for the estimated
130,000 patients living with palmoplantar pustulosis in Japan.
South Korea: In April 2018, we announced that an affiliate of
Janssen reported that guselkumab (Tremfya®) had been ap-
proved for the treatment of moderate-to-severe adult plaque
psoriasis requiring phototherapy or systemic therapies in South
Korea.
N E W C L I N I CA L T RI A LS I N I T I AT ED
Crohn’s disease pivotal clinical program: In July 2018, we
announced that Janssen had initiated a pivotal phase 2/3 clini-
cal program to evaluate the efficacy and safety of guselkumab
(Tremfya®) in the treatment of patients with moderate to se-
verely active Crohn’s disease, a type of inflammatory bowel
disease affecting any part of the gastrointestinal tract. Ex-
pected to enroll approximately 2,000 patients, the program,
which is named GALAXI, consists of three separate studies:
a phase 2 study (GALAXI 1), followed by two phase 3 studies
(GALAXI 2 and GALAXI 3). In connection with the start of the
GALAXI program, we received two milestone payments from
Janssen; the financial details were not disclosed.
Phase 3 trial in pediatric plaque psoriasis patients: In Sep-
tember 2018, we announced that Janssen had initiated a
phase 3 clinical trial of guselkumab (Tremfya®) in pediatric
patients suffering from chronic plaque psoriasis, the most com-
mon form of psoriasis. According to clinicaltrials.gov, the trial,
PROTOSTAR, is expected to enroll approximately 125 children
between 6 and 18 years of age with plaque psoriasis, and will
evaluate the safety, efficacy, and pharmacokinetics* of gusel-
kumab (Tremfya®) against etanercept and placebo.
O per ations and B usiness Env ironment
G roup Management Repor t
39
Phase 2 trial in hidradenitis suppurativa (HS*): In October
2018, we announced that Janssen had initiated a phase 2 clini-
cal study of guselkumab (Tremfya®) in patients with moder-
ate-to-severe HS, a chronic skin disease also known as acne
inversa. According to clinicaltrials.gov, the randomized, dou-
ble-blind study, NOVA, is expected to enroll approximately
180 adult patients with moderate-to-severe HS and will evalu-
ate the efficacy, safety and tolerability of guselkumab (Tremfya®)
against placebo.
In September 2018, Janssen announced new data that showed
clinically relevant improvements in long-term patient-reported
outcomes (PRO) in patients with plaque psoriasis switched to
guselkumab (Tremfya®) after an initial inadequate response to
adalimumab (Humira®). These long-term findings from Jans-
sen’s phase 3 clinical trial programs – VOYAGE 1 and 2 – in
patients with moderate-to-severe plaque psoriasis were part of
six abstracts presented at the European Academy of Dermatol-
ogy and Venereology (EADV) 2018 Congress.
Phase 2a trial in ulcerative colitis (UC*): In January 2019,
we announced that Janssen had initiated a proof-of-concept
phase 2a clinical trial in patients with moderately to severely
active UC, a chronic inflammatory bowel disease. According to
clinicaltrials.gov, this randomized, double-blind study will eval-
uate the efficacy and safety of guselkumab (Tremfya®) in com-
bination with golimumab compared to guselkumab (Tremfya®)
or golimumab monotherapy in approximately 210 patients with
moderately to severely active UC.
N E W LO N G -T ERM DATA PRESEN T ED I N PL AQ U E P SO RI AS IS
During 2018, our partner Janssen announced the presentation
of new long-term data in patients with plaque psoriasis.
In October 2018 , Janssen announced new long-term data from
the open-label period of the phase 3 VOYAGE 1 clinical trial
that demonstrated stably maintained rates of skin clearance
with guselkumab (Tremfya®) treatment at week 52 and week
156 among adult patients with moderate-to-severe plaque
psoriasis.
According to a press release issued by Janssen, the findings,
presented at the 37th Fall Clinical Dermatology Conference in
Las Vegas, Nevada/USA, showed that nearly 83 % of patients
receiving guselkumab (Tremfya®) in the VOYAGE 1 study
maintained at least a 90 % improvement in the Psoriasis Area
Severity Index (PASI* 90) response, or near-complete skin clear-
ance, and an Investigator’s Global Assessment (IGA) score of
cleared (0) or minimal disease (1) at week 156. According to
Janssen, 96.4 % of patients treated with guselkumab (Tremfya®)
achieved a PASI 75 score at week 156. Furthermore, 53.1 % of
patients achieved an IGA score of 0 and 50.8 % of patients
achieved a PASI 100 response. This measure represents skin
completely cleared of psoriasis plaques (except for residual dis-
coloration).
*S E E G L O S S A R Y – page 188
According to Janssen, of the 494 patients in the treatment
groups receiving guselkumab (Tremfya®) in the study, the per-
centage of patients reporting AEs, SAEs, infections and serious
infections through week 156 were 86.2 %, 13.4 %, 67.8 % and
2.2 %, respectively, consistent with data from earlier read-outs
from the study. No cases of active tuberculosis, opportunistic
infections or serious hypersensitivity reactions were reported
among guselkumab (Tremfya®)-treated subjects.
According to Janssen’s press release, study findings showed
that a switch to guselkumab (Tremfya®) at week 28, after an
inadequate response to adalimumab (Humira®), led to a sus-
tained improvement in PROs in both PSSD and DLQI (Dermatol-
ogy Life Quality Index) scores at week 100. The proportions of
patients with PSSD symptom and signs scores of 0 (i.e. no pa-
tient-reported symptoms or signs of psoriasis) increased from
4.2 % and 1.1 %, respectively, at week 28, to 32.6 % and 18.0 % at
week 100. The proportion of patients with a DLQI score of 0 or
1 (i.e. no impact on patient quality of life) increased from 14.4 %
at week 28 to 65.3 % at week 100, showing consistent improve-
ment and impact on patient well-being after switching to gusel-
kumab (Tremfya®).
In February 2018 , Janssen announced the presentation of data
from the phase 3 VOYAGE 2 trial at the 2018 American Acad-
emy of Dermatology (AAD) Annual Meeting. The data showed
that a vast majority of patients with moderate to severe plaque
psoriasis receiving guselkumab (Tremfya®) who achieved at
least 90 percent improvement in the Psoriasis Area and Sever-
ity Index (PASI 90) at week 28, maintained a PASI 90 response
with continuous treatment through week 72. Findings from the
study also demonstrated that a vast majority of patients origi-
nally randomized to guselkumab (Tremfya®), but withdrawn
from treatment at week 28, regained a PASI 90 response within
six months of initiating guselkumab (Tremfya®) re-treatment.
Results from the trial demonstrated that among patients
who achieved PASI 90 response at week 28 with guselkumab
(Tremfya®), 86 % who continued receiving guselkumab
(Tremfya®) maintained a PASI 90 response through week 72,
while only 11.5 % of patients who were withdrawn from
treatment maintained PASI 90 response. Of 173 patients who
lost PASI 90 response after withdrawal from guselkumab
(Tremfya®), 87.6 % recaptured PASI 90 response six months fol-
lowing re-treatment. No new safety signals were observed with
continuous treatment or re-treatment therapy with guselkumab
(Tremfya®) through week 100.
FINANCIAL STATEMENTS G roup Management Repor t
40
O per ations and B usiness Env ironment
Guselkumab (Tremfya®) data from eight additional abstracts
were also presented at the AAD Annual Meeting, including an
oral presentation of a pooled analysis from the phase 3 VOYAGE
1 and 2 trials evaluating consistency of response by weight
across subgroups of patients through week 24.
The phase 3 VOYAGE 2 trial was a randomized, double-blind,
placebo- and active-comparator-controlled study designed to
evaluate the safety and efficacy of guselkumab (Tremfya®) com-
pared with placebo and adalimumab (Humira®) and of gusel-
kumab (Tremfya®) maintenance therapy compared with with-
drawal of therapy in adult patients with moderate to severe
plaque psoriasis. Patients (n = 992) were randomized to receive
subcutaneous (SC) injections of guselkumab (Tremfya®) 100 mg
at weeks 0, 4, 12 and 20; placebo at weeks 0, 4 and 12 with
crossover to guselkumab (Tremfya®) at weeks 16 and 20 or
adalimumab (Humira®) 80 mg at week 0, followed by 40 mg at
week 1 and every two weeks through week 23. Patients initially
randomized to receive guselkumab (Tremfya®) who achieved a
PASI 90 response (n = 375) at week 28 were re-randomized to
either continued treatment with guselkumab (Tremfya®) (n = 193)
or withdrawal to placebo (n = 182) with re-treatment upon a
50 % or greater loss of PASI improvement at week 28 or week 72
if re-treatment criteria were not met.
In December 2018, Janssen announced results from the ECLIPSE
study demonstrating that guselkumab (Tremfya®) was superior
to secukinumab (Cosentyx®) in treating adults with moderate
to severe plaque psoriasis for the primary endpoint assessed at
week 48. The data were presented at the 3rd Inflammatory Skin
Disease Summit. The phase 3, multicenter, randomized, dou-
ble-blind, active comparator trial was designed to evaluate the
efficacy and safety of guselkumab (Tremfya®) compared with
secukinumab (Cosentyx®) in adult patients with moderate to
severe plaque psoriasis. Patients (n = 1,048) were randomized
to receive 100 mg of guselkumab (Tremfya®) administered by
subcutaneous injection at weeks 0, 4 and 12, followed by eight-
week dosing; or 300 mg of secukinumab (Cosentyx®) adminis-
tered by two subcutaneous injections of 150 mg at weeks 0, 1,
2, 3 and 4, followed by 4-week dosing. The primary endpoint of
the study was the proportion of patients achieving a PASI 90
response at week 48. Secondary endpoints were assessed at
weeks 12 and 48, with safety monitoring through week 56.
Data from the study demonstrated that 84.5 % of patients
treated with guselkumab (Tremfya®) achieved at least 90 % im-
provement in their baseline PASI score at week 48, compared
with 70.0 % of patients treated with secukinumab (Cosentyx®)
(p<0.001). These data, according to Janssen, marked the first-
ever results from a head-to-head study comparing an interleu-
kin (IL)-23-targeted biologic therapy (guselkumab (Tremfya®))
with an IL-17 inhibitor (secukinumab (Cosentyx®)).
ECLIPSE incorporated six major secondary endpoints that used
a fixed statistical sequence procedure to control for multiple
comparisons and included both shorter and longer-term analy-
ses. Guselkumab (Tremfya®) demonstrated non-inferiority to
secukinumab (Cosentyx®) in the first major secondary end-
point, with 84.6 % of patients on guselkumab (Tremfya®) achiev-
ing a PASI 75 response at both weeks 12 and 48 vs. 80.2 % of
those on secukinumab (Cosentyx®) (p<0.001). However, it did
not demonstrate superiority (p = 0.062). Because superiority
was not demonstrated for the first major secondary endpoint,
p-values for all the subsequent major secondary endpoints
were considered nominal.
Three of the remaining major secondary endpoints evaluated
efficacy at week 48, including achievement of a PASI 100 re-
sponse and Investigator’s Global Assessment (IGA) scores of 0
(cleared), or 0 or 1 (cleared or minimal disease). At week 48,
58.2 % of patients receiving guselkumab (Tremfya®) achieved
a PASI 100 response, compared with 48.4 % of patients receiv-
ing secukinumab (Cosentyx®); 62.2 % of patients receiving
guselkumab (Tremfya®) achieved an IGA score of 0 compared
to 50.4 % of patients receiving secukinumab (Cosentyx®); and
85.0 % of patients receiving guselkumab (Tremfya®) achieved
an IGA score of 0 or 1 compared to 74.9 % of patients receiv-
ing secukinumab (Cosentyx®) (all comparisons with nominal
p ≤ 0.001).
The remaining major secondary endpoints assessed non-
inferiority of guselkumab (Tremfya®) versus secukinumab
(Cosentyx®) at week 12. The percentage of patients achieving a
PASI 75 response at week 12 was 89.3 % for guselkumab
(Tremfya®) and 91.6 % for secukinumab (Cosentyx®) (p < 0.001
for non-inferiority); the percentage of patients achieving a PASI
90 response at week 12 was 69.1 % for guselkumab (Tremfya®)
and 76.1 % for secukinumab (Cosentyx®) (p = 0.127 for non-
inferiority).
Through week 44, 27 patients (5.1 %) randomized to the gusel-
kumab (Tremfya®) arm discontinued treatment compared with
48 patients (9.3 %) randomized to the secukinumab (Cosentyx®)
arm.
The safety profiles observed for guselkumab (Tremfya®) and
secukinumab (Cosentyx®) in ECLIPSE were consistent with the
known safety profiles seen in the respective registration trials
and current prescribing information. Similar percentages of
patients receiving guselkumab (Tremfya®) (77.9 %), and secu-
kinumab (Cosentyx®) (81.6 %) reported at least one adverse event
(AE). Serious AEs were reported in 6.2 % of patients receiving
guselkumab (Tremfya®) and 7.2 % of patients receiving secu-
kinumab (Cosentyx®). Serious infections occurred in six patients
receiving guselkumab (Tremfya®) and five patients receiving
secukinumab (Cosentyx®).
O per ations and B usiness Env ironment
G roup Management Repor t
41
GANTENERUMAB
OV ERV I E W
Gantenerumab is a HuCAL antibody targeting amyloid beta
that is being developed by our partner Roche as a potential
treatment for Alzheimer’s disease. Amyloid beta denotes a
group of peptides that are centrally involved in Alzheimer’s
disease as the main component of the amyloid plaques found in
the brains of Alzheimer patients. Gantenerumab binds to the
N-terminus and a section in the middle of the amyloid beta pep-
tide. On binding, the antibody seems to neutralize and disrupt
the formation of amyloid plaque and amyloid oligomers and
may also lead to its clearance by recruitment of microglial cells.
In phase 1 clinical trials, gantenerumab has been shown to re-
duce brain amyloid in mild-to-moderate Alzheimer’s disease
patients. Gantenerumab is being investigated in several clini-
cal studies to see if there is a positive effect from intervening at
an early stage in the disease’s progression. There are currently
no drugs available that fundamentally improve the course of
Alzheimer’s disease. However, the anti-amyloid beta antibody
aducanumab from Biogen Inc., that has been tested in a first-in-
human phase 1 study in 2015, showed a substantial clearance
of amyloid beta deposition in the brain as determined by Posi-
tron Emission Photograpy (PET) and a slowing of the cognitive
decline of the patients. Aducanumab is currently in a phase 1
trial, a phase 2 trial and two phase 3 studies to evaluate its effi-
cacy in slowing cognitive and functional impairment in pa-
tients with prodromal, mild or early Alzheimer’s disease, re-
spectively. The market research and consulting firm GlobalData
has indicated that the global market for Alzheimer’s disease
treatment is expected to grow at double-digit rates each year
from US$ 2.9 billion in 2016 to an estimated US$ 14.8 billion
by 2026.
According to the Alzheimer’s Association, 5.7 million Ameri-
cans are living with Alzheimer’s disease, and that figure is
projected to increase to nearly 14 million by 2050. Alzheimer’s
disease is the sixth leading cause of death in the U.S.
N E W C L I N I CA L DATA PRESEN T ED
In March 2018, data were presented in which gantenerumab
was evaluated at considerably higher doses in an open label
extension (OLE) study than previously tested. The data were
presented at the Alzheimer’s and Parkinson’s disease confer-
ence AAT-AD/PDTM Focus Meeting 2018.
The data assessed the clinical effects of higher doses of gan-
tenerumab measured by amyloid beta reduction in the brain.
Eighty-one patients with prodromal to mild Alzheimer’s dis-
ease were enrolled in the OLE study parts and received higher
doses of up to 1,200 mg of gantenerumab subcutaneously every
4 weeks. The dose increase, from starting levels of 105 mg or
225 mg of gantenerumab to up to 1,200 mg, was administered
using different titration schemes with the goal of controlling
potential safety findings due to the increased doses. Fifty-one
patients had a brain positron emission tomography (PET) scan
to determine amyloid plaques at week 52. According to the data
presented, patients who received higher doses of gantenerumab
showed a greater and consistent amyloid reduction compared to
patients who received lower dosing (105 mg or 225 mg). At
week 52, approximately one-third of the high-dose patients had
amyloid levels below the threshold that classifies a patient as
amyloid beta positive.
A review of the data in the OLE studies did not reveal any new
or unexpected safety findings of the higher doses for this pa-
tient population. As reported previously (Klein et al., 2017,
CTAD presentation ), increased doses of gantenerumab led to
an increase of amyloid-related imaging abnormalities (ARIA),
which, however, remained manageable with the implemented
dosing titration scheme. In the higher doses of up to 1,200 mg,
severity and seriousness of adverse events were comparable to
the lower doses (105 mg or 225 mg) applied in the previous
studies.
N E W PH ASE 3 PRO G R A M I N I T I AT ED I N A L ZH EI M ER ’ S D ISE ASE
In June 2018, we announced that our partner Roche had initi-
ated a new phase 3 development program in patients with Alz-
heimer’s disease. The program consists of two phase 3 trials –
GRADUATE-1 and GRADUATE-2 – which are expected to enroll
approximately 1,520 patients in up to 350 study centers in 31
countries worldwide. The two multicenter, randomized, dou-
ble-blind, placebo-controlled trials will assess the efficacy and
safety of gantenerumab in patients with early (prodromal to
mild) Alzheimer’s disease. The primary endpoint for both trials
is the assessment of signs and symptoms of dementia, mea-
sured as the clinical dementia rating-sum of boxes (CDR-SOB)
score, determined as the change of status from baseline to
week 104. Patients are to receive a significantly higher dose of
gantenerumab than in Roche’s previous trials as a subcutane-
ous injection with titration up to the target dose.
FINANCIAL STATEMENTS G roup Management Repor t
42
O per ations and B usiness Env ironment
OTHER PRO GR AMS
In June 2018 , our partner Bayer brought a new compound
based on MorphoSys’s HuCAL technology into clinical develop-
ment. BAY2287411 is a thorium-227 radiolabeled antibody con-
jugate directed against the target molecule mesothelin. In a
phase 1 clinical trial, BAY2287411 is being tested for the first
time in patients with solid tumors known to express mesothelin
in order to evaluate the safety, tolerability, pharmacokinetics
and anti-tumor activity of this compound.
According to clinicaltrials.gov, in 2018 clinical trials with
bimagrumab in patients with sarcopenia or after hip surgery
by our partner Novartis reached primary completion. At the
end of January 2019, Novartis announced that it would discon-
tinue development in these indications.
Other programs developed by our partners continued to make
progress during 2018.
C OLL ABOR ATION WITH LEO PHARMA
We have an ongoing strategic alliance with LEO Pharma for the
discovery and development of therapeutic antibodies for the
treatment of skin diseases. The initial alliance was signed in
November 2016 to jointly discover and develop antibody-based
therapies in dermatology. Under the terms of this agreement,
we are applying our Ylanthia technology platform to generate
antibody candidates against targets selected by LEO Pharma
and will conduct all development activities up to the start of
clinical testing. LEO Pharma is responsible for clinical develop-
ment and commercialization of resulting drugs in all indica-
tions except cancer.
C O L L A B O R AT I O N E X PA N D ED
In September 2018, we announced with LEO Pharma an expan-
sion of our existing strategic alliance to include peptide-derived
therapeutics. The objective of the expansion is to identify novel,
peptide-derived therapeutics for unmet medical needs that will
be valuable additions to both companies’ pipelines.
Under the terms of the agreement, LEO Pharma will select tar-
gets against which we will identify lead molecules using our
proprietary HTH peptide technology platform. LEO Pharma will
either develop these lead molecules or use them to aid the de-
sign of other drug candidates. LEO Pharma will have exclusive,
worldwide rights and be responsible for development and com-
mercialization of resulting drugs in the area of dermatology.
MorphoSys will have an exclusive option to secure worldwide
rights to any drugs arising from the collaboration in the field of
oncology.
We will receive R&D funding as well as success-based develop-
ment, regulatory and commercial milestone payments, plus
royalties on net sales of peptide drugs commercialized by LEO
Pharma. Further financial details were not disclosed.
PAT EN T S
During the 2018 financial year, we continued to consolidate and
expand our patent protection of our development programs and
our growing technology portfolio, which are our most import-
ant value drivers.
In April 2016, we filed a lawsuit in the United States at the Dis-
trict Court of Delaware against Janssen Biotech and Genmab
A/S for patent infringement of U.S. Patent Number 8,263,746.
U.S. Patents 9,200,061 and 9,758,590 were added to the case in
2017. In filing the lawsuit, we sought redress for alleged in-
fringement of these patents by Janssen’s and Genmab’s daratu-
mumab, a CD38-directed monoclonal antibody indicated for the
treatment of certain patients with multiple myeloma. The U.S.
District Court of Delaware, based on a hearing held Novem-
ber 27, 2018, has ruled in a Court Order on January 25, 2019,
that the asserted claims of the MorphoSys patents are invalid.
The Court thus granted a motion for Summary Judgement of
invalidity filed by Janssen Biotech and Genmab, A/S against
the three patents held by MorphoSys. As a result of this deci-
sion, the jury trial scheduled to start February 11, 2019 to con-
sider Janssen’s and Genmab’s alleged infringement and the
validity of the MorphoSys patents did not take place. On Janu-
ary 31, 2019 we announced that we have settled the dispute
with Janssen Biotech and Genmab A/S. The parties agreed to
drop the mutual claims related to the litigation: MorphoSys dis-
missed claims for alleged patent infringement against Janssen
Biotech and Genmab A/S and will not appeal from the court
order dated January 25, 2019. Janssen and Genmab dismissed
their counterclaims against MorphoSys.
At the end of the financial year, we maintained over 60 different
proprietary patent families worldwide in addition to the numer-
ous patent families we pursue with our partners.
Group Development
In April 2018, we successfully closed an initial public offering
on the Nasdaq U.S. stock exchange. The transaction produced
total gross proceeds of US$ 239.0 million from the sale of
2,075,000 new ordinary shares in the form of 8,300,000 Amer-
ican Depositary Shares (“ADSs”) and from the exercise in full of
the underwriters’ option to purchase 311,250 additional new
ordinary shares in the form of 1,245,000 additional ADSs, at a
price of US$ 25.04 per ADS, respectively. Each ADS represents
1/4 of a MorphoSys ordinary share.
At the Annual General Meeting (AGM) of MorphoSys AG on
May 17, 2018, our shareholders approved all resolutions of the
Company’s management with the required majority of votes.
Dr. George Golumbeski and Michael Brosnan were newly
elected to the Supervisory Board, replacing Dr. Gerald Möller,
who retired from the board, and Klaus Kühn, who resigned for
O per ations and B usiness Env ironment
G roup Management Repor t
43
personal reasons. Dr. Möller’s retirement and Mr. Kühn’s resig-
nation became effective at the conclusion of the 2018 AGM.
Dr. Golumbeski most recently served as Executive Vice Presi-
dent and Executive Advisor for Innovation at Celgene Corpora-
tion, a position from which he retired in April 2018. Over the
last 27 years, he held leadership roles in business and corporate
development, partnering and M&A with global pharmaceutical
and life science companies, including Celgene, Novartis, Elan
Corporation (today: Perrigo) and Schwarz Pharma (today: UCB).
Mr. Brosnan has over 40 years of experience in finance, con-
trolling and auditing. Since 2010, he has served as Chief Finan-
cial Officer of Fresenius Medical Care Management AG, a com-
pany with a dual listing in Germany and the U.S. For over
20 years, he has worked in various leadership and executive
positions for Fresenius Medical Care in the U.S. and Germany.
Additionally, Dr. Marc Cluzel was re-elected to the Supervisory
Board following the expiry of his term of office.
Following the AGM, the Supervisory Board in its inaugural
meeting elected Dr. Marc Cluzel as its new Chairman and
Dr. Frank Morich as Deputy Chairman.
On May 24, 2018, MorphoSys AG published a notification to our
shareholders in the German Federal Gazette pursuant to Sec.
62 Para. 2 Sent. 1, Para. 3 Sent. 3 (German Transformation Act)
indicating its intention to merge Sloning BioTechnology GmbH
as the transferring legal entity into MorphoSys AG, as the ac-
quiring legal entity. Upon entry into the commercial register on
June 28, 2018 and based on the merger agreement date May 17,
2018, Sloning BioTechnology GmbH, as the transferring legal
entity, was merged into MorphoSys AG, as the acquiring legal
entity, with the effective date of January 1, 2018.
In July 2018 , we announced the establishment of a U.S. subsid-
iary, MorphoSys US Inc. We also announced the appointment of
Jennifer Herron as President of MorphoSys US Inc. and Execu-
tive Vice President, Global Commercial. In November 2018 we
reported that Ms. Herron had resigned and James Hussey was
appointed Acting President of the U.S. subsidiary. Mr. Hussey
joined MorphoSys US Inc. in 2018. He has more than 30 years
of experience in leading positions in the biotech and pharma-
ceutical industries. Over the last 25 years, he served in senior
management positions of various pharmaceutical, biotech, and
health care companies. He started his career with Bristol Myers
Squibb (BMS) in 1984, where he served for 11 years holding
positions of increasing responsibility within the US business.
The focus of our U.S. subsidiary will be on building a strong
presence in the U.S. to prepare for the planned commercializa-
tion of MOR208.
In July 2018, MorphoSys AG acquired a minority shareholding
position of 19.9 % in adivo GmbH, Martinsried, in the context of
a seed financing. MorphoSys paid a cash contribution and a
contribution in kind. Adivo is dedicated to the research and
development of veterinary therapeutics. In addition to the
two founding shareholders, who are former employees of
MorphoSys, the only other strategic investors in adivo other
than MorphoSys are two financial investors. Under a licensing
agreement, MorphoSys granted adivo rights to a fully synthetic
canine antibody library based on our proven modular combina-
torial approach.
Effective September 24, 2018, MorphoSys’s shares were in-
cluded in the MDAX. MorphoSys remains a member of the
TecDAX segment, which it has been since 2004. The simultane-
ous inclusion in both the MDAX and TecDAX indices is based
on a revision in rules of the Deutsche Börse for indices, which
came into force on September 24, 2018. The TecDAX now in-
cludes the 30 largest stocks in terms of market capitalization*
and trading volume that are focused on technology. The MDAX
now tracks the 60 largest listed companies with the highest
trading volume after the DAX index, which continues to contain
the 30 largest stocks in Germany.
*S E E G L O S S A R Y – page 188
At the beginning of December, the Company held an Investor
and Analyst Event in New York City dedicated to MOR208.
During this event, the latest L-MIND data, which had been pre-
sented at the 60th ASH (American Society of Hematology) con-
ference in San Diego, were discussed and the Company gave an
outlook on the planned filing strategy. Moreover, further devel-
opment plans with MOR208 in first-line DLBCL and also other
indolent lymphomas were revealed. To give an overview about
the indication and treatment options in DLBCL in more detail,
the event also included a discussion of current treatment op-
tions. The event was attended by investors and analysts and
could also be followed via webcast.
GROUP HEADCOUN T DEVEL OPMEN T
On December 31, 2018, the MorphoSys Group had 329 employ-
ees (December 31, 2017: 326), 134 of whom hold PhD degrees
(December 31, 2017: 132). The MorphoSys Group employed an
average of 327 employees in 2018 (2017: 344).
Of these 329 active employees, 246 were involved in research
and development activities, 62 were involved in general admin-
istration and 21 were involved in selling. All of these employees
are located in our offices in Munich, Germany, in Groningen,
the Netherlands and in Princeton, USA. We have no collective
bargaining agreements with our employees and we have not
experienced any labor strikes.
At the end of the reporting year, we had employees represent-
ing 34 different nationalities (2017: 34) employed for an aver-
age of 7.2 years (2017: 7.6 years).
›› S E E F I G U R E 0 4 – Total Headcount of the MorphoSys Group (page 44)
›› S E E F I G U R E 0 5 – Employees by Gender (page 46)
›› S E E F I G U R E 0 6 – Seniority (page 46)
›› S E E F I G U R E 0 7 – Workforce Turnover Rate (page 46)
FINANCIAL STATEMENTS G roup Management Repor t
44
04
Total Headcount of
the MorphoSys
Group (December 31)
(Number)
O per ations and B usiness Env ironment
T O TA L E M P L O Y E E S
329
365
345
326
329
2014
2015
2016
2017
2018
161
105
60
t
n
e
m
g
e
s
y
b
s
e
e
y
o
l
p
m
e
209
71
49
n
o
i
t
c
n
u
f
y
b
s
e
e
y
o
l
p
m
e
253
246
59
62
14
21
2017
2018
2017
2018
pro prie tary
de v elo pment
partnered
disc ov ery
unallo cated
adminis tr atio n
employees
in r&d
employ ees
in sales
In order to successfully compete for the best employees,
MorphoSys conducts an annual comparison of the Company’s
compensation with that paid by other companies in the biotech
industry and similar sectors and makes adjustments when nec-
essary. The remuneration system at MorphoSys includes fixed
compensation and a variable annual bonus that is linked to the
achievement of corporate goals. Individual goals promote both
the employees’ personal development and the achievement of
key corporate goals. In addition, a “spot bonus” (given “on the
spot”) is promptly awarded to employees for exceptional accom-
plishments. We again made significant use of this instrument
during the reporting year.
A detailed description of our activities to promote successful
long-term human resource development can be found in the
section “Sustainable Business Development.”
O per ations and B usiness Env ironment
G roup Management Repor t
45
CHANGES IN T HE BUSINESS ENVIRONMEN T
According to forecasts by the International Monetary Fund
(IMF) in January 2019, global economic growth for 2018 was
projected to remain stable at 3.7 %. However, with softer mo-
mentum seen in the second half of 2018, the IMF has made
downward revisions from earlier forecasts for certain areas
including in Germany. Earlier downward revisions reflected
surprises that suppressed activity in early 2018 in some major
advanced economies, the negative effects of trade measures
implemented or approved between April and mid-September, as
well as a weaker outlook for some key emerging market and
developing economies arising from country-specific factors,
tighter financial conditions, geopolitical tensions and higher oil
import bills.
The 2018 growth forecast for the advanced economies was pro-
jected to be 2.3 % (2017: 2.4 %). The emerging and developing
economies were expected to experience growth of 4.6 % in 2018
(2017: 4.7 %). The IMF forecast growth in the Euro area of 1.8 %
in 2018 (2017: 2.4 %). The 2018 forecast for Germany was 1.5 %
(2017: 2.5 %). The United States was projected to grow by 2.9 %
in 2018 (2017: 2.2 %). China’s economy was expected to grow
6.6 % (2017: 6.9 %), and the economies of Russia and Brazil were
expected to grow by 1.7 % (2017: 1.5 %) and 1.3 % (2017: 1.1 %),
respectively.
MorphoSys takes into account a wide range of potential macro-
economic risks and opportunities when conducting business
activities. Political uncertainty in the global markets did not
cause us to refrain from or change any key activities in 2018,
nor were our operations affected by fluctuations within individ-
ual countries.
CURRENCY DE VELOPMENTS
At the end of December 2018, the exchange rate of the euro to
U.S. dollar was approximately 1.14–1.15. A number of analysts
expect the euro to remain saddled by soft economic data (partly
a result of the moderation in global trade volumes) and political
uncertainty (including Brexit and Italy). The European Central
Bank, which is still confronted with slow GDP growth, low in-
flation and a fragile banking sector, is unlikely to tighten mon-
etary policy soon. But at some point investors will expect the
central bank to start the process of policy normalization. That,
coupled with other macro-economic and geopolitical factors,
could allow the common currency to bounce back in 2019.
Most of our business is transacted in euros and US dollars.
Therefore, changes in these currencies could have an effect on
our future costs and revenues. Any weakness in the euro ver-
sus the US dollar would have a direct positive influence on our
operating results as our commercial and launch activities are
conducted in the United States. Conversely, a strong euro re-
duces the royalty payments from guselkumab (Tremfya®) sales
incurred in US dollars that are converted into euros. We man-
age this risk as far as possible with appropriate currency hedg-
ing tools.
REGUL ATORY ENVIRONMENT
The healthcare industry’s regulatory environment is domi-
nated by stringent product quality, safety and efficacy require-
ments, which place ever-higher demands on the companies in-
volved. Novel drugs are required to demonstrate a benefit over
existing therapies in order to be approved, gain market accep-
tance and be reimbursed.
The current trend in the United States is toward faster approv-
als by the Food and Drug Administration (FDA). The FDA’s ac-
tions are partly due to legislation adopted in 2012 and the
mechanisms created to reduce review times, such as break-
through therapy designation and the extension of accelerated
approvals. These mechanisms are meant to facilitate a faster
review process for drug candidates that demonstrate a sub-
stantial improvement for patients in urgent need of safer, more
effective treatments, such as cancer patients. Indeed, in 2018,
the FDA approved 59 new medicines, surpassing the previous
year’s record-breaking 46. Biopharmaceutical companies such
as MorphoSys, who are focused on the development of therapies
for indications with high unmet medical need, could potentially
benefit from the mechanisms described above. We have re-
ceived FDA breakthrough therapy designation for our drug
candidate MOR208.
DE VELOPMENT OF THE PHARMACEUTICAL AND
BIOTECHNOLO GY SEC TORS
Worldwide prescription drug sales were projected to be ap-
proximately US$ 830 billion, according to a June 2018 report
by EvaluatePharma. This number is projected to increase to
US$ 1.2 trillion in 2024, a compound average growth rate
(CAGR) of 6.4 %. The report indicated that the pharmaceutical
sector seemed to have become a more stable place. While the
political uncertainty that characterized much of 2017 may not
have settled down, the industry appeared less anxious com-
pared to earlier in the year. Much of the expansion of the mar-
ket is expected to be driven by continuing unmet need in a
number of disorders, as demonstrated by sales forecasts for the
orphan drug market reaching US$262 billion in 2024, account-
ing for 20 % of the total prescription drug market. However,
the ever-present danger of product failure remains an intrinsic
risk of drug development. Companies also remain under pric-
ing pressure from payers, even if the threat of price control
from politicians goes away. The demand for real world evidence
before insurers and governments will consider reimbursing
drugs is expected to continue to intensify, no matter how inno-
vative developers claim their products are.
FINANCIAL STATEMENTS G roup Management Repor t
46
05
Employees
by Gender
(December 31)
06
Seniority
07
Workforce Turnover
Rate (in %)
)
r
e
b
m
u
n
(
s
e
e
n
i
a
r
t
)
%
n
i
(
s
e
e
y
o
l
p
m
e
l
a
t
o
t
e
g
a
r
e
v
a
s
r
a
e
y
O per ations and B usiness Env ironment
4
4
6
2
39
33
23
24
)
r
e
b
m
u
n
(
s
e
v
i
t
u
c
e
x
e
2017
2018
2017
2018
64
2017
36
63
2018
37
2017
2018
< 5
5 -10
10 -15
15 - 2 0
>2 0
2017
2018
7.6
Y E ARS
7.2
YEARS
39 %
30 %
18 %
9 %
4 %
%
%
10.6
10.0
O per ations and B usiness Env ironment
G roup Management Repor t
47
DE VELOPMENT OF THE ANTIBODY SEC TOR
The year 2018 was another highly successful year for the clini-
cal development and marketing approval of therapeutic anti-
bodies. By the end of 2018, marketing approval by the FDA or
European Medicines Agency (EMA) had been granted to 13 new
antibodies, a new record. According to “Antibodies to Watch in
2019,” published in mAbs Journal, 62 monoclonal antibodies
(mAbs) are currently in late-stage clinical studies, represent-
ing the largest number to date at this stage of advanced devel-
opment. Thirty-three of the 62 mAbs are being developed as
cancer treatments. Our lead proprietary development product
candidate, MOR208, is listed as one of the “antibodies to watch”
in this report.
We regard the successful development and commercialization
of the antibody segment as a generally positive signal and a
validation of our development focus on this drug class. How-
ever, no conclusions can be drawn regarding the likelihood of
clinical or market success of individual drug candidates.
The market for cancer drugs – the primary market for most of
MorphoSys’s proprietary compounds – remains one of the most
attractive and fastest-growing segments of the pharmaceutical
industry. EvaluatePharma stated that worldwide oncology sales
were approximately US$ 104 billion in 2017, projected to grow
to US$ 233 billion in 2024, at a CAGR of 12 %. In 2024, five of
the top ten companies in oncology are expected to maintain
their 2017 leadership positions. Outside the top ten, the rest of
the industry is expected to have a CAGR of 22 %, bringing their
market share in 2024 up to nearly 40 % from nearly 22 % in
2017. Oncology is the leading therapy area in terms of sales and
is projected to continue to be the dominant therapy segment
in 2024, with sales reaching US$ 233 billion in 2024 (2017:
US$ 104 billion) and an expected CAGR of 12.2 % per year.
Looking at mergers and acquisitions (M&A) activity, according
to BioCentury, the number of biotech takeouts closed in 2018
was 55 compared to 60 in 2017, a decline of 8 %. The total value
of those deals, though, was up 8 % to US$ 65.2 billion. Not in-
cluded in this figure is Takeda’s $ 62 billion acquisition of
Shire, which was announced in 2018 but closed in early Janu-
ary 2019.
According to BioCentury, the top tier of companies have raised
enough capital to weather nearly any storm. The year 2018 saw
the biotech sector setting records in the total amount of money
raised in venture and IPOs, while the amount raised through
follow-ons was second behind 2015. But most of the sector
didn’t participate in the cash grab; BioCentury’s analysis of
public biotech balance sheets shows that about 40 % of loss-
making companies have one year of cash or less. For those who
did not refinance, the window closed with no IPOs or follow-ons
having been completed since the start of the U.S. government
shutdown on December 22nd as of January 14th. Information on
the development of the stock market environment can be found
in the section “Shares and the Capital Market.”
FINANCIAL STATEMENTS
G roup Management Repor t
48
08
Revenues by Region
(December 31) (in %)
O per ating and F inancial Rev iew and Prospects
71
29
41
59
90
10
87
13
75
25
09
Revenues Proprietary
Development and
Partnered Discovery
(December 31)
(in million €)1
1 Diff erences due to
rounding.
2014
2015
2016
2017
2018
euro pe and asia
no rth ameri ca
T O TA L
64.0
106.2
49.7
66.8
76.4
59.9
53.6
43.6
42.3
43.6
41.9
15.0
5.4
4.0
5.6
0.6
17.6
7.3
19.3
3.5
2014
2015
2016
2017
2018
segment partnered disc ov ery
segment partnered disc ov ery
funded research and licesing fees
success-based payments
segment proprietary
de v elo pment
O per ating and F inancial Rev iew and Prospects
G roup Management Repor t
49
Operating and Financial Review
and Prospects
You should read the following discussion and analysis of the
financial condition and results of operations of the Company in
conjunction with the consolidated financial statements and
the related notes thereto included elsewhere in this report. In
addition to historical financial information, the following dis-
cussion contains forward-looking statements that reflect our
plans, estimates and opinions. Our actual results could differ
materially from those discussed in these forward-looking state-
ments. Factors that could cause or contribute to these differ-
ences or cause our actual results or the timing of selected
events to differ materially from those anticipated in these for-
ward-looking statements include those set forth under “Risk
Factors,” “Special Note Regarding Forward-Looking Statements”
and elsewhere in this report.
Our consolidated financial statements comply with both the
IFRSs published by the International Accounting Standards
Board (IASB) and those adopted by the EU. The consolidated
financial statements also take into account the supplementary
provisions under commercial law, which must be applied in
accordance with Section 315e (1) of the German Commercial
Code (Handelsgesetzbuch – HGB).
Results of Operations
REVENUES
Revenues increased by 14 % or € 9.6 million, from € 66.8 mil-
lion in 2017 to € 76.4 million in 2018. The increase in revenues
was primarily a result of a € 47.5 million upfront payment re-
ceived and fully recognized in 2018 following the signing of an
exclusive global license agreement with Novartis Pharma AG
for the development and commercialization of MOR106. Had
revenues in the 2018 financial year continued to be recognized
in accordance with IAS 18, revenues would have been € 1.1 mil-
lion higher than under the application of IFRS 15, the new ac-
counting standard governing revenue recognition. In 2017, rev-
enues were significantly and positively affected by funded
research and license fees from a collaboration agreement with
Novartis that concluded at the end of 2017 as well as by the
signing of an exclusive regional license agreement with I-Mab
Biopharma for the development and commercialization of
MOR202 in China, Taiwan, Hong Kong and Macao. On a re-
gional basis, revenues with biotechnology and pharmaceutical
companies in the United States and Canada increased by more
than 100 %, or € 10.7 million, from € 8.7 million in 2017 to
€ 19.4 million in 2018 primarily due to higher success-based
payments received mainly from Janssen. Revenues with cus-
tomers in Europe or Asia decreased by 2 %, or € 1.0 million,
from € 58.1 million in 2017 to € 57.1 million in 2018.
In 2018, 95 % of our revenues were attributable to activities
with our partners Novartis, Janssen and I-Mab Biopharma,
whereas 90 % of our revenues in 2017 were attributable to activ-
ities with the same partners. This change was due to the
MOR106 agreement with Novartis in 2018 and receipt of the
related upfront payment.
In 2017, revenues increased by 34 %, or € 17.1 million, from
€ 49.7 million in 2016 to € 66.8 million in 2017. The increase in
revenues was primarily a result of a $20.0 million (equal to
€ 16.8 million at the then-prevailing exchange rate) upfront
payment received and fully recognized in 2017 following the
signing of an exclusive regional license agreement with I-Mab
Biopharma for the development and commercialization of
MOR202 in China, Taiwan, Hong Kong and Macao. In 2016 and
2017, revenues were significantly and positively affected by
funded research and license fees from a collaboration agree-
ment with Novartis that concluded at the end of 2017. On a re-
gional basis, revenues with biotechnology and pharmaceutical
companies in the United States and Canada increased by 71 %,
or € 3.6 million, from € 5.1 million in 2016 to € 8.7 million in
2017, primarily due to higher success-based payments received
mainly from Janssen. Revenues with customers in Europe or
Asia increased by 30 %, or € 13.4 million, from € 44.7 million in
2016 to € 58.1 million in 2017 primarily due to the upfront pay-
ment received from I-Mab Biopharma, which was partially off-
set by lower revenues received from Novartis in 2017.
In 2017, 90 % of our revenues were attributable to activities with
our partners Novartis, I-Mab Biopharma and Janssen, whereas
95 % of our revenues in 2016 were attributable to activities with
our partners Novartis, Pfizer and Janssen. This change is due to
entry into the agreement with I-Mab Biopharma in 2017 and
receipt of the related upfront payment.
›› S E E F I G U R E 0 8 – Revenues by Region (page 48)
›› S E E F I G U R E 0 9 – Revenues Proprietary Development and Partnered Discovery
(page 48)
PROPRIE TARY DEVEL OPMEN T
In 2018, revenues in our Proprietary Development segment in-
creased by € 36.0 million, from € 17.6 million in 2017 to
€ 53.6 million in 2018. This increase was due to the revenues
recognized from the upfront payment received under our
MOR106 agreement with Novartis.
FINANCIAL STATEMENTS G roup Management Repor t
50
O per ating and F inancial Rev iew and Prospects
In 2017, revenues in our Proprietary Development segment
increased by € 17.0 million, from € 0.6 million in 2016 to
€ 17.6 million in 2017. This increase was due to the revenues
recognized from the upfront payment received under our 2017
agreement with I-Mab Biopharma.
PAR T NERED DIS COVERY
In 2018, revenues in our Partnered Discovery segment de-
creased by € 26.4 million, from € 49.2 million in 2017 to
€ 22.8 million in 2018. These amounts included € 41.9 million
in 2017 and € 3.5 million in 2018 in funded research and li-
cense fees. The decrease was primarily driven by the termi-
nated collaboration arrangement with Novartis in 2017. The
Partnered Discovery segment also included € 7.3 million in 2017
and € 19.3 million in 2018 in success-based payments received
primarily from Janssen. Revenues in our Partnered Discovery
segment included royalties on net sales of Tremfya® in the
amount of € 1.9 million in 2017 and € 15.4 million in 2018.
In 2017, revenues in our Partnered Discovery segment increased
by € 0.1 million, from € 49.1 million in 2016 to € 49.2 million
in 2017. These amounts included € 43.6 million in 2016 and
€ 41.9 million in 2017 in funded research and license fees,
received primarily in connection with the collaboration with
Novartis as well as € 5.6 million in 2016 and € 7.3 million
in 2017 in success-based payments received primarily from
Janssen and Novartis. Revenues in our Partnered Discovery
segment included € 1.9 million of royalties on net sales of
Tremfya in 2017. As a result of the conclusion of our collabora-
tion arrangement with Novartis, we no longer expect to receive
significant recurring research and license fees from Novartis,
and further revenues received from Novartis, if any, will con-
sist of milestone payments and royalties from sales of approved
products.
Operating Expenses
In 2018, operating expenses increased by 2 %, or € 2.7 million,
from € 133.8 million in 2017 to € 136.5 million in 2018. This
increase was driven by higher cost of sales and selling ex-
penses as well as higher administrative expenses. The line
item “cost of sales” was presented for the first time in the third
quarter of 2018 and consisted of expenses in connection with
services being rendered while transferring projects to custom-
ers such as I-Mab Biopharma. In 2018, cost of sales amounted to
€ 1.8 million. The Group started presenting “selling expenses”
as a separate line item since January 1, 2018. In 2018, selling
expenses amounted to € 6.4 million compared to € 4.8 million.
The presentation of selling expenses led to a change in the pre-
sentation of research and development expenses and general
and administrative expenses for 2017. These items were re-
duced by € 3.5 million and € 1.3 million, respectively, and the
corresponding amounts are now included in “selling expenses.”
Research and development expenses decreased by 6 %, or
€ 6.9 million, from € 113.3 million in 2017 to € 106.4 million
in 2018 mainly as a result of decreased expenses for external
services related to development activities in our Proprietary
Development segment as well as decreased expenses in our
Partnered Discovery Segment. General and administrative ex-
penses increased by 39 %, or € 6.2 million, from € 15.7 million
in 2017 to € 21.9 million in 2018 mainly due to higher person-
nel expenses and costs for external services.
In 2018, operating expenses in our Proprietary Development
segment increased by 8 %, or € 7.9 million, from € 99.1 million
in 2017 to € 107.0 million in 2018, primarily due to an increase
in research and development expenses and selling expenses.
Research and development expenses in our Proprietary Devel-
opment segment, including technology development, increased
by 2 %, or € 2.0 million, from € 96.3 million in 2017 to € 98.3 mil-
lion in 2018 mainly due to an increase in research and develop-
ment expenses for MOR208.
In 2018, operating expenses in our Partnered Discovery seg-
ment decreased by 50 %, or € 9.4 million, from € 18.9 million in
2017 to € 9.5 million in 2018, primarily due to a decrease in
research and development expenses. Research and develop-
ment expenses in our Partnered Discovery segment decreased
by 51 %, or € 8.8 million, from € 17.3 million in 2017 to € 8.5 mil-
lion in 2018. Research and development expenses in our Part-
nered Discovery segment in 2017 related primarily to the
Novartis collaboration, which was concluded in 2017.
In 2017, operating expenses increased by 22 %, or € 24.0 mil-
lion, from € 109.8 million in 2016 to € 133.8 million in 2017.
This increase was driven by higher research and development
as well as general and administrative expenses. Research and
development expenses increased by 21 %, or € 19.3 million,
from € 94.0 million in 2016 to € 113.3 million in 2017 mainly as
a result of increased expenses for external services related to
development in our Proprietary Development segment. General
and administrative expenses increased by 17 %, or € 2.3 mil-
lion, from € 13.4 million in 2016 to € 15.7 million in 2017
mainly due to higher personnel expenses and costs for external
services.
In 2017, operating expenses in our Proprietary Development
segment increased by 26 %, or € 20.6 million, from € 78.5 mil-
lion in 2016 to € 99.1 million in 2017, primarily due to an in-
crease in research and development expenses. Research and
development expenses in our Proprietary Development seg-
ment, including technology development, increased by 24 %, or
€ 18.7 million, from € 77.6 million in 2016 to € 96.3 million in
2017 due to increases mainly in research and development ex-
penses for MOR208, MOR106 and MOR202.
O per ating and F inancial Rev iew and Prospects
G roup Management Repor t
51
10
Selected R&D Expenses
(December 31)
(in million €)
T O TA L
56.0
78.7
94.0
113.3
106.4
61.1
44.3
21.0
15.0
17.8
29.2
25.6
21.0
25.1
22.3
28.5
21.1
47.9
30.9
25.3
2.3
3.0
2.3
2.6
2.3
2014
2015
2016
2017
2018
e x ternal l ab o r ato ry fundin g
perso nnel
c o nsumab les
other (includes expenses for intan-
gible assets, technical infrastructure
and external services)
In 2017, operating expenses in our Partnered Discovery seg-
ment increased by 4 %, or € 0.8 million, from € 18.1 million in
2016 to € 18.9 million in 2017, primarily due to an increase in
research and development expenses. Research and develop-
ment expenses in our Partnered Discovery segment increased
by 5 %, or € 0.8 million, from € 16.5 million in 2016 to € 17.3 mil-
lion in 2017. Research and development expenses in our Part-
nered Discovery segment related primarily to the Novartis col-
laboration, which is now concluded.
›› S E E F I G U R E 10 – Selected R&D Expenses (page 51)
RESEARCH AND DEVEL OPMEN T
In 2018, research and development expenses decreased by 6 %,
or € 6.9 million, from € 113.3 million in 2017 to € 106.4 million
in 2018, primarily due to lower expenses for external laboratory
services and personnel which were partially offset by higher
expenses for intangible assets. External laboratory services
and other expenses (including legal and scientific consulting
services) decreased from € 61.1 million in 2017 to € 47.9 mil-
lion in 2018, primarily due to lower expenses for external labo-
ratory services related to the licensing agreements for MOR202
and MOR106. Personnel expenses decreased from € 28.5 mil-
lion in 2017 to € 25.3 million in 2018, primarily due to lower
share-based compensation and severance expense (in the ag-
gregate by € 1.5 million).
FINANCIAL STATEMENTS G roup Management Repor t
52
O per ating and F inancial Rev iew and Prospects
Expenses for intangible assets increased from € 13.5 million
in 2017 to € 22.8 million in 2018. Expenses for intangible as-
sets in 2018 were mainly driven by impairment charges of
€ 19.2 million primarily related to the impairment of goodwill
for MOR107 and € 9.8 million in 2017 related to the termination
of the cooperation with Aptevo Therapeutics for the develop-
ment of MOR209. Depreciation and other costs for infrastruc-
ture expenses increased from € 4.9 million in 2017 to € 5.4 mil-
lion in 2018, primarily due to higher insurance expenses.
Other expenses remained unchanged at € 2.8 million in 2017
and 2018. Expenses for consumable supplies decreased from
€ 2.6 million in 2017 to € 2.3 million in 2018.
In 2017, research and development expenses increased by 21 %,
or € 19.3 million, from € 94.0 million in 2016 to € 113.3 million
in 2017, primarily due to higher expenses for external labora-
tory services and personnel. External laboratory services and
other expenses (including legal and scientific consulting ser-
vices) increased from € 44.3 million in 2016 to € 61.1 million in
2017, primarily due to increased expenses related to our Propri-
etary Development segment. Personnel expenses increased
from € 25.1 million in 2016 to € 28.5 million in 2017, primarily
due to higher share-based compensation and severance ex-
pense (in the aggregate by € 2.5 million) in connection with the
conclusion of the Novartis collaboration, which were only par-
tially offset by a decrease in the number of employees active in
research and development.
Expenses for intangible assets remained almost unchanged
and decreased slightly from € 13.7 million in 2016 to € 13.5 mil-
lion in 2017. Expenses for intangible assets mainly represent
impairment charges of € 9.8 million in 2017 related to the ter-
mination of the cooperation with Aptevo Therapeutics for the
development of MOR209 and € 10.1 million in 2016. In 2017, the
reason for the impairment was the termination of the coopera-
tion with Aptevo Therapeutics due to the expectation of a delay
in the development plan, a delayed market entry and a delay in
the occurrence of future cash flows compared to previous as-
sumptions. In 2016, the reason for the partial impairment was
the expectation of a lower inflow of benefits and of a delay in the
occurrence of future cash flows*. Depreciation and other costs
for infrastructure expenses decreased from € 5.9 million in
2016 to € 4.9 million in 2017, primarily due to one-time costs
related to our move to a new building in 2016. Other expenses
increased from € 2.6 million in 2016 to € 2.8 million in 2017
primarily due to higher maintenance expenses for laboratory
equipment. Expenses for consumable supplies increased from
€ 2.3 million in 2016 to € 2.6 million in 2017 in line with the
increase in our research and development operations.
*S E E G L O S S A R Y – page 188
SEL L ING
Selling expenses increased by 33 %, or € 1.6 million, from
€ 4.8 million in 2017 to € 6.4 million in 2018, primarily due to
higher personnel expenses and external services. Personnel
expenses increased from € 1.8 million in 2017 to € 2.5 million
in 2018 due to intensified commercialization efforts for
MOR208. Expenses for external services increased from
€ 2.7 million in 2017 to € 3.0 million in 2018.
Selling expenses increased by 100 %, or € 2.4 million, from
€ 2.4 million in 2016 to € 4.8 million in 2017, primarily due to
higher external services. Expenses for external services in-
creased from € 0.3 million in 2016 to € 2.7 million in 2017.
GENERAL AND ADMINIS T RAT IVE
In 2018, general and administrative expenses increased by
39 %, or € 6.2 million, from € 15.7 million in 2017 to € 21.9 mil-
lion in 2018, primarily due to higher personnel expenses and
costs for external services. Personnel expenses increased from
€ 11.8 million in 2017 to € 15.0 million in 2018, primarily due
to higher deferred compensation for share-based incentive
plans, recruitment expenses and wages. Expenses for external
services increased from € 2.2 million in 2017 to € 4.5 million in
2018, primarily due to one-time costs related to our initial pub-
lic offering on the Nasdaq. Other expenses increased from
€ 0.7 million in 2017 to € 1.0 million in 2018, primarily due to
higher rent expenses.
In 2017, general and administrative expenses increased by
17 %, or € 2.3 million, from € 13.4 million in 2016 to € 15.7 mil-
lion in 2017, primarily due to higher personnel expenses. Per-
sonnel expenses increased from € 9.2 million in 2016 to
€ 11.8 million in 2017, primarily due to higher deferred com-
pensation for share-based incentive plans and bonus pay-
ments. Other expenses decreased from € 0.8 million in 2016
to € 0.7 million in 2017, primarily due to one-time costs related
to our move in 2016 to a new building.
Other Income
In 2018, other income increased by 47 %, or € 0.5 million, from
€ 1.1 million in 2017 to € 1.6 million in 2018 and mainly con-
sisted of currency gains in an amount of € 0.5 million in 2017
and € 0.7 million in 2018, gains from the recognition of previ-
ously unrecognized intangible assets of € 0 in 2017 and
€ 0.4 million (resulting from contribution in kind of the invest-
ment in adivo GmbH) in 2018, grant income in an amount of
€ 0.2 million in 2017 and € 0.2 million in 2018 and miscella-
neous income of € 0.4 million in 2017 and € 0.4 million in 2018.
O per ating and F inancial Rev iew and Prospects
G roup Management Repor t
53
In 2017, other income increased by 57 %, or € 0.4 million, from
€ 0.7 million in 2016 to € 1.1 million in 2017 and mainly con-
sisted of grant income in an amount of € 0.2 million in 2017 and
€ 0.3 million in 2016, currency gains in an amount of € 0.5 mil-
lion in 2017 and € 0.2 million in 2016 and miscellaneous in-
come of € 0.5 million in 2017 and € 0.2 million in 2016.
Other Expenses
In 2018, other expenses decreased by 59 %, or € 1.0 million,
from € 1.7 million in 2017 to € 0.7 million in 2018. Other ex-
penses mainly consisted of currency losses in an amount of
€ 0.8 million in 2017 and € 0.5 million in 2018 and miscella-
neous expenses of € 0.9 million in 2017 and € 0.2 million in
2018.
In 2017, other expenses increased by € 1.1 million, from
€ 0.6 million in 2016 to € 1.7 million in 2017. Other expenses
mainly consisted of currency losses in an amount of € 0.8 mil-
lion in 2017 and € 0.4 million in 2016 and miscellaneous ex-
penses of € 0.8 million in 2017 and € 0.2 million in 2016.
EBIT
EBIT, defined as earnings before finance income, finance ex-
penses, impairment losses on financial assets and income
taxes, amounted to € –59.1 million in 2018, compared to an
EBIT of to € –67.6 million in 2017.
Finance Income
Finance income decreased by 43 %, or € 0.3 million, from
€ 0.7 million in 2017 to € 0.4 million in 2018, reflecting lower
returns from investments. Finance income mainly consisted of
realized gains from derivatives of € 0.4 million in 2017 and
€ 0.3 million in 2018 and interest income of € 0.2 million in
2017 and € 0.1 million in 2018 received from investments in
term deposits with fixed or variable interest rates.
In 2017, finance income decreased by 50 %, or € 0.7 million,
from € 1.4 million in 2016 to € 0.7 million in 2017 reflecting
lower returns from investments. Finance income mainly con-
sisted of interest income of € 1.0 million in 2016 and € 0.2 mil-
lion in 2017 received from investments in term deposits with
fixed or variable interest rates, € 0.3 million in 2016 and less
than € 0.1 million in 2017 in realized gains from the divest-
ment of available-for-sale financial assets and bonds and
€ 0.1 million in 2016 and € 0.4 million in 2017 in realized gains
from derivatives.
Finance Expenses
In 2018, finance expenses decreased by 5 %, or € 1.1 million,
from € 1.9 million in 2017 to € 0.8 million in 2018 and primar-
ily consisted of losses on marketable securities and derivatives
of € 1.5 million in 2017 and € 0.4 million in 2018 and interest
expenses of € 0.5 million in 2017 and € 0.3 million in 2018.
In 2017, finance expenses increased by 46 %, or € 0.6 million,
from € 1.3 million in 2016 to € 1.9 million in 2017 and consisted
primarily of losses on derivatives of € 1.4 million and interest
expenses of € 0.4 million in 2017. In 2016, finance expenses
mainly consisted of € 1.2 million in realized losses from the
sale of available-for-sale financial assets and bonds.
Income Tax Expenses
In 2018, income tax benefits amounted to € 4.3 million and in
2017 income tax expenses amounted to € 1.0 million. The in-
come tax benefit is mainly the consequence of derecognition of
a deferred tax liability resulting from the impairment of intan-
gible assets.
The effective income tax rate changed from negative 1.5 % in
2017 to 7.1 % in 2018. The difference to the expected tax rate of
26.7 % (which would have resulted in an expected income tax
benefit of € 16.1 million in 2018 and € 18.3 million in 2017) is
primarily the result of the non-recognition of deferred tax as-
sets on current year tax losses of € 14.5 million in 2018 and
€ 22.0 million in 2017 as well as permanent differences re-
sulting from transaction costs in connection with the US IPO
of negative € 3.7 million in 2018 and the non-recognition of
deferred tax assets on temporary differences of € 0.3 million
in 2018.
In 2017, income tax expenses increased by 100 %, or € 0.5 mil-
lion, from € 0.5 million in 2016 to € 1.0 million in 2017, due in
large part to an income tax benefit in 2016 related to certain
losses that were carried back to offset 2015 taxable income. In
2017, no such tax loss carry back was possible. The effective
income tax rate changed from negative 0.9 % in 2016 to negative
1.5 % in 2017. The difference between the expected tax rate of
26.7 % (which would have resulted in an expected income tax
benefit of € 18.3 million in 2017 and € 16.0 million in 2016) is
primarily the result of the non-recognition of deferred tax as-
sets on current year tax losses of € 22.0 million in 2017 and
€ 13.4 million in 2016 and the non-recognition of deferred tax
assets on temporary differences of negative € 3.3 million in
2017 and € 3.8 million in 2016.
FINANCIAL STATEMENTS G roup Management Repor t
54
O per ating and F inancial Rev iew and Prospects
Consolidated Net Profit/Loss for
the Period
In 2018, the net result for the period amounted to € –56.2 mil-
lion (2017: € –69.8 million).
T A B L E 0 3
Multi-Year Overview – Statement of Profit or Loss1
in million €
Revenues
Cost of Sales
Research and Development Expenses2
Selling Expenses2
General and Administrative Expenses2
Other Income/Expenses
EBIT
Finance Income/Expenses
Impairment Losses on Financial Assets
Income Tax Benefit/(Expenses)
Consolidated Net Profit/(Loss)
Earnings per Share, basic and diluted (in €)3
Earnings per Share, basic (in €)
Earnings per Share, diluted (in €)
2018
2017
2016
2015
2014
76.4
(1.8)
66.8
0.0
(106.4)
(113.3)
(6.4)
(21.9)
1.0
(59.1)
(0.3)
(1.0)
4.3
(56.2)
(1.79)
–
–
(4.8)
(15.7)
(0.6
(67.6)
(1.2)
0.0
(1.0)
(69.8)
(2.41)
–
–
49.7
0.0
(94.0)
(2.4)
(13.4)
0.2
(59.9)
0.1
1.0
(0.5)
(60.4)
(2.28)
–
–
106.2
0.0
(78.7)
0.0
(15.1)
4.7
17.2
3.4
0.0
(5.7)
14.9
-
0.57
0.57
64.0
0.0
(56.0)
0.0
(14.1)
0.2
(5.9)
1.6
0.0
1.3
(3.0)
(0.12)
–
–
Shares Used in Computing Earnings per Share (in units), basic and diluted3
31,338,948
28,947,566
26,443,415
–
25,903,995
Shares Used in Computing Earnings per Share (in units), basic
Shares Used in Computing Earnings per Share (in units), diluted
Dividends Declared per Share
–
–
–
–
–
–
–
–
–
26,019,855
26,244,292
–
–
–
–
1 Differences due to rounding.
2 In 2018, selling expenses were presented for the first time. In order to provide comparative information for the previous year, the figures for 2017 and 2016 have been adjusted
accordingly. The figures for 2015 and 2014 were not adjusted due to materiality reasons.
3 Basic and diluted Earnings per Share are the same in each of the years ended December 31, 2018, 2017, 2016 and 2014, because the assumed exercise of outstanding stock
options and convertible bonds would be anti-dilutive due to our consolidated net loss in the respective periods.
Liquidity and Capital Resources
S OURCES OF F UNDING
We have funded our operations primarily through the issuance
of ordinary shares and through cash received in the ongoing
operations of our business, including upfront fees, milestone
payments, license fees, royalties, and support fees from our
strategic partners and government grants.
“financial assets at amortized cost”. As of December 31, 2017,
liquidity had been presented in the balance sheet items “cash
and cash equivalents”, “available-for-sale financial assets” as
well as “financial assets classified as loans and receivables”.
Liquidity as of December 31, 2018 is presented in the balance
sheet items “cash and cash equivalents”, “financial assets at
fair value, with changes recognized in profit or loss” as well as
As of December 31, 2018, we had € 45.5 million in cash and
cash equivalents, € 44.6 million in financial assets at fair value,
with changes recognized in profit or loss, and € 364.7 million
in current and non-current financial assets at amortized cost.
O per ating and F inancial Rev iew and Prospects
G roup Management Repor t
55
As of December 31, 2017, we had € 76.6 million in cash and
cash equivalents, € 86.5 million in available-for-sale financial
assets and € 149.1 million in current other financial assets cat-
egorized as “loans and receivables.”
Cash in excess of immediate working capital requirements is
invested in accordance with our investment policy, primarily
with a view to liquidity and capital preservation. Investments
are primarily made in money market funds, corporate bonds
and term deposits with fixed or variable interest.
shareholders, increased fixed payment obligations or the secu-
rities may have rights senior to those of our ordinary shares or
the ADSs. If we incur indebtedness, we could become subject to
covenants that would restrict our operations and potentially
impair our competitiveness, such as limitations on our ability
to incur additional debt, limitations on our ability to acquire,
sell or license intellectual property rights and other operating
restrictions that could adversely impact our ability to conduct
our business.
We do not have any financial indebtedness, and we are not sub-
ject to any operating covenants or capital requirements.
Cash Flows
USES OF F UNDING
Our primary use of cash is to fund research and development
costs related to the development of our product candidates. Our
primary future funding requirements include the development
of our proprietary clinical pipeline (primarily MOR208) and the
advancement of our earlier stage wholly-owned or co-developed
product candidates.
We believe that our existing cash and cash equivalents and
other financial instruments (including cash invested in various
financial instruments as described above) will be sufficient to
fund our anticipated operating expenses for at least the next
twelve months.
We have based this estimate on assumptions that may prove to
be wrong, and we could use our capital resources sooner than
we currently expect. Additionally, the process of testing prod-
uct candidates in clinical trials is costly, and the timing of prog-
ress in these trials is uncertain.
Because our product candidates are in various stages of devel-
opment and the outcome of these efforts is uncertain, we cannot
estimate the actual amounts necessary to successfully com-
plete the development and commercialization of our product
candidates or whether, or when, we may achieve profitability.
We will likely require additional capital for the further develop-
ment of our existing product candidates, regulatory approval
processes, the potential buildout of a commercial organization
and for our operation as a public company in the U.S. and may
also need to raise additional funds sooner to pursue other inli-
censing or development activities related to additional product
candidates. Until we can generate a sufficient amount of reve-
nue, we expect to finance future cash needs primarily through
public or private equity or debt offerings, including convertible
bonds. Additional capital may not be available on reasonable
terms, if at all. If we are unable to raise additional capital in
sufficient amounts or on terms acceptable to us, we may have to
significantly delay, scale back or discontinue the development
or commercialization of one or more of our product candidates.
If we raise additional funds through the issuance of debt or
equity securities, it could result in dilution to our existing
C ASH F L OWS PROVIDED BY / USED IN OPERAT ING
AC T IVI T IES
In 2018, net cash used in operating activities was € 33.3 million,
primarily driven by the consolidated net loss of € 56.2 million,
partially offset by non-cash charges of positive € 27.4 million,
and changes in operating assets and liabilities and taxes paid
of negative € 4.5 million. The consolidated net loss of € 56.2 mil-
lion was primarily driven by expenses incurred to fund our
ongoing operations, in particular research and development
expenses, selling expenses and general and administrative
expenses. Non-cash charges consisted primarily of impairment
expenses for intangibles assets in the amount of € 24.0 million,
deferred compensation for share-based payment of € 5.6 mil-
lion and depreciation and amortization of tangible and intan-
gible assets of € 3.8 million, offset by an income tax benefit of
€ 4.3 million. Changes in operating assets and liabilities for
2018 consisted primarily of an increase in accounts receivable
by € 6.6 million and a decrease in other liabilities by € 2.7 mil-
lion, offset by contract liabilities in the amount of € 2.4 million
incurred during the year as well as an increase in accounts
payable and accruals by € 1.9 million. The increase in accounts
receivable was mainly due to a comparatively higher level of
receivables outstanding at year-end. The decrease in other lia-
bilities was mainly due to the payment of tax liabilities and the
repayment of a governmental cost subsidy. The contract liabil-
ity incurred during the year mainly related to annual license
fees. The increase in accounts payable and accruals was mainly
due to an increase in external laboratory services that were
outstanding at year end.
In 2017, net cash used in operating activities was € 38.4 million,
primarily driven by the consolidated net loss of € 69.8 million,
partially offset by non-cash charges of positive € 0.7 million,
and changes in operating assets and liabilities and taxes paid
of € 30.6 million. The consolidated net loss of € 69.8 million was
primarily driven by expenses incurred to fund our ongoing
operations, in particular research and development expenses
and general and administrative expenses. Changes in operating
assets and liabilities for 2017 consisted primarily of € 18.4 mil-
lion in deferred revenue received during the year, a € 7.8 million
increase in accounts payable and accruals and a € 3.1 million
increase in other liabilities. The deferred revenue received during
the year mainly related to annual license fees. The increase in
FINANCIAL STATEMENTS G roup Management Repor t
56
O per ating and F inancial Rev iew and Prospects
In 2016, net cash used in investing activities was € 80.8 mil-
lion, primarily driven by purchase of financial assets of
€ 423.4 million, partially offset by sales of financial assets and
bonds of € 343.5 million. Use of cash in investing activities
during the period primarily related to a shift in the composition
in our investment portfolio.
C ASH F L OWS PROVIDED BY / USED IN F INANC ING
AC T IVI T IES
In 2018, net cash provided by financing activities was
€ 179.5 million and mainly related to the gross proceeds from
our initial public offering on the Nasdaq of € 193.6 million off-
set by the related issuance costs of € 15.0 million.
In 2017, net cash provided by financing activities was € 8.2 mil-
lion and mainly related to exercises of convertible bonds by
members of the Management Board and the senior management.
In 2016, net cash provided by financing activities was
€ 110.4 million. Cash provided by financing activities during
the period primarily related to our capital increase in Novem-
ber 2016, resulting in gross proceeds of € 115.4 million.
Investments
In 2018, MorphoSys invested € 1.8 million in property, plant
and equipment (2017: € 1.3 million), mainly laboratory equip-
ment (i.e. machinery) and computer hardware. Depreciation of
property, plant and equipment in 2018 decreased to € 1.8 mil-
lion (2017: € 2.0 million).
The Company invested € 0.6 million in intangible assets in
2018 (2017: € 11.8 million). Amortization of intangible assets
was below the prior year’s level and amounted to € 1.9 million
in 2018 (2017: € 2.1 million). In 2018, impairment of € 15.1 mil-
lion was recognized on the in-process R&D programs, thereof
€ 13.4 million on the MOR107 program (2017: impairment of
€ 9.8 million was recognized on the in-process MOR209/ES414
program).
accounts payable and accruals was mainly due to an increase
in external laboratory services primarily related to the MOR208
program that were outstanding at year end. The increase in
other liabilities was mainly due to the deferral of the rent-free
period for the rental agreement for our headquarters.
In 2016, net cash used in operating activities was € 46.6 mil-
lion, primarily driven by the consolidated net loss of € 60.4 mil-
lion, after consideration of the net non-cash charges of negative
€ 0.7 million, and changes in operating assets and liabilities as
well as taxes paid of € 14.4 million. Consolidated net loss of
€ 60.4 million, after consideration of the net non-cash charges
of negative € 0.7 million, was primarily driven by expenses
incurred to fund our ongoing operations, in particular research
and development expenses and general and administrative
expenses. Net cash provided by changes in operating assets
and liabilities for 2016, consisted primarily of € 17.4 million in
deferred revenue prepayments received during the year and a
€ 13.0 million increase in accounts payable and accruals, par-
tially offset by a € 13.9 million increase in prepaid expenses
and other assets. The prepayments for deferred revenue re-
ceived during the year mainly related to annual license fees.
The increase in accounts payable and accruals was mainly due
to an increase in external laboratory services. The increase in
prepaid expenses and other assets was mainly due to an in-
crease in the purchase of combination compounds and prepaid
fees for external laboratory services, in each case primarily
related to our MOR208 program.
C ASH F L OWS PROVIDED BY / USED IN INVES T ING
AC T IVI T IES
In 2018, net cash used in investing activities was € 177.3 mil-
lion, primarily driven by the purchase of financial assets in the
amount of € 451.3 million, of which € 366.8 million were classi-
fied at amortized cost, partially offset by proceeds from the sale
of financial assets in the amount of € 276.4 million, of which
€ 150.0 million were classified at amortized cost. Cash used in
investing activities primarily related to the investment of the
proceeds from our initial public offering on the Nasdaq as well
as a shift in the composition in our investment portfolio as finan-
cial assets matured and were sold and new, similar financial
assets were purchased.
In 2017, net cash provided by investing activities was € 32.9 mil-
lion, primarily driven by proceeds from the sale of financial
assets in the amount of € 210.2 million, partially offset by the
purchase of financial assets in the amount of € 164.4 million, of
which € 108 million were classified as loans and receivables.
Cash provided by investing activities primarily related to a
shift in the composition in our investment portfolio as financial
assets matured and were sold and new, similar financial assets
were purchased.
O per ating and F inancial Rev iew and Prospects
T A B L E 0 4
Multi-Year Overview – Financial Situation1
G roup Management Repor t
57
in million €
2018
2017
2016
2015
2014
Net Cash Provided by/Used in Operating Activities2
Net Cash Provided by/Used in Investing Activities2
Net Cash Provided by/Used in Financing Activities2
Cash and Cash Equivalents (as of 31 December)
Financial Assets at Fair Value through Profit or Loss3
Other Financial Assets at Amortized Cost, Current Portion3
Other Financial Assets at Amortized Cost, Net of Current Portion3
Available-for-sale Financial Assets3
Bonds, Available-for-sale3
Financial Assets Categorized as Loans and Receivables, Current Portion3
Financial Assets Categorized as Loans and Receivables, Net of Current Portion3
(33.3)
(177.3)
179.5
45.5
44.6
268.9
95.7
0.0
0.0
0.0
0.0
(38.4)
32.9
8.2
76.6
0.0
0.0
0.0
86.5
0.0
149.1
0.0
(46.6)
(80.8)
110.4
73.9
0.0
0.0
0.0
63.4
6.5
136.1
79.5
(23.5)
86.3
(4.1)
90.9
0.0
0.0
0.0
64.3
33.1
94.6
15.5
(14.2)
(21.5)
(3.9)
32.2
0.0
0.0
0.0
106.0
7.5
157.0
50.0
1 Differences due to rounding.
2 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.
3 In 2018, due to the first time adoption of IFRS 9 Financial Instruments, the items representing liquidity are presented in different balance sheet than in prior years.
Net Assets
ASSE T S
As of December 31, 2018, total assets amounted to € 538.8 mil-
lion and were € 123.4 million above their level on December 31,
2017 (€ 415.4 million). Current assets increased by € 48.2 mil-
lion. This change was mainly driven by an overall increase in
financial assets and cash and cash equivalents as well as from
an increase in accounts receivable and was partly offset by the
decline in prepaid expenses and other current assets.
As of December 31, 2018, an amount of € 44.6 million (Decem-
ber 31, 2017: € 86.5 million) was invested in various money
market funds and reported under “financial assets at fair value
through profit or loss.” On December 31, 2017, such investments
were reported as “available-for-sale financial assets.” The cate-
gory “other financial assets at amortized cost” included finan-
cial instruments totaling € 268.9 million (December 31, 2017:
€ 149.1 million). These instruments comprised mainly term
deposits with either fixed or variable interest rates as well as
three commercial papers. In 2017 such investments were re-
ported in the category “loans and receivables”.
Non-current assets increased by € 75.2 million to € 149.9 mil-
lion compared to their level of € 74.7 million on December 31,
2017. The main reason for this change was an increase in
non-current financial assets in the category “other financial
assets at amortized cost, net of current portion” which was
partially offset by a decline of the line item “In-process R&D
Programs”.
L IABIL I T IES
Current liabilities decreased from € 47.7 million on Decem-
ber 31, 2017 to € 45.9 million on December 31, 2018. This effect
mainly resulted from a decrease in other provisions and con-
tract liabilities.
Non-current liabilities (December 31, 2018: € 4.5 million; De-
cember 31, 2017: € 9.0 million) decreased mainly due to the
decline in deferred tax liabilities. The decrease in deferred tax
liabilities is mainly related to the impairment of in-process
R&D programs.
FINANCIAL STATEMENTS G roup Management Repor t
58
O per ating and F inancial Rev iew and Prospects
On December 31, 2018, the Company held 281,036 shares of
treasury stock valued at € 10,398,773, representing a decline of
€ 1,428,208 compared to December 31, 2017 (319,678 shares,
€ 11,826,981). The cause of the decline was the transfer of
17,129 shares of treasury stock valued at € 636,414 to the Man-
agement Board and Senior Management Group from the perfor-
mance-based 2014 long-term incentive program (LTI). The vest-
ing periods for this LTI program expired on April 1, 2018.
Beneficiaries were given the option to receive a total of 17,219
shares within six months. In May 2018, the Management Board,
the Senior Management Group and certain employees of the
Company who are not part of the Senior Management Group
received a one-time entitlement in a total fixed amount of
€ 2.1 million. As of December 31, 2018, 20,105 shares in an
amount of € 2.1 million have been transferred to beneficiaries
as a result of this entitlement.
S T OCKHOL DERS’ EQUI T Y
As of December 31, 2018, Group equity totaled € 488.4 million
compared to € 358.7 million on December 31, 2017. As of De-
cember 31, 2018, the Company’s equity ratio amounted to 91 %
compared to 86 % on December 31, 2017.
The number of shares issued totaled 31,839,572 as of Decem-
ber 31, 2018, of which 31,558,536 shares were outstanding
(December 31, 2017: 29,420,785 shares issued and 29,101,107
shares outstanding). Common stock was higher due to the cap-
ital increases carried out in April 2018 as a result of the intial
public offering on the Nasdaq Global Market. The capital in-
creases were based on American Depositary Shares (“ADS”),
with each ADS representing 1/4 of a MorphoSys common share.
In the IPO process, 2,075,000 new shares were issued on
April 18, 2018 and 311,250 new shares were issued on April 26,
2018 from Authorized Capital 2017-II. Common stock also in-
creased by € 32,537 due to the exercise of 32,537 convertible
bonds granted to the Management Board and the Senior Man-
agement Group. The weighted-average exercise price of the
convertible bonds was € 31.88.
T A B L E 0 5
Multi-Year Overview – Balance Sheet Structure1
in million €
Assets
Current Assets
Non-current Assets
Total
Equity and Liabilities
Current Liabilities
Non-current Liabilities
Stockholders’ Equity2
Total
12/31/2018
12/31/2017
12/31/2016
12/31/2015
12/31/2014
388.9
149.9
538.8
45.9
4.5
488.4
538.8
340.7
74.7
415.4
47.7
9.0
358.7
415.4
308.1
155.5
463.6
38.3
9.8
415.5
463.6
300.1
100.0
400.1
27.5
9.9
362.7
400.1
322.4
104.1
426.5
32.7
45.0
348.8
426.5
1 Differences due to rounding.
2 Includes Common Stock as of December 31, 2018: € 31,839,572; December 31, 2017: € 29,420,785; December 31, 2016: € 29,159,770;
December 31, 2015: € 26,537,682; December 31, 2014: € 26,456,834
O per ating and F inancial Rev iew and Prospects
G roup Management Repor t
59
Contractual Obligations
The following table summarizes our contractual obligations at
December 31, 2018.
T A B L E 0 6
Contractual Obligations (December 31, 2018)
(in € thousands)
Total
Less than
1 year
1 to
3 years
3 to
5 years
More than
5 years
Operating Lease Obligations
24,107
4,512
5,720
5,371
8,504
Payments due by period
OF F-BAL ANCE SHEE T ARRANGEMEN T S
We did not have, during 2018 and 2017, and we do not currently
have, any off-balance sheet arrangements.
Comparison of Actual Business
Results Versus Forecasts
MorphoSys demonstrated solid financial performance during
the 2018 reporting year. A detailed comparison of the Compa-
ny’s forecasts versus the actual results can be found in Table 7.
OPERAT ING L EASE OBL IGAT IONS
We lease facilities and equipment under long-term operating
leases. In 2018, leasing expenses amounted to € 3.2 million.
Leasing expenses also include leasing of company cars and
machinery. The majority of these leasing contracts can be re-
newed on a yearly or quarterly basis, and some agreements
may be terminated prematurely.
O T HER COMMI T MEN T S
Other commitments may become due for future payments for
outsourced studies. As of December 31, 2018, we expected to
incur approximately € 97.0 million of fees for outsourced stud-
ies, of which approximately € 51.4 million will be paid in the
next twelve months. Additionally, if certain milestones are
achieved in the Proprietary Development segment, for example,
filing an application for an investigational new drug, or IND, for
specific target molecules, this may trigger regulatory and sales
milestone payments to licensors of up to an aggregate of
$ 287 million. The next milestone payment in the amount of
$ 12.5 million could occur in approximately 12 to 18 months.
No accruals have been recorded in our consolidated balance
sheet for these amounts.
FINANCIAL STATEMENTS
G roup Management Repor t
60
O per ating and F inancial Rev iew and Prospects
T A B L E 0 7
Comparison of Actual Business Results Versus Forecasts
2018 Targets
2018 Results
Financial
targets
Group revenues between € 67 million and € 72 million
(initial forecast € 20–25 million; revised on July 19, 2018 upon
announcement of licensing agreement with Novartis for
MOR106)
Expenses for proprietary product and technology development
of € 87 million to € 97 million
(initial forecast: € 95–105 million; revised on July 19, 2018 upon
announcement of licensing agreement with Novartis for
MOR106)
EBIT of € (55) million to € (65) million
(initial forecast: € (110) million to € (120) million; revised on
July 19, 2018 upon announcement of licensing agreement with
Novartis for MOR106)
Proprietary Development segment:
R&D expenses to continue to rise (2017: € 99.1 million)
EBIT sharply negative due to planned R&D expenditures on
proprietary programs (2017: € (81.3) million)
Partnered Discovery segment:
R&D expenses lower than in the prior year due to the expiration
of the partnership with Novartis (2017: € 17.7 million)
EBIT positive (2017: € 30.2 million)
Group revenues of € 76.4 million; original guidance exceeded
due to signing of licensing agreement for MOR106 with Novartis
Expenses for proprietary product and technology development
of € 98.3 million; original guidance was not met due to changes
in individual project plans and signing of licensing agreement for
MOR106 with Novartis
EBIT of € (59.1) million
Proprietary Development segment:
R&D expenses of € 107.0 million
EBIT of € (53.2) million
Partnered Discovery segment:
R&D expenses of € 8.5 million
EBIT of € 13.3 million
Proprietary
Development
MOR208
• Update on interactions with the FDA based on breakthrough
MOR208
• Regular updates on developments regarding path to market
therapy designation status
• Completion of treatment of 81 patients under the current study
protocol of the fully recruited L-MIND trial with MOR208 and
lenalidomide in r/r DLBCL and the start of data evaluation
• Continuation of the pivotal phase 3 study evaluating MOR208
in combination with bendamustine in comparison to rituximab
and bendamustine in r/r DLBCL (B-MIND study)
• All 81 patients enrolled in the trial, data evaluation ongoing
• B-MIND study ongoing
• Continuation of the phase 2 COSMOS trial with MOR208 in
• COSMOS trial ongoing, data presented at conferences: EHA
combination with idelalisib or venetoclax in r/r CLL or SLL and
presentation of study data at conferences
• Continue to advance the development towards a potential
regulatory approval and begin to set up commercial capabilities
in order to commercialize MOR208 in certain geographies
(June) and ASH (December)
• Preparation for potential regulatory approval ongoing; set-up
of commercial capabilities started, foundation of MorphoSys
US Inc. to support commercialization of MOR208 in the U.S.
MOR202
• Evaluation of new potential partnerships for the compound’s
MOR202
• Termination of active partnering efforts for MOR202 in multiple
optimal development
• Evaluate the start of an exploratory clinical trial in non-small-
cell lung cancer (NSCLC)
• Presentation of study data after completion of the phase 1/2a
dose-escalation trial in multiple myeloma
MOR106
• Initiation of a phase 2 trial of MOR106 in atopic dermatitis
under our co-development program with Galapagos
myeloma outside I-Mab partnership for Greater China
• Stop of clinical development plans for NSCLC after discontinuation
of a clinical study by Genmab and Janssen of anti-CD38 antibody
daratumumab in combination with a checkpoint inhibitor in NSCLC
due to safety findings
• Presentation of final phase 1/2a data in MM at ASH (December)
MOR106
• Start of IGUANA phase 2 trial in atopic dermatitis in May
• Start of phase 1 bridging study wih Galapagos evaluating a
subcutaneous formulation of MOR106 in September
• Exclusive global license agreement with Novartis signed together
with Galapagos for further development of MOR106 in atopic
dermatitis and potentially other indications
MOR107
• Preclinical investigation of MOR107 with a focus on oncology
MOR107
• Preclinical investigation in oncology indications ongoing
indications based on initial anti-tumor data
Initiation and continuation of development programs in the area
of antibody discovery and preclinical development
• Exclusive strategic collaboration and regional licensing agree-
ment for MOR210 with I-Mab Biopharma for development and
commercialization in China, Hong Kong, Macao, Taiwan and
South Korea
• Continuation of antibody discovery programs
O per ating and F inancial Rev iew and Prospects
G roup Management Repor t
61
2018 Targets
2018 Results
Partnered
Discovery
Progress of partnered development programs
Increasing number of partnered programs (103 programs) as
maturity progresses
Guselkumab (Tremfya®, partner: Janssen):
• Further marketing approval for the treatment of moderate to
severe plaque psoriasis in Brazil, Australia, South Korea and
Japan as well as for psoriatic arthritis in Japan (April) and for
the treatment of patients with palmoplantar pustulosis in Japan
(November)
• Start of phase 2/3 program (GALAXI) in Crohn’s disease (July)
• Start of phase 3 trial (PROTOSTAR) in pediatric psoriasis patients
(September)
• Start of a phase 2 study in patients with moderate to severe
hidradenitis suppurativa (HS) (November)
• Data from phase 3 head-to-head study ECLIPSE demonstrated
superiority of guselkumab (Tremfya®) vs. secukinumab
(Cosentyx®) in the treatment of plaque psoriasis (December)
Partner Roche started two new phase 3 trials of gantenerumab in
patients with early Alzheimer’s disease (June)
Expansion of existing strategic alliance with LEO Pharma to include
peptide-derived therapeutics with the objective of identifying
novel, peptide-derived therapeutics for unmet medical needs
(September)
Partner GSK reported data from phase 2 BAROQUE clinical
study of GSK3196165 (formerly MOR103) in rheumatoid
arthritis (RA) at ACR conference (October)
The Management Board’s General
Assessment Of Business Performance
The 2018 financial year was marked by both operational high-
lights as well as positive events among our development pro-
grams. The successful Nasdaq listing in April strengthened
our financial position and gave us more flexibility to allocate
our resources. Moreover, the IPO enhanced our visibility in the
U.S., which was further increased by the foundation of our
wholly owned subsidiary MorphoSys US Inc. With this, we fol-
lowed our plan to build a strong U.S. presence as preparation
for the planned commercialization of MOR208, our antibody for
the treatment of hematological malignancies, which was defi-
nitely the key focus during the reporting year. Driven by posi-
tive data from our L-MIND trial and encouraged by our ongoing
discussions with the FDA we followed our plan to bring the
antibody to the U.S. market as fast as possible, pending FDA
approval.
Revenues in the 2018 financial year increased to € 76.4 million,
and EBIT amounted to € –59.1 million. The increase in revenues
and the improved operating result compared to the previous
year were the result of our exclusive license agreement for
MOR106, which we and our partner Galapagos signed with
Novartis Pharma AG in July thereby covering the further devel-
opment and commercialization of our joint program MOR106.
This agreement resulted in an upfront payment of € 47.5 mil-
lion, which prompted us to raise our financial forecast for the
2018 financial year. Moreover, guselkumab (Tremfya®) sales
grew rapidly during 2018 resulting in royalty payments with
strong year-on-year growth as compared to 2017. The net cash
outflow from operating activities amounted to € 33.3 million,
which was the result of the planned expenses for proprietary
research and development. Our equity ratio of 91 % and liquid
funds of € 454.7 million are a confirmation of the strength of
the Company’s financial resources.
FINANCIAL STATEMENTS
G roup Management Repor t
62
O per ating and F inancial Rev iew and Prospects
Our other Proprietary Development and Partnered Discovery
programs made great progress in 2018. For MOR202, we pre-
sented final data from our phase 1/2a trial in multiple myeloma
at ASH. Our partner I-Mab submitted an investigational new
drug application for MOR202 in MM in China in August and we
expect them to start pivotal trials soon. We ourselves are not
pursuing the further development in MM without a partner, but
of course we continue to support I-Mab in their development of
MOR202 in Greater China. We made progress evaluating poten-
tial options for MOR202 in other indications, such as autoim-
mune diseases, while we stopped the clinical development
plans in NSCLC. For GSK3196165 (formerly MOR103), GSK pre-
sented data from their phase 2 trial in rheumatoid arthritis at
the ACR conference in October, where they also announced
plans to continue clinical development in this indication. Build-
ing on our existing collaboration with I-Mab Biopharma for
MOR202 for China and certain other Asian territories, we en-
tered into an exclusive strategic collaboration and regional li-
censing agreement for MOR210, a preclinical-stage antibody
directed against C5aR, which has potential to be developed as
an immuno-oncology agent.
We were also pleased to report successes of our Partnered Pro-
grams. Guselkumab (Tremfya®), developed by our partner Jans-
sen and the first approved and marketed therapeutic antibody
based on MorphoSys’s proprietary technology, was granted
marketing authorization in several additional countries during
2018, including Japan. Janssen continued to develop gusel-
kumab (Tremfya®) in several additional indications and re-
ported positive long-term data in plaque psoriasis. We were
very pleased about the data from the ECLIPSE trial reported
by Janssen in December showing superiority of guselkumab
(Tremfya®) versus secukinumab (Cosentyx®) for the treatment
of plaque psoriasis. Our partner Roche initiated two new phase 3
trials with gantenerumab, the antibody against amyloid-beta,
which is being developed by Roche for the treatment of Alz-
heimer’s disease patients. By the end of the year, our pipeline
comprised a total of 115 drug candidates (103 proprietary and
12 partnered programs), 29 of which are in clinical development.
O utlook and Forecast
G roup Management Repor t
63
Outlook and Forecast
MorphoSys’s business model is focused on developing innova-
tive drug candidates derived from its proprietary technologies,
such as the HuCAL and Ylanthia antibody libraries. We develop
drug candidates both on a proprietary basis and together with
partners with the goal of giving patients access to better treat-
ment alternatives. Our proprietary development activities fo-
cus mainly on oncology compounds, which we aim to bring to
market and commercialize. We continue to concentrate on fur-
ther developing our technologies in the fast-growing, innova-
tion-driven areas of the life sciences sector as the foundation of
our business model.
General Statement on Expected
Development
MorphoSys’s strategic focus is on the development of innova-
tive drugs to improve the lives of patients suffering from seri-
ous diseases. The development of MOR208, our most advanced
drug candidate, for the treatment of certain forms of blood can-
cer, is currently our top priority. Our continued investment in
the development of validated and innovative technology plat-
forms is an important basis for our business. In the Partnered
Discovery segment, the commercialization of our technologies
provides contractually secured cash flows from our partner-
ships with pharmaceutical companies.
The Management Board expects, among others, the following
developments in 2019:
• Complete the L-MIND trial and submit the filing package by
end of the year for approval at the FDA
• Continue to build capabilities in the U.S. in order to prepare
for commercialization of MOR208 there pending regulatory
approval and explore commercialization options in other
geographies.
• Continue the development of other proprietary drug candi-
dates such as MOR202 and MOR106 and support our partners
in the development of these compounds.
• Continue to participate in the development of our partners’
drug candidates through the receipt of success-based reve-
nues such as milestone payments or royalties on commercial-
ized product sales and continue to invest these funds into the
development of our proprietary programs.
• Evaluate new strategic agreements based on proprietary
technologies focused on gaining access to innovative target
molecules and compounds.
• Continue expansion of proprietary development activities
through potential in-licensing, company acquisitions, co-de-
velopment and new proprietary development activities.
• Invest in the development of proprietary technologies to
maintain and expand our position in therapeutic antibodies
and related technologies.
Strategic Outlook
MorphoSys plans to invest a substantial portion of its financial
resources in proprietary R&D for the foreseeable future. The
Management Board believes this is the best route to increasing
the Company’s value for the long term. We plan to advance our
portfolio of proprietary development candidates and further
strengthen our technology platform. Revenues from R&D fund-
ing, royalties, license and milestone payments and a strong li-
quidity position should allow us to continue expanding our
proprietary drug and technology development.
In our Proprietary Development segment, we will continue de-
veloping therapeutic antibodies and peptides for our own ac-
count. We concentrate on oncology, but also explore our drug
candidates in other disease areas such as inflammatory or auto-
immune disorders if opportunities arise. Decisions to enter into
alliances with other companies to co-develop our proprietary
candidates or to outlicense them, either globally or for certain
geographies, are made on a case-by-case basis. It has become
an increasingly integral part of our strategy to retain projects
in proprietary development in-house until later states of clinical
development or even until commercialization. Our main focus
is currently developing MOR208 towards a potential regulatory
approval and to preparing commercialization capabilities for
MOR208 in selected geographies, in particular the U.S.
FINANCIAL STATEMENTS G roup Management Repor t
64
O utlook and Forecast
Our Partnered Discovery segment generates contractually se-
cured cash flows based on various partnerships with pharma-
ceutical companies. The majority of development candidates in
recent years stemmed from our partnership with Novartis. Al-
though this partnership ended in accordance with the contract
in November 2017, we expect that drug candidates under this
and other partnerships will continue to be developed and may
lead to additional milestone payments and royalties in the fu-
ture. In 2017, Tremfya®, developed and marketed by Janssen,
became the first antibody from our partnered discovery busi-
ness to reach the market. We expect that Tremfya® will con-
tinue to provide the bulk of our royalty revenue for the foresee-
able future. Based on its breadth, the partnered pipeline is
expected to generate further marketable therapeutic antibodies
in the future. Should these be successful, the Company’s finan-
cial participation in the form of royalties on product sales would
increase.
Expected Economic Development
In its January 2019 report, the International Monetary Fund
(IMF) projected global economic growth of 3.5 % in 2019, com-
pared to 3.7 % forecast for 2018. Growth in advanced economies
is anticipated to be 2.0 % in 2019, compared to a forecast growth
of 2.3 % for 2018. The IMF expects growth in in the euro area to
decline to 1.6 % in 2019 compared to the 1.8 % forecast for 2018.
Growth rates have been marked down for many economies, in-
cluding Germany. The IMF expects growth in Germany to be
1.3 % in 2019 (2018E: 1.5 %); this decrease is due to soft private
consumption, weak industrial production following the intro-
duction of revised auto emission standards and subdued for-
eign demand. The IMF is projecting U.S. economic growth in
2019 to be 2.5 % (and soften further to 1.8 % in 2020) compared
to expected growth of 2.9 % in 2018 with the unwinding of fiscal
stimulus and as the federal funds rate temporarily overshoots
the neutral rate of interest. Nevertheless, the projected pace of
expansion is above the U.S. economy’s estimated potential
growth rate in both years. Strong domestic demand growth
will support rising imports and contribute to a widening of
the U.S. current account deficit. According to the IMF, growth
in emerging and developing countries in 2019 is expected to
be 4.5 % (2018E: 4.6 %). Growth in China is projected to reach
6.2 % in 2019 (2018E: 6.6 %) while Russia is expected to grow
1.6 % compared to growth of 1.7 % in 2018. Brazil is also ex-
pected to experience positive growth, projected at 2.5 % for
2019 (2018E: 1.3 %).
Expected Development of the
Life Sciences Sector
According to research by BioCentury, two-thirds of biotech
companies could be facing a cash crunch in 2019 if the markets
remain difficult. While investors do not expect capital avail-
ability to be a problem, they think the rising cost of capital
might mean employing alternative financing structures to help
biotechs extend their runway. Investors and bankers contacted
by BioCentury believe that most of the financial market issues
facing the biotech sector in 2019 have nothing to do with indus-
try fundamentals but that macro-economic forces have driven
a shift toward a risk-off sentiment. The fourth quarter of 2018
was one of the worst quarters for biotech indexes in over
16 years, and investors see little reason to think the sentiment
will change in the near-term.
One bright spot is the string of M&A events that kicked off
2019 that could draw investors back to the sector. But short of
an M&A spending spree, investors expect cost of capital may be
one of the most important areas of focus in 2019. Investors are
holding a relatively bleak outlook for the sector in 2019, with
enough reason to worry from the last three months, which saw
biotech enter a bear market.
On the positive side, the number of new FDA product approvals
reached an all-time high of 59 in 2018. Despite this, investors
are wary about companies’ ability to effectively commercialize
products once approved, as revenue trajectories, particularly
from small and mid-cap companies, have not met projections.
Future Research and Development
and Expected Business Performance
PROPRIE TARY DEVEL OPMEN T
The Company’s R&D budget for proprietary drug and technol-
ogy development in the 2019 financial year is expected to be in
the range of € 95 million to € 105 million. The majority of in-
vestment will fund the development of our proprietary drug
candidates MOR208, MOR202 and our discovery efforts. The
lion’s share of that funding will be dedicated to the clinical de-
velopment of MOR208. Further investment will be made in the
areas of target molecule validation as well as antibody and
technology development. We will also continue to seek collabo-
rations with partners such as academic institutions to gain ac-
cess to new target molecules and technologies.
O utlook and Forecast
G roup Management Repor t
65
The events and development activities planned in 2019 include
the following:
• Continue interactions with the FDA during the breakthrough
therapy designation process for MOR208.
• Complete data evaluation of all 81 patients enrolled under the
current study protocol of the fully recruited L-MIND trial in
r/r DLBCL and present study results based on the primary
completion analysis.
• Initiate phase 1b trial with MOR208 in frontline DLBCL in
second half of 2019.
• Continue the pivotal phase 3 study evaluating MOR208 in
combination with bendamustine in comparison to rituximab
and bendamustine in r/r DLBCL (B-MIND study).
• Continue the phase 2 COSMOS trial of MOR208 with idelal-
isib and venetoclax in CLL/SLL and present data.
• Complete the regulatory filing package comprising clinical
and CMC (chemistry, manufacturing and controls) data for
MOR208 and submit the regulatory filing in the U.S. to the
FDA by year-end; according to current plans, the filing will
be primarily based on data from the L-MIND study in addi-
tion to historical data from lenalidomide single-agent treat-
ment of the targeted patient population.
• Continue the set up of commercial capabilities in the U.S. in
order to prepare for expected commercialization of MOR208.
• Prepare for and start an exploratory clinical trial of MOR202
in an autoimmune indication.
• Continue ongoing clinical studies of MOR106 in atopic derma-
titis together with our co-development partner Galapagos un-
der the existing global licensing agreement with Novartis
including the phase 2 iv* IGUANA study and the phase 1 sc
bridging study and prepare the start of additional clinical
studies in atopic dermatitis.
• Continue preclinical investigations of MOR107 with a focus
on oncology indications.
• Continue and/or initiate development programs in the area of
antibody discovery and preclinical development.
*S E E G L O S S A R Y – page 188
Based on announcements made by our partner GSK earlier this
year, we might see the initiation of phase 3 development of
MOR103/GSK3196165 in rheumatoid arthritis in the second
half of 2019 by our partner GSK.
PAR T NERED DIS COVERY
MorphoSys intends to continue to focus, above all, on the fur-
ther development of its proprietary development pipeline. In
the Partnered Discovery segment, MorphoSys will carefully
review its options to enter into additional collaborations based
on its proprietary technologies with pharmaceutical and bio-
tech companies, similar to the dermatology partnership with
LEO Pharma that was initiated in 2016 based on our Ylanthia
antibody platform and that was expanded in 2018 based on our
proprietary peptide platform.
According to information provided on the website clinicaltrials.
gov, by the end of 2019 primary completion may be reached in
a total of up to 13 clinical trials in phase 2 and 3 from partners
evaluating antibodies made using MorphoSys technology. This
includes a potentially pivotal phase 2b study by Mereo Pharma
in osteogenesis imperfecta (brittle bone syndrome) of the HuCAL
antibody setrusumab (BSP804), directed against the target
molecule sclerostin and generated within the scope of the No-
vartis partnership. Phase 3 trials with Tremfya® conducted by
Janssen in psoriasis and in psoriatic arthritis are also sched-
uled for primary completion in 2019.
Whether, when and to what extent news will be published fol-
lowing the primary completion of trials in the Partnered Dis-
covery segment is at the full discretion of our partners.
Expected Personnel Development
The number of employees in the Proprietary Development seg-
ment is expected to increase during the 2019 financial year,
partly due the increased number of employees in connection
with the build-up of commercial capabilities. The number of
employees in the Partnered Discovery segment is expected to
remain stable. The number of employees in G&A is expected to
increase slightly.
FINANCIAL STATEMENTS G roup Management Repor t
66
O utlook and Forecast
Expected Development of the
Financial Position and Liquidity
MorphoSys had financial resources of € 454.7 million at the end
of the 2018 financial year. Revenues in the 2019 financial year
are expected to be below those achieved in 2018. The main rea-
son for this expected decline is a positive one-time effect in
2018, namely the upfront payment of € 47.5 million received
from Novartis in connection with a global licensing deal for
MOR106. The Management Board is projecting Group revenues
of € 43 million to € 50 million in the 2019 financial year. Reve-
nues are expected to include royalty income from Tremfya®
ranging from € 23 million to € 30 million at constant US$ cur-
rency. This forecast does not take into account revenues from
future collaborations and/or licensing agreements.
R&D expenses for proprietary programs and technology devel-
opment are expected to reach € 95 million to € 105 million in
2019. Most of these expenses in the Proprietary Development
segment will arise from the development of MOR208, MOR202
and from our early-stage development programs, with the lion’s
share expected to stem from clinical development of MOR208.
R&D expenses for the Partnered Discovery segment are ex-
pected to be lower than in the prior year.
MorphoSys will continue to build commercial structures in the
U.S. in preparation for the potential commercialization of
MOR208 pending regulatory approval and therefore expects to
incur a significant amount of selling expenses in the low to mid
double-digit million euro range for 2019.
The Company expects EBIT of approximately € –127 million to
€ –137 million in 2019.
This guidance does not include a potential larger milestone for
the start of a phase 3 clinical trial for MOR103/GSK3196165
that could occur in the course of 2019. The guidance also does
not include revenues from potential future partnership or li-
censing agreements for MOR208 or any other compound that is
in MorphoSys’s proprietary development. Effects from potential
in-licensing or co-development deals for new development can-
didates are also not included in the guidance. The Partnered
Discovery segment is expected to generate a positive operating
result in 2019 which will exceed the result of the previous year.
The Proprietary Development segment is expected to report a
substantially more negative EBIT compared to the previous year
due to the one-time effect in 2018 from the payment in the
amount of € 47.5 million related to the MOR106 license agree-
ment with Novartis Pharma AG and due to the continued high
level of R&D expenditures on proprietary programs.
In the years ahead, one-time events, such as the in-licensing
and out-licensing of development candidates and larger mile-
stone payments and royalties from the market maturity of
HuCAL and Ylanthia antibodies could have an impact on the
Company’s net assets and financial position. Such events could
cause financial targets to change significantly. Similarly, fail-
ures in drug development could have negative consequences
for the MorphoSys Group. Revenue growth in the near to me-
dium term will depend on the Company’s ability to out-license
its proprietary programs and/or enter into new partnerships as
well as to secure regulatory approval for, launch and success-
fully commercialize its first proprietary program MOR208. In
addition, revenues should increasingly benefit from royalties
based on sales of Tremfya® (guselkumab).
At the end of the 2018 financial year, MorphoSys had liquidity
of € 454.7 million (December 31, 2017: € 312.2 million). The loss
projected for 2019 will cause a decline in liquidity. MorphoSys
sees its solid cash position as an advantage that can be used to
accelerate its future growth through strategic activities such as
the in-licensing of compounds and partnering with promising
companies. Available liquidity can also be used to fund re-
search and development expenses for the Company’s propri-
etary portfolio of therapeutic antibodies.
Dividend
In the separate financial statements of MorphoSys AG, pre-
pared in accordance with German Generally Accepted Ac-
counting Principles (German Commercial Code), the Company
is reporting an accumulated deficit, which prevents it from dis-
tributing a dividend for the 2018 financial year. In view of the
anticipated losses in 2019, the Company expects to continue
to report an accumulated loss for the 2019 financial year.
MorphoSys will invest further in the development of propri-
etary drugs and the set up of commercial capabilities in the
U.S. and will potentially pursue additional in-licensing and ac-
quisition transactions to open up new growth opportunities
and increase the Company’s value. Based on these plans, the
Company does not expect to pay a dividend in the foreseeable
future.
This outlook takes into account all known factors at the time of
preparing this report and is based on the Management Board’s
assumptions of events that could influence the Company in
2019 and beyond. Future results may differ from the expecta-
tions described in the section entitled “Outlook and Forecast.”
The most significant risks are described in the risk report.
Shares and the Capital Mar ket
G roup Management Repor t
67
Shares and the Capital Market
MorphoSys AG shares opened the reporting year at a share
price of € 76.58. After a solid start in the first weeks of 2018,
the share price dropped in line with the TecDax due to weak
trends observed on Wall Street affecting the European markets
and MorphoSys’s share reached its low for the year of € 72.05
mid-February. The shares then trended higher in line with the
TecDAX before breaking out in April after the Company an-
nounced the initial public offering in the United States and the
listing of ADSs on the Nasdaq Global Market. From April 9 on,
the share price constantly increased, far outpacing the bench-
mark index. The dual listing as well as positive news flow, such
as approval of Tremfya® for plaque psoriasis in new regions and
also for psoriatic arthritis in Japan received by Janssen in June
as well as the global licensing agreement with Novartis and
Galapagos for MOR106 mid-July, drove MorphoSys shares to a
high of €122.20 on July 24. Thereafter, the worldwide stock
markets were affected by the U.S. trade war with China and by
the jump in returns in the U.S. Moreover, the European Market
was marked by insecurities due to the banking crisis in Italy,
with all causing a continuous decline for both the TecDAX as
well as the MorphoSys shares. This resulted in a low of € 77.75
on October 26. Of note, MorphoSys shares were included into
the MDAX as of September 24 while remaining part of the
TecDAX segment. The simultaneous inclusion in both indices,
MDAX and TecDAX, was based on the reorganization of the
index rules of Deutsche Börse, the existing separation into the
Tech and Classic segments having been removed. While both
the TecDAX and MDAX declined further in the course of the
year, MorphoSys’s share price again increased from the begin-
ning of November and closed the financial year at € 88.95,
amounting to a share price increase of 16 % and a market capi-
talization of € 2.8 billion .
MorphoSys AG shares therefore clearly outperformed the de-
velopment of the relevant indices, namely the Nasdaq Biotech-
nology Index (–9 %), the MDAX (–18 %) and the TecDAX (–3 %)
in 2018 .
›› S E E F I G U R E 11 – Performance of the MorphoSys Share in 2018 (page 68)
›› S E E F I G U R E 12 – Performance of the MorphoSys Share 2014–2018 (page 68)
Stock Market Development
2018 was a difficult year on the stock markets. For the first time
since 2011, the leading German index DAX was down signifi-
cantly at about –18 %. Concerns about a slowdown in the global
economy, the trade dispute between the USA and China, and
the approaching Brexit in March have had a greater impact on
the German stock markets than on the U.S. markets. However,
the Dow Jones index also ended the year down roughly 6 %. Bio-
tech shares did not manage to escape this negative stock mar-
ket environment and also had to face falling prices. During the
reporting year, MorphoSys continued to increase its investor
relations activities both in Europe and with a growing focus
also in the United States following the listing on the Nasdaq
Global Market.
Liquidity and Index Membership
The average daily trading volume in MorphoSys shares on all
regulated trading platforms increased by about 45 % in 2018,
reaching a volume of € 22.5 million (2017: € 15.6 million). The
average daily trading volume on the TecDAX, which contains
the 30 largest technology stocks on the Frankfurt Stock Ex-
change, rose 93 %. In addition, in 2018 MorphoSys shares were
included for the first time in the German MDAX index, which
comprises the 60 largest companies in terms of market capital-
ization and turnover on the Frankfurt Stock Exchange behind
those that make up the DAX. By the end of 2018, MorphoSys
ranked 10th in the TecDAX in terms of market capitalization
(2017: 10th) and 14th in terms of trading volume (2017: 12th).
In the MDAX, MorphoSys shares ranked 59th in terms of mar-
ket capitalization and 65th in terms of trading volume (the rank
refers to DAX (30) and MDAX (60) listed companies).
The average daily trading volume in MorphoSys shares on al-
ternative trading platforms (“dark pools”) in 2018 was approxi-
mately € 16.2 million, or 173,000 shares (2017: approx. 98,700
shares valued at € 6.3 million), representing a year-on-year in-
crease of 156 %.
Market Information
Our shares have been trading on the Frankfurt Stock Exchange
under the symbol “MOR” since 1999. On April 23, 2018 we an-
nounced the closing of our initial public offering (IPO) in the
United States through an ADS offering. The ADSs are listed on
the Nasdaq Global Market under the symbol “MOR.”
The following table sets forth for the periods indicated the re-
ported high and low closing sale prices per ordinary share in
Xetra trading in euros on the Frankfurt Stock Exchange as well
as per ADS in US dollars traded on Nasdaq.
FINANCIAL STATEMENTS Shares and the Capital Mar ket
4/19/18
M O R P H O S Y S
N A S D A Q - L I S T I N G
G roup Management Repor t
68
11
Performance of
the MorphoSys Share
in 2018 (January 1,
2018 = 100 %)
* MorphoSys Nasdaq-listing
as of 4/19/2018
170
160
150
140
130
120
110
100
90
80
70
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
morphosys xe tr a
morphosys nasdaq*
tec da x
mda x
nasdaq b iotech
12
Performance of
the MorphoSys Share
2014–2018 (January 1,
2014 = 100 %)
300
250
200
150
100
50
0
2014
2015
2016
2017
2018
morphosys
tec da x
nasdaq b iotech
T A B L E 0 8
Closing Prices of MorphoSys Shares and ADS
2014
2015
2016
2017
2018
ADSs traded on Nasdaq
(in US$)
Ordinary shares traded on
Frankfurt Stock Exchange (in €)
High
Low
High
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
35.66
21.96
86.72
78.65
56.07
82.95
122.00
Low
55.45
52.52
33.25
47.60
72.05
Shares and the Capital Mar ket
Common Stock
G roup Management Repor t
69
The Company’s common stock increased to 31,839,572 shares,
or € 31,839,572, in the reporting year mainly due to a capital
increase in connection with the initial public offering (IPO) on
the Nasdaq Stock Market.
In April 2018, MorphoSys successfully completed the IPO on
the Nasdaq Stock Market, generating gross proceeds of
US$ 239,006,800. The transaction was executed in two consec-
utive capital increases from Authorized Capital 2017-II, exclud-
ing the subscription rights of existing shareholders. Initially,
2,075,000 new ordinary shares were issued as part of a basic
offering in the form of 8,300,000 American Depositary Shares
(“ADS”). This was followed by the full exercise of an option
granted to the underwriters to acquire a further 311,250 new
ordinary shares in the form of 1,245,000 ADSs. The price was
US$ 25.04 per ADS in both transactions. Each ADS represents
1/4 of a MorphoSys ordinary share. The new ordinary shares
underlying the ADSs in the basic offer and the option exercised
by the underwriters correspond to approximately 8.1 % of the
common stock of MorphoSys prior to the capital increases from
Authorized Capital 2017-II.
Another reason for the increase in the Company’s common
stock was the exercise of convertible bonds granted to the Man-
agement Board and the Senior Management Group. A detailed
description of the convertible bond program can be found in the
Notes (Item 7.2).
T A B L E 0 9
Key Data for the MorphoSys Share (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 €)
Average daily trading volume (in % of common stock)
2018
2017
2016
2015
2014
488.4
358.7
415.5
362.7
348.8
31,839,572
29,420,785
29,159,770
26,537,682
26,456,834
2,832
88.95
22.5
0.77
2,253
76.58
15.6
0.83
1,422
48.75
9.7
0.78
1,530
57.65
14.9
0.87
2,027
76.63
11.9
0.65
International Investor Base
Annual General Meeting
Various voting right notifications were issued during the re-
porting year in accordance with Section 26 (1) of the German
Securities Trading Act (WpHG). These notifications were pub-
lished on the MorphoSys website and can be found under
Media and Investors – Stock Information – Recent Voting Rights
Notifications.
The Management and Supervisory Boards of MorphoSys AG
welcomed shareholders to the Company’s 20th Annual General
Meeting (AGM) in Munich on May 17, 2018. The shareholders
and proxies attending represented more than 60.7 % of the com-
mon stock of MorphoSys AG (2017: 54.0 % of the common stock
represented).
According to the definition given by the Deutsche Börse, the
free float in MorphoSys AG’s shares was 99.11 % at the end of
the reporting year.
All resolution proposals of the management were approved
with the required majority of votes. At the close of the 2018 AGM,
the terms of office of Supervisory Board members Dr. Gerald
Möller and Dr. Marc Cluzel ended. Klaus Kühn resigned from
the Supervisory Board for personal reasons at the end of the
2018 AGM. The Annual General Meeting re-elected Dr. Marc
Cluzel and newly elected Dr. George Golumbeski and Michael
Brosnan to the Company’s Supervisory Board. In its constitu-
tive meeting following the AGM, the Supervisory Board elected
Dr. Marc Cluzel as its new chairman and Dr. Frank Morich as
vice chairman.
FINANCIAL STATEMENTS
G roup Management Repor t
70
Dividend Policy
We have not paid any dividends on our ordinary shares since
our inception, and we currently intend to retain any future
earnings to finance the growth and development of our busi-
ness. Therefore, we do not anticipate that we will declare or pay
any cash dividends in the foreseeable future. Except as re-
quired by law, any future determination to pay cash dividends
will be at the discretion of our Management Board and Supervi-
sory Board and will be dependent upon our financial condition,
results of operations, capital requirements, and other factors
our Management Board and Supervisory Board deem relevant.
Investor Relations Activities
At the beginning of December, the Company held an Investor
and Analyst Event in New York City dedicated to MOR208, im-
mediately following the 60th ASH conference in San Diego.
During this event, the latest L-MIND data were presented and
the Company gave an outlook on the planned filing strategy.
Following the presentation, participants were given an oppor-
tunity to address questions to the management. The event was
Shares and the Capital Mar ket
also webcast, making it accessible to interested parties world-
wide. A total of more than 100 investors, analysts and share-
holders watched the Management Board’s presentations.
MorphoSys also took part in over 20 international investor con-
ferences. Several roadshows were held at various locations in
both Europe and the USA. The strongest interest continued to
be in the United States where a large number of specialized
healthcare investors are located. Following the listing on Nasdaq
in April, we estimate that nearly 50 % of MorphoSys AG shares
are meanwhile held by U.S. institutional investors.
The Management Board also held conference calls in conjunc-
tion with the publication of the annual, half-yearly and quar-
terly results to report past and expected business developments
and answer questions from analysts and investors.
The development of our lead product candidate MOR208, the
general progress of our proprietary portfolio and the partnered
pipeline were the topics in investor discussions.
A total of 14 analysts covered MorphoSys shares at the end
of 2018.
T A B L E 1 0
Analyst Recommendations (December 31, 2018)
Buy/Overweight/Market Outperform
Hold/Neutral
Reduce/Underperform
7
5
2
Detailed information on MorphoSys shares, financial ratios,
the Company’s strategic direction and the Group’s recent de-
velopments can be found on the Company’s website (Media and
Investors).
Sustainable B usiness Development
G roup Management Repor t
71
Sustainable Business Development
We are aware of our responsibility to present and future gener-
ations and see sustainable behavior as a prerequisite for long-
term business success. As a biotechnology company conduct-
ing both research and drug development, observing the highest
ecological, social and ethical standards is a top priority and a
key component of our corporate culture. The following section
describes our sustainability strategy and the activities carried
out during the reporting year that represent non-financial per-
formance indicators. The financial performance indicators are
presented in the section “Operating and Financial Review and
Prospects.” Information on our management structure and cor-
porate governance practices can be found in the Corporate Gov-
ernance Report.
Sustainable Corporate Management
Sustainability is a hallmark of our corporate management and
plays a major role in the pursuit of corporate goals and in con-
tributing value to society. This applies to the short- and long-
term objectives of all levels of management and is reflected in
our core task of developing even more effective and safer drugs.
To ensure lasting business success, we incorporate environ-
mental and social responsibility into our daily business and
base our business model on sustainable growth that protects
the interests of our shareholders, creates long-term value and
weighs our actions in terms of their impact on the environment,
society, patients and employees. Internally, this business model
is reflected in a progressive human resources policy that takes
employees’ needs seriously.
Our long-term and sustainable business success rests on inno-
vative research and development to meet the major challenge of
providing comprehensive healthcare in the future. Due to a
growing and aging population, biotechnology-derived drugs
represent a growing portion of the overall healthcare system.
In the opinion of management, all aspects of our current busi-
ness model support the sustainable investment interests of our
shareholders.
A comprehensive risk management system ensures that factors
that could threaten sustainable corporate performance are
identified early and corrected if necessary. We only accept risk
when there is an opportunity to increase our enterprise value.
At the same time, great effort is made to systematically identify
new opportunities and leverage our business success (more in-
formation on risks and opportunities can be found on page 76).
Group-wide compliance with the sustainability strategy is
monitored by the entire Management Board, with primary re-
sponsibility assigned to the Chief Financial Officer. The sus-
tainability strategy is based on the Company’s Credo, which
contains the ethical principles forming the foundation of all
activities of MorphoSys and its employees. The Credo is devel-
oped further by our Code of Conduct. The Compliance Commit-
tee consists of six members and is available to employees at all
times. The Compliance Officer, who is also a member of the
committee, coordinates the elements of MorphoSys’s Compli-
ance Management System. More information on this subject
can be found on page 107 of the Corporate Governance Re-
port. Employees can ask for advice on all matters concerning
compliance and report any suspected violations. If preferred,
this may be done on an anonymous basis. Violations are sys-
tematically pursued, and appropriate remedial action is taken.
No such violations have been reported to date.
Detailed information on the KPIs for sustainable development
used by MorphoSys is provided in the section “Strategy and
Group Management” (page 25). The following report on the
implementation of our corporate strategy and the Company’s
sustainable business development is based on the recommen-
dations of the German Sustainability Code originally presented
by the Council for Sustainable Development in October 2011
and last updated in 2017.
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 hu-
man clinical trials and animal testing are anchored in our Code
of Conduct. Strict compliance with applicable national and in-
ternational regulations is mandatory for all MorphoSys employ-
ees and sub-contractors.
As European and international legislation requires animal test-
ing to determine the toxicity, pharmacokinetics and pharmaco-
dynamics* of drug candidates, the biotechnology industry can-
not forgo this type of testing. Animal testing for our drug
candidates is outsourced to contract research organizations
(CROs) as we do not have laboratories suitable for this type of
research. As part of our product development activities, we
award animal experiments in accordance with the 3Rs princi-
ples of animal welfare (Replace, Reduce, Refine) as laid down
FINANCIAL STATEMENTS G roup Management Repor t
72
13
Occupational Safety
at MorphoSys
Sustainable B usiness Development
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
“Gentechnik Sicherheitsverordnung” (Ger-
man Genetic Engineering Safety Directive)
and other safety professionals perform an
internal audit to assess the risk involved
Specifi c safety and evacuation training for
the employees working with the substances
Assurance that all safety measures are
implemented before actual work commences
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
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
ONLY SPECIALLY TRAINED
EMPLOYEES ARE ALLOWED
TO WORK WITH TOXIC
SUBSTANCES
in national, European and international regulations. We have
established a quality assurance system with written standard
operating procedures (SOPs*) that are continuously updated to
ensure that we only work with CROs that comply with local,
national and international guidelines and animal welfare regu-
lations. Animal studies are only conducted after approval by
the relevant ethics committee and under the supervision of the
attending veterinarian.
Contract research organizations cooperating with us must com-
ply with ethical principles and legal regulations for research
involving animals and, in case required, have the Good Labora-
tory Practice (GLP*) certification. This is how we ensure we
fulfill our moral obligation for the respectful treatment of ani-
mals. We also conduct on-site visits and audits of the research
institute’s study centers that include a review of the staff’s
skills and training as well as animal welfare.
We observe the ethical principles defined in The Declaration of
Helsinki, and follow all applicable international and national
laws and guidelines, such as Good Clinical Practice (GCP*)
guidelines, when conducting clinical trials. The trials are con-
ducted in compliance with the relevant provisions on privacy
and confidentiality. Protecting the rights, safety and well-being
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 institu-
tional review board. Before participating in a clinical trial, each
participant must voluntarily submit an informed consent.
The goal of our business activities is to improve patients’ health
through our scientific work. We can only achieve this goal if our
activities are socially accepted. Achieving this acceptance re-
quires a continuous and open dialog with stakeholders so that
we can understand potential concerns with regard to biotechno-
logical approaches and explain our activities and their benefits.
To accomplish this, we are active in a variety of ways that range
from participation in public information events to active sup-
port of the Communication and Public Relations task force of
BIO Deutschland e.V., Berlin.
Sustainable B usiness Development
G roup Management Repor t
73
PROCUREMEN T
Our Central Purchasing and Logistics Department is responsi-
ble for negotiating and purchasing goods and services. The de-
partment is continuing to improve the efficiency of procurement
management systems and processes including the introduction
of electronic approval processes. Also, during this year, a new
ERP system has been developed to address our future needs.
For more details, please see section “Information Technology”
on page 105.
ENVIRONMEN TAL PRO T EC T ION AND OCCUPAT IONAL
SAF E T Y
Because the biotechnology industry is subject to stringent reg-
ulatory requirements, environmental protection and occupa-
tional safety are important tasks for us. Our Technical Opera-
tions Department and its subsections monitor our compliance
with all relevant requirements. In addition to strict compliance
with all legal requirements, we make a tremendous effort to
maintain sustainable environmental management and the ef-
fective protection of our employees.
We offer employees an extensive range of preventative health-
care options. A sample of these options can be found in the
section entitled “Human Resources” (page 75).
With two reportable occupational accidents in 2018, the num-
ber of accidents remained at a very low level, placing our ratio
of reportable accidents significantly below the average ratio in
the German chemical industry (14.6 reportable occupational
accidents as defined by the employers’ liability insurance asso-
ciation BG RCI per 1,000 full-time employees in the latest sur-
vey conducted in 2017).
We try to minimize the amount of harmful substances used in
our laboratories. Only specific employees who are specially
trained are allowed to work with toxins. Work involving conta-
gious pathogens can only be carried out in secure laboratories.
We only use certified companies to dispose of chemical waste
and also refrain from radioactive substances.
›› S E E F I G U R E 13 – Occupational Safety at MorphoSys (page 72)
QUAL I T Y ASSURANCE
Biopharmaceutical companies bear a special responsibility to
comply with the highest quality and safety standards. We fol-
low detailed procedures and stringent rules in drug develop-
ment to minimize safety risks for patients and ensure the qual-
ity of the investigational medicinal products, integrity and
reliability of the data generated.
To control and regulate these processes in our own drug devel-
opment activities, we implemented an integrated quality man-
agement system that complies with the applicable principles of
Good Manufacturing Practice (GMP*), Good Clinical Practice
(GCP), Good Laboratory Practice (GLP) and Good Distribution
Praxis (GDP) to ensure that all development activities follow
national and international laws, rules and guidelines. Our inde-
pendent quality assurance department prepares an annual
risk-based audit plan enabling an objective auditing of contract
research organizations, investigational sites, suppliers and con-
tract manufacturers selected for clinical studies as well as our
own departments involved in drug development activities. The
Head of Quality Assurance 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 volunteers and patients in clinical trials.
*S E E G L O S S A R Y – page 188
We hold a manufacturing license for the Qualified Person’s cer-
tification of investigational medicinal products, as well as a cer-
tificate from the German authorities of Upper Bavaria confirm-
ing the Company’s compliance with Good Manufacturing
Practice (GMP) standards and guidelines.
›› S E E F I G U R E 14 – Quality Management System at MorphoSys (page 74)
IN T EL L EC T UAL PROPER T Y
Proprietary technology and the drug candidates derived there-
from are our most valuable assets. Therefore, it is critical to our
success that these assets are protected by appropriate mea-
sures such as patents and patent filings. Only through these
means can we ensure that these assets are exclusively utilized.
It is also the reason our Intellectual Property (IP) Department
seeks out the best strategy to protect our products and technol-
ogies. The rights of third parties are also actively monitored
and respected.
Our core technologies, which include the Ylanthia antibody
library and the Slonomics technology amongst others, form our
basis for success. Each of these technologies is protected by a
number of patent families. Meanwhile, most of these patents
have been granted in all of the key regions, including the mar-
kets of Europe, the United States and Asia.
The same is true for our development programs. In addition to
the patents that protect the drug candidates themselves, other
patent applications were filed that cover other aspects of the
programs. The relevant patents for our development candidates
MOR103/GSK3196165 (out-licensed to GSK) and MOR202 (out-
licensed to I-Mab for Greater China) are expected to expire not
before 2031 (including the predicted patent term extensions
and supplementary protection certificates). The MOR208 pro-
gram is also protected by various patents. The key patents are
scheduled to expire in 2029 (U.S.) and 2027 (Europe), not tak-
ing into account the additional protection of up to five years
which is available via supplementary protection certificates or
patent term extensions. Likewise, the key patent for MOR106
(out-licensed together with Galapagos to Novartis) expires in
2037, not taking into account any potential extensions. For all
development programs regulatory exclusivities are available
as well.
FINANCIAL STATEMENTS G roup Management Repor t
74
14
Quality Management
System at MorphoSys
Sustainable B usiness Development
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
M A N A G E M E N T B O A R D
Q U A L I T Y
M A N A G E M E N T
S Y S T E M S
1
2
7
6
T R A I N I N G A N D
Q U A L I F I C AT I O N
3
S E L F -I N S P E C T I O N /
I N T E R N A L A U D I T S
R E G U L AT O R Y
R E Q U I R E M E N T S
4
5
E X T E R N A L A U D I T S
( C M O *, C T O *, C R O * ,
C L I N I C A L T R I A L
S I T E S )
S O P S Y S T E M *
D O C U M E N TAT I O N
S Y S T E M
B AT C H R E C O R D
R E V I E W / B AT C H
R E L E A S E
H A N D L I N G O F D E V I AT I O N S ,
C H A N G E C O N T R O L , C O M P L A I N T S ,
O U T O F S P E C I F I C AT I O N ( O O S )
A N D R E C A L L S
Sustainable B usiness Development
G roup Management Repor t
75
The programs developed in cooperation with or for partners are
also fully secured by patent protection. Our patent department
works closely with the relevant partners. The patents covering
these drug development programs have durations that signifi-
cantly exceed those of the underlying technology patents. In
addition, we monitor the activities of our competitors and initi-
ate any necessary actions.
For IP developments in the reporting year please see section
“Patents” under “Research and Development and Business
Performance.”
HUMAN RES OURCES
We follow a progressive human resources policy for the long-
term retention of professionally and personally suitable em-
ployees from a variety of fields. In an industry such as ours,
where success largely depends on the creativity and commit-
ment of staff, factors such as employee retention and employee
satisfaction are crucial for success.
Employees have access to a broad range of in-house and exter-
nal training programs, advanced education, specialized con-
tinuing education and development programs. Employees also
can visit or present at industry conferences. We promote not
only ongoing professional education but also the personal de-
velopment of our employees and in some cases even offer sup-
port through customized coaching.
We encourage all employees with management responsibility
to take part in management seminars created exclusively for
us. The training is offered in several modules with themes that
build upon one another. The goal is not only to provide theoret-
ical knowledge but also to prepare participants for the special
demands placed on our executives.
We actively promoted the professional career paths of special-
ists and experts once again during the reporting year. The in-
tended goal of this type of career promotion, which is also avail-
able to employees without personnel responsibilities, is to
continue to maintain flat hierarchies and place traditional man-
agement and professional career paths on an equal footing, also
in terms of titles and compensation structures.
We offer in-house vocational training to open up promising ca-
reer prospects, particularly for young people. In awarding ap-
prenticeships, we have been very successful in considering
students who are equally suitable but do not have a diploma. On
December 31, 2018, we had two trainees in the IT department
and six biology laboratory trainees (December 31, 2017: two IT
trainees; six biology laboratory trainees).
Our corporate values – Innovation, Collaboration, Courage and
Urgency – are the basis of our company culture. They deter-
mine how we act and interact. As articulated in our credo,
transparent communication between employees is one central
aspect of our corporate culture. One example is the employees’
use of our intranet to obtain target-group-specific information.
We also have a general meeting every three weeks, in which
the Management Board presents the latest developments to em-
ployees, answers questions and provides an opportunity for
employees to present selected projects. Employees’ questions
and feedback can be taken directly in the meeting or submitted
in advance in writing – anonymously if desired.
We maintain a Facebook career page to promote employer
branding. The target group is potential applicants who want to
learn more about us. The page presents employee profiles and
reports on a variety of activities extending beyond the typical
workday to give an authentic and modern impression of us.
New employees are helped to become familiar with the Group
through extensive onboarding activities. Employees can learn
about our processes in one-day orientation seminars with pre-
sentations from all operating departments and by participating
in laboratory tours. New executives are offered an additional
seminar concerning their management duties.
Free athletic and relaxation options, such as soccer, volleyball
and basketball, as well as autogenic training and massage for a
fee, all work to promote health and socializing among employ-
ees of all departments.
Providing feasible concepts for reconciling a professional ca-
reer with personal life is a strategic success factor for progres-
sive companies. For many years, we have been offering em-
ployees a diverse range of options, such as flexible working
hours and special part-time employment arrangements. Mod-
ern IT equipment also allows employees to work during busi-
ness trips or from their home office without interruption. We
make it easier for employees with families to reenter the work-
force and combine work and family life. We cooperate with an
external provider offering employees additional services re-
lated to care and nursing.
We make every effort to protect employees from workplace haz-
ards and maintain their health through preventative measures.
The extremely low number of occupational accidents illustrates
the success of our strict monitoring of all occupational protec-
tion and safety measures. During the reporting year, there
were two reportable occupational accidents. We try 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.
A detailed overview of the Group’s headcount development can
be found in the section “Operations and Business Environment.”
FINANCIAL STATEMENTS G roup Management Repor t
76
Risk and O ppor tunit y Repor t
Risk and Opportunity Report
We operate in an industry characterized by constant change
and innovation. The challenges and opportunities in the health-
care 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,
companies must also grapple with growing regulatory require-
ments in the field of drug development as well as cost pressure
on healthcare systems.
We undertake great efforts to identify new opportunities and to
leverage our business success to generate a lasting increase
in enterprise value. Entrepreneurial success, however, is not
achievable without conscious risk-taking. Through our world-
wide operations, we are confronted with a number of risks that
could affect our business. Our risk management system identi-
fies these risks, evaluates them and takes suitable action to
avert risk and reach our corporate objectives. A periodic strat-
egy review ensures that there is a balance between risk and
opportunity. We only assume risk when there is an opportunity
to increase our enterprise value.
Risk Management System
The risk management system is an essential element of our cor-
porate governance and ensures we adhere to good corporate
governance principles and comply with regulatory require-
ments.
We have a comprehensive system in place to identify, assess,
communicate and deal with our risks. The risk management
system identifies risk as early as possible and details possible
actions to limit operating losses and avoid risks that could
endanger the Company. All actions to minimize risk are
assigned to risk officers, who are also members of our Senior
Management Group.
All of our material risks in the various business segments are
assessed using a systematic risk assessment that is carried out
twice a year. Risks are assessed by comparing their quantifi-
able financial impact with their probability of occurrence with
and without initiating a risk mitigation process. This method is
applied over a 12-month assessment period as well as a period
of three years to include our risks related to proprietary devel-
opment that have longer durations. Additionally, there is long-
term strategic risk assessment that spans more than three
years (qualitative assessment). An overview of our current risk
assessment activities can be found in Tables 11 and 12.
Risk managers enter their risks into an IT platform that makes
monitoring, analyzing and documenting risks easier. The risk
management system distinguishes risk owners from risk man-
agers. For risks relating to clinical development, the risk owner
is the responsible business team head for the respective clini-
cal program. For non-clinical risks, the risk owner is the re-
sponsible department head. Employees from the respective
area of the risk owner can be risk managers as long as the risks
included in the risk management system fall under their area of
responsibility. Risk owners and risk managers are required to
update their risks and assessments at half-yearly intervals. The
process for this is coordinated and led from the Corporate Fi-
nance & Corporate Development Department, which is also re-
sponsible for monitoring the evaluation process and summariz-
ing the key information. The information is regularly presented
to the Management Board which, in turn, presents the results
to the Supervisory Board twice a year. The entire evaluation
process is based on standardized forms for the evaluations.
Risk management and monitoring activities are carried out by
the relevant managers. The changes in the risk profile result-
ing from these activities are recorded at regular intervals. It is
also possible to report important risks on an ad hoc basis when
they occur outside of the regular intervals. A regular audit by
external consultants ensures the ongoing development of the
risk management system and that any potential changes in our
risk areas are promptly incorporated. The risk and opportunity
management system combines a bottom-up approach for recog-
nizing both short- and medium-term risks with a top-down ap-
proach that systematically identifies long-term global risks and
opportunities. As part of the top-down approach, workshops
are held twice per year with selected members of the Senior
Management Group. These workshops assess and discuss the
long-term risks and opportunities in different areas, including
those exceeding a period of three years. The evaluation process
is solely qualitative. These risks are listed in Table 11 and 12.
Principles of Risk and Opportunity
Management
We continually encounter both risks and opportunities. These
could have a potential material impact on our net assets and fi-
nancial position as well as a direct effect on intangible assets,
such as our image in the sector or our trademark.
We define risk as an internal or external event that has an imme-
diate impact and includes an assessment of the potential financial
impact on our targets. There is a direct relationship between op-
portunity and risk. Seizing opportunities has a positive influence
on our targets, whereas risk emergence has a negative influence.
Risk and O ppor tunit y Repor t
G roup Management Repor t
77
Responsibilities under the Risk and
Opportunity Management System
Our Management Board is responsible for the risk and opportu-
nity management system and ensures that all risks and opportu-
nities are evaluated, monitored and presented in their entirety.
The Corporate Finance & Corporate Development Department
coordinates the risk management process and reports regu-
larly to the Management Board. The Supervisory Board has ap-
pointed the Audit Committee to monitor the effectiveness of our
risk management system. The Audit Committee periodically
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 15 – Risk and Opportunity Management System at MorphoSys (page 78)
Accounting-Related Internal Control
System
We employ extensive internal controls, Group-wide reporting
guidelines as well as other measures, such as employee train-
ing and ongoing professional education with the goal of main-
taining accurate bookkeeping and accounting and ensuring
reliable financial reporting in the consolidated financial state-
ments and group management report. This essential compo-
nent of Group accounting consists of preventative, monitoring
and detection measures intended to ensure security and con-
trol in accounting and operating functions. Detailed informa-
tion about the internal control system for financial reporting
can be found in the Corporate Governance Report.
Risks According to Risk Management
System
RISK C AT EGORIES
As part of its risk assessment, we assign risks to the six catego-
ries described below. The assessment of the relevance of the
risks is not distinguished according to categories but according
to impact and probability of occurrence. Therefore, Tables 11
and 12, which list our biggest risks, do not necessarily include
risks from all six categories.
FINANCIAL RISK
Our financial risk management seeks to limit financial risk and
reconciles this risk with the requirements of our business.
Financial risk can arise in relation to licensing agreements, for
example when projects (products or technologies) do not mate-
rialize, are delayed or are out-licensed under different terms
and conditions than originally planned. Risk also arises when
revenues do not reach their projected level or when costs are
higher than planned due to greater resource requirements. De-
tailed project preparations, such as those made through in-
depth exchanges with internal and external partners and con-
sultants, ensure the optimal starting point early in the process
and are important for minimizing risk. Our financial risk re-
lated to proprietary programs was reduced in July 2018 when
we, together with Galapagos NV, entered into a worldwide, ex-
clusive agreement with Novartis Pharma AG covering the de-
velopment and commercialization of our joint program MOR106.
The financial risk relating to the fully proprietary program
MOR208 remains entirely with us. We retain some risk with
respect to the clinical development of programs introduced into
partnerships; for example MOR210. In 2018 we partnered this
program with I-Mab for China, Taiwan, Hong Kong, Macao and
South Korea, but retain responsibility for the rest of the world
ourselves. The early termination of development partnerships
may force us to bear future development costs alone and have
a major impact on our statement of profit or loss and financial
planning. Through our successful Nasdaq IPO in April 2018,
we strengthened our financial position.
Continuing economic difficulties in Europe indicate that poten-
tial bank insolvencies still pose a financial risk. For this rea-
son, we continue to invest only in funds and bank instruments
deemed safe – to the extent this is possible and can be esti-
mated – and that have a high rating and/or are secured by a
strong partner. We limit our dependence on individual financial
institutions by diversifying and/or investing in lower risk
money market funds. However, a strategy that eliminates all
risks of bank insolvency would be too costly and impractical.
For example, German government bonds are a very secure form
of investment but currently trade with negative interest rates.
A further risk is the receipt of adequate interest on financial
investments, particularly in light of today’s negative interest
rates. It is currently very difficult for us to invest within the
scope of our policies and still avoid negative interest rates. We
invest when possible in instruments that yield positive interest
rates. However, there is no guarantee that positive, safe, inter-
est-bearing investments will always be available.
In the Partnered Discovery segment, there is a financial risk
associated with royalties on Tremfya® product sales. Revenues
generated by our partner Janssen from the drug, which was
approved in 2017, are difficult to predict and may lead to devia-
tions from the budgeted revenues.
We plan to continue to invest a significant portion of our funds
in the development of our product candidates. This includes
identifying target molecules and drug candidates, conducting
preclinical and clinical studies, producing clinical material,
supporting partners and co-developing programs. Current finan-
cial resources and expected revenues are expected to be suffi-
cient to meet our current and short-term capital needs. This
does not guarantee, however, that sufficient funds will be avail-
able over the long term at all times.
FINANCIAL STATEMENTS Risk and O ppor tunit y Repor t
G roup Management Repor t
78
15
Risk and Opportunity
Management System
at MorphoSys
C O R P O R AT E
G O V E R N A N C E
S U P E R V I S O R Y
B O A R D
M A N A G E M E N T
B O A R D
C O M P L I A N C E
M A N A G E M E N T
R I S K A N D
O P P O R T U N I T Y
M A N A G E M E N T
I N T E R N A L
C O N T R O L
S Y S T E M
I N T E R N A L
R E V I S I O N
D E F I N E
O B J E C T I V E S
D I S C U S S I O N
F O R U M
M O N I T O R
S Y S T E M
A S S E S S
R I S K
T E C H N O L O G Y
S C O U T I N G
B U S I N E S S
D E V E L O P M E N T
I M P L E M E N T
M E A S U R E S
I N N O V AT I O N
C A P I TA L
I N T E R N A L
A U D I T
Risk and O ppor tunit y Repor t
G roup Management Repor t
79
OPER ATIONAL RISK
Operational risk includes risks related to the discovery and de-
velopment of proprietary drug candidates.
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 does not produce the ex-
pected results, shows unexpected adverse side effects or the
data are compiled 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 relevant data
in clinical testing and convince regulatory agencies and poten-
tial partners of the drug candidate’s potential. External experts
also contribute to our existing internal know-how. Special
steering committees and panels are formed to monitor the
progress of clinical programs.
Any changes with respect to clinical trials such as the trial’s
design, the speed at which patients can be recruited or upcom-
ing alternative therapies may lead to a delay in development
and, as a result, have a negative impact on the trial’s economic
feasibility and potential.
There is also a risk associated with proprietary programs if
partnerships fail or are delayed.
STR ATEGIC RISK
Access to sufficient financing options also poses a strategic risk
for us. Following our decision to develop our proprietary portfo-
lio in-house, the financing of research and development is now
a key focus. Risks in this respect can arise from a lack of access
to capital. We established an in-depth budget process to miti-
gate these risks. We also employ various departments and ex-
ternal consultants to ensure the smooth execution of capital
market transactions.
A further strategic risk is the danger that a development pro-
gram introduced into a partnership may fail. Partnerships can
be terminated prematurely, forcing us to search for new devel-
opment partners or bear the substantial cost of further develop-
ment alone. This may result in a delay or even the termination
of the development of individual candidates and could lead to
additional costs and a potential long-term loss of revenues for
us due to delayed market entry.
Another strategic risk is that preliminary data from clinical tri-
als may lead to the trial’s termination or a change in the trial’s
design.
With respect to the development and potential approval of
MOR208, we are currently preparing a submission of a regula-
tory filing with the FDA based on the single-arm L-MIND trial.
There may be a strategic risk that the regulatory authorities do
not accept a filing and/or grant approval based on single-arm
data for MOR208 plus lenalidomide.
E X TERNAL RISKS
We face external risks with respect to intellectual property,
among others. The patent protection of our proprietary technol-
ogies and compounds is especially important. To minimize
risks in this area, we keep a vigilant eye on published patents
and patent applications and analyze the corresponding results.
We also develop strategies to ensure that the patents or patent
applications of others do not limit our ability to pursue our own
activities. Through the years, we have seen increasing success
with this strategy and have created ample leeway for our pro-
prietary technology platforms and products for many years to
come. Risks can also arise through the enforcement of our in-
tellectual property rights vis-à-vis third parties. The respective
proceedings can be costly and mobilize significant resources.
There is also the risk that a third party files a counter-claim
against us. External risks may also arise as a result of changes
in the legal framework. This risk is minimized through contin-
ued training of the relevant staff and discussions with external
experts. It is also conceivable that competitors might challenge
our patents or infringe on our patents or patent families, which
in turn could lead us to take legal action against our competi-
tors. Such procedures, particularly when they take place in the
U.S., are costly and represent a significant financial risk.
As an internationally operating biotechnology company with
numerous partnerships and an in-house research and develop-
ment department for developing drug candidates, we are sub-
ject to a number of regulatory and legal risks. These risks in-
clude those related to patent, competition, tax and antitrust law,
potential liability claims from existing partnerships and envi-
ronmental protection. The Regulatory Affairs department is
also affected by this risk in terms of the feedback it receives
from regulators on study design. Future legal proceedings are
conceivable and cannot be anticipated. Therefore, we cannot
rule out that we may incur expenses 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.
ORGANIZ ATIONAL RISK
Organizational risks arise, for example, with respect to setting
up commercial structures and the related costs. For us, this
means that processes and procedures need to be adapted ac-
cordingly. In September 2017, we established a “Global Com-
mercial” department, which works with external consultants to
set up commercial structures in the headquarters and supports
other functions to get ready for commercialization. In July 2018,
we opened a 100 % affiliate in the U.S., MorphoSys US Inc.,
which will be the first commercial operation. Highly experi-
enced employees are being hired to ensure thorough prepara-
tion for launch.
Risk also arises from missing or delayed information within
the organization on patent issues.
FINANCIAL STATEMENTS G roup Management Repor t
80
Risk and O ppor tunit y Repor t
C OMPLIANCE RISK
Compliance risks can arise when quality standards are not
met, or business processes are not conducted properly from a
legal standpoint. To counter these risks, we are committed to
having our business operations meet the highest quality stan-
dards as set out in the Sustainability Report. Carrying out a
compliance risk analysis is a central tool of the Compliance
Management System.
Specific risks 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 prob-
lems. If the internal controls are not able to detect violations of
Good Manufacturing Practice (GMP), Good Clinical Practice
(GCP), Good Laboratory Practice (GLP) or Good Distribution
Praxis (GDP) then this also would represent a compliance risk.
To minimize risk, the internal quality management system is
also regularly audited by external experts and subjected to re-
curring audits by an internal, independent quality assurance
department.
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 re-
peat of the Annual General Meeting. Pending decisions for corpo-
rate 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 pro-
cesses are carefully reviewed and monitored by the relevant
internal departments, as well as by external lawyers and audi-
tors when it comes to the annual financial statements.
None of the Top 10 Risks listed in Tables 11 and 12 belonged to
this risk category in the reporting period.
T HE MANAGEMEN T BOARD’S EVALUAT ION OF T HE OVERAL L
RISK SI T UAT ION IN OUR GROUP
Our Management Board considers the overall risk to be man-
ageable and trusts in the effectiveness of the risk management
system in relation to changes in the environment and the needs
of the ongoing business. It is the Management Board’s view that
our continued existence is not jeopardized. This assessment
applies to us as a whole as well as to each Group company. This
conclusion is based on several factors that are summarized
below:
• We have an exceptionally high equity ratio.
• The Management Board firmly believes that we are well posi-
tioned to cope with any adverse events that may occur.
• We control a comprehensive portfolio of preclinical and clini-
cal programs in partnerships with a number of large pharma-
ceutical companies and have a strong foundation of technolo-
gies for expanding our proprietary portfolio.
Despite these factors, it is impossible to rule out, control or in-
fluence risk in its entirety.
Opportunities
Cutting-edge antibody technologies, excellent know-how and a
broad portfolio of validated clinical programs have made us 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 our products and technologies. Based on this fact
and our extensive, long-term technological and product devel-
opment expertise, we have identified a number of future growth
opportunities.
Our technologies for developing and optimizing therapeutic an-
tibody 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 our core
capabilities – even those outside of the field of antibodies –
opens up new opportunities for us because many classes of
compounds have similar molecular structures.
OPP OR T UNI T Y MANAGEMEN T SY S T EM
The opportunity management system is an important compo-
nent of our corporate management and is used to identify oppor-
tunities as early as possible and generate added value for us.
Opportunity management is based on the following pillars:
• a routine discussion forum involving the Management Board
and selected members of the Senior Management Group;
• our business development activities;
• a technology scouting team;
• a compound scouting team; and
• an in-house suggestion scheme, with appropriate incentive
systems, for new scientific ideas.
Committees discuss specific opportunities and decide what
action should be taken to exploit these opportunities. The meet-
ings and their outcomes are recorded in detail, and any subse-
quent action is reviewed and monitored. Our Business Develop-
ment Team takes part in numerous conferences and in the
process identifies different opportunities that can enhance our
growth. These opportunities are presented and considered by
the committee by means of an evaluation process. The technol-
ogy scouting team searches specifically for innovative technol-
ogies that can generate synergies with our existing technology
platforms and could be used to source new therapeutic mole-
cules. The compound scouting team searches specifically for
compounds that can add to our proprietary pipeline or future
sales force. These outcomes are also discussed and evaluated in
interdepartmental committees. A proven process for evaluating
opportunities gives us a qualitative and replicable evaluation.
Our key opportunities are described in Table 13 (qualitative
evaluation).
Risk and O ppor tunit y Repor t
G roup Management Repor t
81
GENERAL S TAT EMEN T ON OPP OR T UNI T IES
Increased life expectancy in industrialized countries and ris-
ing 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 pro-
cess of disease and paves the way for new therapeutic ap-
proaches. Innovative therapies, such as fully human antibod-
ies, have reached market maturity in recent years and have led
to the development of commercially successful medical prod-
ucts. Therapeutic compounds based on proteins – also referred
to as “biologics” – are less subject to generic competition than
chemically produced molecules because the production of bio-
logical compounds 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 li-
censing agreements made over the past two to three years.
MARKE T OPP OR T UNI T IES
We believe our antibody platforms HuCAL, Ylanthia, Slonomics,
the HTH peptide technology and the in-licensed lanthipeptide
technology can all be used to develop products addressing sig-
nificant unmet medical needs.
October that new Tremfya® (guselkumab) 3-year data show sta-
bly maintained rates of skin clearance in patients with moder-
ate to severe plaque psoriasis. In December, Janssen reported
that results from the ECLIPSE study demonstrated that
Tremfya® was superior to Cosentyx® (secukinumab) in treating
adults with moderate to severe plaque psoriasis for the primary
endpoint of a PASI 90 response at week 48.
Tremfya® has received further regulatory approval in a number
of territories worldwide, including Canada, the European
Union, Brazil, Japan, Australia and South Korea to treat pa-
tients suffering from moderate-to-severe plaque psoriasis and
in Japan additionally for the treatment of psoriatic arthritis,
pustular psoriasis and erythrodermic psoriasis. Moreover,
Tremfya® is being investigated in clinical studies including two
phase 3 trials in psoriatic arthritis and a phase 2/3 clinical
study program in Crohn’s disease. Janssen also initiated a
phase 2 study (NOVA) to evaluate guselkumab in hidradenitis
suppurativa.
In June 2018, we announced new phase 3 clinical trials by
our partner Roche with gantenerumab in early Alzheimer’s
disease.
T HERAPEU T IC AN T IBODIES – PROPRIE TARY DEVEL OPMEN T
It is reasonable to assume that the pharmaceutical industry
will continue or even increase its in-licensing of drugs to refill
its pipelines and replace key products and blockbusters that
have lost patent protection. Our most advanced compounds
MOR103/GSK3196165, MOR106, MOR202 and MOR208 place
us in an excellent position to capitalize on the needs of pharma-
ceutical companies. Our collaborations with GSK (for MOR103/
GSK3196165), with I-Mab (MOR202 and MOR210) and with No-
vartis (MOR106) exemplify this point.
We are continuously enhancing our proprietary portfolio and
will continue to advance it by adding clinical trials with our key
drug candidates in new disease areas and by adding additional
programs. In this way, we may take advantage of existing and
future opportunities for co-development or partnerships. We
are also looking for more opportunities to in-license promising
drug candidates.
The drug candidate MOR208 may provide us with our first op-
portunity to independently market a drug.
T HERAPEU T IC AN T IBODIES – PAR T NERED DEVEL OPMEN T
By developing drugs with a number of partners, we have been
able to spread the risk that is inevitably linked with drug devel-
opment. With 103 individual therapeutic antibodies currently
in partnered development programs, it is becoming more likely
that we will have an opportunity to participate financially in
marketed drugs. Since the first regulatory approval of Tremfya®
by the U.S. FDA in mid-2017, our licensee Janssen reported in
T ECHNOL OGY DEVEL OPMEN T
We continue to invest in our existing and new technologies to
defend our technological leadership. One example is our new
antibody platform Ylanthia that enjoys much longer patent pro-
tection than its predecessor HuCAL.
This type of technological advance can help us to increase not
only the speed but also the success rate of our partnered and
proprietary drug development programs. New technology mod-
ules that enable the production of antibodies against novel
classes of target molecules can also provide access to new dis-
ease areas in which antibody-based treatments are underrepre-
sented.
In September 2018, we announced an expansion of the existing
strategic dermatology alliance with LEO Pharma A/S. The ob-
jective of the alliance is to identify novel, peptide-derived ther-
apeutics for unmet medical needs. Under the terms of the
agreement, LEO Pharma will select targets against which
MorphoSys will identify lead molecules using its proprietary
peptide technology platform. MorphoSys has an exclusive op-
tion to secure worldwide rights to any drugs arising from the
collaboration in the field of oncology.
Technology development is carried out by a team of scientists
whose focus is the further development of our technologies. We
not only develop technology internally but also use external re-
sources to enhance our own activities. A good example of this
is our acquisition of Lanthio Pharma, a Dutch company develop-
ing lanthipeptides.
FINANCIAL STATEMENTS G roup Management Repor t
82
Risk and O ppor tunit y Repor t
ACQUISI T ION OPP OR T UNI T IES
In the past, we have proven our ability to acquire compounds
and technologies that accelerate our growth. Potential acquisi-
tion candidates are also systematically presented, discussed
and evaluated during the routine meetings described above
between the Management Board and selected members of the
Senior Management 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 candidates and evaluations are systematically
archived for follow-up and monitoring. A proprietary database
helps administer this information and keep it available.
F INANC IAL OPP OR T UNI T IES
Exchange rate and interest rate developments can positively
or negatively affect our financial results. Interest rate and
financial market developments are continuously monitored to
promptly identify and take advantage of opportunities.
T A B L E 11
Summary of MorphoSys’s Key Short- and Medium-Term Risks
Proprietary Development segment
Risks related to building a marketing structure
Failure of one or more proprietary clinical programs
Risks related to regulatory approval process
Increase in development costs
Outside of the Proprietary Development segment
Failure to reach revenue targets in Partnered Discovery programs
Proprietary Development segment
Failure of one or more proprietary clinical programs
Risks related to regulatory approval process
Delay in the development of one or more proprietary clinical programs
and/or higher development costs
Risks related to technology access
Patent-related risks
Outside of the Proprietary Development segment
Failure to reach revenue targets in Partnered Discovery programs
Risks from bank insolvencies
Risk category
3-year assessment
Financial
Financial, strategic,
operational
Financial, strategic
Strategic
••
••
••
••
Moderate
Moderate
Moderate
Moderate
Financial
••
Moderate
Risk category
1-year assessment
Operational
Strategic
•••
••
Financial, operational,
organizational
Strategic
External
••
•
•
High
Moderate
Moderate
Low
Low
Financial
Financial
••
•
Moderate
Low
LEG END
•
••
•••
••••
LOW RISK :
MODER ATE RISK :
HIG H RISK :
CATASTROPHIC RISK :
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
Risk and O ppor tunit y Repor t
T A B L E 12
Summary of MorphoSys’s Key Long-Term Risks
G roup Management Repor t
83
Segment
Risk
Order of importance1
Proprietary Development
Failure to get approval or significant delay of approval of
lead proprietary program
Proprietary Development
Failure to build a commercial structure in the U.S.
Proprietary Development
Negative study outcome of lead proprietary program
Partnered Discovery
Discontinuation, delay or less revenue than expected from late-stage
partnered compounds
Proprietary Development
Termination of earlier stage proprietary programs
1 Declining importance of risk from 1 to 5, whereby 1 represents the most important risk.
1
2
3
4
5
T A B L E 1 3
Summary of MorphoSys’s Key Opportunities
Segment
Opportunity
Order of importance1
Proprietary Development
Potential FDA approval for MOR208 based on L-MIND study in r/r DLBCL
and successful commercialization of the drug
Proprietary Development
Potential positive outcome in CD38 patent infringement lawsuit2
Proprietary Development
MOR202 development in autoimmune disease
1
2
3
1 Declining importance of opportunity from 1 to 3, whereby 1 represents the greatest opportunity.
2 The assessment of opportunities is based on the evaluation of the opportunity management system in the reporting year. Due to the settlement in the patent lawsuit
with Janssen Biotech and Genmab A/S as of January 31, 2019, this is no longer an opportunity for MorphoSys and therefore it will not be evaluated in the opportunity
management system any more.
FINANCIAL STATEMENTS G roup Management Repor t
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84
Statement on Corporate Governance,
Group Statement on Corporate
Governance and Corporate Governance
Report
There is no cap on the overall or individual variable remuner-
ation components of Management Board members’ remuner-
ation (see Item 4.2.3 (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.
2. MorphoSys will continue to comply with the recommenda-
tions of the “Government Commission on the German Corpo-
rate Governance Code” in the version dated February 7, 2017
with the exception described under Item 1.
Planegg, November 30, 2018
MorphoSys AG
On behalf of the
Management Board:
On behalf of the
Supervisory Board:
Dr. Simon Moroney
Chief Executive Officer
Dr. Marc Cluzel
Chairman of the Supervisory Board
The Statement on Corporate Governance, the Group Statement
on Corporate Governance and the Corporate Governance Re-
port are available on our website under Media and Investors –
Corporate Governance.
Statement on Corporate Governance
under Section 289F HGB and Group
Statement on Corporate Governance
under Section 315d HGB for the 2018
Financial Year
In the Statement on Corporate Governance under Section 289f
HGB and the Group Statement on Corporate Governance under
Section 315d HGB, the Management Board and the Supervisory
Board provide information on the main elements of our corpo-
rate governance. In addition to the annual Declaration of Con-
formity in accordance with Section 161 of the Stock Corporation
Act (AktG), the Statement on Corporate Governance and the
Group Statement on Corporate Governance also include rele-
vant information on corporate governance practices and other
aspects of corporate governance, including a description of the
working practices of the Management Board and Supervisory
Board.
DECL ARAT ION OF CONF ORMI T Y WI T H T HE GERMAN
CORP ORAT E GOVERNANCE CODE ( T HE “CODE” ) OF T HE
MANAGEMEN T BOARD AND SUPERVIS ORY BOARD OF
MORPHOSY S AG
The Management Board and Supervisory Board of MorphoSys AG
declare the following under Section 161 of the German Stock
Corporation Act:
1. Since the last Declaration of Conformity on December 1,
2017, MorphoSys has complied with the recommendations of
the “Government Commission on the German Corporate Gov-
ernance Code” in the version from February 7, 2017 with the
following exception:
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
G roup Management Repor t
85
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
We ensure compliance with laws and rules of conduct through
the Group-wide enforcement of the following documents: the
Code of Conduct, the Compliance Management Handbook and
additional internal policies and guidelines.
Our 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 conflict situations. It reinforces our prin-
ciples of transparent and sound management and fosters trust
from the public, business partners, employees and financial
markets, and the compliance with the Code of Conduct is care-
fully monitored. The Group-wide application of the Code is over-
seen by the Compliance Committee, and the Code itself is regu-
larly reviewed and updated. The Code of Conduct is being
distributed to each new employee and can be downloaded from
our website under Media and Investors – Corporate Governance.
The Compliance Handbook describes our Compliance Manage-
ment System (CMS) and is intended to ensure compliance with
all legal regulations as well as high ethical standards that ap-
ply to both the management and all employees. The Manage-
ment Board has overall responsibility for the Compliance Man-
agement System and is required to report regularly to the Audit
Committee and the Supervisory Board. In carrying out its com-
pliance responsibility, the Management Board has assigned the
relevant tasks to various functions at MorphoSys.
The Compliance Officer ensures the exchange of information
between the internal compliance-relevant functions. The Com-
pliance Officer monitors our existing CMS and upgrades it based
on decisions taken by the Management Board and Compliance
Committee. The Compliance Officer is the first point of contact
for each employee for all compliance-related issues.
The Compliance Committee includes representatives from dif-
ferent functions and meets quarterly. The Compliance Commit-
tee supports the Compliance Officer in the implementation and
monitoring of the CMS. The Compliance Committee is particu-
larly responsible for the identification and discussion of all com-
pliance-relevant issues and thus makes it possible for the Com-
pliance Officer as well as the other members of the Compliance
Committee to periodically verify our compliance status and, if
necessary, update the CMS.
More information on our Compliance Management System can
be found in the Corporate Governance Report.
SUPERVIS ORY BOARD
MANAGEMENT BOARD
The Management Board of the Company consists of a Chief Ex-
ecutive Officer and three other members. A schedule of respon-
sibilities currently defines the different areas of responsibility
as follows:
• Dr. Simon Moroney, Chief Executive Officer: Strategy and
Planning, Compliance & Quality Assurance, Internal Audit,
Human Resources, Business Development & Portfolio Man-
agement, Legal, Commercial Planning, the coordination of
individual areas of the Management Board, representation of
the Management Board vis-à-vis the Supervisory Board
• Jens Holstein, Chief Financial Officer: Accounting & Tax,
Controlling, Corporate Finance & Corporate Development, IT,
Technical Operations, Central Purchasing & Logistics, Corpo-
rate Communications & Investor Relations, Environmental
Social Governance (ESG)
• Dr. Markus Enzelberger, Chief Scientific Officer: Discovery
Alliances & Technologies, CMC & Protein Sciences, Alliance
Management, Supply Chain, Intellectual Property, Lanthio
Pharma
• Dr. Malte Peters, Chief Development Officer: Preclinical Re-
search, Project Management, Clinical Development, Clinical
Operations, Drug Safety & Pharmacovigilance, Regulatory
Affairs
SUPERVISORY BOARD
As of December 31, 2018, our Supervisory Board consisted of
six members who oversee and advise the Management Board.
The current Supervisory Board consists of professionally qual-
ified members who represent our shareholders. The Chairman
of the Supervisory Board (Dr. Gerald Möller until May 17, 2018
and Dr. Marc Cluzel since May 17, 2018), coordinates the
Board’s activities, chairs the Supervisory Board meetings and
represents the interests of the Supervisory Board externally.
All Supervisory Board members are independent, as defined in
the German Corporate Governance Code and the Nasdaq List-
ing Rules, and have many years of experience in the biotechnol-
ogy and pharmaceutical industries. The Chairman of the Super-
visory Board is not a former member of our Management Board.
The members of the Supervisory Board and its committees are
listed in the table below.
FINANCIAL STATEMENTS G roup Management Repor t
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86
T A B L E 14
Composition of the Supervisory Board until Termination of the 2018 Annual General Meeting
Name
Position
Appointment
End of Term
Committee
Initial
Audit
Remuneration
and Nomination
Committee
Science and
Technology
Committee
Dr. Gerald Möller
Chairman
1999
2018
Dr. Frank Morich
Deputy Chairman
Krisja Vermeylen
Klaus Kühn
Dr. Marc Cluzel
Wendy Johnson
Member
Member
Member
Member
2015
2017
2015
2012
2015
2020
2019
2020
2018
2020
Independent financial expert
Chairperson
Member
T A B L E 1 5
Composition of the Supervisory Board since Termination of the 2018 Annual General Meeting
Name
Position
Appointment
End of Term
Committee
Initial
Audit
Remuneration
and Nomination
Committee
Science and
Technology
Committee
Dr. Marc Cluzel
Chairman
Dr. Frank Morich
Deputy Chairman
Krisja Vermeylen
Member
Michael Brosnan
Member
Dr. George
Golumbeski
Wendy Johnson
Member
Member
2012
2015
2017
2018
2018
2015
2021
2020
2019
2020
2020
2020
Independent financial expert
Chairperson
Member
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
G roup Management Repor t
87
WORK ING PRAC T ICES OF T HE MANAGEMEN T BOARD AND
SUPERVIS ORY BOARD
To ensure good corporate governance, a guiding principle of the
cooperation between our Management Board and Supervisory
Board is the open, comprehensive and regular communication
of information. The dual board system prescribed by the Ger-
man Stock Corporation Act clearly differentiates between a
company’s management and supervision. The responsibility of
both boards is clearly stipulated by law and by the boards’
bylaws and Articles of Association. The boards work closely to-
gether to make decisions and take actions for our benefit. Their
stated objective is to sustainably increase our value.
Management Board members each have their own area of re-
sponsibility as defined in the schedule of responsibilities. They
regularly report to their Management Board colleagues, their
cooperation being governed by the bylaws. The Supervisory
Board ratifies both the schedule of responsibilities and the by-
laws. Management Board meetings are typically held weekly
and are 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. Manage-
ment Board resolutions are passed by a simple majority and, in
the event of a tied vote, the Chief Executive Officer’s vote de-
cides. For material events, each Management Board or Supervi-
sory Board member can call an extraordinary meeting of the
entire Management Board. Management Board resolutions can
also be passed outside of meetings by an agreement made
orally, by telephone or in writing (also by e-mail). Minutes are
taken of each meeting of the full Management Board, are sub-
mitted for approval to the full Management Board and for signa-
ture by the Chief Executive Officer at the following meeting.
In addition to the regularly scheduled meetings, Management
Board strategy workshops are also held for developing and pri-
oritizing the Group-wide strategic objectives.
The Management Board promptly and comprehensively in-
forms the Supervisory Board in writing and at Supervisory
Board meetings about planning, business development, the
Group’s position, risk management and other compliance is-
sues. 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 funda-
mental Company issues. In addition to regular Supervisory
Board meetings, a strategy meeting takes place between the
Management Board and Supervisory Board once annually to
discuss our strategic direction. The Management Board’s by-
laws specify that material business transactions require the
approval of the Supervisory Board. Detailed information on the
cooperation of the Management Board and Supervisory Board
and important items of discussion during the 2018 financial
year can be found in the Report of the Supervisory Board.
The Supervisory Board holds a minimum of two meetings per
calendar half-year and at least four meetings per full calendar
year. The Supervisory Board has supplemented the Articles of
Association with bylaws that apply to its duties. In accordance
with these bylaws, 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 meetings, but resolutions may also be
passed outside of meetings in writing (also by e-mail), by tele-
phone or video conference.
The Supervisory Board has a quorum when at least two-thirds
of its members (including either the Chairperson or Deputy
Chairperson of the Supervisory Board) take part in the vote.
Resolutions of the Supervisory Board are generally passed with
a simple majority unless the law prescribes otherwise. In the
event of a tied vote, the vote of the Chairperson of the Supervi-
sory Board is decisive.
Minutes are completed for Supervisory Board meetings and
resolutions passed outside of meetings. A copy of the Supervi-
sory Board’s minutes is made available to all Supervisory Board
members. The Supervisory Board conducts an efficiency evalu-
ation regularly in accordance with the recommendation in
Item 5.6 of the Code.
COMPOSI T ION AND WORKING PRAC T ICES OF T HE MANAGE-
MEN T BOARD AND SUPERVIS ORY BOARD COMMI T T EES
The Management Board has not formed any committees.
The Supervisory Board has three committees: the Audit Com-
mittee, the Remuneration and Nomination Committee and the
Science and Technology Committee. The members of the three
committees formed by the Supervisory Board are profession-
ally qualified.
FINANCIAL STATEMENTS G roup Management Repor t
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88
T A B L E 1 6
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
by phone
01/16
2018
03/09
2018
05/16
2018
05/17
2018
06/24
2018
07/26
2018
07/27
2018
10/26
2018
12/12
2018
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Name
Dr. Gerald
Möller1
Dr. Marc
Cluzel
Wendy
Johnson
Klaus Kühn1
Dr. Frank
Morich
Krisja
Vermeylen
Dr. George
Golumbeski2
Michael
Brosnan2
1 Supervisory Board member until termination of the 2018 Annual General Meeting.
2 Supervisory Board member since termination of the 2018 Annual General Meeting.
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
Wendy Johnson
Klaus Kühn1
Krisja Vermeylen
Michael Brosnan2
by phone
03/08/2018
04/26/2018
07/25/2018
10/26/2018
12/12/2018
–
–
–
–
–
1 Supervisory Board member until termination of the 2018 Annual General Meeting.
2 Supervisory Board member since termination of the 2018 Annual General Meeting.
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
G roup Management Repor t
89
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 Möller1
Dr. Marc Cluzel
Krisja Vermeylen
Dr. Frank Morich
by phone
by phone
by phone
by phone
by phone
01/16/2018
03/02/2018
05/07/2018
06/08/2018
10/10/2018
–
–
–
–
–
1 Supervisory Board member until termination of the 2018 Annual General Meeting.
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
Name
03/08/2018
05/16/2018
07/25/2018
10/26/2018
12/12/2018
Dr. Marc Cluzel
Wendy Johnson
Dr. Frank Morich
Dr. George Golumbeski2
–
–
–
–
–
2 Supervisory Board member since termination of the 2018 Annual General Meeting.
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
AUDI T COMMI T T EE
The main task of the Audit Committee is to support the Super-
visory Board in fulfilling its supervisory duties with respect to
the accuracy of the annual and consolidated financial state-
ments, the activities of the auditor and internal control func-
tions, such as risk management, compliance and internal audit-
ing. The Audit Committee submits a recommendation to the
Supervisory Board for the election at the Annual General Meet-
ing of an independent auditor. The members of the Audit Com-
mittee until May 17, 2018 were Klaus Kühn (Chairperson),
Wendy Johnson and Krisja Vermeylen. The members of the Au-
dit Committee since May 17, 2018 are Michael Brosnan (Chair-
person), Wendy Johnson and Krisja Vermeylen. Michael Brosnan
currently fulfills the prerequisite of an independent financial
expert.
REMUNERAT ION AND NOMINAT ION COMMI T T EE
The Remuneration and Nomination Committee is responsible
for preparing and reviewing the Management Board’s compen-
sation system annually before its final approval. When neces-
sary, the Committee searches for suitable candidates to appoint
to the Management Board and Supervisory Board and submits
appointment proposals to the Supervisory Board. The Commit-
tee also prepares the contracts made with Management Board
members. The members of the Remuneration and Nomination
Committee until May 17, 2018 were Dr. Gerald Möller (Chair-
person), Dr. Marc Cluzel and Krisja Vermeylen. The members of
the Remuneration and Nomination Committee since May 17,
2018 are Krisja Vermeylen (Chairperson), Dr. Marc Cluzel and
Frank Morich.
FINANCIAL STATEMENTS
G roup Management Repor t
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90
S C IENCE AND T ECHNOL OGY COMMI T T EE
The Science and Technology Committee advises the Supervi-
sory Board on matters concerning proprietary drug and tech-
nology development and prepares the relevant Supervisory
Board resolutions. The members of the Science and Technology
Committee until May 17, 2018 were Dr. Marc Cluzel (Chairper-
son), Dr. Frank Morich and Wendy Johnson. The members of
the Science and Technology Committee since May 17, 2018 are
Dr. George Golumbeski (Chairperson), Dr. Frank Morich and
Wendy Johnson.
In line with Section 5.4.1. para. 5 sentence 2 of the Corporate
Governance Code, the Supervisory Board members’ biogra-
phies are published on our website under Company – Manage-
ment – Supervisory Board.
Corporate Governance Report
At MorphoSys, responsible, sustainable and value-oriented cor-
porate governance is a high priority. Good corporate gover-
nance is an essential aspect of our corporate management and
forms the framework for the Group’s management and supervi-
sion, 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
companies that strongly emphasizes shareholder interests. The
Code was originally published by the German Federal Ministry
of Justice (Bundesministerium der Justiz) in 2002 and was most
recently amended on February 7, 2017 and published by the
German Federal Gazette (Bundesanzeiger) on April 24, 2017.
The Code contains recommendations (Empfehlungen) and sug-
gestions (Anregungen) relating to the management and super-
vision of German companies that are listed on a stock exchange.
It follows internationally and nationally recognized standards
for good and responsible corporate governance. The purpose of
the Code is to make the German system of corporate gover-
nance transparent for investors. The Code includes corporate
governance recommendations and suggestions with respect to
shareholders and shareholders’ meetings, the management and
Supervisory Boards, transparency, accounting policies and
auditing.
There is no obligation to comply with the recommendations or
suggestions of the Code. The German Stock Corporation Act re-
quires only that the Management Board and Supervisory Board
of a German listed company issue an annual declaration that
either (i) states that the company has complied with the recom-
mendations of the Code or (ii) lists the recommendations that
the company has not complied with and explains its reasons for
deviating from the recommendations of the Code. In addition, a
listed company is also required to state in this annual declara-
tion whether it intends to comply with the recommendations or
list the recommendations it does not plan to comply with in the
future. These declarations have to be published permanently on
the company’s website. If the company changes its policy on
certain recommendations between such annual declarations, it
must disclose this fact and explain its reasons for deviating
from the recommendations. Non-compliance with suggestions
contained in the Code need not be disclosed.
Many of the corporate governance principles contained in the
Code have been practiced at MorphoSys for many years. Our
corporate governance is detailed in the Statement on Corporate
Governance under Section 289f HGB and 315d HGB. The state-
ment also contains the annual Declaration of Conformity, rele-
vant information on corporate governance practices and a de-
scription 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 principle of corporate communication is to
inform institutional investors, private shareholders, financial
analysts, employees and all other stakeholders, simultaneously
and fully of the Company’s situation through regular, transpar-
ent and timely communication. Shareholders have immediate
access to the information provided to financial analysts and
similar recipients and can obtain this information in both Ger-
man and English. The Company is firmly committed to follow-
ing a fair information policy.
Regular meetings with analysts and investors in the context of
road shows and individual meetings play a central role in inves-
tor relations at MorphoSys. Conference calls accompany publi-
cation 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 recordings of other important events as well as con-
ference call transcripts are also available on the Company’s
website to all interested parties.
The Company’s website www.morphosys.com serves as a cen-
tral platform for current information on the Company and its
development. Financial reports, analyst meetings and confer-
ence presentations, as well as press releases and ad hoc state-
ments, are also available. The important regularly scheduled
publications and events (annual reports, interim reports, an-
nual general meetings and press and analyst conferences) are
published in the Company’s financial calendar well in advance.
ES TABL ISHMEN T OF SPEC IF IC TARGE T S F OR T HE
COMP OSI T ION OF T HE SUPERVIS ORY BOARD
The Supervisory Board shall determine concrete objectives re-
garding its composition and prepare a profile of skills and ex-
pertise for the Supervisory Board such that (i) the Supervisory
Board in its entirety has the necessary knowledge, skills and
professional experience to properly perform its duties, (ii) the
Company’s international activities and potential conflicts of in-
terest are taken into consideration, (iii) a sufficient number of
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
G roup Management Repor t
91
independent Supervisory Board members is ensured, (iv) an
age limit and a regular limit on the length of service is speci-
fied for members of the Supervisory Board, and (v) the aspect of
diversity is taken into account.
In view of these factors and in consideration of the Company’s
specific circumstances (Section 5.4.1 of the German Corporate
Governance Code), the Supervisory Board first set targets for
its composition in July 2015 and reviewed and updated these
targets on July 26, 2017. The Supervisory Board has taken these
targets into account when it submitted its proposal for the elec-
tion of three new members to the Supervisory Board to the 2018
Annual General Meeting, while at the same time aiming at ful-
filling the overall profile of reported skills and expertise of the
Supervisory Board. The implementation of these targets is as
follows:
APPROPRIATE REPRESENTATION OF WOMEN AND DIVERSIT Y
Our Supervisory Board has a total of six members, two of whom
are women. The Supervisory Board strongly believes that, at
33.33 %, the current proportion of women is appropriate and
intends to maintain this proportion in the future. The Supervi-
sory Board currently fulfills this quota.
The Supervisory Board also believes a quota of at least two
non-German members or at least two members with extensive
international experience represents a fair share of diversity
given our international orientation. The Supervisory Board cur-
rently meets this quota.
INDEPENDENCE
The Supervisory Board considers it appropriate that at least
four of its members are independent (Section 5.4.2 of the Ger-
man Corporate Governance Code and the Nasdaq listing rules).
Members of the Supervisory Board are considered independent
when they have no personal or business relationship with
MorphoSys, its management, a controlling shareholder or an
affiliate that may give rise to a material and more than tempo-
rary conflict of interest. All six current members of the Super-
visory Board meet the criteria to be classified as independent.
Therefore, the Supervisory Board currently meets the quota of
four independent members.
Significant and more than temporary conflicts of interest
should be avoided, especially when it involves work for major
competitors. It should be noted, however, that conflicts of inter-
est in certain cases cannot be excluded. Any potential conflicts
of interest must be disclosed to the Chairperson of the Supervi-
sory Board and remedied appropriately. There are currently no
conflicts of interest.
AGE LIMIT
At the time of their appointment by the Annual General Meet-
ing, Supervisory Board members should not be older than
75 years. However, the Supervisory Board may decide to make
an exception in specific cases. The age limit of 75 years is cur-
rently met by the Supervisory Board members.
TERM OF APP OINTMENT
At the Annual General Meeting, the Supervisory Board intends
to propose an initial two-year period of office for Supervisory
Board members. The Supervisory Board intends to allow reap-
pointment twice, each for an additional term of three years, but
reserves the right to make exceptions in specific cases and
propose to the Annual General Meeting to permit members to
be reappointed for a fourth term of three years. Since the time
of setting this target, the maximum term of appointment for all
elected Supervisory Board members has been respected.
The Supervisory Board intends to adhere to the targets set for
its composition when making future election proposals to the
Annual General Meeting.
SK IL L AND EXPERIENCE PROF IL E F OR T HE SUPERVIS ORY
BOARD AS A WHOL E
In addition to defining specific targets, the Supervisory Board
should develop a profile of skills and experience for the entire
Supervisory Board (Section 5.4.1 of the German Corporate Gov-
ernance Code). On July 26, 2017, the Supervisory Board defined
the following profile of skills and experience for the entire Su-
pervisory Board:
PROFES SIONAL E XPER TISE AND E XPERIENCE
Supervisory Board members should possess the necessary pro-
fessional expertise and experience to fulfill their duties as
members of the Supervisory Board of MorphoSys as an interna-
tional biotechnology company. All current Supervisory Board
members have the relevant experience in management posi-
tions in the pharmaceutical and biotechnology industries and,
therefore, meet this requirement.
In order to promote further cooperation between members of
the Supervisory Board, care should be taken in the selection of
candidates to ensure that the aspect of diversity in terms of
professional background, expertise, experience and personal-
ity is sufficiently taken into account.
GENER AL KNOWLEDGE
All members of the Supervisory Board should have general
knowledge of the industry in which we operate in order to make
sufficient and substantial contributions to Supervisory Board
meetings. All Supervisory Board members have the necessary
expertise in the pharmaceutical and biotechnology industries
based on their background and, therefore, meet this requirement.
PROFES SIONAL E XPER TISE
• At least two members of the Supervisory Board must have
extensive experience in drug development
• At least one Supervisory Board member must have expertise
in the areas of accounting or auditing (Section 100 (5) AktG)
• At least one member of the Supervisory Board must have ex-
perience in human resource issues, particularly with regard
to Management Board matters
The Company currently meets the above targets.
FINANCIAL STATEMENTS G roup Management Repor t
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92
SUFFICIENT AVAIL ABILIT Y OF TIME
All members of the Supervisory Board must ensure that they
have sufficient time available to properly perform their Super-
visory Board duties. It must therefore be ensured that
• the Supervisory Board member is able to personally attend at
least four ordinary Supervisory Board meetings per year, as
well as the annual strategy meeting, for which a reasonable
amount of preparation time is required in each case;
• the Supervisory Board member is able to attend extraordi-
nary meetings of the Supervisory Board if necessary to deal
with specific topics;
• the Supervisory Board member is able to attend the Annual
General Meeting;
• the Supervisory Board member has sufficient time available
to review the annual and consolidated financial statements;
• the Supervisory Board member sets aside additional time to
prepare and participate in committee meetings, depending
on his/her possible membership in one or more of the current
three committees of the Supervisory Board.
The Supervisory Board intends to observe the skills and expe-
rience profile for the entire Supervisory Board when making
future election proposals to the Annual General Meeting.
WOMEN’S QUO TA F OR T HE SUPERVIS ORY BOARD,
MANAGEMEN 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 adopted a women’s quota
for the Supervisory Board for an initial period of two years. The
Supervisory Board reviewed this quota in July 2017 and up-
dated it as follows: “MorphoSys AG’s Supervisory Board has a
total of six members. Two of those members are women, which
places the current quota of 33.33 % for female members on the
Company’s Supervisory Board above the 30 % target. The Su-
pervisory Board confirms its decision regarding the quota for
women on the Supervisory Board, which was passed in July
2015, and intends to maintain this ratio until June 30, 2022.”
We continue to meet this target.
In July 2015, the Supervisory Board adopted the following
quota for women on the Management Board for an initial period
of two years, which was reviewed and updated in July 2017 as
follows:
“The Management Board of MorphoSys AG has a total of five
members, including one female member. The current ratio of
women’s representation on the Management Board of the com-
pany is therefore below 30 % and amounts to 20 %. With refer-
ence to the decision on the quota of women on the Management
Board, which was taken in July 2015, the Supervisory Board
intends to achieve a ratio of 25 % in the future, namely by
June 30, 2022.”
We do not currently meet this target. The reason this target has
not been met was the unplanned departure of Dr. Marlies Sproll
as Chief Scientific Officer as of October 31, 2017 for personal
reasons and the appointment of Dr. Markus Enzelberger ini-
tially as Interim Chief Scientific Officer from April 15, 2017 to
October 31, 2017, and then as Dr. Marlies Sproll’s successor as
Chief Scientific Officer beginning on November 1, 2017. As a
result, since October 31, 2017, the Management Board consists
of four male members, and there are currently no women on the
Management Board.
In July 2015, the Management Board adopted the following
quota for women in the first level of management below the
Management Board for an initial period of two years and re-
viewed and updated it in July 2017 as follows:
“At the time of the decision, the first management level below
the Management Board (the Senior Management Group) con-
sisted of 22 members, nine of whom were women, placing the
level of female representation at this management level at
40.9 %, which is above the 30 % target. The Management Board
confirms its July 2015 decision on the quota of women in the
first level of management below the Management Board and
intends to continue to maintain a minimum ratio of 30 % until
June 30, 2022.”
We continue to meet this target.
In July 2015, the Management Board adopted a women’s quota
for the second level of management below the Management
Board initially for a period of two years and reviewed and up-
dated the quota in July 2017 as follows: “The second manage-
ment level below the Management Board (i.e. the Company’s
managers excluding the Senior Management Group) at the time
of the decision consisted of 40 members, 14 of whom were
women. This placed the quota of women in the second manage-
ment level below the Company’s Management Board at 35 %,
which is above the 30 % target at the time of the resolution. The
Management Board confirms its July 2012 decision on the
quota of women in the second level of management below the
Management Board and intends to maintain a quota of at least
30 % until June 30, 2022.”
We continue to meet this target.
DIVERSI T Y PL AN
Diversity is firmly anchored in our corporate culture and our
affiliates. All dimensions of diversity are of equal importance,
be it age, gender, educational background, occupation, origin,
religion, sexual orientation or identity. Our Management Board
and Supervisory Board see it as their responsibility to further
increase and effectively utilize the various aspects of diversity
beyond the mere determination of targets for the proportion of
women on the Management Board, Supervisory Board and in
executive positions.
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
G roup Management Repor t
93
We have not yet developed our own diversity plan with respect
to the composition of the Management and Supervisory Boards.
Nevertheless, the internal organization and continued develop-
ment of an open and inclusive corporate culture play an import-
ant role in the day-to-day work of the Management and Super-
visory Boards. The skills and experience profile for the
Supervisory Board as a whole also takes diversity into consid-
eration. The Management and Supervisory Boards intend to
develop a diversity plan for their composition in the future that
addresses key aspects of diversity, defines specific goals for
this purpose and contains guidelines on how these goals should
be achieved.
Remuneration Report
The Remuneration Report presents the principles, structure
and amount of Management Board and Supervisory Board re-
muneration. The report complies with the legal provisions and
considers the recommendations of the German Corporate Gov-
ernance Code.
MANAGEMEN T BOARD REMUNERAT ION
The Management Board’s remuneration system is intended to
provide an incentive for performance-oriented and sustainable
corporate management. Therefore, the aggregate remuneration
of the Management Board members consists of different compo-
nents: fixed components, an annual cash bonus based on the
achievement of corporate targets (short-term incentive – STI), a
variable compensation component with a long-term incentive
(long-term incentive – LTI) and other remuneration compo-
nents. Variable remuneration components with long-term in-
centive consist of performance share plans from the current
and prior years, a convertible bond program from the year
2013, as well as a stock option plan from the current and prior
year. Due to the successful U.S. listing the Management Board
members received a special one-time bonus in the form of trea-
sury shares held by MorphoSys AG. These shares could be
called by the individual Management Board members during
the time period from June 1 until end of December 2018 for a
pre-defined maximal amount in EUR. The relevant number of
shares was determined on the basis of the share price of one
MOR share (final auction price in Xetra-trading on the Frank-
furt Stock Exchange) on the date the shares were called. Man-
agement 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 remuneration pack-
ages are reviewed annually for their scope and appropriateness
by the Remuneration and Nomination Committee and are com-
pared to the results of an annual Management Board remuner-
ation analysis. The amount of compensation paid to Manage-
ment Board members highly depends on their individual areas
of responsibility, the Company’s economic situation and suc-
cess and the Company’s business prospects versus its competi-
tion. All decisions concerning adjustments to remuneration
packages are made by the entire Supervisory Board. The Man-
agement Board’s remuneration and index-linked pension
scheme were last adjusted in July 2018.
OVERVIE W
In the 2018 financial year, total benefits of € 6,904,508 (2017:
€ 6,453,649) were granted to the Management Board in accor-
dance with the provisions of the German Corporate Governance
Code. Of the total remuneration granted for the year 2018,
€ 3,616,602 was cash compensation and € 3,287,906, or 48 %,
resulted from personnel expenses for share-based compensa-
tion (remuneration with short-term incentive: one-time bonus
award in shares due to the successful U.S. listing; remunera-
tion with long-term incentive: performance share plan, stock
option plan and convertible bond plan).
The total amount of benefits paid to the Management Board
in the 2018 financial year amounted to € 7,505,917 (2017:
€ 10,593,126). In addition to cash compensation payments of
€ 3,189,972 (2017: € 2,963,485), this amount includes primarily
the relevant value under German tax law of the transfer of trea-
sury stock from a performance-based share plan (share-based
compensation), which amounted to € 626,606 (2017: € 1,986,671)
as well as from the one-time bonus award in shares due to the
successful U.S. listing, which amounted to € 1,483,804 in 2018.
Because convertible bonds were exercised in 2018 and 2017,
the total amount for 2018 also included proceeds from the exer-
cise of convertible bonds in the amount of € 2,205,535 (2017:
€ 4,743,008).
As of April 11, 2018, a total of 6,969 treasury shares from the
2014 performance-based share plan for the Management Board
vested because the vesting period for this LTI program had ex-
pired. The beneficiaries had the option to call the shares during
a six-month period ending on October 10, 2018. All transactions
in MorphoSys shares executed by members of the Management
Board were reported as required by law and are published in
the Corporate Governance Report as well as on the Company’s
website.
In accordance with the requirements of Section 4.2.5 (3) of the
German Corporate Governance Code, the tables that follow pro-
vide detailed mandatory information on the remuneration of
the individual Management Board members.
Please note that the tables that follow are provided in the con-
text of the Corporate Governance Report and differ from the
information about Management Board remuneration presented
in the Notes of this report (Item 7.4). These differences are due
to the differing presentation requirements under the German
Corporate Governance Code and IFRS*.
*S E E G L O S S A R Y – page 188
FINANCIAL STATEMENTS G roup Management Repor t
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94
T A B L E 17
Compensation of the Management Board in 2018 and 2017 (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 €
Fixed Compensation
Fringe Benefits1
Total Fixed Compensation
One -Year Variable Compensation2
One-Time Bonus in Shares
Multi-Year Variable Compensation:
2013 Convertible Bonds Program3 (Vesting Period 4 Years)
2017 Long-Term Incentive Program4 (Vesting Period 4 Years)
2018 Long-Term Incentive Program4 (Vesting Period 4 Years)
2017 Stock Option Plan4 (Vesting Period 4 Years)
2018 Stock Option Plan4 (Vesting Period 4 Years)
Total Variable Compensation
Service Cost
Total Compensation
in €
Fixed Compensation
Fringe Benefits1
Total Fixed Compensation
One -Year Variable Compensation2
One-Time Bonus in Shares
Multi-Year Variable Compensation:
2013 Convertible Bonds Program3 (Vesting Period 4 Years)
2017 Long-Term Incentive Program4 (Vesting Period 4 Years)
2018 Long-Term Incentive Program4 (Vesting Period 4 Years)
2017 Stock Option Plan4 (Vesting Period 4 Years)
2018 Stock Option Plan4 (Vesting Period 4 Years)
Total Variable Compensation
Service Cost
Total Compensation
Dr. Simon Moroney
Chief Executive Officer
2017
2018
2018
(Mini-
mum)
2018
(Maxi-
mum)
500,876
542,074
542,074
542,074
372,652
402,235
402,235
402,235
397,800
397,800
397,800
32,654
32,654
32,654
574,728
574,728
574,728
46,725
448,960
30,613
30,613
30,613
428,413
428,413
428,413
35,912
536,788
368,144
0
58,224
343,009
455,343
483,616
0
0
0
307,529
267,861
0
0
300,770
1,037,238
1,547,258
0
0
0
0
0
0
0
0
474,315
483,616
0
0
1,230,116
0
1,203,080
3,391,127
149,567
158,788
158,788
158,788
1,723,593
2,280,774
733,516
4,124,643
Dr. Markus Enzelberger5
Chief Scientific Officer
Appointment (Interim-CSO): April 15, 2017
Appointment: November 1, 2017
2017
2018
2018
(Mini-
mum)
2018
(Maxi-
mum)
321,300
321,300
321,300
31,211
31,211
31,211
352,511
352,511
352,511
204,698
417,158
621,856
121,688
0
0
144,354
269,892
286,650
0
0
0
201,463
112,745
0
378,787
29,186
0
197,065
955,070
68,515
0
0
0
0
0
0
0
0
281,138
286,650
0
0
805,852
0
788,260
2,161,900
68,515
68,515
1,029,829
1,376,096
421,026
2,582,926
Jens Holstein
Chief Financial Officer
Dr. Malte Peters
Chief Development Officer
Appointment: March 1, 2017
2017
2018
2017
2018
2018
(Mini-
mum)
2018
(Maxi-
mum)
2018
(Mini-
mum)
2018
(Maxi-
mum)
42,905
415,557
273,899
0
0
0
59,641
224,747
175,498
46,725
448,960
337,877
358,857
0
0
0
201,463
197,065
281,500
568,644
850,144
206,903
224,747
175,498
46,725
448,960
351,955
358,857
0
0
0
805,852
788,260
334,152
354,900
0
0
0
201,463
197,065
348,075
354,900
0
0
0
805,852
788,260
2,297,087
733,785
1,095,262
2,304,924
607,148
1,087,580
99,949
111,233
111,233
111,233
60,967
76,190
76,190
76,190
1,249,291
1,655,455
560,193
2,865,117
1,518,259
1,592,183
504,603
2,801,690
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Dr. Marlies Sproll6
Chief Scientific Officer
Temporary Leave:
April 15, 2017 – October 31, 2017
Resignation: October 31, 2017
Dr. Arndt Schottelius
Chief Development Officer
Resignation: February 28, 2017
2017
2018
2017
2018
2017
2018
2018
(Mini-
mum)
2018
(Maxi-
mum)
2018
(Mini-
mum)
2018
(Maxi-
mum)
Total
2018
(Mini-
mum)
2018
(Maxi-
mum)
222,450
20,427
242,877
67,745
0
0
0
39,879
168,543
131,629
407,796
77,976
728,649
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
103,253
9,161
112,414
23,490
39,879
63,369
28,245
204,028
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,685,429
1,663,409
1,663,409
1,663,409
1,094,207
141,203
141,203
141,203
2,779,636
1,804,612
1,804,612
1,804,612
1,061,869
1,397,264
0
1,484,023
197,623
1,105,400
863,231
0
0
0
0
0
911,918
891,965
3,228,123
4,685,170
0
0
0
0
0
0
0
0
1,455,483
1,484,023
0
0
0
3,647,672
3,567,860
10,155,038
445,890
414,726
414,726
414,726
6,453,649
6,904,508
2,219,338
12,374,376
1 In 2017, the fringe benefits of Dr. Malte Peters and Dr. Markus Enzelberger each included a one-time compensation in the form of MorphoSys shares
as an incentive to join the Management Board of MorphoSys AG.
2 The one-year compensation granted for the 2018 financial year represents the bonus accrual for 2018 that will be paid in February 2019.
The bonus granted for the 2017 financial year was paid in February 2018.
3 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.
4 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.
5 In 2017, the figures presented for Dr. Markus Enzelberger do not include any compensation granted for his activities as a member of the Senior Management Group
as they do not relate to his appointment as a member of the Management Board.
6 Dr. Marlies Sproll left the Management Board of MorphoSys AG on October 31, 2017. Since November 1, 2017, Dr. Marlies Sproll has taken on a new part-time role
at MorphoSys as Special Advisor to the CEO. Therefore, the figures presented for Dr. Marlies Sproll do not include any remuneration granted for these activities.
T A B L E 17
Compensation of the Management Board in 2018 and 2017 (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 €
Fixed Compensation
Fringe Benefits1
Total Fixed Compensation
One -Year Variable Compensation2
One-Time Bonus in Shares
Multi-Year Variable Compensation:
2013 Convertible Bonds Program3 (Vesting Period 4 Years)
2017 Long-Term Incentive Program4 (Vesting Period 4 Years)
2018 Long-Term Incentive Program4 (Vesting Period 4 Years)
2017 Stock Option Plan4 (Vesting Period 4 Years)
2018 Stock Option Plan4 (Vesting Period 4 Years)
Total Variable Compensation
Service Cost
Total Compensation
in €
Fixed Compensation
Fringe Benefits1
Total Fixed Compensation
One -Year Variable Compensation2
One-Time Bonus in Shares
Multi-Year Variable Compensation:
2013 Convertible Bonds Program3 (Vesting Period 4 Years)
2017 Long-Term Incentive Program4 (Vesting Period 4 Years)
2018 Long-Term Incentive Program4 (Vesting Period 4 Years)
2017 Stock Option Plan4 (Vesting Period 4 Years)
2018 Stock Option Plan4 (Vesting Period 4 Years)
Total Variable Compensation
Service Cost
Total Compensation
Dr. Simon Moroney
Chief Executive Officer
2017
2018
2018
(Mini-
mum)
2018
(Maxi-
mum)
35,912
536,788
368,144
0
0
0
58,224
343,009
267,861
32,654
32,654
32,654
574,728
574,728
574,728
455,343
483,616
474,315
483,616
0
0
0
0
0
0
307,529
1,230,116
300,770
1,037,238
1,547,258
1,203,080
3,391,127
149,567
158,788
158,788
158,788
1,723,593
2,280,774
733,516
4,124,643
Dr. Markus Enzelberger5
Chief Scientific Officer
Appointment (Interim-CSO): April 15, 2017
Appointment: November 1, 2017
2017
2018
2018
(Mini-
mum)
2018
(Maxi-
mum)
321,300
321,300
321,300
31,211
31,211
31,211
352,511
352,511
352,511
204,698
417,158
621,856
121,688
0
0
0
0
144,354
112,745
378,787
29,186
269,892
286,650
0
0
0
201,463
197,065
955,070
68,515
281,138
286,650
0
0
0
805,852
788,260
2,161,900
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,029,829
1,376,096
421,026
2,582,926
68,515
68,515
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
G roup Management Repor t
95
Jens Holstein
Chief Financial Officer
Dr. Malte Peters
Chief Development Officer
Appointment: March 1, 2017
2017
2018
2018
(Mini-
mum)
2018
(Maxi-
mum)
2017
2018
2018
(Mini-
mum)
2018
(Maxi-
mum)
500,876
542,074
542,074
542,074
372,652
402,235
402,235
402,235
397,800
397,800
397,800
30,613
30,613
30,613
428,413
428,413
428,413
42,905
415,557
273,899
0
59,641
224,747
46,725
448,960
337,877
358,857
0
0
0
201,463
175,498
0
0
197,065
733,785
1,095,262
46,725
448,960
0
0
0
0
0
0
0
0
46,725
448,960
351,955
358,857
0
0
281,500
568,644
850,144
206,903
0
0
224,747
334,152
354,900
0
0
805,852
0
201,463
0
175,498
0
788,260
0
197,065
2,304,924
607,148
1,087,580
0
0
0
0
0
0
0
0
348,075
354,900
0
0
805,852
0
788,260
2,297,087
99,949
111,233
111,233
111,233
60,967
76,190
76,190
76,190
1,249,291
1,655,455
560,193
2,865,117
1,518,259
1,592,183
504,603
2,801,690
Dr. Marlies Sproll6
Chief Scientific Officer
Temporary Leave:
April 15, 2017 – October 31, 2017
Resignation: October 31, 2017
Dr. Arndt Schottelius
Chief Development Officer
Resignation: February 28, 2017
Total
2017
2018
2018
(Mini-
mum)
2018
(Maxi-
mum)
2017
2018
2018
(Mini-
mum)
2018
(Maxi-
mum)
2017
2018
2018
(Mini-
mum)
2018
(Maxi-
mum)
222,450
20,427
242,877
67,745
0
39,879
168,543
0
131,629
0
407,796
77,976
728,649
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
103,253
9,161
112,414
23,490
0
39,879
0
0
0
0
63,369
28,245
204,028
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,685,429
1,663,409
1,663,409
1,663,409
1,094,207
141,203
141,203
141,203
2,779,636
1,804,612
1,804,612
1,804,612
1,061,869
1,397,264
0
1,484,023
197,623
1,105,400
0
0
0
911,918
863,231
0
0
891,965
3,228,123
4,685,170
0
0
0
0
0
0
0
0
1,455,483
1,484,023
0
0
3,647,672
0
3,567,860
10,155,038
445,890
414,726
414,726
414,726
6,453,649
6,904,508
2,219,338
12,374,376
1 In 2017, the fringe benefits of Dr. Malte Peters and Dr. Markus Enzelberger each included a one-time compensation in the form of MorphoSys shares
as an incentive to join the Management Board of MorphoSys AG.
2 The one-year compensation granted for the 2018 financial year represents the bonus accrual for 2018 that will be paid in February 2019.
The bonus granted for the 2017 financial year was paid in February 2018.
3 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.
4 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.
5 In 2017, the figures presented for Dr. Markus Enzelberger do not include any compensation granted for his activities as a member of the Senior Management Group
as they do not relate to his appointment as a member of the Management Board.
6 Dr. Marlies Sproll left the Management Board of MorphoSys AG on October 31, 2017. Since November 1, 2017, Dr. Marlies Sproll has taken on a new part-time role
at MorphoSys as Special Advisor to the CEO. Therefore, the figures presented for Dr. Marlies Sproll do not include any remuneration granted for these activities.
FINANCIAL STATEMENTS
G roup Management Repor t
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
96
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. Malte Peters
Chief Development Officer
Appointment: March 1, 2017
Appointment (Interim-CSO):
Temporary Leave:
Dr. Arndt Schottelius7
April 15, 2017
April 15, 2017 – October 31, 2017
Chief Development Officer
Appointment: November 1, 2017
Resignation: October 31, 2017
Resignation: February 28, 2017
Total
Dr. Markus Enzelberger5
Chief Scientific Officer
Dr. Marlies Sproll6
Chief Scientific Officer
in €
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
Fixed Compensation
Fringe Benefits1
Total Fixed Compensation
One-time bonus award in shares
One-Year Variable Compensation2
Multi-Year Variable Compensation:
2013 Convertible Bonds Program3
(Vesting Period 4 Years)
2013 Long-Term Incentive Program3
(Vesting Period 4 Years)
2014 Long-Term Incentive Program3
(Vesting Period 4 Years)
Other4
Total Variable Compensation
Service Cost
Total Compensation
500,876
35,912
536,788
0
210,873
0
650,378
0
0
861,251
149,567
1,547,606
542,074
32,654
574,728
483,597
368,144
372,652
42,905
415,557
0
143,054
402,235
46,725
448,960
358,785
273,899
0
0
658,350
2,205,535
445,431
0
351,412
0
1,203,153
158,788
1,936,669
0
0
1,246,835
99,949
1,762,341
223,600
0
3,061,819
111,233
3,622,012
281,500
568,644
850,144
0
0
0
0
0
0
0
60,967
911,111
397,800
30,613
428,413
354,822
206,903
0
0
0
0
561,725
76,190
1,066,328
204,698
417,158
621,856
0
0
0
0
0
0
0
29,186
651,042
321,300
31,211
352,511
286,600
121,688
0
0
0
51,594
459,882
68,515
880,908
222,450
20,427
242,877
0
143,054
2,800,381
445,431
0
0
3,388,866
77,976
3,709,719
0
0
0
0
0
0
0
0
0
0
0
0
103,253
9,161
112,414
0
140,940
1,284,277
445,431
0
0
1,870,648
28,245
2,011,307
0
0
0
0
0
0
0
0
0
0
0
0
1,685,429
1,094,207
2,779,636
637,921
1,663,409
141,203
1,804,612
1,483,804
970,634
4,743,008
2,205,535
0
0
0
0
1,986,671
7,367,600
445,890
10,593,126
0
0
0
626,606
5,286,579
414,726
7,505,917
1 In 2017, the fringe benefits of Dr. Malte Peters and Dr. Markus Enzelberger each included a one-time compensation in the form of MorphoSys shares as an incentive
5 In 2017, the figures presented for Dr. Markus Enzelberger do not include any payments for his activities as a member of the Senior Management Group as they do not relate
to join the Management Board of MorphoSys AG.
2 The one-year variable compensation presented here represents the bonus paid in the respective financial year for the previous financial year.
3 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.
4 No compensation recovery claims against the Management Board existed in 2018 or 2017.
to his appointment as a member of the Management Board.
6 Dr. Marlies Sproll left the Management Board of MorphoSys AG on October 31, 2017. Since November 1, 2017, Dr. Marlies Sproll has taken on a new part-time role at MorphoSys
as Special Advisor to the CEO. Therefore, the payments presented for Dr. Marlies Sproll do not include any remuneration for these activities.
7 In 2017, the figures presented for Dr. Arndt Schottelius do include remuneration from the exercise of convertible bonds and the transfer of treasury stock from a long-term
incentive program after his resignation as Chief Development Officer. These were granted for his activities as a member of the Management Board in previous years.
FIXED REMUNER ATION AND FRINGE BE NE FITS
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.
PENSION E XPENSES
The Company also provides payments to Management Board
members equal to a maximum of 10 % of the member’s fixed
annual salary and partly plus any taxes payable. This compen-
sation is intended for the members’ individual retirement
plans. Additionally, all Management Board members partici-
pate in a pension plan in the form of a provident fund, which
was introduced in cooperation with Allianz Pensions-Manage-
ment e.V. The pension obligations of the provident fund will be
met by Allianz Pensions-Management e.V. These pension obli-
gations are not pension benefit plans.
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
G roup Management Repor t
97
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
Chief Development Officer
Appointment: March 1, 2017
Dr. Malte Peters
Dr. Markus Enzelberger5
Chief Scientific Officer
Appointment (Interim-CSO):
April 15, 2017
Appointment: November 1, 2017
Dr. Marlies Sproll6
Chief Scientific Officer
Temporary Leave:
April 15, 2017 – October 31, 2017
Resignation: October 31, 2017
Dr. Arndt Schottelius7
Chief Development Officer
Resignation: February 28, 2017
Total
in €
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
Fixed Compensation
Fringe Benefits1
Total Fixed Compensation
One-time bonus award in shares
Multi-Year Variable Compensation:
2013 Convertible Bonds Program3
(Vesting Period 4 Years)
One-Year Variable Compensation2
210,873
2013 Long-Term Incentive Program3
(Vesting Period 4 Years)
650,378
2014 Long-Term Incentive Program3
(Vesting Period 4 Years)
Other4
Total Variable Compensation
Service Cost
Total Compensation
861,251
149,567
1,547,606
500,876
35,912
536,788
0
0
0
0
542,074
32,654
574,728
483,597
368,144
0
0
0
351,412
1,203,153
158,788
1,936,669
372,652
42,905
415,557
0
143,054
402,235
46,725
448,960
358,785
273,899
281,500
568,644
850,144
658,350
2,205,535
445,431
0
0
1,246,835
99,949
1,762,341
0
0
223,600
3,061,819
111,233
3,622,012
397,800
30,613
428,413
354,822
206,903
0
0
0
0
0
0
0
0
0
0
0
60,967
911,111
561,725
76,190
1,066,328
204,698
417,158
621,856
0
0
0
0
0
0
0
29,186
651,042
321,300
31,211
352,511
286,600
121,688
0
0
51,594
0
459,882
68,515
880,908
222,450
20,427
242,877
0
143,054
2,800,381
445,431
0
0
3,388,866
77,976
3,709,719
0
0
0
0
0
0
0
0
0
0
0
0
103,253
9,161
112,414
0
140,940
1,284,277
445,431
0
0
1,870,648
28,245
2,011,307
0
0
0
0
0
0
0
0
0
0
0
0
1,685,429
1,094,207
2,779,636
0
637,921
0
1,663,409
141,203
1,804,612
1,483,804
970,634
0
4,743,008
2,205,535
1,986,671
0
0
0
7,367,600
445,890
10,593,126
626,606
0
5,286,579
414,726
7,505,917
1 In 2017, the fringe benefits of Dr. Malte Peters and Dr. Markus Enzelberger each included a one-time compensation in the form of MorphoSys shares as an incentive
5 In 2017, the figures presented for Dr. Markus Enzelberger do not include any payments for his activities as a member of the Senior Management Group as they do not relate
to join the Management Board of MorphoSys AG.
2 The one-year variable compensation presented here represents the bonus paid in the respective financial year for the previous financial year.
3 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.
4 No compensation recovery claims against the Management Board existed in 2018 or 2017.
to his appointment as a member of the Management Board.
6 Dr. Marlies Sproll left the Management Board of MorphoSys AG on October 31, 2017. Since November 1, 2017, Dr. Marlies Sproll has taken on a new part-time role at MorphoSys
as Special Advisor to the CEO. Therefore, the payments presented for Dr. Marlies Sproll do not include any remuneration for these activities.
7 In 2017, the figures presented for Dr. Arndt Schottelius do include remuneration from the exercise of convertible bonds and the transfer of treasury stock from a long-term
incentive program after his resignation as Chief Development Officer. These were granted for his activities as a member of the Management Board in previous years.
PERFORMANCE - BASE D C OMPE NSATION
(SHOR T-TERM INCENTIVE – STI)
Members of the Management Board each receive perfor-
mance-based compensation in the form of an annual bonus
payment of up to 70 % of the gross base salary when 100 % of the
member’s targets have been achieved. These bonus payments
are dependent on the achievement of corporate targets speci-
fied by the Supervisory Board at the start of each financial year.
Targets are typically based on, amongst other objectives, the
Company’s performance and the progress of the partnered
pipeline and the Company’s proprietary pipeline. At the start of
the year, the Supervisory Board assesses the degree to which
corporate goals were achieved in the prior year and uses this
information to determine the bonus. The bonus may not exceed
125 % of the target amount (corresponding to 87.5 % of the gross
base salary). Performance-based compensation can be reduced
to zero if goals are not achieved. The bonus for the 2018 finan-
cial year will be paid in February 2019.
FINANCIAL STATEMENTS
G roup Management Repor t
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
98
LONG -TERM INCENTIVE C OMPENSATION
(LONG -TERM INCENTIVE – LTI)
In 2011, MorphoSys introduced a long-term incentive compen-
sation plan (Performance Share Plan) for the Management
Board and members of the Senior Management Group. The Per-
formance Share Plan is based on the allocation of shares linked
to the achievement 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,
2018, the Management Board members were granted a total of
8,804 shares. Each Management Board member received an en-
titlement benefit for a specific number of shares. For more infor-
mation, please refer to Item 7.3.5 in the Notes to the Consoli-
dated Financial Statements and the explanation on stock
repurchases in the Corporate Governance Report.
Long-term performance targets are set by the Supervisory
Board at the time the shares are allocated for a specific year.
The defined targets for the 2018 Performance Share Plan were
the absolute performance of MorphoSys shares, as well as the
relative performance of MorphoSys shares relative to a bench-
mark index comprising of equal parts of the Nasdaq Biotechnol-
ogy Index and the TecDAX Index. The absolute and relative
performance of the share price for each of the four assessment
periods (one year each) is determined by comparing the aver-
age share price of the last 30 trading days prior to the begin-
ning of the relevant assessment period (April 1) with the aver-
age share price of the last 30 trading days prior to the end of the
evaluation period. The participants in the Performance Share
Plan receive an annual share entitlement, which will be evalu-
ated on the basis of the absolute and relative performance of the
share price, that is, a comparison of the performance of
MorphoSys shares versus the benchmark index. Depending on
the absolute and relative performance of the share price over
the course of an evaluation period, certain (absolute and rela-
tive) tiered target attainment levels between 10 % and 300 %
can be achieved. Exceeding the target attainment level of
300 % does not grant entitlement to additional shares during
the relevant assessment period (cap). At the end of the four-year
term, a total level of target achievement based on the absolute
and relative target attainment levels has to be established.
The average absolute and relative attainment levels reached
are weighted at 50 %. The overall target achievement is capped
at 200 %.
The ultimate number of performance shares allocated to the
Performance Share Plan participants is determined at the com-
pletion of the program, which spans four years. This calculation
incorporates the number of shares initially granted (“grants”)
multiplied with the total level of target achievement, as well as
a “company factor” that is determined at the Supervisory
Board’s discretion. This company factor is a number between
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 (1).
In 2017, MorphoSys also introduced a stock option plan (SOP*)
as another form of long-term incentive compensation based on
the resolution of the Annual General Meeting on June 2, 2016
(Agenda Item 9). As of April 1, 2018, a total of 29,312 stock op-
tions were granted to the Management Board. Each member of
the Management Board received a specific number of stock op-
tions that entitle them to purchase up to two MorphoSys shares
each. Further details can be found in Item 7.1 in the Notes to the
Consolidated Financial Statements and the explanations on
stock repurchases in the Corporate Governance Report.
*S E E G L O S S A R Y – page 188
In accordance with the resolution of the Annual General Meet-
ing on June 2, 2016 (Agenda Item 9), the SOP’s performance
targets include the absolute price performance of MorphoSys
shares and the relative price performance of MorphoSys shares
compared to a benchmark index. The benchmark index con-
sists of equal parts of the Nasdaq Biotechnology Index and the
TecDAX Index. Each performance target has a 50 % weighting
in the achievement of the overall target.
To determine the degree of target achievement for each perfor-
mance target, the four-year vesting period (until the first stock
options can be exercised) is subdivided into four equal periods
of one year each. An arithmetic mean is calculated based on the
degree of target achievement in each of the four years. This, in
turn, determines the final percentage of target achievement for
each performance target. The final percentage of target achieve-
ment for each of the two performance targets are then added
together and divided by two, the result being the overall level of
target achievement.
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
G roup Management Repor t
99
For the performance target of absolute price performance,
a comparison is made between the stock market price of
MorphoSys shares at the beginning of each year in the four-
year period with the price at the end of each respective period.
If MorphoSys shares perform well, the degree of target achieve-
ment can reach up to 200 % on a straight-line basis for that par-
ticular year. Any further positive share price development of
MorphoSys shares will not lead to any further increase in the
performance target (cap).
For the performance target of relative price performance, the
development of MorphoSys’s share price is compared with the
development of the benchmark index during each annual pe-
riod and set in relation to each other. In forming the benchmark
index, the Nasdaq Biotech Index and the TecDAX Index are
each weighted at 50 % in such a way that the percentage price
movements of each index are added for the respective annual
period and divided by two. If MorphoSys shares outperform the
benchmark index, the degree of target achievement for the rel-
evant period can reach up to 200 % on a straight-line basis. Any
further positive share price development of MorphoSys shares
versus the benchmark index will not lead to any further in-
crease in the performance target (cap).
Stock options can only be exercised when the four-year (mini-
mum) vesting period prescribed by law has expired, and the
specified minimum value for the degree of target achievement
of a performance target has been exceeded. The ultimate num-
ber of exercisable stock options is calculated by multiplying the
number of initially granted stock options (“grants”) by the total
level of target achievement and rounding up to the nearest
whole number. The resulting ultimate number of stock options
is limited to 200 % of the initially granted number of stock op-
tions. The stock options are settled in the form of Company
shares, with each stock option entitling the holder to one share
for the final number of stock options.
When the stock options are exercised, the exercise price must
be paid for each underlying share. The exercise price corre-
sponds to the average closing auction price of MorphoSys
shares in the 30 trading days prior to the day on which the
stock options were issued.
The terms of the stock option plan provide further details on
the granting and settlement of stock options, the issue of Com-
pany shares from the Conditional Capital 2016-III and the ad-
ministration of the SOP. For more information, please refer to
the corresponding resolution of the Annual General Meeting on
June 2, 2016 (Agenda Item 9).
MISCELL ANEOUS
None of the Management Board members were granted any
loans or similar benefits in the reporting year nor have they
received any benefits from third parties that were promised or
granted based on their positions as members of the Manage-
ment Board.
PAYMENTS UP ON TERMINATION OF MANAGEMENT BOARD
EMPLOYMENT C ONTR AC TS/CHANGE OF C ONTROL
In case of a premature termination of the service contract with
a Management Board member, the compensation, including
fringe benefits, is capped at 200 % of the fixed yearly gross sal-
ary and the annual bonus (Severance Cap) and no more than
the remaining term of the service contract is compensated. If
the service contract is terminated for good cause for which the
Management Board member is responsible, such member is not
entitled to any payments. The Severance Cap is calculated on
the basis of the total compensation of the full business year
prior to the termination and, if appropriate, the expected total
compensation of the business year in which the termination
occurs.
If a Management Board member’s service contract terminates
due to the 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 of con-
trol, Management Board members are entitled to exercise their
extraordinary right to terminate their employment contracts
and demand the fixed salary and annual bonus still outstand-
ing until the end of the service contract, however at least 200 %
of the fixed yearly gross salary and annual bonus. Moreover, in
such a case, all stock options and performance shares granted
will become vested immediately and can be exercised after the
expiration of the statutory vesting periods or blackout periods.
A change of control has occurred when (i) MorphoSys transfers
FINANCIAL STATEMENTS G roup Management Repor t
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
100
assets or a substantial portion of its assets to unaffiliated third
parties, (ii) MorphoSys merges with an unaffiliated company,
(iii) MorphoSys AG as dominated company becomes party to an
agreement pursuant to Section 291 of the German Stock Cor-
poration Act or MorphoSys is integrated in accordance with
Section 319 of the German Stock Corporation Act, or (iv) a
shareholder or third party holds 30 % or more of MorphoSys’s
voting rights.
In addition, post-contractual non-compete clauses exist with
the members of the Board of Management, providing for com-
pensatory payments to be made by MorphoSys AG until six
months after the service contract has terminated. During the
duration of the non-compete clause, the compensatory payment
amounts to up to 100 % of the fixed salary.
CHANGE IN THE C OMP OSITION OF THE MANAGEMENT BOARD
There was no change in the composition of our Management
Board in the 2018 financial year.
AGE LIMIT
The age limit for Executive Board members at the time of their
appointment or re-appointment by the Supervisory Board shall
correspond to 67 years. Exceptions thereto may be resolved
by the Supervisory Board in the individual case. The age limit
of 67 years is currently respected by the Executive Board
members.
SAY ON PAY
Due to the existing legal uncertainty resulting from the forth-
coming legal changes to the Shareholders’ Rights Directive and
the German Corporate Governance Code, MorphoSys will de-
liberately refrain from submitting the Management Board
compensation system to a vote at its forthcoming 2019 Annual
General Meeting. The current remuneration system for the
members of the Management Board remains unchanged from
the remuneration system approved by the Annual General
Meeting on May 19, 2011 with a majority of more than 91 %. A
corresponding vote on the remuneration system is planned for
the 2020 Annual General Meeting.
SUPERVIS ORY BOARD REMUNERAT ION
The remuneration of Supervisory Board members is governed
by our Articles of Association and a corresponding Annual Gen-
eral Meeting resolution on Supervisory Board remuneration. In
the 2018 financial year, Supervisory Board members received
fixed compensation, attendance fees and expense allowances
for their participation in Supervisory Board and committee
meetings. Each Supervisory Board member has received an-
nual fixed compensation (€ 85,400 for Chairpersons, € 51,240
for Deputy Chairpersons and € 34,160 for all other members)
for their membership of the Supervisory Board. The Chairper-
son receives € 4,000 for each Supervisory Board meeting
chaired and the other members receive € 2,000 for each Super-
visory Board meeting attended. For committee work, the com-
mittee Chairperson receives € 12,000 and other committee
members each receive € 6,000. Committee members also re-
ceive € 1,200 for their participation in a committee meeting.
Participation in a Supervisory Board or committee meeting by
telephone or video conference results in a 50 % reduction in
compensation for meeting participation. 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
expenses and value-added taxes (VAT) on their compensation.
In the 2018 financial year, Supervisory Board members re-
ceived a total of € 525,428 (2017: € 523,015) excluding the reim-
bursement of travel expenses. This amount consists of fixed
compensation and attendance fees for participating in Supervi-
sory Board and committee meetings.
We did not grant any loans to Supervisory Board members.
The table below details the Supervisory Board’s remuneration.
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
G roup Management Repor t
101
T A B L E 1 8
Compensation of the Supervisory Board in 2018 and 2017
in €
Dr. Marc Cluzel
Dr. Frank Morich
Krisja Vermeylen
Wendy Johnson
Dr. George Golumbeski2
Michael Brosnan2
Dr. Gerald Möller3
Klaus Kühn3
Karin Eastham4
TOTAL
Fixed Compensation
Attendance Fees1
Attendance Fees
2018
2017
2018
2017
2018
2017
76,742
61,004
49,916
46,160
28,961
28,961
36,558
17,326
–
52,160
57,240
28,961
46,160
–
–
95,156
46,160
19,578
32,400
23,200
24,400
37,400
25,200
18,600
11,800
6,800
–
26,800
23,200
16,000
38,000
–
–
36,800
22,000
14,800
109,142
84,204
74,316
83,560
54,161
47,561
48,358
24,126
–
78,960
80,440
44,961
84,160
–
–
131,956
68,160
34,378
345,628
345,415
179,800
177,600
525,428
523,015
1 The attendance fee contains expense allowances for the attendence at the Supervisory Board and the Committee meetings.
2 Dr. George Golumbeski and Michael Brosnan have joined the Supervisory Board of MorphoSys AG on May 17, 2018.
3 Dr. Gerald Möller and Klaus Kühn have left the Supervisory Board of MorphoSys AG AG on May 17, 2018.
4 Karin Eastham has left the Supervisory Board of MorphoSys AG AG on May 17, 2017.
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, stock options and convertible
bonds held by each member of the Management Board and the
Supervisory Board are listed below.
FINANCIAL STATEMENTS
G roup Management Repor t
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
102
T A B L E 19
Directors’ Holdings
S H A R E S
MANAG EMENT BOARD
Dr. Simon Moroney
Jens Holstein
Dr. Malte Peters
Dr. Markus Enzelberger
TOTAL
SUPERVISORY BOARD
Dr. Marc Cluzel
Dr. Frank Morich
Krisja Vermeylen
Wendy Johnson
Dr. George Golumbeski1
Michael Brosnan1
Dr. Gerald Möller2
Klaus Kühn2
TOTAL
S T O C K O P T I O N S
MANAG EMENT BOARD
Dr. Simon Moroney
Jens Holstein
Dr. Malte Peters
Dr. Markus Enzelberger
TOTAL
01/01/2018
Additions
Sales
12/31/2018
483,709
11,000
9,505
7,262
511,476
500
1,000
350
500
-
-
11,000
0
13,350
8,928
36,554
3,313
3,248
52,043
0
0
0
0
0
0
900
0
900
8,928
30,537
0
8,834
48,299
0
0
0
0
0
0
0
0
0
483,709
17,017
12,818
1,676
515,220
500
1,000
350
500
0
0
-
-
2,350
01/01/2018
Additions
Forfeitures3
Exercises
12/31/2018
12,511
8,197
8,197
5,266
34,171
9,884
6,476
6,476
6,476
29,312
0
0
0
0
0
0
0
0
0
0
22,395
14,673
14,673
11,742
63,483
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
G roup Management Repor t
103
C O N V E R T I B L E B O N D S
MANAG EMENT BOARD
Dr. Simon Moroney
Jens Holstein
Dr. Malte Peters
Dr. Markus Enzelberger
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. Malte Peters
Dr. Markus Enzelberger
TOTAL
01/01/2018
Additions
Forfeitures3
Exercises
12/31/2018
88,386
60,537
0
0
148,923
0
0
0
0
0
0
0
0
0
0
0
30,537
0
0
88,386
30,000
0
0
30,537
118,386
01/01/2018
Additions
Forfeitures3
Allocations4
12/31/2018
30,060
20,086
3,187
5,987
59,320
2,969
1,945
1,945
1,945
8,804
2,182
1,495
0
329
4,006
3,797
2,600
0
572
6,969
27,050
17,936
5,132
7,031
57,149
1 Dr. George Golumbeski and Michael Brosnan have joined the Supervisory Board of MorphoSys AG on May 17, 2018.
2 Dr. Gerald Möller and Klaus Kühn have left the Supervisory Board of MorphoSys AG AG on May 17, 2018. Changes in the number of shares after resignation
from the Supervisory Board of MorphoSys AG are not presented in the tables.
3 Forfeited performance Shares are a result of the KPI achievement rate of 63.5 % and a company factor of 1.0 as determined at the end of the performance
period of the LTI plan 2014.
4 Allocations are made as soon as performance shares are transferred within the six-month exercise period after the end of the four-year waiting period.
The members of our Supervisory Board do not hold stock op-
tions, convertible bonds or performance shares.
and persons related to such members are required to disclose
any trading in MorphoSys shares.
MANAGERS T RANSAC T IONS
In accordance with the relevant legal provisions of Article 19
para. 1 (a) of the Market Abuse Regulation (MAR), the members
of MorphoSys AG’s Management Board and Supervisory Board
During the reporting year, MorphoSys received the following
notifications under Article 19 para 1 (a) MAR listed in the table
below.
FINANCIAL STATEMENTS
G roup Management Repor t
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
104
T A B L E 2 0
Managers Transactions in 2018
Party Sub-
ject to the
Notification
Requirement
Markus
Enzelberger
Simon
Moroney
Simon
Moroney
Markus
Enzelberger
Markus
Enzelberger
Malte Peters
Jens Holstein
Function
Chief Scientific
Officer
Chief Executive
Officer
Chief Executive
Officer
Chief Scientific
Officer
Chief Scientific
Officer
Chief
Development
Officer
Chief Financial
Officer
Date of
Transaction
in 2018
Type of Transaction
Aggregated
Share Price
Aggregated
Volume
Place of
Transaction
09/24/2018
Disposal
€ 91.43
€ 52,296.75
09/20/2018
Disposal
€ 93.63
€ 323,300.40
09/19/2018
Disposal
€ 94.1
€ 515,186.55
08/07/2018
Disposal
€ 107.35
€ 886,946.90
Xetra
Xetra
Xetra
Xetra
08/06/2018
08/06/2018
Purchase of 2,676 shares as part of
his remuneration as member of the
Managing Board (issuer’s own shares)
Purchase of 3,313 shares as part of
his remuneration as member of the
Managing Board (issuer’s own shares)
not numberable
not numberable
not numberable
not numberable
Outside a
trading venue
Outside a
trading venue
08/06/2018
Disposal
€ 105.58
€ 622,920.00
Xetra
Purchase of 3,417 shares as part of
his remuneration as member of the
Managing Board (issuer’s own shares)
Purchase of shares based on conversion
of convertible bonds as part of his remu-
neration as member of the Managing
Board (Convertible Bonds Program 2013)
not numberable
not numberable
Outside a
trading venue
€ 31,875
€ 973,366,875
Outside a
trading venue
Jens Holstein
Chief Financial
Officer
08/03/2018
08/03/2018
Jens Holstein
Jens Holstein
Dr. Gerald
Möller
Chief Financial
Officer
Chief Financial
Officer
Member of the
Supervisory
Board
08/03/2018
Disposal
€ 105.13
€ 259,084.30
Xetra
05/09/2018
Purchase
€ 88.70
€ 79,830.00
Xetra
Dr. Simon
Moroney
Chief Executive
Officer
04/11/2018
Jens Holstein
Chief Financial
Officer
04/11/2018
Markus
Enzelberger
Chief Scientific
Officer
04/11/2018
Simon
Moroney
Chief Executive
Officer
04/10/2018
Jens Holstein
Chief Financial
Officer
04/10/2018
Markus
Enzelberger
Chief Scientific
Officer
04/10/2018
Malte Peters
Chief Develop-
ment Officer
04/10/2018
Allocation of 3,797 shares as part of
his remuneration as member of the
Managing Board (Long-Term Incentive
Program 2014) (issuer’s own shares)
Allocation of 2,600 shares as part of
his remuneration as member of the
Managing Board (Long-Term Incentive
Program 2014) (issuer’s own shares)
Allocation of 572 shares as part of
his remuneration as member of the
Managing Board (Long-Term Incentive
Program 2014) (issuer’s own shares)
Acceptance of 9,884 stock options to
subscribe for up to 2 shares each within
the compensation as a Management Board
Member (Stock Option-Program 2018)
Acceptance of 6,476 stock options to
subscribe for up to 2 shares each within
the compensation as a Management Board
Member (Stock Option-Program 2018)
Acceptance of 6,476 stock options to
subscribe for up to 2 shares each within
the compensation as a Management Board
Member (Stock Option-Program 2018)
Acceptance of 6,476 stock options to
subscribe for up to 2 shares each within
the compensation as a Management Board
Member (Stock Option-Program 2018)
not numberable
not numberable
not numberable
not numberable
not numberable
not numberable
not numberable
not numberable
not numberable
not numberable
not numberable
not numberable
not numberable
not numberable
Outside a
trading venue
Outside a
trading venue
Outside a
trading venue
Outside a
trading venue
Outside a
trading venue
Outside a
trading venue
Outside a
trading venue
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
G roup Management Repor t
105
in our hybrid IT environment. The new tool provides additional
intelligence to identify security risks, detect anomalous user
behavior and investigate threat patterns in time to prevent
damage.
INFORMAT ION ON THE INTERNAL CONTROL AND RISK
MANAGEMENT SYSTEM WITH REGARD T O THE ACCOUNT ING
PROCESS UNDER SECTION 289 (4) AND SECTION 315 (4) HGB
In the 2018 financial year, we completed a regular update of the
documentation for our existing internal control and risk man-
agement system. This update serves to maintain adequate in-
ternal control over financial reporting and to ensure the avail-
ability of key controls so that financial figures can be reported
as precisely and accurately as possible. COSO (Committee of
Sponsoring Organizations of the Treadway Commission) de-
fines the corresponding COSO framework (“Internal Control –
Integrated Framework”). We use this framework which is the
most commonly used for the internal control over financial
reporting.
System constraints make it impossible to give absolute assur-
ance that internal controls will always prevent or completely
detect all misrepresentations made in the context of financial
reporting. Internal controls can only provide reasonable assur-
ance that financial reporting is reliable and verify that the
financial statements were prepared in accordance with the
IFRS standards that were effective on and endorsed by the
European Union (EU) for external purposes.
The consolidated financial statements are subjected to numer-
ous preparation, review and control processes so that they can
be reported promptly to the market and to shareholders. To ac-
complish this, our executives have a coordinated plan for which
all internal and external resources are made available. We also
use a strict four-eye principle to ensure the accuracy of the key
financial ratios reported and the underlying execution of all ac-
counting processes. Numerous rules and guidelines are also
followed to ensure the strict separation of the planning, posting
and execution of financial transactions. This functional separa-
tion of processes is ensured by all of our operating IT systems
through an appropriate assignment of rights. External service
providers regularly review the implementation of and compli-
ance with these guidelines as well as the efficiency of the ac-
counting processes.
AVOIDING CONF L IC T S OF IN T ERES T
Management Board and Supervisory Board members are re-
quired to refrain from any actions that could lead to a conflict
of interest with their duties at MorphoSys AG. Such transac-
tions or the secondary employment of Management Board
members must be disclosed 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 handling. In the 2018 financial
year, no conflicts of interest arose in the Supervisory Board.
S T OCK REPURCHASES
By resolution of the Annual General Meeting on May 23, 2014,
MorphoSys is authorized in accordance with Section 71 (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 spec-
ified 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 invi-
tation to submit a bid.
In 2018, MorphoSys did not repurchase any shares based on the
authorization from the year 2014.
INF ORMAT ION T ECHNOL OGY
In preparation for our planned transition to a commercial bio-
pharmaceutical company, the replacement of our current ERP
system with SAP Business By Design was started in April 2018.
In parallel, we started the integration of SAP Concur in July
2018 to substitute our legacy systems for absence and business
travel management.
IT security and compliance continued to be key topics in the
area of information technology in 2018. External security ex-
perts checked the technical security controls, inter alia, using
simulated different hacking attacks to detect potential weak-
nesses. The IT Security Awareness Campaign (ISAC) simulated
deceitful phishing attacks to sensitize employees for their
co-responsibility and essential contribution to IT security in
our organization.
Any security-relevant system notifications or user notifications
that occurred were analyzed by the internal CERT (Computer
Emergency Response Team) with partial external support. As
in the previous year, no serious security incidents occurred.
A SIEM (Security Information and Event Management) system
was integrated to optimize our cyber defense measures. The
previous system for auditing and tracking system changes,
configurations and access controls was replaced with a new
tool enabling control over changes, configurations and access
FINANCIAL STATEMENTS G roup Management Repor t
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
106
16
Compliance
Management System
(CMS)
Credo
Code of Conduct
reports,
if required, to
C O M P L I A N C E
O F F I C E R
reports to
C H A I R P E R S O N O F T H E
A U D I T C O M M I T T E E
C H I E F E X E C U T I V E
O F F I C E R
manages the interfaces between the
different compliance streams
C O M P L I A N C E
R I S K M A N A G E M E N T
S U P E R V I S I O N
+
I M P R O V E M E N T S
C O M P L I A N C E
C O M M I T T E E
CMS
T R A I N I N G S
C O M P L I A N C E
D O C U M E N T S
W H I S T L E B L O W E R
S Y S T E M
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
G roup Management Repor t
107
Predicting future events is not the job of our internal control
and risk management system. Our risk management system
does, however, ensure that business risks are detected and as-
sessed early. The risks identified are eliminated or at least
brought to an acceptable level using appropriate corrective
measures. Special attention is given to risks that could jeopar-
dize us.
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 our
risks and opportunities can be found in the “Risk and Opportu-
nity Report.”
ACCOUN T ING AND EX T ERNAL AUDI T
We prepare our financial statements in accordance with the
provisions of the German Commercial Code (HGB) and the
Stock Corporation Act (AktG).
The consolidated financial statements are prepared in accor-
dance with International Financial Reporting Standards (“IFRS”)
and take into account the recommendations of the Interna-
tional Financial Reporting Standards Interpretations Commit-
tee (IFRS IC). We have applied all standards and interpretations
that were effective on and endorsed by the European Union
(EU) as at December 31, 2018. There were no standards or inter-
pretations as at December 31, 2018, impacting our consolidated
financial statements for the years ended December 31, 2018
and 2017, that were effective but not yet endorsed. As a result,
our consolidated financial statements comply with both the
IFRSs published by the International Accounting Standards
Board (IASB) and those adopted by the EU. These consolidated
financial statements also take into account the supplementary
provisions under commercial law, which must be applied in
accordance with Section 315e (1) of the German Commercial
Code (Handelsgesetzbuch – HGB).
For the election of our auditor, the Audit Committee of the Su-
pervisory Board submits a nomination proposal to the Supervi-
sory Board. At the 2018 Annual General Meeting, Pricewater-
houseCoopers GmbH Wirtschaftsprüfungsgesellschaft was
appointed as auditor for the 2018 financial year. As proof of its
independence, the auditor submitted an Independence Declara-
tion to the Supervisory Board. The lead auditor of these consol-
idated financial statements was Stefano Mulas, who has audited
the consolidated financial statements since 2018.
PricewaterhouseCoopers GmbH has been our auditor since the
2011 financial year. Information on audit-related fees and all
other fees provided by PricewaterhouseCoopers GmbH to us
during the 2018 financial year can be found in the Notes under
Item 6.1.
COMPL IANCE MANAGEMEN T SY S T EM
Our basic mechanisms of the Compliance Management System
(CMS) are presented in the section “Relevant Information on
Corporate Governance Practices.”
The identification and assessment of compliance risks are an
important part of the CMS, and feed the overall CMS strategic
development. Our main compliance-relevant risk areas are
evaluated using a systematic approach, taking into account our
current business strategy and priorities. In the 2018 financial
year, we carried out a compliance risk analysis, including anti-
bribery and corruption risks. Risk mitigation measures are
being identified for the areas requiring action. As part of the
CMS, employees are given the opportunity to report suspected
breaches of law within the MorphoSys Group in a protected
manner.
In connection with the General Data Protection Regulation of
the EU (Regulation (EU) 2016/679 – “GDPR”) which came into
effect on May 25, 2018, we implemented various procedures in
2018 to safeguard compliance with the GDPR.
›› S E E F I G U R E 16 – Compliance Management System (CMS) (page 106)
IN T ERNAL AUDI T DEPAR T MEN T
Our Internal Audit Department is an essential element of the
Corporate Governance structure. The Internal Audit Depart-
ment assists us in accomplishing our objectives by bringing a
systematic approach to evaluate and improve the effectiveness
of our risk management, internal control and other corporate
governance processes. The accounting and consulting firm
KPMG was mandated for 2018 as a co-sourcing partner for the
internal auditing process.
The Corporate Internal Audit Department executes on a risk-
based audit plan including requirements and recommendations
of the Management Board and Supervisory Board’s Audit
Committee.
Our Internal Audit Department reports regularly to the Man-
agement Board. The Head of Internal Audit and the Chief Exec-
utive Officer both report to the Supervisory Board’s Audit Com-
mittee twice a year or on an ad hoc basis when necessary.
Five audits were conducted successfully in the course of 2018.
Some areas requiring action were identified and corrective ac-
tion plans were agreed. The Corporate Internal Audit Depart-
ment is planning four audits in 2019.
FINANCIAL STATEMENTS G roup Management Repor t
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
108
Disclosures under Section 289a (1),
Section 315a (1) HGB and Explanatory
Report of the Management Board
under Section 176 (1) Sentence 1 AktG
COMP OSI T ION OF COMMON S T OCK
As of December 31, 2018, the Company’s statutory common
stock amounted to € 31,807,035.00 and was divided into
31,807,035 no-par-value bearer shares. Excluding the 281,036
treasury shares held by the Company, the statutory common
stock concerns bearer shares with voting rights granting each
share one vote at the Annual General Meeting. On January 17,
2019, our Supervisory Board resolved to adjust the share capital
to reflect the issuance of new shares in 2018 based on the exer-
cise of 32,537 convertible bonds. This results in an increase of
the share capital from € 31,807,035 to € 31,839,572, which was
entered in the commercial register on February 2, 2019.
RES T RIC T IONS AF F EC T ING VO T ING RIGH T S OR T HE
T RANSF ER OF SHARES
Our 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 rights restrictions may also arise from the provisions of
the German Stock Corporation Act (AktG), such as those under
Section 136 AktG, or the provisions for treasury stock under
Section 71b AktG.
SHAREHOL DINGS IN COMMON S T OCK EXCEEDING 10 %
OF VO T ING RIGH T S
We are not aware of nor have we been notified 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 CONF ERRING 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 OWNERSHIP OF C API TAL
Employees who hold shares in the Company exercise their vot-
ing rights directly in accordance with the statutory provisions
and the Articles of Association as do other shareholders.
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
Section 6 of the Articles of Association and Section 84 AktG.
Our Management Board currently consists of the Chief Execu-
tive Officer and three other members. Management Board mem-
bers may be appointed for a maximum term of five years. Reap-
pointments or 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 Section 84 (3) AktG. If a required
member of the Management Board is absent, one will be ap-
pointed by the court in cases of urgency under Section 85 AktG.
As a rule, the Articles of Association can only be amended by a
resolution of the Annual General Meeting in accordance with
Section 179 (1) sentence 1 AktG. Under Section 179 (2) sentence
2 AktG in conjunction with Section 20 of the Articles of Associ-
ation, our 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 repre-
sented. If the law stipulates a higher mandatory majority of
votes or capital, this shall be applied. Amendments to the Arti-
cles of Association that only affect their wording can be re-
solved by the Supervisory Board in accordance with Section
179 (1) sentence 2 AktG in conjunction with Section 12 (3) of
the Articles of Association.
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
G roup Management Repor t
109
P OWER OF T HE MANAGEMEN T BOARD T O ISSUE SHARES
The Management Board’s power to issue shares is granted under
Section 5 (5) through (6e) of the Company’s Articles of Associa-
tion and the statutory provisions:
1. Authorized Capital
a. According to Section 5 (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 € 11,768,314.00 for
cash contributions and/or contributions in kind by issuing
up to 11,768,314 new, no-par-value bearer shares until and
including the date of April 30, 2022 (Authorized Capital
2018-I).
Shareholders are principally entitled to subscription rights
in the case of a capital increase. One or more credit insti-
tutions may also subscribe to the shares with the obliga-
tion to offer the shares to shareholders for subscription.
With the Supervisory Board’s consent, the Management
Board is, however, authorized to exclude shareholder sub-
scription 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; or
cc) in the case of a capital increase for cash contribu-
tion when the new shares are placed on a domestic
and/or foreign stock exchange in the context of a pub-
lic offering.
The total shares to be issued via a capital increase against
contribution in cash and/or in kind, excluding preemptive
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 authoriza-
tions or the exercise of the authorizations, whichever
amount is lower. The 20 % limit mentioned above shall take
into account (i) treasury shares sold excluding preemptive
rights after the effective date of these authorizations (un-
less they service the entitlements of members of the Man-
agement Board and/or employees under employee partici-
pation programs), (ii) shares that are issued from other
authorized capital existing on the effective date of these
authorizations and excluding preemptive rights during
the effective period of these authorizations or resolved by
the same Annual General Meeting that resolved these au-
thorizations, and (iii) shares to be issued during the effec-
tive period of these authorizations to service convertible
bonds and/or bonds with warrants whose basis for autho-
rization exists 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 shareholders (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) Pursuant to Section 5 (6) of the Articles of Association,
with the Supervisory Board’s consent, the Management
Board is authorized to increase the common stock of the
Company against contribution in cash once or several
times by a total of up to € 2,915,977.00 until and including
April 30, 2022 by issuing up to 2,915,977 new no-par-
value bearer shares (Authorized Capital 2017-I).
Shareholders are principally entitled to subscription rights
in the case of a capital increase. One or more credit insti-
tutions may also subscribe to the shares with the obliga-
tion to offer the shares to shareholders for subscription.
With the Supervisory Board’s consent, the Management
FINANCIAL STATEMENTS
G roup Management Repor t
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
110
Board is, however, authorized to exclude shareholder sub-
scription rights:
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 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 au-
thorization takes effect or at the time it is exercised, in
accordance with or in the respective application of
Section 186 (3) sentence 4 AktG.
The total number of shares to be issued via capital in-
creases against contribution in cash, excluding subscrip-
tion rights and based on the authorizations mentioned
above, shall not exceed 20 % of the common stock when
calculated based on the authorizations’ effective date or
exercise, whichever amount is lower. This 20 % limit shall
take into account (i) treasury shares sold with the exclu-
sion of subscription rights after the effective date of these
authorizations (unless they service the entitlements of
members of the Management Board and/or employees un-
der employee participation programs); (ii) shares to be is-
sued with the exclusion of subscription rights during the
effective period of these authorizations from other autho-
rized capital existing on the effective date of these autho-
rizations or to be resolved by the same Annual General
Meeting resolving these authorizations; and (iii) shares to
be issued during the effective period of these authoriza-
tions to service bonds with conversion or warrant rights,
whose authorization basis exists on the effective date of
these authorizations, to the extent the bonds with conver-
sion or warrant rights were issued with the exclusion of
shareholders’ subscription rights (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.
2. Conditional Capital
a. According to Section 5 (6b) of the Articles of Association,
the Company’s common stock is conditionally increased
by up to € 5,307,536.00, divided into a maximum of
5,307,536 no-par-value bearer shares (Conditional Capital
2016-I). The conditional capital increase serves solely as a
means to grant new shares to the holders of conversion or
warrant rights, which will be issued by the company or
companies in which the Company has a direct or indirect
majority interest according to the authorizing resolution
of the Annual General Meeting on June 2, 2016, under
Agenda Item 7 letter a). The shares will be issued at the
respective conversion or exercise price to be determined
in accordance with the resolution above. The conditional
capital increase will only be carried out to the extent that
the holders of conversion or warrant rights exercise these
rights or fulfill conversion obligations under such bonds.
The shares will be entitled to dividends as of the begin-
ning of the previous financial year, provided they were
issued before the start of the Company’s Annual General
Meeting, or as of the beginning of the financial year in
which they were issued.
b. According to Section 5 (6e) of the Articles of Association,
the Company’s common stock is conditionally increased
by up to € 188,985.00 through the issue of up to 188,985
new no-par- value bearer shares of the Company (Condi-
tional Capital 2008-III). The conditional capital increase
will only be executed to the extent that holders of the con-
vertible bonds exercise their conversion rights for conver-
sion into ordinary shares of the Company. The new shares
participate in the Company’s profits from the beginning of
the financial year, for which there has been no resolution
on the appropriation of accumulated income at the time of
issuance. With the Supervisory Board’s consent, the Man-
agement Board is authorized to determine the further de-
tails of the capital increase and its implementation. On
January 17, 2019, our Supervisory Board resolved to adjust
the conditional capital to reflect the issuance of new shares
in 2018 based on the exercise of 32,537 convertible bonds.
This results in a reduction of the conditional capital 2008-
III from € 188,985 to € 156,448, which was entered in the
commercial register on February 1, 2019.
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
G roup Management Repor t
111
c. According to Section 5 (6g) of the Articles of Association,
the Company’s common stock is conditionally increased
by up to € 995,162.00 through the issue of up to 995,162
new no-par- value bearer shares of the Company (Condi-
tional Capital 2016-III). The conditional capital serves to
meet the obligations of subscription rights that have been
issued and exercised based on the authorization resolved
by the Annual General Meeting of June 2, 2016 under
Agenda Item 9 letter a). The conditional capital increase
will only be executed to the extent that holders of sub-
scription rights exercise their right to subscribe to shares
of the Company. The shares will be issued at the exercise
price set in each case as the issue amount in accordance
with Agenda Item 9 letter a) subparagraph (8) of the An-
nual General Meeting’s resolution dated June 2, 2016; Sec-
tion 9 (1) AktG remains unaffected. The new shares are
entitled to dividends for the first time for the financial
year for which there has been no resolution by the Annual
General Meeting on the appropriation of accumulated in-
come. The Management Board, and the Company’s Super-
visory Board where members of the Management Board
are concerned, is authorized to determine the additional
details of the conditional capital increase and its execution.
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 Section 71 AktG and by the authoriza-
tion of the Annual General Meeting of May 23, 2014:
Until and including the date of April 30, 2019, the Company is
authorized to repurchase its own shares in an amount of up to
10 % of the common stock existing at the time of the resolution
(or possibly a lower amount of common stock at the time of ex-
ercising this authorization) for any purpose permitted under
the statutory limits. The repurchase takes place at the Manage-
ment Board’s discretion on either the stock exchange, through
a public offer or public invitation to submit a bid. The authoriza-
tion may not be used for the purpose of trading in the Compa-
ny’s own shares. The intended use of treasury stock 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:
1. The shares may be redeemed without the redemption or its
execution requiring a further resolution of the Annual Gen-
eral Meeting.
2. 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.
3. The shares may be sold for contribution in kind, particularly
in conjunction with company mergers, acquisitions of com-
panies, parts of companies or interests in companies.
4. The shares may be used to fulfill subscription or conversion
rights resulting from the exercise of options and/or conver-
sion rights or conversion obligations for Company shares.
5. 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
Company shares that were or will be granted to employees of
the Company or those of affiliated companies, members of
the Company’s management or managers of affiliated compa-
nies. The shares may also be used to fulfill obligations or
rights to purchase Company shares that will be agreed with
the Company’s employees, members of the senior manage-
ment and affiliates in the context of employee participation
programs.
If shares are used for the purposes mentioned above, share-
holder 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
The Company has not entered into any material agreements
that fall under the condition of a change of control after a take-
over bid.
FINANCIAL STATEMENTS G roup Management Repor t
Statement on C or por ate G over nance, G roup Statement on C or por ate G over nance and C or por ate G over nance Repor t
112
COMPENSAT ION AGREEMEN T S CONCLUDED 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 service contract and demand the fixed sal-
ary and annual bonus still outstanding until the regular end of
the service contract, however at least 200 % of the fixed yearly
gross salary and the annual bonus. Moreover, in such a case, all
stock options, convertible bonds and performance 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, some Senior Management Group
members may also terminate their employment contract and
demand a severance payment equal to one annual gross fixed
salary and the full contractual bonus for the calendar year in
which the termination is exercised, whereby a target achieve-
ment rate of 100 % shall be applied. Moreover, in such a case, all
stock options and performance shares granted will become
vested immediately and can be exercised after the expiration of
the statutory vesting or blackout 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
entity, (iii) MorphoSys AG as dominated company becomes
party to an agreement pursuant to Section 291 of the German
Stock Corporation Act or MorphoSys is integrated in accor-
dance with Section 319 of the German Stock Corporation Act, or
(iv) a shareholder or third party directly or indirectly holds 30 %
or more of MorphoSys’s voting rights.
Subsequent Events
G roup Management Repor t
113
At the end of February 2019, our partner Janssen announced
that it had received U.S. FDA approval for Tremfya® One-Press,
a single-dose, patient-controlled injector for adults with mod-
erate-to-severe plaque psoriasis. This is a device that allows
patients to administer the drug subcutaneously by themselves
and is thus intended to provide a higher convenience to psori-
asis patients with respect to the treatment of their chronic
disease.
On March 7, 2019 MorphoSys announced that during the first
quarter of 2019, the Company in agreement with the FDA im-
plemented an amendment of the B-MIND study by introducing
a co-primary endpoint into the trial. The scientific rationale for
the amendment is based on published literature as well as
MorphoSys’s own pre-clinical data, which indicate that MOR208
might be particularly active in patients who can be character-
ized by the presence of a certain biomarker. Discussions with
the FDA regarding the biomarker assay are currently being
planned and are expected to take place in the middle of 2019.
The pre-planned, event-driven interim analysis of B-MIND
remains projected to take place in the second half of 2019.
Depending on the outcome of the interim analysis, an increase
from 330 to 450 patients may be required, in which case an
event-driven primary analysis of the study is expected in the
first half of 2021.
Subsequent Events
On January 26, 2019, we announced that in our lawsuit against
Janssen Biotech and Genmab A/S, the United States (U.S.) Dis-
trict Court of Delaware, based on a hearing held November 27,
2018, ruled in a Court Order on January 25, 2019, that the as-
serted claims of three MorphoSys patents with U.S. Patent
Numbers 8,263,746, 9,200,061 and 9,758,590 are invalid. The
Court thus granted a motion for Summary Judgement of inva-
lidity filed by Janssen Biotech and Genmab, A/S against the
three patents held by MorphoSys. As a result of this decision,
the jury trial scheduled for February 2019 to consider Janssen’s
and Genmab’s alleged infringement and the validity of the
MorphoSys patents did not take place. On January 31, 2019 we
announced that we had settled the dispute with Janssen Bio-
tech and Genmab A/S. The parties agreed to drop the mutual
claims related to the litigation: MorphoSys dismissed claims
for alleged patent infringement against Janssen Biotech and
Genmab A/S and agreed not to appeal from the court order
dated January 25, 2019. Janssen and Genmab dismissed their
counterclaims against MorphoSys.
In early February 2019, we announced the appointment of
David Trexler as President and Member of the Board of
Directors of MorphoSys US Inc. effective February 6, 2019.
Mr. Trexler will lead the further development of MorphoSys’s
U.S. subsidiary with a focus on building commercial capabili-
ties. Mr. Trexler joins MorphoSys from EMD Serono, a subsidi-
ary of Merck KGaA, Darmstadt. AT EMD Serono, he was respon-
sible, among other things, for establishing the first commercial
organization of Merck KGaA’s oncology division in the U.S. and
for the market launch of the cancer drug avelumab for the treat-
ment of metastatic Merkel cell carcinoma.
On February 19, 2019, Simon Moroney, CEO and co-founder of
MorphoSys AG (informed the Company’s Supervisory Board
that he has decided not to renew his contract as a member of
the company’s Management Board. As a result of his decision,
Dr. Moroney will step down as CEO on expiry of his current
contract on June 30, 2020, or when a successor is appointed,
whichever comes sooner.
FINANCIAL STATEMENTS F inancial Statements
114
C ontents
Financial
Statements
C ontents
F inancial Statements
115
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
116
117
118
120
122
n o t e s
124
124
143
146
151
158
161
Consolidated Statement of Profit or Loss (IFRS)
Consolidated Statement of Comprehensive Income (IFRS)
Consolidated Balance Sheet (IFRS)
Consolidated Statement of Changes in Stockholders’ Equity (IFRS)
Consolidated Statement of Cash Flows (IFRS)
General Information
Summary of Significant Accounting Policies
Segment Reporting
Notes to Profit or Loss
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
172
Additional Notes
F inancial Statements
116
C onsolidated Statement of Prof it or Loss (IFRS)
Consolidated Statement of
Profit or Loss (IFRS)
in €
Revenues
Operating Expenses
Cost of Sales
Research and Development
Selling
General and Administrative
Total Operating Expenses
Other Income
Other Expenses
Earnings before Interest and Taxes (EBIT)
Finance Income
Finance Expenses
Impairment Losses on Financial Assets
Income Tax Benefit/(Expenses)
Consolidated Net Loss
Earnings per Share, basic and diluted
Shares Used in Computing Earnings per Share, basic and diluted
Note
2018
2017
2016
2.7.1, 4.1
76,442,505
66,790,840
49,743,515
2.1.1, 2.7.2,
4.2.1
(1,796,629)
0
0
2.7.2, 4.2.2
(106,397,017)
(113,313,679)
(93,962,975)
2.1.1, 2.7.2,
4.2.3
(6,382,510)
(4,816,038)
(2,444,224)
2.7.2, 4.2.4
(21,927,731)
(15,717,578)
(13,431,955)
2.7.3, 4.3
2.7.4, 4.3
2.7.5, 4.3
2.7.5, 4.3
2.3.1
2.7.6, 4.4
2.7.7, 4.5
2.7.7, 4.5
(136,503,887)
(133,847,295)
(109,839,154)
1,644,632
(689,343)
1,119,598
(1,670,792)
708,571
(553,925)
(59,106,093)
(67,607,649)
(59,940,993)
417,886
(753,588)
(1,035,000)
4,304,674
712,397
(1,894,852)
0
1,385,164
(1,308,322)
0
(1,036,365)
(518,625)
(56,172,121)
(69,826,469)
(60,382,776)
(1.79)
(2.41)
(2.28)
31,338,948
28,947,566
26,443,415
The notes are an integral part of these consolidated financial statements.
C onsolidated Statement of C omprehensi ve Income (IFRS)
F inancial Statements
117
Consolidated Statement of
Comprehensive Income (IFRS)1
in €
Consolidated Net Loss
Change in Fair Value of Equity Instruments through Other Comprehensive Income2
Foreign Currency Translation Differences from Consolidation3
Change in Unrealized Gains and Losses on Available-for-sale Financial Assets and Bonds
(Thereof € 0 for 2018, € 86,685 for 2017 and € 251,455 for 2016, respectively, Reclassifica-
tions of realized Gains and Losses to Profit or Loss)
Change of Tax Effects presented in Other Comprehensive Income on Available-for-sale
Financial Assets and Bonds
Change in Unrealized Gains and Losses on Available-for-sale Financial Assets and Bonds,
Net of Tax Effects
Change in Unrealized Gains and Losses on Cash Flow Hedges
(Thereof € 0 for 2018, € 256,085 for 2017 and € 0 for 2016, respectively, Reclassifications
of realized Losses to Profit or Loss)
Change of Tax Effects presented in Other Comprehensive Income on Cash Flow Hedges
Change in Unrealized Gains and Losses on Cash Flow Hedges, Net of Tax Effects
Other Comprehensive Income
Total Comprehensive Income
2018
2017
2016
(56,172,121)
(69,826,469)
(60,382,776)
(127,458)
(83,432)
0
0
0
0
0
0
0
0
0
0
(210,890)
54,170
115,396
63,659
(136,550)
117,829
(21,154)
(490,164)
130,751
(359,413)
(241,584)
490,164
(130,751)
359,413
338,259
(56,383,011)
(70,068,053)
(60,044,517)
1 In financial years 2017 and 2016, the statement of comprehensive income only comprised components which will be reclassified in terms of
IAS 1.82A(a)(ii) to profit or loss in subsequent periods when specific conditions are met.
2 Item will not be reclassified in terms of IAS 1.82A(a)(i) to profit or loss in subsequent periods.
3 Item will be reclassified in terms of IAS 1.82A(a)(ii) to profit or loss in subsequent periods when specific conditions are met.
The notes are an integral part of these consolidated financial statements.
F inancial Statements
118
C onsolidated B alance Sheet (IFRS)
Consolidated Balance Sheet (IFRS)
in €
AS SE TS
Current Assets
Cash and Cash Equivalents
Available-for-sale Financial Assets
Financial Assets classified as Loans and Receivables
Financial Assets at Fair Value through Profit or Loss
Other Financial Assets at Amortized Cost
Accounts Receivable
Income 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
Other Financial Assets at Amortized Cost, Net of Current Portion
Shares at Fair Value through Other Comprehensive Income
Prepaid Expenses and Other Assets, Net of Current Portion
Total Non-current Assets
TOTAL AS SE TS
The notes are an integral part of these consolidated financial statements.
Note
12/31/2018
12/31/2017
2.8.1, 5.1
2.8.1, 5.2
2.8.1, 5.2
2.1.2, 5.2
2.1.2, 5.2
2.8.2, 5.3
2.8.2, 5.5
2.8.2, 5.4
2.8.3, 5.5
2.8.4, 5.5
2.8.5, 5.6
2.8.6, 5.7.1
2.8.6, 5.7.2
2.8.6, 5.7.3
2.8.6, 5.7.4
2.8.6, 5.7.5
2.8.1, 5.2
2.8.7, 5.8
2.8.8, 5.9
45,459,836
0
0
44,581,264
268,922,724
17,732,933
161,048
147,449
245,161
76,589,129
86,538,195
149,059,254
0
0
11,234,308
654,511
84,727
300,753
11,654,880
16,219,761
388,905,295
340,680,638
3,530,709
3,938,739
2,526,829
37,019,370
203,807
3,676,233
95,749,059
232,000
2,981,716
149,858,462
3,526,351
4,669,128
2,999,074
52,158,527
655,399
7,364,802
0
0
3,344,292
74,717,573
538,763,757
415,398,211
C onsolidated B alance Sheet (IFRS)
F inancial Statements
119
in €
Note
12/31/2018
12/31/2017
LIABILITIES AND STO CK HOLDERS ’ EQUIT Y
Current Liabilities
Accounts Payable and Accruals
Tax Provisions
Other Provisions
Current Portion of Contract Liability
(2017: Current Portion of Deferred Revenue)
Total Current Liabilities
Non-current Liabilities
Other Provisions, Net of Current Portion
Contract Liability, Net of Current Portion
(2017: Deferred Revenue, Net of Current Portion)
Convertible Bonds due to Related Parties
Deferred Tax Liability
Other Liabilities, Net of Current Portion
Total Non-current Liabilities
Total Liabilities
Stockholders’ Equity
Common Stock
Ordinary Shares Issued (31,839,572 and 29,420,785 for 2018 and 2017, respectively)
Ordinary Shares Outstanding (31,558,536 and 29,101,107 for 2018 and 2017, respectively)
Treasury Stock (281,036 and 319,678 shares for 2018 and 2017, respectively), at Cost
Additional Paid-in Capital
Revaluation Reserve
Other Comprehensive Income Reserve
Accumulated Deficit
Total Stockholders’ Equity
2.9.1, 6.1
2.9.2, 6.2
2.9.1, 6.2
2.9.3, 6.3
44,760,615
208,034
160,411
44,811,718
314,944
1,185,741
794,230
45,923,290
1,388,638
47,701,041
2.9.1, 6.2
23,166
23,166
2.9.4, 6.3
2.9.5
2.9.6, 4.4
2.9.7, 6.4
158,024
71,517
3,507,233
707,893
4,467,833
50,391,123
306,385
87,785
7,811,258
797,537
9,026,131
56,727,172
2.9.8, 6.5.1
31,839,572
29,420,785
2.9.8, 6.5.4
2.9.8, 6.5.5
2.9.8, 6.5.6
2.9.8, 6.5.7
2.9.8, 6.5.8
(10,398,773)
619,908,453
0
(210,890)
(152,765,728)
488,372,634
(11,826,981)
438,557,856
(105,483)
0
(97,375,138)
358,671,039
TOTAL LIABILITIES AND STO CK HOLDERS ’ EQUIT Y
538,763,757
415,398,211
The notes are an integral part of these consolidated financial statements.
F inancial Statements
120
C onsolidated Statement of Changes in Stockholder s ’ Equit y (IFRS)
Consolidated Statement of Changes
in Stockholders’ Equity (IFRS)
BAL ANCE AS OF JANUARY 1, 2016
Capital Increase, Net of Issuance Cost of € 2,778,652
Compensation Related to the Grant of Convertible Bonds and Performance Shares
Repurchase of Treasury Stock, Net of Bank Fees
Transfer of Treasury Stock for Long-Term Incentive Program
Reserves:
Change in Unrealized Gains and Losses on Available-for-sale Financial Assets
and Bonds, Net of Tax Effects
Change in Unrealized Gains on Cash Flow Hedges, Net of Tax Effects
Consolidated Net Loss
Total Comprehensive Income
BAL ANCE AS OF DECEMBER 31, 2016
BAL ANCE AS OF JANUARY 1, 2017
Compensation Related to the Grant of Stock Options, Convertible Bonds
and Performance Shares
Exercise of Convertible Bonds Issued to Related Parties
Transfer of Treasury Stock for Long-Term Incentive Program
Transfer of Treasury Stock to Members of the Management Board
Reserves:
Change in Unrealized Gains and Losses on Available-for-sale Financial Assets
and Bonds, Net of Tax Effects
Change in Unrealized Gains on Cash Flow Hedges, Net of Tax Effects
Consolidated Net Loss
Total Comprehensive Income
BAL ANCE AS OF DECEMBER 31, 2017
Application of IFRS 9
Application of IFRS 15
BAL ANCE AS OF JANUARY 1, 2018
Capital Increase, Net of Issuance Cost of € 15,038,362
Compensation Related to the Grant of Stock Options and Performance Shares
Exercise of Convertible Bonds Issued to Related Parties
Transfer of Treasury Stock for Long-Term Incentive Program
Transfer of Treasury Stock to Related Parties
Reserves:
Change in Fair Value of Equity Instruments through Other Comprehensive Income
Foreign Currency Losses from Consolidation
Consolidated Net Loss
Total Comprehensive Income
BAL ANCE AS OF DECEMBER 31, 2018
The notes are an integral part of these consolidated financial statements.
Common Stock
Note
Shares
€
26,537,682
2,622,088
26,537,682
2,622,088
0
0
0
0
0
0
0
0
0
0
0
0
0
0
29,159,770
29,159,770
29,159,770
29,159,770
0
261,015
0
261,015
0
0
0
0
0
0
0
0
0
0
0
0
29,420,785
29,420,785
319,678
(11,826,981)
438,557,856
(97,375,138)
358,671,039
0
0
29,420,785
2,386,250
0
32,537
0
0
29,420,785
2,386,250
0
32,537
0
0
0
0
0
0
0
0
0
0
0
0
31,839,572
31,839,572
281,036
(10,398,773)
619,908,453
(152,765,728)
488,372,634
7.1, 7.2, 7.3
7.2
7.3.1
7.4
6.5.8
2.1.2, 6.5.6, 6.5.8
2.1.2, 6.5.8
6.5.1, 6.5.5
7.1, 7.3
7.2, 7.4
7.3.2, 7.4
6.5.4, 7.3.7, 7.4
5.8, 6.5.7
6.5.7
6.5.8
Additional
Paid-in Capital
Revaluation
Reserve
Other Compre-
hensive In-
come Reserve
Accumulated
Stockholders’
Deficit
434,670
(15,827,946)
(202,158)
32,834,107
Treasury Stock
Shares
52,295
(90,955)
(2,181,963)
3,361,697
319,394,322
109,971,132
2,357,418
(3,361,697)
396,010
396,010
(14,648,212)
(14,648,212)
428,361,175
428,361,175
(61,871)
(14,461)
2,286,752
534,479
4,974,599
8,043,313
(2,286,752)
(534,479)
319,678
(11,826,981)
(17,219)
(21,423)
636,414
791,794
438,557,856
176,189,256
5,584,969
1,004,580
(636,414)
(791,794)
€
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
€
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(21,154)
359,413
338,259
136,101
136,101
117,829
(359,413)
(241,584)
(105,483)
105,483
€
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Total
Equity
€
362,736,007
112,593,220
2,357,418
(2,181,963)
0
(21,154)
359,413
(60,382,776)
(60,044,517)
415,460,165
415,460,165
4,974,599
8,304,328
0
0
0
0
117,829
(359,413)
(69,826,469)
(70,068,053)
(248,000)
1,135,014
359,558,053
178,575,506
5,584,969
1,037,117
(127,458)
(83,432)
(56,172,121)
(56,383,011)
€
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(60,382,776)
(60,382,776)
(27,548,669)
(27,548,669)
(69,826,469)
(69,826,469)
(353,483)
1,135,014
(96,593,607)
€
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(127,458)
(83,432)
(210,890)
(210,890)
(56,172,121)
(56,172,121)
C onsolidated Statement of Changes in Stockholder s ’ Equit y (IFRS)
F inancial Statements
121
Common Stock
Treasury Stock
Additional
Paid-in Capital
Revaluation
Reserve
Other Compre-
hensive In-
come Reserve
Accumulated
Deficit
Total
Stockholders’
Equity
BAL ANCE AS OF JANUARY 1, 2016
Capital Increase, Net of Issuance Cost of € 2,778,652
Compensation Related to the Grant of Convertible Bonds and Performance Shares
Repurchase of Treasury Stock, Net of Bank Fees
Transfer of Treasury Stock for Long-Term Incentive Program
Reserves:
Change in Unrealized Gains and Losses on Available-for-sale Financial Assets
and Bonds, Net of Tax Effects
Change in Unrealized Gains on Cash Flow Hedges, Net of Tax Effects
Consolidated Net Loss
Total Comprehensive Income
BAL ANCE AS OF DECEMBER 31, 2016
BAL ANCE AS OF JANUARY 1, 2017
Compensation Related to the Grant of Stock Options, Convertible Bonds
and Performance Shares
Exercise of Convertible Bonds Issued to Related Parties
Transfer of Treasury Stock for Long-Term Incentive Program
Transfer of Treasury Stock to Members of the Management Board
Reserves:
Change in Unrealized Gains and Losses on Available-for-sale Financial Assets
and Bonds, Net of Tax Effects
Change in Unrealized Gains on Cash Flow Hedges, Net of Tax Effects
Consolidated Net Loss
Total Comprehensive Income
BAL ANCE AS OF DECEMBER 31, 2017
Application of IFRS 9
Application of IFRS 15
BAL ANCE AS OF JANUARY 1, 2018
Capital Increase, Net of Issuance Cost of € 15,038,362
Compensation Related to the Grant of Stock Options and Performance Shares
Exercise of Convertible Bonds Issued to Related Parties
Transfer of Treasury Stock for Long-Term Incentive Program
Transfer of Treasury Stock to Related Parties
Reserves:
Change in Fair Value of Equity Instruments through Other Comprehensive Income
Foreign Currency Losses from Consolidation
Consolidated Net Loss
Total Comprehensive Income
BAL ANCE AS OF DECEMBER 31, 2018
The notes are an integral part of these consolidated financial statements.
7.1, 7.2, 7.3
7.2
7.3.1
7.4
6.5.8
2.1.2, 6.5.6, 6.5.8
2.1.2, 6.5.8
6.5.1, 6.5.5
7.1, 7.3
7.2, 7.4
7.3.2, 7.4
6.5.4, 7.3.7, 7.4
5.8, 6.5.7
6.5.7
6.5.8
26,537,682
2,622,088
26,537,682
2,622,088
29,159,770
29,159,770
29,159,770
29,159,770
261,015
261,015
29,420,785
2,386,250
29,420,785
2,386,250
32,537
32,537
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
€
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Note
Shares
Shares
€
€
€
434,670
(15,827,946)
0
0
52,295
(90,955)
0
0
(2,181,963)
3,361,697
319,394,322
109,971,132
2,357,418
0
(3,361,697)
0
0
0
0
0
0
0
0
0
0
0
0
396,010
396,010
(14,648,212)
(14,648,212)
428,361,175
428,361,175
0
0
(61,871)
(14,461)
0
0
2,286,752
534,479
4,974,599
8,043,313
(2,286,752)
(534,479)
0
0
0
0
0
0
0
0
0
0
0
0
29,420,785
29,420,785
319,678
(11,826,981)
438,557,856
0
0
0
0
319,678
(11,826,981)
0
0
0
(17,219)
(21,423)
0
0
0
0
0
0
0
636,414
791,794
0
0
0
0
0
0
438,557,856
176,189,256
5,584,969
1,004,580
(636,414)
(791,794)
0
0
0
0
31,839,572
31,839,572
281,036
(10,398,773)
619,908,453
(202,158)
0
0
0
0
(21,154)
359,413
338,259
136,101
136,101
0
0
0
0
117,829
(359,413)
0
(241,584)
(105,483)
105,483
0
0
0
0
0
0
0
0
0
0
0
0
€
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(127,458)
(83,432)
0
(210,890)
(210,890)
€
€
32,834,107
0
0
0
0
0
0
(60,382,776)
(60,382,776)
(27,548,669)
(27,548,669)
0
0
0
0
0
0
(69,826,469)
(69,826,469)
362,736,007
112,593,220
2,357,418
(2,181,963)
0
(21,154)
359,413
(60,382,776)
(60,044,517)
415,460,165
415,460,165
4,974,599
8,304,328
0
0
117,829
(359,413)
(69,826,469)
(70,068,053)
(97,375,138)
358,671,039
(353,483)
1,135,014
(96,593,607)
0
0
0
0
0
0
0
(56,172,121)
(56,172,121)
(248,000)
1,135,014
359,558,053
178,575,506
5,584,969
1,037,117
0
0
(127,458)
(83,432)
(56,172,121)
(56,383,011)
(152,765,728)
488,372,634
F inancial Statements
122
C onsolidated Statement of Cash Flows (IFRS)
Consolidated Statement of
Cash Flows (IFRS)
in €
OPER ATING AC TIVITIES:
Consolidated Net Loss
Adjustments to Reconcile Net Loss to Net Cash Provided by/
(Used in) Operating Activities:
Impairment of Assets
Depreciation and Amortization of Tangible and Intangible Assets
Net (Gain)/Loss on Sales of Financial Assets at Fair Value
through Profit or Loss
(2017 and 2016: Available-for-sale Financial Assets)
Proceeds from Derivative Financial Instruments
Net (Gain)/Loss on Derivative Financial Instruments
Net (Gain)/Loss on Sale of Property, Plant and Equipment
Proceeds from Recognition of previously unrecognized
Intangible Assets
Recognition of Contract Liability
(2017 and 2016: Recognition of Deferred Revenue)
Share-based Payment
Income Tax (Benefit)/Expenses
Changes in Operating Assets and Liabilities:
Accounts Receivable
Prepaid Expenses and Other Assets, Tax Receivables and
Other Receivables
Accounts Payable and Accruals, Tax Provisions
and Other Provisions
Other Liabilities
Contract Liability
(2017 and 2016: Deferred Revenue)
Income Taxes Paid
Note
2018
2017
2016
(56,172,121)
(69,826,469)
(60,382,776)
5.6, 5.7
5.6, 5.7
24,033,479
3,750,259
9,863,582
4,028,948
10,141,187
3,763,813
5.2
5.4
5.4
5.8
6.3
4.2.5, 7
4.4
5.3
1,114,330
(488,201)
121,717
(24,093)
84,841
(589,134)
919,042
11,314
915,201
725,157
(29,879)
(4,037)
(350,000)
0
0
(1,993,763)
5,584,969
(4,304,674)
(19,595,746)
(19,042,772)
4,974,599
1,036,365
2,357,418
518,625
(6,610,625)
1,362,347
(1,154,597)
5.4, 5.5
545,816
1,807,670
(13,912,263)
6.1, 6.2
6.4
6.3
1,890,046
(2,718,825)
7,819,386
3,133,558
2,386,009
(33,837)
18,385,824
(1,861,982)
13,010,160
(421,492)
17,440,930
(540,383)
Net Cash Provided by/(Used in) Operating Activities
(33,269,514)
(38,445,855)
(46,615,708)
The notes are an integral part of these consolidated financial statements.
C onsolidated Statement of Cash Flows (IFRS)
F inancial Statements
123
in €
INVESTING AC TIVITIES:
Purchase of Financial Assets at Fair Value through Profit or Loss
(2017 and 2016: Available-for-sale Financial Assets)
Proceeds from Sales of Financial Assets at Fair Value
through Profit or Loss
(2017 and 2016: Available-for-sale Financial Assets)
Proceeds from Sales of Bonds, Available-for-sale
Purchase of Other Financial Assets at Amortized Cost
(2017 and 2016: Financial Assets Classified as Loans and
Receivables)
Proceeds from Sales of Other Financial Assets at Amortized Cost
(2017 and 2016: Financial Assets Classified as Loans and
Receivables)
Purchase of Property, Plant and Equipment
Proceeds from Disposals of Property, Plant and Equipment
Purchase of Intangible Assets
Purchase of Financial Assets at Fair Value through Other
Comprehensive Income
Interest Received
Net Cash Provided by/(Used in) Investing Activities
FINANCING AC TIVITIES:
Repurchase of Treasury Stock, Net of Bank Fees
Proceeds of Share Issuance
Cost of Share Issuance
Proceeds in Connection with Convertible Bonds Granted
to Related Parties
Outflows in Connection with 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
Note
2018
2017
2016
5.2
(84,511,324)
(56,406,580)
(166,923,795)
5.2
5.2
126,388,925
0
33,231,500
6,500,000
167,873,152
25,770,000
5.2
(366,810,000)
(108,000,000)
(256,499,997)
5.2
5.6
5.7
5.8
6.5
6.5
7.2
149,980,211
(1,820,749)
28,444
(644,575)
170,498,593
(1,317,058)
84
(11,831,789)
149,894,769
(2,502,286)
5,000
(411,204)
(9,458)
136,124
0
0
257,752
2,008,325
(177,262,402)
32,932,502
(80,786,036)
0
193,613,868
(15,038,362)
0
0
(15,525)
(2,181,963)
115,371,872
(2,778,652)
1,020,849
8,189,345
0
0
(134,269)
179,462,086
(59,463)
(31,129,293)
76,589,129
45,459,836
0
0
(6,707)
(1,819)
8,173,820
110,402,731
0
2,660,467
73,928,661
76,589,129
0
(16,999,013)
90,927,673
73,928,661
The notes are an integral part of these consolidated financial statements.
F inancial Statements
124
Notes
Notes
1 General Information
BUSINE SS AC T IVI T IE S AND T HE COMP ANY
MorphoSys AG (“the Company” or “MorphoSys”) develops and applies
technologies for generating therapeutic antibodies. The Company has
a broad proprietary portfolio of compounds and a broad pipeline of
compounds developed with partners from the pharmaceutical and
biotechnology industry. MorphoSys was founded as a German limited
liability company in July 1992. In June 1998, MorphoSys became a
German stock corporation. In March 1999, the Company completed its
initial public offering on Germany’s “Neuer Markt”: the segment of the
Deutsche Börse at that time designated for high-growth companies. On
January 15, 2003, MorphoSys AG was admitted to the Prime Standard
segment of the Frankfurt Stock Exchange. On April 18, 2018, MorphoSys
completed an IPO on the Nasdaq Global Market through the issue of
American Depositary Shares (ADS). MorphoSys AG’s registered office
is located in Planegg (district of Munich), and the registered business
address is Semmelweisstraße 7, 82152 Planegg, Germany. The Com-
pany is registered in the Commercial Register B of the District Court of
Munich under the number HRB 121023.
2 Summary of Significant Accounting
Policies
2.1
BASI S OF AND CHANGE S IN ACCOUN T ING S TANDARD S
2 .1.1 BASIS OF APPLICATION
These consolidated financial statements were prepared in accordance
with the International Financial Reporting Standards (“IFRS”), taking
into account the recommendations of the International Financial Re-
porting Standards Interpretations Committee (IFRS IC). We have applied
all standards and interpretations that were in force as of December 31,
2018 and adopted by the European Union (EU). As of December 31, 2018,
there were no standards or interpretations that affected our consoli-
dated financial statements for the years ended December 31, 2018 and
2017 that were in effect but not yet endorsed into European law. As a
result, our consolidated financial statements comply with both the
IFRSs published by the International Accounting Standards Board
(IASB) and those adopted by the EU. These consolidated financial state-
ments also take into account the supplementary provisions under com-
mercial law, which must be applied in accordance with Section 315e (1)
of the German Commercial Code (Handelsgesetzbuch – HGB).
These consolidated financial statements as of December 31, 2018 and
2017 and for each of the years in the three years period ended Decem-
ber 31, 2018, comprise MorphoSys AG and its subsidiaries (collectively
referred to as the “MorphoSys Group” or the “Group”).
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 consolidated 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 annual financial statements of the foreign Group companies are
prepared in their respective functional currencies and converted into
the euro prior to their consolidation. The consolidated financial state-
ments were prepared in euros.
The financial statements are prepared on the basis of historical cost,
with the exception of derivative financial instruments and financial
assets at fair value, which are recognized at their respective fair value.
All figures in this report have been rounded to the nearest euro, thou-
sand euros or million euros.
The line item “cost of sales” in profit or loss was first introduced in the
third quarter of 2018 and includes the expenses related to the provi-
sion of services for the transfer of projects to customers. The rationale
for introducing this item is the generally increasing significance of
this item in the course of the Group’s planned business development.
In 2017 and 2016, there were no material comparable transactions to
be reported under this item.
Since January 1, 2018, the Group has reported the line item “selling
expenses” separately under “operating expenses” in profit or loss. The
reason for introducing this new line item and the concomitant changes
to the presentation of existing items is the increasing importance of
marketing expenses in connection with the preparations planned for
the commercialization of MOR208. To ensure comparability of the in-
formation, the previous year’s figures have been adjusted accordingly.
The disclosure of selling expenses resulted in a change in the record-
ing of research and development and general and administrative ex-
penses in 2017, which reduced these items in 2017 by € 3.5 million and
€ 1.3 million and in 2016 by € 1.7 million and € 0.7 million, respectively.
The corresponding amounts are now reported in “selling expenses”.
Unless stated otherwise, the accounting policies set out below have
been applied consistently to all periods presented in these consoli-
dated financial statements.
Notes
F inancial Statements
125
2 .1.2 CHANGES IN AC C OUNTING P OLICIES AND DISCLOSURES
The accounting principles applied generally correspond to the policies
used in the prior year.
N E W A N D R E V I S ED STA N DA R DS A N D I N T ER P R E TAT I O N S A P P L I ED F O R
T H E FI RST T I M E I N T H E FI N A N C I A L Y E A R
Standard/Interpretation
IFRS 9
IFRS 15 and IFRS 15 (A)
Instruments
Financial Revenue from Contracts with Customers
Classification and Measurement of Share-based Payment
Transactions
Applying IFRS 9 ‘Financial Instruments’ with IFRS 4 ‘Insurance
Contracts’
Revenue from Contracts with Customers
Transfers of Investment Property
Foreign Currency Transactions and Advance Consideration
Annual Improvements to IFRS Standards 2014 – 2016 Cycle
IFRS 2 (A)
IFRS 4 (A)
IFRS 15 (C)
IAS 40 (A)
IFRIC 22
(A) Amendments
(C) Clarifications
Mandatory
Application for
financial years
starting on
01/01/2018
01/01/2018
01/01/2018
01/01/2018
01/01/2018
01/01/2018
01/01/2018
01/01/2018
Adopted by the
European Union
Impact on
MorphoSys
yes
yes
yes
yes
yes
yes
yes
yes
yes
yes
yes
none
yes
none
none
none
The impact of the amendments to IFRS 2 on the consolidated financial
statements is deemed not to be material.
I FRS 9 – FI N A N C I A L I N ST RU M EN TS
As of January 1, 2018, the Group has been applying the new standard
for financial instruments, IFRS 9. In this context, the exception granted
by IFRS 9 Section 7.2.15 is applied for the transitional provisions for
classification and measurement according to which the adjustment
of prior year figures is not required. Financial instruments were
accounted for in accordance with IAS 39 in fiscal years 2017 and
2016. The Group applied the provisions of IAS 39 on the classification,
recognition, measurement and derecognition of financial instruments.
As of January 1, 2018, financial instruments, namely money market
funds, previously reported in accordance with IAS 39 until Decem-
ber 31, 2017, in the balance sheet item “available-for-sale financial as-
sets” are now classified as “financial assets at fair value, with changes
recognized in profit or loss” in accordance with IFRS 9. These items do
not meet the IFRS 9 criteria for classification at amortized cost, be-
cause their cash flows do not represent solely payments of principal
and interest.
Financial instruments, namely term deposits with fixed and variable
interest rates as well as corporate bonds, previously classified in accor-
dance with IAS 39 as “financial assets classified as loans and receiv-
ables” until December 31, 2017, are now presented in the balance sheet
item “other financial assets at amortized cost” in accordance with
IFRS 9. At the date of initial application the Group’s business model is
to hold these financial instruments for collection of contractual cash
flows, and the cash flows represent solely payments of principal and
interest on the principal amount.
F inancial Statements
126
Notes
Available-for-
sale Financial
Assets
Financial As-
sets at Fair
Value through
Profit or Loss
Financial As-
sets classified
as Loans and
Receivables
Other Financial
Assets at
Amortized Cost
86,538
(86,538)
0
0
0
0
149,059
86,538
0
0
86,538
0
(149,059)
0
0
0
0
149,059
(136)
148,923
in 000’ €
Balance as of December 31, 2017
Reclassifications of “Available-for-sale Financial Assets” to “Financial Assets
at Fair Value through Profit or Loss”
Reclassifications of “Financial Assets classified as Loans and Receivables”
to “Other Financial Assets at Amortized Cost”
Impairment
Balance as of January 1, 2018
As of January 1, 2018, there was no difference between the previous
carrying amounts of financial instruments in accordance with IAS 39
and the carrying amounts in accordance with IFRS 9. As a result, no
change in value has been recognized in accumulated deficit as of Janu-
ary 1, 2018. For financial instruments classified as “at amortized cost”,
impairment losses for the expected twelve-month loss were recog-
nized in accumulated deficit as of January 1, 2018. For financial instru-
ments previously classified as “available-for-sale financial assets”, all
unrealized gains and losses recognized in the revaluation reserve as
of December 31, 2017 were reclassified to accumulated deficit as of
January 1, 2018, as these financial instruments are now classified as
“financial assets at fair value, with changes recognized in profit or
loss”. No reclassification adjustment was required to be made to other
financial assets at amortized cost under IFRS 9 compared to the appli-
cation of IAS 39.
in 000’ €
Revaluation Reserve
Accumulated Deficit
Balance as of December 31, 2017
Reclassifications of “Available-for-sale Financial Assets” to “Financial Assets
at Fair Value through Profit or Loss”
Balance as of January 1, 2018
(105)
105
0
0
(105)
(105)
The group recognized impairments on financial instruments in accor-
dance with the incurred loss model of IAS 39 until December 31, 2017,
by recognizing an allowance once objective evidence of impairment
occurred. On January 1, 2018, an expected twelve-month loss for finan-
cial instruments, namely for the cash and cash equivalents as well as
the term deposits, amounting to € 0.1 million, was recognized as
strictly required by IFRS 9. All of these debt investments at amortized
cost are considered to have a low credit risk, and the risk provision
recognized was therefore limited to twelve-month expected losses. For
accounts receivable, the simplified impairment model was applied,
which requires expected lifetime losses to be recognized. This resulted
in a risk provision of € 0.1 million as of January 1, 2018.
Notes
F inancial Statements
127
Impair-
ment
IAS 39
General Impairment Model
Simplified Impairment
Model
Accumu-
lated
Deficit
in 000’ €
Stage 1
Stage 2
Stage 3
Stage 2
Stage 3
Balance as of December 31, 2017
Other Financial Assets at Amortized Cost
Accounts Receivable
Balance as of January 1, 2018
0
0
0
0
0
(136)
0
(136)
0
0
0
0
0
0
0
0
0
0
(112)
(112)
0
0
0
0
0
(136)
(112)
(248)
MorphoSys did not apply hedge accounting under IAS 39 as of De-
cember 31, 2017, nor during the year 2018, therefore the first time
application of IFRS 9 has no impact on the accounting of hedging rela-
tionships.
I FRS 15 – R E V EN U E FRO M C O N T R ACTS W I T H C U STO M ERS
Since January 1, 2018, the Group has been applying IFRS 15, the new
accounting standard governing revenue recognition, using the modified
retrospective method. Using this method requires that the cumulative
effects of the first adoption of IFRS 15 to be recognized in accumulated
deficit as of January 1, 2018 without an adjustment of previous periods.
Hence, deferred revenue and accumulated deficit each decreased by
€ 1.1 million. This effect resulted from license payments which, under
IFRS 15, are to be realized at a specific point in time rather than over a
period of time, as was the case under IAS 18.
in 000’ €
Balance as of December 31, 2017
Application of IFRS 15
Balance as of January 1, 2018
Had revenues in the 2018 financial year continued to be recognized in
accordance with IAS 18, revenues would have been € 1.1 million higher.
This reflects the aforementioned effect as of January 1, 2018, which
would have been fully realized as revenue until December 31, 2018,
without the application of the new IFRS 15 standard. For the revenue
realized under IFRS 15 in the 2018 financial year, the accounting under
IAS 18 would have resulted in revenue recognition in the same amount
and at the same point in time.
Accounting principles for accounts receivable assets are presented in
Items 2.4.2*, 2.5.1* and 2.8.2* of these Notes.
*C R O S S - R E F E R E N C E to page 136 and page 140
Current Portion of
Contract Liability
(2017: Current Portion
of Deferred Revenue)
Contract Liability,
Net of Current Portion
(2017: Deferred Reve-
nue, Net of Current
Portion)
1,389
(1,041)
348
306
(94)
212
Accumulated
Deficit
0
1,135
1,135
As of January 1, 2018, contract liabilities as defined by IFRS 15 rather
than deferred revenue were recorded in the consolidated balance sheet.
The accounting policies that apply to contract liabilities are presented
in Items 2.9.3* and 2.9.4* of the Notes.
*C R O S S - R E F E R E N C E to page 142
N E W A N D R E V I S ED STA N DA R DS A N D I N T ER P R E TAT I O N S T H AT W ER E
N OT Y E T M A N DATO RY
The following new and revised standards and interpretations that 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. Only those
standards having a material impact are described in more detail. The
impact on the consolidated financial statements of the amendments to
IAS 1 and IAS 8 is not expected to be material and therefore these are
not explained separately. Standards with the remark “none” are unlikely
to have a material impact on the consolidated financial statements.
F inancial Statements
128
Notes
Standard / Interpretation
IFRS 3 (A)
IFRS 16
IFRS 17
IFRS 9 (A)
IAS 1 and IAS 8 (A)
IAS 19 (A)
IAS 28 (A)
IFRIC 23
Business Combinations
Leases
Insurance Contracts
Prepayment Features with Negative Compensation
Definition of Material
Plan Amendment, Curtailment or Settlement
Long-term Interests in Associates and Joint Ventures
Uncertainty over Income Tax Treatments
Amendments to References to the Conceptual Framework
in IFRS Standards
Annual Improvements to IFRS Standards 2015 – 2017 Cycle
Mandatory
Application for
financial years
starting on
Adopted by
the European
Union
Possible
Impact on
MorphoSys
01/01/2020
01/01/2019
01/01/2021
01/01/2019
01/01/2020
01/01/2019
01/01/2019
01/01/2019
01/01/2020
01/01/2019
no
yes
no
yes
no
no
yes
yes
no
no
none
yes
none
none
yes
none
none
none
none
none
(A) Amendments
I FRS 16 – L E AS ES
As of January 1, 2019, the new IFRS 16 standard for leases, replaces the
previous IAS 17 standard for leases, including the related interpreta-
tions (IFRIC 4, SIC-15, SIC-27). Currently, all leases are accounted for
as operating leases in accordance with IAS 17.
The Group reviewed IFRS 16 for its potential impact on existing lease
contracts and will apply the standard for the first time as of the date of
its mandatory adoption on January 1, 2019, using the modified retro-
spective method. The Group will not retroactively adjust comparative
amounts for the year prior to first-time adoption and will recognize
right-of-use assets in the amount of the lease liabilities in accordance
with IFRS 9.C8 (b)(ii) on January 1, 2019. The analysis of the first-time
application of IFRS 16 showed that IFRS 16 will have a material impact
on components of the consolidated financial statements and the pre-
sentation of net assets, financial position and results of operations.
For lessees, IFRS 16 introduces a uniform approach to the accounting
treatment of leases, whereby assets for the right of use and liabilities
for the payment obligations must be recognized in the balance sheet
for all leases. The right of use is initially measured at the present value
of the future lease payments plus the initial direct costs and subse-
quently amortized over the term of the lease. The lease liability is the
present value of the lease payments that are paid during the term of
the lease. For subsequent measurement, the carrying amount of the
lease liabilities is compounded with the interest rate or the incremental
borrowing rate underlying the lease and reduced by lease payments
made. For low value lease assets or short-term leases (less than
twelve months), the simplified method is applied. Under this method,
the lease payments are recognized as expenses over the term of the
lease.
The analysis of the first-time application of IFRS 16 has shown that, as
of January 1, 2019, the conversion is expected to result in the recogni-
tion of rights of us right-of-use assets and lease liabilities of around
€ 40.6 million in the balance sheet. In addition, current prepaid ex-
penses of € 0.3 million resulting from rent paid in advance and
non-current prepaid expenses of € 2.1 million are reclassified to the
capitalized right-of-use asset as of January 1, 2019. Furthermore, as of
January 1, 2019, current other liabilities of € 0.1 million and non-cur-
rent other liabilities of € 0.7 million resulting from deferred rent-free
periods are offset against the right-of-use asset. The resulting expan-
sion in total liabilities is expected to decrease the equity ratio. The
first-time adoption of IFRS 16 is not expected to have an impact on
equity as of January 1, 2019.
The lease expenses currently recognized in the statement of income
will be replaced by depreciation on assets and interest expenses from
the compounding of lease liabilities. This means that the related costs
will be presented in different line items in the statement of income and
may differ in their total amount compared to the application of IAS 17.
The first-time application of IFRS 16 is not expected to have a material
impact on Group EBIT.
Payments for the repayment of lease liabilities and payments relating
to the interest portion of the lease liability will be allocated to cash flow
from financing activities.
2.2 CONS OL IDAT ION PRINC IPL E S
Intercompany balances and transactions and any unrealized gains
arising from intercompany transactions are eliminated when prepar-
ing consolidated financial statements pursuant to IFRS 10.B86. Unreal-
ized losses are eliminated in the same manner as unrealized gains.
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.
Notes
F inancial Statements
129
2 .2 .1 C ONSOLIDATE D C OMPANIES AND SC OPE OF C ONSOLIDATION
MorphoSys AG, as the ultimate parent company, is located in Planegg,
near Munich. MorphoSys AG has two wholly owned subsidiaries
(collectively referred to as the “MorphoSys Group” or the “Group”):
MorphoSys US Inc. (Princeton, New Jersey) and Lanthio Pharma B.V.
(Groningen, The Netherlands). Additionally, MorphoSys AG’s invest-
ment in Lanthio Pharma B.V. indirectly gives it 100 % ownership in
LanthioPep B.V. (Groningen, The Netherlands).
On July 2, 2018, MorphoSys AG established the wholly owned subsidi-
ary, MorphoSys US Inc., under Section 102 of the General Corporation
Law of the State of Delaware. Since its foundation, the company has
been fully included in the MorphoSys AG scope of consolidation.
Upon entry into the commercial register on June 28, 2018, and based
on the merger agreement dated May 17, 2018, Sloning BioTechnology
GmbH, as the transferring legal entity, was merged into MorphoSys AG,
as the acquiring legal entity, with retroactive effect from January 1, 2018.
The consolidated financial statements for the year ended December 31,
2018, were prepared and approved by the Management Board in its
meeting on March 13, 2019, by means of a resolution. The Management
Board members are Dr. Simon Moroney (Chief Executive Officer), Jens
Holstein (Chief Financial Officer), Dr. Markus Enzelberger (Chief Scien-
tific Officer) and Dr. Malte Peters (Chief Development Officer).
On March 13, 2019, the Management Board authorized the consoli-
dated financial statements for issue and passed it through to the Super-
visory Board for review and authorization.
2 .2 .2 C ONSOLIDATION ME THODS
The following Group subsidiaries are included in the scope of consoli-
dation as shown in the table below.
Company
Lanthio Pharma B.V.
LanthioPep B.V.
MorphoSys US Inc.
Purchase of
Shares/
Establishment
Included in
Basis of
Consolidation
since
May 2015
May 2015
July 2018
05/07/2015
05/07/2015
07/02/2018
These subsidiaries are fully consolidated because they are either
directly or indirectly wholly owned. MorphoSys controls these sub-
sidiaries because it possesses full power over the investees. Addition-
ally, MorphoSys is subject to risk exposure and has rights to variable
returns from its involvement 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
using the equity method as defined by IFRS 11 “Joint Arrangements”,
nor does it exercise a controlling influence as defined by IAS 28 “In-
vestments in Associates and Joint Ventures”.
Assets and liabilities of fully consolidated domestic and international
entities are recognized using Group-wide uniform accounting and val-
uation methods. The consolidation methods applied have not changed
from the previous year.
Receivables, liabilities, expenses and income among consolidated enti-
ties are eliminated in the consolidated financial statements.
2 .2 .3 BASIS 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
currencies. Transactions denominated in foreign currencies are trans-
lated at the exchange rates prevailing on the date of the transaction.
Any resulting translation differences are recognized in profit or loss.
On the reporting date, assets and liabilities are translated at the clos-
ing rate for the financial year. Any foreign exchange rate differences
derived from these translations are recognized in profit or loss. Any
other foreign exchange rate differences at the group level are recognized
in the “Other Comprehensive Income Reserve” (stockholders’ equity).
2.3
F INANC IAL INS T RUMEN T S AND F INANC IAL
RI SK MANAGEMEN T
2 .3.1 CRE DIT RISK AND LIQUIDIT Y RISK
Financial instruments in which the Group may have a concentration of
credit and liquidity risk are mainly cash and cash equivalents, finan-
cial assets at fair value, with changes recognized in profit or loss, other
financial assets at amortized cost, derivative financial instruments
and receivables. The Group’s cash and cash equivalents are mainly
denominated in euros. Financial assets at fair value, with changes rec-
ognized in profit or loss and other financial assets at amortized cost
are high-quality assets. Cash, cash equivalents, financial assets at fair
value, with changes recognized in profit or loss and other financial
assets at amortized cost are generally held at numerous reputable
financial institutions. With respect to its investments, the Group con-
tinuously monitors the financial institutions that are its counterparties
to the financial instruments, as well as their creditworthiness, and
does not anticipate any risk of non-performance.
The changes in impairment losses for credit risks required to be recog-
nized under IFRS 9 on the financial year's profit or loss in the line item
“impairment losses on financial assets” (see Item 2.4* of the Notes)
were as follows. Negative values represent additions and positive val-
ues represent reversals of this risk provision. No utilization of impair-
ments was recognized in 2018. The increase of this risk provision
resulted from a higher volume of financial assets at amortized cost due
to the cash raised in connection with the IPO on the Nasdaq and higher
premiums on counterparties’ credit default swaps compared with Jan-
uary 1, 2018.
*C R O S S - R E F E R E N C E to page 136
F inancial Statements
130
Notes
General Impairment Model
Simplified Impairment Model
Total
in 000’ €
Stage 1
Stage 2
Stage 3
Stage 2
Stage 3
Balance as of January 1, 2018
Unused Amounts Reversed
Increase in Impairment Losses for
Credit Risks recognized in Profit or
Loss during the Year
Change between Impairment Stages
Amounts written off during the Year
as uncollectible
Balance as of December 31, 2018
(136)
0
(570)
41
0
(665)
0
0
(465)
(41)
0
(506)
0
0
0
0
0
0
(112)
112
(90)
0
0
(90)
0
0
0
0
0
0
(248)
112
(1,125)
0
0
(1,261)
The Group recognizes impairment losses for credit risks on financial
assets as of December 31, 2018 as follows.
Balance Sheet Item
Cash and Cash Equivalents
Other Financial Assets at
Amortized Cost
Accounts Receivable
Internal Credit
Rating
Basis for Rec-
ognition of Ex-
pected Credit
Loss Provision
Gross Carrying
Amount
(in 000’ €)
Impairment
(in 000’ €)
Carrying
Amount
(in 000’ €)
Average Im-
pairment Rate
Expected
Twelve-Month
Loss
Expected
Twelve-Month
Loss
low
low
medium
Lifetime Expected
Credit Losses
Lifetime Expected
Credit Losses
low
43,165
(16)
43,149
0.0 %
275,805
93,102
17,823
(649)
(506)
(90)
275,156
92,596
17,733
0.2 %
0.5 %
0.5 %
The Group is also exposed to credit risk from debt instruments that are
measured at fair value in profit or loss. As of December 31, 2018, the
maximum credit risk corresponded to the carrying amounts of these
investments amounting to € 44.6 million.
One of the Group’s policies requires that all customers who wish to
transact business on credit undergo a credit assessment based on ex-
ternal ratings. Nevertheless, the Group’s revenue and accounts receiv-
able are still subject to credit risk from customer concentration. The
Group’s most significant single customer accounted for € 5.9 million
of accounts receivables as of December 31, 2018 (December 31, 2017:
€ 5.1 million) or 33 % of the Group’s total accounts receivable at the end
of 2018. The Group’s top three single customers accounted for of 65 %,
25 % and 5 % of the total revenue in 2018. On December 31, 2017, one
customer had accounted for 45 % of the Group’s accounts receivable,
and the top three customers had individually accounted for 55 %, 25 %
and 10 % of the Group’s revenue in 2017. In 2016, the top three cus-
tomers had individually accounted for 85 %, 5 % and 5 % of the Group’s
revenue. The carrying amounts of financial assets represented the
maximum credit risk.
The table below shows accounts receivables by region as of the report-
ing date.
in €
12/31/2018
12/31/2017
Europe and Asia
USA and Canada
Other
Impairment
TOTAL
13,176,523
4,646,410
0
(90,000)
17,732,933
8,838,884
2,395,424
0
0
11,234,308
The following table shows the aging of accounts receivable as of the
reporting date. The loss rate for accounts receivable is valued at 0.5 %
as of December 31, 2018.
Notes
in €; due since
F inancial Statements
131
12/31/2018
0 – 30 days
12/31/2018
30 – 60 days
12/31/2018
60+ days
12/31/2018
Total
Accounts Receivable
Impairment
Accounts Receivable, Net of Allowance for Impairment
17,822,933
(90,000)
17,732,933
0
0
0
0
0
0
17,822,933
(90,000)
17,732,933
in €; due since
12/31/2017
0 – 30 days
12/31/2017
30 – 60 days
12/31/2017
60+ days
12/31/2017
Total
Accounts Receivable
Write-off
Accounts Receivable, Net of Allowance for Impairment
11,234,308
0
11,234,308
0
0
0
0
0
0
11,234,308
0
11,234,308
On December 31, 2018 and December 31, 2017, the Group’s exposure to
credit risk from derivative financial instruments was assessed as low.
The maximum credit risk (is equal to carrying amount) for rent de-
posits on the reporting date amounted to € 0.7 million (December 31,
2017: € 1.1 million).
The following table shows the maturities of accounts payable as of the
reporting date.
in €; due in
Trade Accounts Payable
Convertible Bonds due to Related Parties
in €; due in
Trade Accounts Payable
Convertible Bonds due to Related Parties
12/31/2018
Between One
and Twelve
Months
12/31/2018
More than
12 Months
12/31/2018
Total
7,215,127
71,517
0
0
7,215,127
71,517
12/31/2017
Between One
and Twelve
Months
12/31/2017
More than
12 Months
12/31/2017
Total
4,621,918
87,785
0
0
4,621,918
87,785
Financial assets and financial liabilities were not netted as of Decem-
ber 31, 2018. There is no current legal right to offset amounts recog-
nized against each other, to settle on a net basis or to settle an associ-
ated liability simultaneously with the realisation of an asset. There
were no financial instruments pledged as collateral as of December 31,
2018. Under existing framework netting agreements, there was no net-
ting potential as of December 31, 2018.
C U R R EN CY R I S K
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 exchange rates to minimize currency risk and addresses this
risk by using derivative financial instruments.
2 .3.2 MARKE T RISK
Market risk represents the risk that changes in market prices, such as
foreign exchange rates, interest rates or equity prices, will affect the
Group’s results of operations or the value of the financial instruments
held. The Group is exposed to both currency and interest rate risks.
Under the Group’s hedging policy, highly probable cash flows and defi-
nite foreign currency receivables collectible within a twelve-month
period are tested to determine if they should be hedged. MorphoSys
had begun using foreign currency options and forwards to hedge its
foreign exchange risk against US dollar receivables in 2003. For deriv-
atives with a positive fair value, unrealized gains are reported in other
receivables and for derivatives with a negative fair value, unrealized
losses are reported in other liabilities.
F inancial Statements
132
Notes
As of December 31, 2018, there were nine unsettled forward rate
agreements with terms ranging from one month to nine months (De-
cember 31, 2017: twelve unsettled forward rate agreements; Decem-
ber 31, 2016: ten unsettled forward rate agreements). The unrealized
gross gains from these agreements amounted to € 0.1 million as of
December 31, 2018, and were reported in the finance result (Decem-
ber 31, 2017: € 0.3 million unrealized gross loss; December 31, 2016:
less than € 0.1 million unrealized gross gain).
The table below shows the Group’s exposure to foreign currency risk
based on the items’ carrying amounts.
as of December 31, 2018; in €
EUR
US$
Other
Impairment
Total
Cash and Cash Equivalents
Financial Assets at Fair Value through Profit or Loss
Other Financial Assets at Amortized Cost
Accounts Receivable
Restricted Cash (included in Other Current Assets)
Accounts Payable and Accruals
TOTAL
38,732,565
34,971,116
365,823,783
17,570,035
772,425
(43,638,268)
414,231,656
6,743,271
9,610,148
0
252,898
12,901
(1,122,347)
15,496,871
0
0
0
0
0
0
0
(16,000)
0
(1,152,000)
(90,000)
(3,000)
0
(1,261,000)
45,459,836
44,581,264
364,671,783
17,732,933
782,326
(44,760,615)
428,467,527
as of December 31, 2017; in €
EUR
US$
Other
Impairment
Total
Cash and Cash Equivalents
Available-for-sale Financial Assets
Financial Assets classified as Loans and Receivables
Accounts Receivable
Restricted Cash (included in Other Current Assets)
Accounts Payable and Accruals
TOTAL
74,289,250
86,538,195
149,059,254
11,199,652
1,132,782
(44,655,328)
277,563,805
2,299,879
0
0
34,656
0
(156,390)
2,178,145
0
0
0
0
0
0
0
0
0
0
0
0
0
0
76,589,129
86,538,195
149,059,254
11,234,308
1,132,782
(44,811,718)
279,741,950
Various foreign exchange rates and their impact on assets and liabili-
ties were simulated in an in-depth sensitivity analysis to determine
the effects on profit or loss. A 10 % increase in the euro versus the US
dollar as of December 31, 2018, would have reduced the Group’s in-
come by € 1.4 million. A 10 % decline in the euro versus the US dollar
would have increased the Group’s income by € 1.7 million.
A 10 % increase in the euro versus the US dollar as of December 31,
2017, would have reduced the Group’s income by € 0.2 million. A 10 %
decline in the euro versus the US dollar would have increased the
Group’s income by € 0.2 million.
A 10 % increase in the euro versus the US dollar as of December 31,
2016, would have reduced the Group’s income by less than € 0.1 mil-
lion. A 10 % decline in the euro versus the US dollar would have in-
creased the Group’s income by less than € 0.1 million.
I N T ER EST R AT E R I S K
The Group’s risk exposure to changes in interest rates mainly relates
to fixed term deposits and corporate bonds. Changes in the general
level of interest rates may lead to an increase or decrease in the fair
value of these securities. The Group’s investment focus places the
safety of an investment ahead of its return. Interest rate risks are
limited because all securities can be liquidated within a maximum of
two years and due to the partially fixed interest commitment during
the term.
Different interest rates and their effects on existing investments with
variable interest rates were simulated in a detailed sensitivity analysis
in order to determine the effects on profit or loss. An increase of the
variable interest rate by 0.5 % would have increased the Group’s result
by € 0.4 million as of December 31, 2018 (December 31, 2017: € 0.6 mil-
lion; December 31, 2016: € 0.3 million). A decrease of the variable
Notes
F inancial Statements
133
interest rate by 0.5 % would have reduced the Group’s result by
€ 0.1 million as of December 31, 2018 (December 31, 2017: € 0.4 mil-
lion; December 31, 2016: € 0.5 million). Changes in the interest rate
had no material impact on equity as of December 31, 2017 or Decem-
ber 31, 2016.
The Group is not subject to significant interest rate risks from the
liabilities currently reported in the balance sheet.
2 .3.3 FAIR VALUE HIE R ARCHY AND ME ASURE ME NT PRO CE DURES
The IFRS 13 “Fair Value Measurement” guidelines must always be ap-
plied when measurement at fair value is required or permitted or dis-
closures 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 be-
tween independent market participants or the price to be paid for the
transfer of a liability (disposal or exit price). Accordingly, the fair value
of a liability reflects the default risk (i.e., own credit risk). Measure-
ment at fair value requires that the sale of the asset or the transfer of
the liability takes place on the principal market or, if no such principal
market is available, on the most advantageous 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
independent 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
instruments, the use of bid prices for assets and ask prices for liabili-
ties is permitted but not required if those prices best reflect the fair
value in the respective circumstances. For simplification, mean rates
are also permitted. Thus, IFRS 13 not only applies to financial assets,
but all assets and liabilities.
MorphoSys applies the following hierarchy in determining and disclos-
ing the fair value of financial instruments:
Level 1:
Quoted (unadjusted) prices in active markets for identical
assets or liabilities to which the Company has access.
Inputs other than quoted prices included within Level 1
that are observable for assets or liabilities, either directly
(i.e., as prices) or indirectly (i.e., derived from prices).
Inputs for 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 other
financial assets at amortized cost, as well as accounts receivable and
accounts payable, approximate their fair value because of their short-
term maturities.
H I ER A RC H Y L E 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 regularly accessible and prices reflect current and regu-
larly 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 Hierarchy Level 1 (see
Item 5.2* of the Notes).
*C R O S S - R E F E R E N C E to page 152
H I ER A RC H Y L E V EL 2 A N D 3
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 maxi-
mum use of market data and relies as little as possible on entity-spe-
cific inputs. If all significant inputs required for measuring fair value
by using valuation methods are observable, the instrument is allocated
to Hierarchy Level 2. If significant inputs are not based on observable
market data, the instrument is allocated to Hierarchy Level 3.
Hierarchy Level 2 contains forward exchange contracts to hedge ex-
change rate fluctuations, term deposits and restricted cash. Future
cash flows for these forward exchange contracts are determined based
on forward exchange rate curves. The fair value of these instruments
corresponds to their discounted cash flows. The fair value of the term
deposits and restricted cash is determined by discounting the ex-
pected cash flows at market interest rates.
Financial assets belonging to Hierarchy Level 3 are shown in Item 5.7*
of the Notes to the Consolidated Financial Statements. No financial
liabilities were assigned to Hierarchy Level 3, and there were no Hier-
archy Level 3 balance sheet items measured at fair value in 2017.
*C R O S S - R E F E R E N C E to page 155
There were no transfers from one fair value hierarchy level to another
in 2018 or 2017.
The table below shows the fair values of financial assets and liabilities
and the carrying amounts presented in the consolidated balance sheet.
F inancial Statements
134
Notes
December 31, 2018 (in 000’ €)
Cash and Cash Equivalents
Financial Assets at Fair Value through Profit or Loss
Other Financial Assets at Amortized Cost
Accounts Receivable
Other Receivables
thereof Financial Assets
thereof Forward Exchange Contracts used for Hedging
Current Assets
Other Financial Assets at Amortized Cost, Net of Current Portion
Shares at Fair Value through Other Comprehensive Income
Prepaid Expenses and Other Assets, Net of Current Portion
thereof Non-Financial Assets
thereof Restricted Cash
Non-current Assets
TOTAL
Accounts Payable and Accruals
Current Liabilities
Convertible Bonds - Liability Component
Non-current Liabilities
TOTAL
Note
Hierarchy
Level
Not classified
into a
Measurement
Category
Financial Assets
at Amortized
Cost
Financial Assets
at Fair Value
Financial Assets
at Fair Value
(Through Other
Financial
Financial
(Through Profit
Comprehensive
Liabilities at
Liabilities at
Total Carrying
or Loss)
Income)
Amortized Cost
Fair Value
Amount
Fair value
5.1
5.2
5.2
5.3
5.4
5.2
5.8
5.9
6.1
*
1
*
*
*
2
2
3
n/a
2
*
2
45,460
0
268,923
17,733
81
0
332,197
95,749
0
711
96,460
428,657
0
0
0
0
0
2,271
2,271
2,271
* Declaration waived in accordance with IFRS 7.29 (a). For these instruments the carrying amount is a reasonable approximation of fair value.
December 31, 2017 (in 000’ €)
Cash and Cash Equivalents
Available-for-sale Financial Assets
Financial Assets classified as Loans and Receivables
Accounts Receivable
Other Receivables
Prepaid Expenses and Other Current Assets
thereof Non-Financial Assets
thereof Restricted Cash
Current Assets
Prepaid Expenses and Other Assets, Net of Current Portion
thereof Non-Financial Assets
thereof Restricted Cash
Non-current Assets
TOTAL
Accounts Payable and Accruals
Other Provisions
thereof Non-Financial Liabilities
thereof Forward Exchange Contracts used for Hedging
Current Liabilities
Convertible Bonds - Liability Component
Non-current Liabilities
TOTAL
Note
Hierarchy
Level
Not classified
into a
Measurement
Category
Loans and
Receivables
Available-
Other Financial
Total Carrying
for-sale
Liabilities
Amount
5.1
5.2
5.2
5.3
5.4
5.5
5.9
6.1
*
1
*
*
*
n/a
*
n/a
2
*
n/a
2
2
76,589
0
149,059
11,234
85
432
237,399
701
701
238,100
0
0
0
0
0
0
15,788
15,788
2,643
2,643
18,431
(886)
(886)
(886)
* Declaration waived in line with IFRS 7.29 (a). For these instruments carrying amount is a reasonable approximation of fair value.
45,460
44,581
268,923
17,733
147
81
66
376,844
95,749
232
2,982
2,271
711
98,963
475,807
(44,761)
(44,761)
(72)
(72)
(44,833)
44,581
66
95,749
*
*
*
*
0
*
n/a
701
(72)
44,581
66
44,647
44,647
86,538
86,538
86,538
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
232
232
232
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(44,761)
(44,761)
(72)
(72)
(44,833)
76,589
86,538
149,059
11,234
85
16,220
15,788
432
339,725
3,344
2,643
701
3,344
343,069
(44,812)
(1,186)
(886)
(300)
(45,998)
(88)
(88)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
*
*
*
*
Fair value
86,538
n/a
*
n/a
701
*
n/a
(300)
(88)
(44,812)
(300)
(45,112)
(88)
(88)
(45,200)
(46,086)
December 31, 2018 (in 000’ €)
Note
Level
Category
Cost
Not classified
Hierarchy
Measurement
at Amortized
into a
Financial Assets
Financial Assets
at Fair Value
(Through Profit
or Loss)
Financial Assets
at Fair Value
(Through Other
Comprehensive
Income)
Financial
Liabilities at
Amortized Cost
Financial
Liabilities at
Fair Value
Total Carrying
Amount
Fair value
Notes
F inancial Statements
135
* Declaration waived in accordance with IFRS 7.29 (a). For these instruments the carrying amount is a reasonable approximation of fair value.
Note
Hierarchy
Level
Not classified
into a
Measurement
Category
Loans and
Receivables
Cash and Cash Equivalents
Financial Assets at Fair Value through Profit or Loss
Other Financial Assets at Amortized Cost
Accounts Receivable
Other Receivables
thereof Financial Assets
Current Assets
thereof Forward Exchange Contracts used for Hedging
Other Financial Assets at Amortized Cost, Net of Current Portion
Shares at Fair Value through Other Comprehensive Income
Prepaid Expenses and Other Assets, Net of Current Portion
thereof Non-Financial Assets
thereof Restricted Cash
Non-current Assets
TOTAL
Accounts Payable and Accruals
Current Liabilities
Convertible Bonds - Liability Component
Non-current Liabilities
TOTAL
December 31, 2017 (in 000’ €)
Cash and Cash Equivalents
Available-for-sale Financial Assets
Financial Assets classified as Loans and Receivables
Accounts Receivable
Other Receivables
Prepaid Expenses and Other Current Assets
Prepaid Expenses and Other Assets, Net of Current Portion
thereof Non-Financial Assets
thereof Restricted Cash
Current Assets
thereof Non-Financial Assets
thereof Restricted Cash
Non-current Assets
TOTAL
Accounts Payable and Accruals
Other Provisions
thereof Non-Financial Liabilities
thereof Forward Exchange Contracts used for Hedging
Current Liabilities
Convertible Bonds - Liability Component
Non-current Liabilities
TOTAL
5.1
5.2
5.2
5.3
5.4
5.2
5.8
5.9
6.1
5.1
5.2
5.2
5.3
5.4
5.5
5.9
6.1
*
1
*
*
*
2
2
3
*
2
*
1
*
*
*
n/a
*
n/a
2
n/a
*
2
2
n/a
2
2,271
2,271
2,271
15,788
15,788
2,643
2,643
18,431
(886)
(886)
(886)
45,460
0
268,923
17,733
81
0
0
332,197
95,749
711
96,460
428,657
76,589
0
149,059
11,234
85
432
237,399
701
701
238,100
0
0
0
0
0
0
0
0
0
0
0
* Declaration waived in line with IFRS 7.29 (a). For these instruments carrying amount is a reasonable approximation of fair value.
0
44,581
0
0
66
44,647
0
0
0
0
44,647
0
0
0
0
0
0
0
0
0
0
0
0
232
0
232
232
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(44,761)
(44,761)
(72)
(72)
(44,833)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
45,460
44,581
268,923
17,733
147
81
66
376,844
95,749
232
2,982
2,271
711
98,963
475,807
(44,761)
(44,761)
(72)
(72)
(44,833)
*
44,581
*
*
*
66
95,749
0
n/a
701
*
(72)
Available-
for-sale
Other Financial
Liabilities
Total Carrying
Amount
0
86,538
0
0
0
0
86,538
0
0
86,538
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(44,812)
(300)
(45,112)
(88)
(88)
(45,200)
76,589
86,538
149,059
11,234
85
16,220
15,788
432
339,725
3,344
2,643
701
3,344
343,069
(44,812)
(1,186)
(886)
(300)
(45,998)
(88)
(88)
(46,086)
Fair value
*
86,538
*
*
*
n/a
*
n/a
701
*
n/a
(300)
(88)
F inancial Statements
136
Notes
2.4
IMP AIRMEN T S
2 .4.1 FINANCIAL INSTRUME NTS
As of January 1, 2018, the Group assesses on a forward-looking basis
the expected credit losses associated with its debt instruments carried
at amortized cost, namely term deposits with fixed and variable inter-
est rates as well as corporate bonds. The impairment method applied
depends on whether there has been a significant increase in credit
risk. If, at the reporting date, the credit risk of a financial instrument
has not increased significantly since initial recognition, the Group
measures the loss allowance for that financial instrument at an amount
equal to twelve-month expected credit losses (Level 1). In case the
credit risk of a financial instrument has increased significantly since
initial recognition, the Group measures the loss allowance for that finan-
cial instrument at an amount equal to the lifetime expected credit
losses. The Group currently classifies an increase in credit risk on debt
instruments as significant if the premium on a counterparty credit
default swap exceeds 100 basis points at the reporting date (Leve 2). If
there is an objective indication of impairment, the interest received
must also be adjusted so that as of that date the interest is accrued on
the basis of the net carrying amount (carrying amount less risk provi-
sions) of the financial instrument (Level 3).
Objective evidence of a financial instrument’s impairment may arise
from material financial difficulties of the issuer or the borrower, a
breach of contract such as a default or delay in interest or principal
payments, an increased likelihood of insolvency or other remediation
process, or from the disappearance of an active market for a financial
asset due to financial difficulties.
Financial instruments are derecognized when it can be reasonably ex-
pected that they will not be recovered and when one of the objective
evidences occurs. Impairment of financial intruments is reported un-
der impairment losses on financial assets.
2 .4.2 RECE IVABLES
In the case of accounts receivable, the Group applies the simplified
approach permitted by IFRS 9, which requires expected lifetime losses
to be recognized from the initial recognition of the receivables (Leve 2).
In the case of insufficient reason to expect recovery, the expected loss
shall be calculated as the difference between the gross carrying
amount and the present value of the expected cash flows discounted at
the original effective interest rate (Level 3). An indicator that there is
insufficient reason to expect recovery includes a situation, among
others, when internal or external information indicates that the Group
will not fully receive the contractual amounts outstanding.
All accounts receivable were aggregated to measure the expected
credit losses as they all share the same credit risk characteristics. All
accounts receivable are currently due from customers in the same in-
dustry and are therefore exposed to the same credit risks. The impair-
ment is determined on the basis of the premium for an industry credit
default swap. In the event that accounts receivable cannot be grouped
together, they are measured individually.
Accounts receivable are derecognized when it can be reasonably ex-
pected that they will not be recovered. Impairment of accounts receiv-
able is reported under other expenses. If in subsequent periods amounts
are received that were previously impaired, these amounts are recog-
nized in other income.
2 .4.3 NON - FINANCIAL AS SE TS
The carrying amounts of the Group’s non-financial assets and invento-
ries are reviewed at each reporting date for any indication of impair-
ment. The non-financial asset’s recoverable amount and inventories’
net realizable value is estimated if such indication 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, or on an interim basis, if required. Impairment is recog-
nized if the carrying amount of an asset or the cash-generating unit
(CGU) exceeds its estimated recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value-
in-use 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 assess-
ments 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 goodwill are aggregated so that the level at
which impairment testing is performed reflects the lowest level at
which goodwill is monitored for internal reporting purposes. Goodwill
acquired in a business combination may be 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 impair-
ment as part of the impairment testing of the CGU that was allocated
the corporate asset.
Impairment losses are recognized in profit or loss. Goodwill impair-
ment 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 asset’s carrying amount does not exceed the carrying
amount net of depreciation or amortization that would have been deter-
mined if an impairment had not been recognized.
2.5 ADDI T IONAL INF ORMAT ION
2 .5.1 KE Y ESTIMATES AND AS SUMP TIONS
Estimates and judgments are continually evaluated and based on
historical 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
correspond to the actual results. The estimates and assumptions that
carry a significant risk of causing material adjustments to the carry-
ing amounts of assets and liabilities in the next financial year are
addressed below.
Notes
F inancial Statements
137
R E V EN U E
Revenues from milestones, royalties and contracts with multiple per-
formance obligations are subject to assumptions regarding probabili-
ties of occurrence and individual selling prices within the scope of the
accounting and measurement principles explained in Note 2.7.1*.
*C R O S S - R E F E R E N C E to page 137
FI N A N C I A L AS S E TS
Impairment losses on financial assets in the form of debt instruments
and accounts receivable are based on assumptions about credit risk.
The Group exercises discretion in making these assumptions and in
selecting the inputs to calculate the impairment based on past experi-
ence, current market conditions and forward-looking estimates at the
end of each reporting period.
I N - P RO C ES S R&D P RO G R A M S A N D G O O DW I L L
The Group performs an annual review to determine whether in-pro-
cess R&D programs or goodwill is subject to impairment in accordance
with the accounting policies discussed in Item 2.4.3*. The recoverable
amounts from in-process R&D programs and cash-generating units
have been determined using value-in-use calculations and are sub-
jected to a sensitivity analysis. These calculations require the use of
estimates (see Items 5.7.3* and 5.7.5* in the Notes).
*C R O S S - R E F E R E N C E to page 136 and page 156
I N C O M E TA X ES
The Group is subject to income taxes in a number of tax jurisdictions.
Due to the increasing complexity of tax laws and the corresponding
uncertainty regarding the legal interpretation by the fiscal authorities,
tax calculations are generally subject to an elevated amount of uncer-
tainty. To the extent necessary, possible tax risks are taken into account
in the form of provisions.
Deferred tax assets on tax loss carryforwards are recognized based on
the expected business performance of the relevant Group entity. For
details on tax loss carryforwards and any recognized deferred tax
assets, please refer to Item 4.4* in the Notes.
*C R O S S - R E F E R E N C E to page 148
2 .5.2 CAPITAL 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 capital market and to support
future business development. As of December 31, 2018, the equity ratio
was 90.6 % (December 31, 2017: 86.3 %; see also the following over-
view). The Group does not currently have any financial liabilities.
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 remu-
neration consisting of convertible bonds issued in 2013 and stock op-
tion plans (SOP) set up in 2017 and 2018. MorphoSys also established
Long-Term Incentive plans (LTI plan) in 2014, 2015, 2016, 2017 and
2018. These programs are based on the performance-related issue of
shares, or “performance shares”, which are granted when certain pre-
defined success criteria have been achieved and the vesting period has
expired (for more information, please refer to Item 7.3* in 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 163
in 000’ €
12/31/2018
12/31/2017
Stockholders’ Equity
In % of Total Capital
Total Liabilities
In % of Total Capital
TOTAL CAPITAL
488,373
90.6 %
50,391
9.4 %
538,764
358,671
86.3 %
56,727
13.7 %
415,398
2.6 USE OF IN T ERE S T RAT E S F OR MEASUREMEN T
The Group uses interest rates to measure fair value. When calculating
share-based payment, MorphoSys uses the interest rate on four-year
German government bonds on the date the share-based payment was
granted.
2.7 ACCOUN T ING P OL IC IE S APPL IED T O L INE I T EMS
OF PROF I T OR L O SS
2 .7.1 RE VE NUES AND RE VE NUE REC O GNITION
As of January 1, 2018, the Group has adopted IFRS 15, the new account-
ing standard governing revenue recognition, using the modified retro-
spective method.
The application of IFRS 15 requires a five-stage approach:
• Identification of the contract
• Identification of performance obligations
• Determination of the transaction price
• Allocation of the transaction price
• Revenue recognition
The Group’s revenues typically include license fees, milestone pay-
ments, service fees, and royalties.
L I C EN S E FEES A N D M I L ESTO N E PAY M EN TS
The Group recognizes revenues from license fees for intellectual prop-
erty (IP) both at a point in time and over a period of time. An assess-
ment needs to be made as to whether such a license represents a right
to use (at a point in time) or a right to access (over time). Revenue for a
right to use a license is recognized by the Group when the customer
can use the IP and benefit from it as well as when the license term be-
gins, e.g. for outlicensing of a drug candidate or technology without
any further obligations for the Group. A license is treated as a right to
access if the Group will undertake activities that significantly affect
the IP during the license term, and the customer is directly exposed to
any positive or negative effects of these activities, and these activities
do not result in the transfer of a good or service to the customer. Reve-
nues from right to access licenses are recognized linear over the
license term.
Milestone payments for research and development are contingent upon
occurrence of a future event and represent variable consideration. The
Group determines that at contract inception the most likely amount for
milestone payments is zero. The most likely amount method of estima-
tion is considered to be the most predictive for the outcome, since the
outcome is binary, such as achieving a certain success in clinical de-
velopment (or not). The Group will recognize milestone payments as
revenue when it is highly unlikely that there will be a material reversal
of cumulative revenue in future periods.
Sales-based milestone payments included in contracts for licenses of
IP are considered by the Group to be sales-based license fees because
they are solely determined by sales of an approved drug. Accordingly,
such milestones are recognized as revenue once sales of such drug
occur or later if the performance obligation has not been fulfilled.
F inancial Statements
138
Notes
S ERV I C E FEES
Service fees for the assignment of personnel in research and develop-
ment collaborations are recognized as revenues in the period the ser-
vices are provided. In case a Group company acts as agent, revenues
are recognized on a net basis.
ROYA LT I ES
With regard to royalties (income based on a percentage of sales of a
marketed product), the same revenue recognition principles apply as
for sales-based milestones as described above.
AG R EEM EN TS W I T H M U LT I P L E P ER F O R M A N C E O B L I G AT I O N S
A Group company may enter into agreements with multiple perfor-
mance obligations that include both licenses and services. In such
cases, it has to be assessed as to whether the license is distinct from
services (or other performance obligations) provided under the same
agreement. The transaction price is allocated to separate performance
obligations based on the relative stand-alone selling price of the perfor-
mance obligations in the agreement. The Group company estimates
stand-alone selling prices for non-individually sold goods and services
on the basis of comparable transactions with other customers. A resid-
ual approach is used as a method to estimate the stand-alone selling
price when the selling price for a good or service is highly variable or
uncertain.
P R I N C I P L E - AG EN T R EL AT I O N S H I P S
In agreements involving two or more independent parties that contrib-
ute to the provision of a specific good or service to a customer, a Group
company assesses as to whether it has promised to provide the specific
good or service itself (the company acting as a principal) or to arrange
for this specific good or service to be provided by another party (the
company acting as an agent). Depending on the result of this assess-
ment, the Group company records revenues on a gross (principal) or
net (agent) basis. A Group company is an agent and recognizes revenue
on a net basis if its obligation is to arrange for another party to provide
goods or services, i.e., the Group company does not control the speci-
fied good or service before it is transferred to the customer. Indicators
to assist a company in determining whether it does not control the
good or service before it is provided to a customer, and is therefore an
agent, include, but are not limited to, the following criteria:
• Another party is primarily responsible for fulfilling the contract.
• The company does not have inventory risk.
• The company does not have discretion in establishing the price.
No single indicator is determinative or weighted more heavily than other
indicators. However, some indicators may provide stronger evidence
than others, depending on the individual facts and circumstances. A
Group company’s control needs to be substantive, so obtaining legal title
of a good or service only momentarily before it is transferred to the cus-
tomer does not necessarily indicate that a Group company is a principal.
In general, the assessment whether a Group company is acting as a
principal or as an agent in a transaction requires significant judgement.
Based on the relevant facts and circumstances, the assessment of an
agreement may lead to the conclusion that the counterparty is a coop-
eration partner or partner rather than a customer, meaning the agree-
ment does not fall in the scope of IFRS 15 because the parties equally
share the risks of co-developing a drug and the future profits from the
marketing of the approved drug.
R E V EN U E R EC O G N I T I O N T H RO U G H D EC EM B ER 31, 2017
The group applied the revenue recognition principles of IAS 18 Reve-
nue through December 31, 2017.
The Group’s revenue included license fees, milestone payments and
service fees in 2017 and 2016. Under IAS 18.9, revenues were mea-
sured at fair value of the consideration received or receivable. In accor-
dance with IAS 18.20b, revenues were recognized only to the extent
that it was sufficiently probable that the Company will have received
the economic benefits associated with the transaction.
L I C EN S E FEES A N D M I L ESTO N E PAY M EN TS
Revenues related to non-refundable fees for providing access to tech-
nologies, fees for the use of technologies and license fees were recog-
nized immediately and in full, if all IAS 18.14 criteria were met. Specif-
ically, when significant risks and rewards of a license ownership have
transferred to the customer and a Group company does not retain any
continuing managerial involvement or effective control. In case these
criteria were not met, revenues were recognized on a straight-line ba-
sis over the period of the agreement unless a more appropriate method
of revenue recognition was available. The period of the agreement
usually corresponded to the contractually agreed term of the research
project or, in the case of contracts without an agreed project term, the
expected term of the collaboration. Revenues from milestone payments
were recognized upon achievement of certain contractual criteria.
S ERV I C E FEES
Service fees from research and development collaborations were rec-
ognized in the period the services were provided.
Discounts that were likely to be granted and whose amount could be
reliably determined were recognized as a reduction in revenue at the
time of revenue recognition. The timing of the transfer of risks and
rewards varied depending on the terms of the sales contract. In accor-
dance with IAS 18.21 and 18.25, revenue from multiple-component
contracts was recognized by allocating the total consideration to the
separately identifiable components based on their respective fair val-
ues and by applying IAS 18.20. The applicable revenue recognition
criteria were assessed separately for each component.
2 .7.2 OPE R ATING E XPE NSES
C OST O F SA L ES
Cost of sales is recognized as an expense in the period in which the
associated revenue accrues. This line item currently includes person-
nel expenses only.
R ES E A RC H A N D D E V ELO P M EN T
Research costs are expensed in the period in which they occur. Devel-
opment 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 ex-
pected future economic benefits, reliability of cost measurement) are
met and if the Group can provide proof under IAS 38.57.
This line item contains personnel expenses, consumables supplies,
other operating expenses, impairment charges, amortization and other
costs of intangible assets (additional information can be found under
Item 5.7* in the Notes), costs for external services and depreciation
and other costs for infrastructure.
*C R O S S - R E F E R E N C E to page 155
Notes
F inancial Statements
139
S EL L I N G
The item includes personnel expenses, consumables, operating costs,
amortization of intangible assets (software; further details in Item 5.7*
of the Notes), costs for external services, infrastructure costs and
depreciation.
*C R O S S - R E F E R E N C E to page 155
G EN ER A L A N D A D M I N I ST R AT I V E
This line item contains personnel expenses, consumable supplies,
other operating expenses, amortization of intangible assets (software;
additional information can be found under Item 5.7* in the Notes),
expenses for external services and depreciation and other costs for
infrastructure.
*C R O S S - R E F E R E N C E to page 155
P ERSO N N EL E X P EN S ES R ES U LT I N G FRO M STO C K O P T I O N S
The Group applies the provisions of IFRS 2 “Share-based Payment”,
which require the Group to spread compensation expenses from the
estimated fair values of share-based payments on the reporting date
over the period in which the beneficiaries provide the services which
triggered the granting of the share-based payments.
IFRS 2 “Share-based Payment” requires the consideration of the ef-
fects of share-based payments if the Group acquires goods or services
in exchange for shares or stock options (“settlement in equity instru-
ments”) 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 personnel expense resulting from the use of an
option pricing model in relation to share-based incentives for the Man-
agement Board and employees. Additional information can be found
under Items 7.1*, 7.2*, 7.3* and 7.4* in the Notes.
*C R O S S - R E F E R E N C E to page 161–167
O P ER AT I N G L E AS E PAY M EN TS
Payments made under operating leases are recognized in profit or loss
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 recog-
nized as an integral part of the net consideration agreed for the use of
the leased asset. The total amount of income from incentives is recog-
nized 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.
2 .7.3 OTHE R INC OME
In addition to government grants, other income primarily included
currency gains from operating activities and income related to the
Company’s canteen.
G OV ER N M EN T G R A N TS
Grants, not repayable, received from government agencies to fund spe-
cific research and development projects are recognized in profit or loss
in the separate line item “other income” to the extent that the related
expenses have already occurred. Under the terms of the grants, govern-
ment 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 or loss is limited to the corresponding costs.
When the repayment of cost subsidies depends on the success of the
development project, these cost subsidies are recognized as other lia-
bilities until success has been achieved. If the condition for repayment
is not met, then the grant is recognized under “other income”.
No payments were granted in the 2018, 2017 and 2016 financial year
that are required to be classified as investment subsidies.
2 .7.4 OTHE R E XPE NSES
The line item “other expenses” consisted mainly of currency losses
from the operating business.
2 .7.5 FINANCE INC OME AND FINANCE E XPE NSES
Gains and losses arising from changes in fair value, as well as interest
effects from the application of the effective interest method to financial
assets are recognized in profit or loss when incurred.
2 .7.6 INC OME TA X E XPE NSES/BE NE FIT
Income taxes consist of current and deferred taxes and are recognized
in profit or loss unless they relate to items recognized directly in equity.
Current taxes are the taxes expected to be payable on the year’s tax-
able income based on prevailing tax rates on the reporting date and
any adjustments to taxes payable in previous years.
The calculation of deferred taxes is based on the balance sheet liability
method that refers to the 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 assets’ 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 are offset against deferred tax liabilities if the
taxes are levied by the same taxation authority and the entity has a
legally enforceable right to set off current tax assets against current
tax liabilities.
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 reduced by the amount that the related tax benefit is no longer ex-
pected to be realized.
2 .7.7 E ARNING S PE R SHARE
The Group reports basic and diluted earnings per share under consid-
eration of IAS 33.41. Basic earnings per share is computed by dividing
the net profit or loss attributable to parent company shareholders by
the weighted-average number of ordinary 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 dilutive effects re-
sulting from stock options and convertible bonds granted to the Man-
agement Board and employees.
In 2018, 2017 and 2016, diluted earnings per share equaled basic earn-
ings per share. The effect of 120,214 potentially dilutive shares in 2018
(2017: 87,904 dilutive shares; 2016: 99,764 dilutive shares) resulting
from stock options and convertible bonds granted to the Management
Board, the Senior Management Group and employees of the Company
who are not members of the Senior Management Group, has been ex-
cluded from the diluted earnings per share because it would result in a
decrease in the loss per share and should therefore not be treated as
dilutive.
F inancial Statements
140
Notes
The 52,930 stock options not yet vested as of December 31, 2018 are not
included in the calculation of potentially dilutive shares, as they are
anti-dilutive for the 2018 fiscal year. These shares could possibly have
a dilutive effect in the future.
2.8 ACCOUN T ING P OL IC IE S APPL IED T O T HE ASSE T S OF T HE
BAL ANCE SHEE T
2 .8.1 LIQUIDIT Y
C L AS S I FI CAT I O N
As of January 1, 2018, the Group classifies its financial assets (debt in-
struments) in the following measurement categories: those that are
subsequently measured at fair value (either through other comprehen-
sive income or profit or loss) and those that are measured at amortized
cost. The classification depends on the Company’s business model with
respect to the management of the financial assets and the contractual
cash flows. For assets measured at fair value, gains and losses are rec-
ognized either within other comprehensive income or profit or loss.
The Group only reclassifies debt instruments when the business model
for managing such assets changes.
The Group regards all cash at banks and on hand and all short-term
deposits with a maturity of three months or less as cash and cash
equivalents. The Group invests most of its cash and cash equivalents
at several major financial institutions: Commerzbank, UniCredit,
BayernLB, LBBW, BNP Paribas, Deutsche Bank, Sparkasse, Rabobank
and Bank of America Merrill Lynch.
Guarantees granted for rent deposits 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.
R EC O G N I T I O N A N D D ER EC O G N I T I O N
A purchase or sale of financial assets in a manner that is customary for
the market is recognized as of the trade date, which is the date on
which the Group commits to buying or selling the asset. Financial as-
sets are derecognized when the claims to receive cash flows from the
financial assets expire or have been transferred, and the Group has
transferred substantially all the risks and rewards of ownership.
M E AS U R EM EN T
Upon initial recognition, the Group measures a financial asset at fair
value plus transaction costs directly attributable to the acquisition of
that asset when a financial asset is not subsequently measured at fair
value in profit or loss. Transaction costs of financial assets measured
at fair value through profit or loss are recognized as expenses in profit
or loss.
The subsequent measurement of debt instruments depends on the
Group’s business model for managing the asset and the asset’s cash
flow characteristics. The Group classifies its debt instruments in one of
the following measurement categories.
Assets that are held in order to collect the contractual cash flows and
for which these cash flows represent only interest and principal pay-
ments are measured at amortized cost. Interest income from these
financial assets is recognized in finance income using the effective
interest method. Gains or losses on derecognition are recognized
directly in profit or loss and recorded in the finance result. Impairment
losses are recognized as a separate line item in profit or loss.
Assets that are held to collect the contractual cash flows and to sell the
financial assets and where the cash flows represent solely principle
and interest payments are measured at fair value through other com-
prehensive income. Changes in the carrying amount are recognized in
other comprehensive income, with the exception of impairment losses
and income from the reversal of impairment, interest income, and for-
eign currency gains and losses, which are recognized in profit or loss.
Upon derecognition of the financial asset, the cumulative gain or loss
previously recognized in other comprehensive income is reclassified
from equity to profit or loss and is recorded in the finance result. Interest
income from these financial assets is reported in finance income using
the effective interest method. Foreign exchange gains and losses are
shown under other income/expenses, and impairment losses are in-
cluded in a separate line item in profit or loss.
Assets that do not meet the criteria of the categories at amortized cost
or at fair value through other comprehensive income are allocated to
the category at fair value through profit or loss. Gains or losses on a
debt instrument that is subsequently measured at fair value through
profit or loss, are recognized on a net basis in the finance result in the
period in which they occur.
D ER I VAT I V ES
The Group uses derivatives to hedge its foreign exchange risk and cash
flows. The use of derivatives is subject to a Group policy approved by
the Management Board, which sets out a written guideline on the use
of derivatives. According to the Group’s hedging policy, only highly
probable future cash flows and clearly identifiable receivables that can
be collected within a twelve-month period are hedged.
Derivatives are initially recognized at fair value at the time of the con-
clusion of a derivative transaction and subsequently remeasured at
fair value at the end of each reporting period. Changes in the fair value
of a derivative instrument that are not accounted for as a hedging rela-
tionship are recognized directly in the finance result in profit or loss.
MorphoSys did not apply hedge accounting under IAS 39 as at Decem-
ber 31, 2017, nor during the year 2018, therefore IFRS 9 has no impact
on the recognition of hedging relationships.
2 .8.2 AC C OUNTS RECE IVABLE , INC OME TA X RECE IVABLES AND
OTHE R RECE IVABLES
Accounts receivable are measured at amortized cost less any impair-
ment using the simplified impairment model (see Items 2.3.1*, 2.4.2*
and 5.3* in the Notes).
*C R O S S - R E F E R E N C E to page 129, page 136 and page 153
Income tax receivables mainly include receivables due from tax author-
ities in the context of capital gain taxes withheld.
Other non-derivative financial instruments are measured at amortized
cost using the effective interest method.
2 .8.3 INVE NTORIES
Inventories are measured at the lower value of production or acquisi-
tion cost and net realizable value under the first-in first-out method.
Acquisition costs comprise all costs of purchase and those incurred
in bringing the inventories into operating condition while taking into
account purchase price reductions, such as bonuses and discounts. Net
realizable value is the estimated selling price less the estimated ex-
penses necessary for completion and sale. Inventories are divided into
the categories of raw materials and supplies.
Notes
F inancial Statements
141
2 .8.4 PRE 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 main-
tenance contracts, sublicenses and upfront payments for external
laboratory services not yet performed. Other current assets primarily
consist of receivables towards tax authorities from input tax surplus
resulting from value-added taxes, combination compounds and receiv-
ables from upfront payments. This item is recognized at nominal value.
2 .8.5 PROPE R T Y, PL ANT AND EQUIPME NT
Property, plant and equipment is recorded at historical cost less accu-
mulated depreciation (see Item 5.6* in the Notes) and any impairment
(see Item 2.4.3* in the Notes). Historical cost includes expenditures
directly related to the purchase at the time of the acquisition. Replace-
ment purchases, building alterations and improvements are capital-
ized 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 estimated useful life (see table below).
Leasehold improvements are depreciated on a straight-line basis over
the lesser of the asset’s estimated useful life or the remaining term of
the lease.
*C R O S S - R E F E R E N C E to page 154 and page 136
Asset Class
Computer Hardware
Low-value Laboratory and Office
Equipment between € 250 and € 800
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 %
The residual values and useful lives of assets 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
acquisition or production costs because the Group finances the entire
operating business with equity.
2 .8.6 INTANGIBLE AS SE TS
Purchased intangible assets are capitalized at acquisition cost and
exclusively 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 capi-
talization criteria described in IAS 38 have been met, namely, clear
specification of the product or procedure, technical feasibility, inten-
tion of completion, 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 of intangible assets is recorded in
research and development expenses.
Expenses to be classified as research expenses are allocated to re-
search and development expenses as defined by IAS 38.
Subsequent expenditures for capitalized intangible assets are capital-
ized only when they substantially increase the future economic bene-
fits 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
accumulated amortization (see below) and any impairment (see
Item 2.4.3* in 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 acquisition, less accumulated amortization (useful
life of ten years).
*C R O S S - R E F E R E N C E to page 136
L I C EN S E R I G H TS
The Group has acquired license rights from third parties by making
upfront license payments, paying annual fees to maintain the license
and paying fees for sublicenses. The Group amortizes upfront license
payments on a straight-line basis over the estimated useful life of the
acquired license (eight to ten years). The amortization period and
method are reviewed at the end of each financial year in accordance
with IAS 38.104. Annual fees to maintain a license are amortized over
the term of each annual agreement. Sublicense 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.
I N - P RO C ES S R&D P RO G R A M S
This line item contains capitalized upfront payments from the in-
licensing of compounds for the Proprietary Development segment, as
well as milestone payments for these compounds subsequently paid as
milestones were achieved. Additionally, this line item also includes
compounds or antibody programs resulting from acquisitions. The
assets are recorded at acquisition cost and are not yet available for use
and therefore not subject to scheduled amortization. The assets are
tested for impairment annually or in case of triggering events, as re-
quired by IAS 36.
SO F T WA R E
Software is recorded at acquisition cost less accumulated amortization
(see below), and any impairment (see Item 2.4.3* in the Notes). Amor-
tization is recognized in profit or loss on a straight-line basis over the
estimated 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 136
G O O DW I L L
Goodwill is recognized for expected synergies from business combina-
tions and the skills of the acquired workforce. Goodwill is tested annu-
ally for impairment as required by IAS 36 (see Item 5.7.5* in the Notes).
*C R O S S - R E F E R E N C E to page 156
Intangible Asset Class
Useful Life
Amortization
Rates
Patents
License Rights
In-process R&D Programs
Software
Goodwill
10 years
8 – 10 years
Not yet amor-
tized, Impair-
ment Only
3 – 5 years
Impairment Only
10 %
13 % – 10 %
-
33 % – 20 %
-
F inancial Statements
142
Notes
2 .8.7 INVESTME NTS AT FAIR VALUE , WITH CHANGES REC O GNIZE D
IN OTHE R C OMPRE HE NSIVE INC OME
The investment in adivo GmbH is accounted for as an equity instru-
ment at fair value. Changes in fair value are recognized in other com-
prehensive income. This was irrevocably determined when the invest-
ment was first recognized. This investment is a strategic financial
investment, and the Group considers this classification to be more
meaningful. If the investment is derecognized, no subsequent reclassi-
fication of gains or losses to profit or loss will occur. Dividends from
this investment are recognized in profit or loss when there is a justified
right to receive payment.
2 .8.8 PRE PAID E XPE NSES AND OTHE R AS SE TS , NE T OF CURRE NT
P OR TION
The non-current portion of expenses that occurred prior to the report-
ing date, but are to be recognized in subsequent financial years is
recorded in prepaid expenses. This line item contains maintenance
contracts and sublicenses.
This line item also includes other non-current assets, which are rec-
ognized at fair value. Other non-current assets consist mainly of re-
stricted cash, such as rent deposits.
2.9 ACCOUN 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 AC C OUNTS PAYABLE , OTHE R LIABILITIES AND
OTHE R PROVISIONS
Accounts payable and other liabilities are initially recognized at fair
value and subsequently at amortized cost using the effective interest
method. Liabilities with a term of more than one year are discounted to
their net present value. Liabilities with uncertain timing or amount are
recorded as provisions.
IAS 37 requires the recognition of provisions for obligations to third
parties arising from past events. Furthermore, provisions are only rec-
ognized 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 re-
quired to meet the obligation also includes expected price and cost
increases. The interest portion of other provisions is recorded in
the finance result. The measurement of provisions is based on past
experience and considers the circumstances in existence on the re-
porting date.
The Group has entered into various research and development con-
tracts with research institutions and other companies. These agree-
ments are generally cancelable, and related costs are recorded as re-
search and development expenses as incurred. The Group records
accruals for estimated ongoing research costs that have been incurred.
When evaluating the adequacy of the accruals, the Group analyzes the
progress of the studies, including the phase or completion of events,
invoices received and contracted costs. Significant judgments and
estimates are made in determining the accrued balances at the end
of any reporting period. Actual results could differ from the Group’s
estimates. The Group’s historical accrual estimates have not been
materially different from the actual costs.
2 .9.2 TA 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 consoli-
dated entities less any prepayments made.
2 .9.3 CURRE NT P OR TION OF C ONTR AC T LIABILITIES
Upfront payments from customers for services to be rendered by the
Group and revenue that must be recognized over a period of time in
accordance with IFRS 15.35 are deferred and measured at the nominal
amount of cash received. The corresponding rendering of services and
revenue recognition is expected to occur within a twelve-month period
following the reporting date. Prior to December 31, 2017, this item was
recognized as deferred revenue.
2 .9.4 C ONTR AC T LIABILITIES , NE T OF CURRE NT P OR TION
This line item includes the non-current portion of deferred upfront pay-
ments and income from customers that is required to be recognized
over a period of time in accordance with IFRS 15.35. These are mea-
sured at the nominal amount of cash received. Prior to December 31,
2017, this item was reported as deferred revenue, net of current portion.
2 .9.5 C ONVE R TIBLE BONDS DUE TO RE L ATE D PAR TIES
The Group had issued convertible bonds to the Group’s Management
Board and employees. In accordance with IAS 32.28, the equity compo-
nent of a convertible bond must be credited separately in additional
paid-in capital. The equity component is determined by deducting the
separately determined amount of the liability component from the fair
value of the convertible bond. The debit effect of the equity component
is recognized in profit or loss in personnel expenses from share-based
payments, whereas the effect on profit or loss from the liability compo-
nent is recognized as interest expense. The Group applies the provi-
sions of IFRS 2 “Share-based Payment” for all convertible bonds granted
to the Management Board and the Group’s employees.
2 .9.6 DE FE RRE D TA XES
The recognition and measurement of deferred taxes are based on the
provisions 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 subse-
quent financial years are based on the applicable tax rate at the time of
recognition.
Deferred tax assets and liabilities are recorded separately in the bal-
ance sheet and take into account the future tax effect resulting from
temporary differences between values in the balance sheet for assets,
liabilities as well as for tax loss carryforwards.
Deferred tax assets are offset against deferred tax liabilities if the
taxes are levied by the same taxation authority and the entity has a
legally enforceable right to set off current tax assets against current
tax liabilities. Pursuant to IAS 12, deferred tax assets and liabilities
may not be discounted.
2 .9.7 OTHE R LIABILITIES
The line item “other liabilities” consists of a deferred amount related
to rent-free periods as agreed. The corresponding reduction of these
liabilities over the minimum rent period is calculated based on the
effective interest method. Other liabilities are discounted due to their
long-term maturities at an interest rate equivalent to the rent term.
Notes
F inancial Statements
143
2 .9.8 STO 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.
T R E AS U RY STO C K
Repurchases of the Company’s own shares at prices quoted on an
exchange or at market value are recorded in this line item as a deduc-
tion from common stock.
When common stock that is recorded as stockholders’ equity is repur-
chased, the amount of consideration paid, including directly attribut-
able costs, is recognized as a deduction from stockholders’ equity net
of taxes and is classified as treasury shares. When treasury shares are
subsequently sold or reissued, the proceeds are recognized as an in-
crease in stockholders’ equity, and any difference between the proceeds
from the transaction and the initial acquisition costs is recognized in
additional paid-in capital.
The allocation of treasury shares to beneficiaries under Long-Term
Incentive plans (in this case: performance shares) is reflected in this
line item based on the set number of shares to be allocated after the
expiration of the four-year vesting period (quantity structure) multi-
plied by the weighted-average purchase price of the treasury shares
(value structure). The adjustment is carried out directly in equity by
reducing the line item treasury stock, which is a deduction from com-
mon stock, while simultaneously reducing additional paid-in capital.
Further information can be found in Items 7.3.1* and 7.3.2* in the Notes.
*C R O S S - R E F E R E N C E to page 163
A D D I T I O N A L PA I D - I N CA P I TA L
Additional paid-in capital mainly consists of personnel expenses result-
ing from the grant of stock options, convertible bonds and performance
shares and the proceeds from newly created shares in excess of their
nominal value.
R E VA LUAT I O N R ES ERV E
The revaluation reserve mainly consisted of unrealized gains and
losses on available-for-sale financial assets that were measured
directly in equity until they were sold. Starting with the application of
IFRS 9 as of January 1, 2018, the reporting of this reserve is no longer
required.
OT H ER C O M P R EH EN S I V E I N C O M E R ES ERV E
The item “other comprehensive income reserve” includes changes in
the fair value of equity instruments that are recognized in other
comprehensive income and foreign exchange differences that are not
recognized in profit or loss.
AC C U M U L AT ED I N C O M E/D EFI C I T
The “accumulated income/deficit” line item consists of the Group’s
accumulated consolidated net profits/losses. A separate measurement
of this item is not made.
3 Segment Reporting
MorphoSys Group applies IFRS 8 “Operating Segments”. An operating
segment is defined as a unit of an entity that engages in business
activities from which it can earn revenues and incur expenses and
whose operating results are regularly reviewed by the entity’s chief
operating decision maker, the Management Board, and for which dis-
crete 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 directly 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 relevant income and expenses are
included. EBIT, which the Company defines as earnings before finance
income, finance expenses, impairment losses on financial assets and
income taxes, is the key benchmark for measuring and evaluating the
operating results. Refer to the table in Note 3.3* for a reconciliation of
EBIT to Net income as well as to the table in Note 4.3* for a breakdown
of finance income and expenses. Other key internal reporting figures
include revenues, operating expenses, segment results and the liquid-
ity position. The Group consists of the following operating segments.
*C R O S S - R E F E R E N C E to page 144 and page 148
3.1 PROPRIE TARY DEVEL OPMEN T
The segment comprises all activities related to the proprietary develop-
ment of therapeutic antibodies and peptides. Currently, this segment’s
activities comprise a total of twelve antibodies and peptides, with
MOR208 representing the Company’s most advanced proprietary clin-
ical program. Also included are the antibody MOR202, which was par-
tially out-licensed to I-Mab Biopharma and MOR106, which had been
co-developed with Galapagos and was out-licensed to Novartis during
the reporting year. Also included is the Company’s MOR103 program,
which was out-licensed to GlaxoSmithKline (GSK) in 2013. The par-
tially or completely out-licensed programs have been part of the Pro-
prietary Development segment since the beginning of their develop-
ment and will therefore continue to be reported in this segment.
MorphoSys is also pursuing other early-stage proprietary develop-
ment and co-development programs. These include the clinical pro-
gram MOR107 (formerly LP2), which originated from the acquisition of
Lanthio Pharma B.V. This program was evaluated in a phase 1 study in
healthy volunteers and is currently undergoing preclinical studies for
oncology indications. One other program is in preclinical development
and another six programs are in drug discovery. The Proprietary
Development segment also manages the development of proprietary
technologies.
3.2 P AR T NERED DI S COVERY
MorphoSys possesses one of the leading technologies for generating
therapeutics based on human antibodies. The Group markets this
technology commercially through its partnerships with numerous
pharmaceutical and biotechnology companies. The Partnered Discov-
ery segment encompasses all operating activities relating to these
commercial agreements.
F inancial Statements
144
Notes
3.3 CRO SS -SEGMEN T DI S CL O SURE
The information on segment assets is based on the assets’ respective
locations.
For the Twelve-month Period
Ended December 31
External Revenues
Operating Expenses
SEG MENT RESULT
Other Income
Other Expenses
SEG MENT EB IT
Finance Income
Finance Expenses
Impairment Losses on Financial Assets
E ARNINGS BEFORE TA XES
Income Tax Benefit/(Expenses)
NE T 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
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
53,610
(107,019)
(53,409)
159
0
(53,250)
17,635
(99,106)
(81,471)
157
0
(81,314)
621
(78,515)
(77,894)
327
0
(77,567)
15,842
42,041
57,883
32,167
3,291
0
35,458
1,319
1,903
8,802
60,658
69,460
33,008
7,072
0
40,080
12,344
1,555
13,157
59,292
72,449
20,948
6,930
0
27,878
1,358
1,272
22,832
(9,516)
13,316
0
0
13,316
7,114
6,288
13,402
1,471
158
0
1,629
879
1,429
49,156
(18,906)
30,250
0
0
30,250
18,054
8,490
26,544
4,083
1,045
0
5,128
602
2,075
49,123
(18,113)
31,010
0
0
31,010
18,415
10,165
28,580
2,512
2,165
0
4,677
1,181
2,117
0
(19,969)
(19,969)
1,486
(689)
(19,172)
365,949
101,530
467,479
12,285
1,019
488,373
0
(15,835)
(15,835)
963
(1,671)
(16,543)
313,825
5,569
319,394
10,610
909
358,671
(13,384)
(59,106)
0
(13,212)
(13,212)
382
(554)
276,484
86,087
362,571
14,842
743
415,460
76,442
(136,504)
(60,062)
1,645
(689)
418
(754)
(1,035)
(60,477)
4,305
(56,172)
388,905
149,859
538,764
45,923
4,468
488,373
501,677
370,190
431,045
538,764
268
418
204
400
374
375
2,466
3,750
66,791
(133,847)
(67,056)
1,120
(1,671)
(67,607)
712
(1,895)
0
(68,790)
(1,036)
(69,826)
340,681
74,717
415,398
47,701
9,026
358,671
415,398
13,150
4,030
49,744
(109,840)
(60,096)
709
(554)
(59,941)
1,385
(1,308)
0
(59,864)
(519)
(60,383)
308,056
155,544
463,600
38,302
9,838
415,460
463,600
2,913
3,764
The segment result is defined as a segment’s revenue less the seg-
ment’s operating expenses. The unallocated other operating expenses
of € 20.0 million (2017: € 15.8 million; 2016: € 13.2 million) included
primarily expenses for central administrative functions that are not
allocated to one of the two segments. Finance income, finance expense
and income tax are also not allocated to the segments as they are man-
aged on a Group basis. In the 2018 financial y ear, impairments total-
ing € 19.2 million were recognized in the Proprietary Development
segment (2017: impairments of € 9.9 million in the Proprietary Devel-
opment segment; 2016: impairments of € 10.1million in the Proprietary
Development segment).
customer accounted for € 36.9 million of the Group’s total revenue, the
second largest € 16.8 million and the third largest € 6.7 million. The
largest and third largest customers were allocated to the Partnered
Discovery segment, and the second largest customer to the Proprietary
Development segment. The top three of the Group’s customers that
were all allocated to the Partnered Discovery segment accounted for
€ 42.1 million, € 2.5 million and € 2.5 million, respectively, of the total
revenues in 2016.
The following overview shows the Group’s regional distribution of
revenue.
The Group’s key customers are allocated to either the Proprietary
Development or Partnered Discovery segments. As of December 31,
2018, the single most important customer represented accounts re-
ceivable with a carrying amount of € 5.9 million (December 31, 2017:
€ 5.1 million). The largest customer accounted for revenues in 2018 of
€ 49.5 million, the second largest for € 19.0 million and the third
largest for € 3.9 million. The largest and third largest customers are
allocated to the Proprietary Development segment and the second larg-
est customer to the Partnered Discovery segment. In 2017, the largest
in 000’ €
Germany
Europe and
Asia
USA and
Canada
TOTAL
2018
309
2017
851
2016
1,621
56,784
57,229
43,046
19,350
76,443
8,711
66,791
5,077
49,744
3.3 CRO SS -SEGMEN T DI S CL O SURE
The information on segment assets is based on the assets’ respective
locations.
For the Twelve-month Period
Ended December 31
External Revenues
Operating Expenses
SEG MENT RESULT
Other Income
Other Expenses
SEG MENT EB IT
Finance Income
Finance Expenses
Impairment Losses on Financial Assets
E ARNIN GS BEFORE TA XES
Income Tax Benefit/(Expenses)
NE T 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
53,610
(107,019)
(53,409)
159
0
17,635
(99,106)
(81,471)
157
0
621
(78,515)
(77,894)
327
0
22,832
(9,516)
13,316
0
0
49,156
(18,906)
30,250
0
0
49,123
(18,113)
31,010
0
0
(53,250)
(81,314)
(77,567)
13,316
30,250
31,010
15,842
42,041
57,883
32,167
3,291
0
35,458
1,319
1,903
8,802
60,658
69,460
33,008
7,072
0
40,080
12,344
1,555
13,157
59,292
72,449
20,948
6,930
0
27,878
1,358
1,272
7,114
6,288
13,402
1,471
158
0
1,629
879
1,429
18,054
8,490
26,544
4,083
1,045
0
5,128
602
2,075
18,415
10,165
28,580
2,512
2,165
0
4,677
1,181
2,117
The segment result is defined as a segment’s revenue less the seg-
ment’s operating expenses. The unallocated other operating expenses
of € 20.0 million (2017: € 15.8 million; 2016: € 13.2 million) included
primarily expenses for central administrative functions that are not
allocated to one of the two segments. Finance income, finance expense
and income tax are also not allocated to the segments as they are man-
aged on a Group basis. In the 2018 financial y ear, impairments total-
ing € 19.2 million were recognized in the Proprietary Development
segment (2017: impairments of € 9.9 million in the Proprietary Devel-
opment segment; 2016: impairments of € 10.1million in the Proprietary
Development segment).
The Group’s key customers are allocated to either the Proprietary
Development or Partnered Discovery segments. As of December 31,
2018, the single most important customer represented accounts re-
ceivable with a carrying amount of € 5.9 million (December 31, 2017:
€ 5.1 million). The largest customer accounted for revenues in 2018 of
€ 49.5 million, the second largest for € 19.0 million and the third
largest for € 3.9 million. The largest and third largest customers are
allocated to the Proprietary Development segment and the second larg-
est customer to the Partnered Discovery segment. In 2017, the largest
Notes
F inancial Statements
145
Proprietary Development
Partnered Discovery
Unallocated
Group
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
0
(19,969)
(19,969)
1,486
(689)
(19,172)
365,949
101,530
467,479
12,285
1,019
488,373
501,677
268
418
0
(15,835)
(15,835)
963
(1,671)
(16,543)
313,825
5,569
319,394
10,610
909
358,671
370,190
204
400
0
(13,212)
(13,212)
382
(554)
(13,384)
276,484
86,087
362,571
14,842
743
415,460
431,045
374
375
76,442
(136,504)
(60,062)
1,645
(689)
(59,106)
418
(754)
(1,035)
(60,477)
4,305
(56,172)
388,905
149,859
538,764
45,923
4,468
488,373
538,764
2,466
3,750
66,791
(133,847)
(67,056)
1,120
(1,671)
(67,607)
712
(1,895)
0
(68,790)
(1,036)
(69,826)
340,681
74,717
415,398
47,701
9,026
358,671
415,398
13,150
4,030
49,744
(109,840)
(60,096)
709
(554)
(59,941)
1,385
(1,308)
0
(59,864)
(519)
(60,383)
308,056
155,544
463,600
38,302
9,838
415,460
463,600
2,913
3,764
The following overview shows the timing of the satisfaction of perfor-
mance obligations in 2018.
in 000’ €
Proprietary
Development
Partnered
Discovery
At a Point in Time thereof perfor-
mance obligations fulfilled in previ-
ous periods: € 0 in Proprietary De-
velopment and € 19.0 million in
Partnered Discovery
Over Time
TOTAL
53,610
0
53,610
22,268
564
22,832
A total of € 136.1 million (December 31, 2017: € 42.2 million) and
€ 13.7 million (December 31, 2017: € 32.6 million) of the Group’s
non-current assets, excluding deferred tax assets, are located in Ger-
many and the Netherlands, respectively. There are no non-current as-
sets in the USA as of December 31, 2018. The Group’s total investments
of € 2.4 million (December 31, 2017: € 13.1 million) were made in
Germany, except for € 0.1 million (December 31, 2017: € 0.1 million),
which were made in the Netherlands. In accordance with internal defi-
nitions, investments only included additions to property, plant and
equipment as well as intangible assets which are not related to busi-
ness combinations.
F inancial Statements
146
Notes
4 Notes to Profit or Loss
4 .1 REVENUE S
In 2018, revenues consisted of milestone payments and royalties total-
ing € 19.3 million (2017: € 7.3 million; 2016: € 5.6 million). In 2018, 2017
and 2016 these were entirely generated by the Partnered Discovery
segment.
Revenues from license fees (except milestone payments and royal-
ties) amounted to € 51.2 million in 2018 (2017: € 37.5 million; 2016:
€ 22.8 million) and was attributable to the Proprietary Development
segment in the amount of € 50.6 million (2017: € 16.8 million), and to
the Partnered Discovery segment in the amount of € 0.6 million (2017:
€ 20.7 million; 2016: € 22.8 million).
Of the service fee revenues totaling € 5.9 million (2017: € 22.0 million;
2016: € 21.4 million), € 3.0 million (2017: € 0.8 million; 2016: € 0.6 mil-
lion) was attributable to the Proprietary Development segment, and
€ 2.9 million (2017: € 21.2 million; 2016: € 20.8 million) to the Part-
nered Discovery segment. Substantially all service fee revenues relate
to revenue on a gross basis (principal).
Of the total revenues in 2018, revenues of € 19.0 million were recognized
from performance obligations that were fulfilled in previous periods
and relate to milestone payments and royalties (2017: € 7.8 million;
2016: € 7.1 million).
4 .2 OPERAT ING EXPENSE S
4.2 .1 C OST OF SALES
Cost of sales consists of the items below.
in 000’ €
Personnel Expenses
TOTAL
2018
1,797
1,797
2017
2016
0
0
0
0
4.2 .2 RESE ARCH AND DE VE LOPME NT E XPE NSES
Research and development expenses are composed of the items below.
in 000’ €
2018
2017
2016
Personnel Expenses
Consumable Supplies
Other Operating Expenses
Impairment, Amortization and Other Costs of Intangible Assets
External Services
Depreciation and Other Costs for Infrastructure
TOTAL
4.2 .3 SE LLING E XPE NSES
Selling expenses consist of 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
25,288
2,310
2,761
22,760
47,889
5,389
106,397
2018
2,536
3
538
25
2,953
328
6,383
28,482
2,588
2,757
13,503
61,119
4,865
113,314
2017
1,771
1
386
0
2,658
0
4,816
25,145
2,321
2,608
13,689
44,311
5,889
93,963
2016
1,661
1
444
0
338
0
2,444
Notes
F inancial Statements
147
4.2 .4 GE NE R AL AND ADMINISTR ATIVE E XPE NSES
General and administrative expenses included the items below.
in 000’ €
2018
2017
2016
15,016
15
1,012
97
4,475
1,313
21,928
11,797
33
714
112
2,224
838
15,718
9,208
97
847
111
2,244
925
13,432
2018
2017
2016
30,349
4,341
5,585
1,241
3,121
44,637
28,196
4,542
4,975
881
3,456
42,050
27,146
4,570
2,357
1,061
880
36,014
segment while 71 employees were not allocated to a specific segment
(December 31, 2017: 161 in the Proprietary Development segment,
105 employees in the Partnered Discovery segment and 60 employees
were unallocated; December 31, 2016: 135 in the Proprietary Develop-
ment segment, 156 employees in the Partnered Discovery segment
and 54 employees were unallocated). Costs for defined-contribution
plans amounted to € 0.7 million in 2018 (2017: € 0.6 million; 2016:
€ 0.5 million).
Personnel Expenses
Consumable Supplies
Other Operating Expenses
Amortization of Intangible Assets
External Services
Depreciation and Other Costs for Infrastructure
TOTAL
4.2 .5 PE RSONNE L E XPE NSES
Personnel expenses included the items below.
in 000’ €
Wages and Salaries
Social Security Contributions
Share-based Payment Expense
Temporary Staff (External)
Other
TOTAL
Personnel expenses from share-based payment in 2018 included a one-
time entitlement granted to related parties to receive treasury shares
amounting to € 2.1 million. Further details can be found in Item 6.5.4*
of the Notes.
*C R O S S - R E F E R E N C E to page 160
In 2018, other personnel expenses mainly included costs for personnel
recruitment as well as promotion and development measures. In 2017,
this item consisted primarily of costs for severance payments and mea-
sures to recruit, promote and develop personnel. In 2016, other person-
nel expenses comprised mainly of recruitment costs.
Due to the increasing importance of selling expenses in connection
with the planned preparations for the commercialization of MOR208,
the existing functions presented in profit or loss were expanded in
2018 to include the area of “sales”. In order to ensure the comparability
of information, the previous year’s figures have been adjusted accord-
ingly. The average number of employees in the 2018 financial year was
327 (2017: 344; 2016: 354). Of the 329 employees on December 31, 2018
(December 31, 2017: 326; December 31, 2016: 345), 246 were active in
research and development (December 31, 2017: 253; December 31,
2016: 280), 21 in sales (December 31, 2017: 14; December 31, 2016: 12),
and 62 were engaged in general and administrative functions (Decem-
ber 31, 2017: 59 employees; December 31, 2016: 53 employees). As of
December 31, 2018, there were 209 employees in the Proprietary De-
velopment segment and 49 employees in the Partnered Discovery
F inancial Statements
148
4 .3 O T HER INCOME AND EXPENSE S, F INANCE INCOME AND
F INANCE EXPENSE S
in 000’ €
Grant Income
Gain on Foreign Exchange
Gain from recognition of previously unrecognized intangible assets
Reversal of Impairment for Accounts Receivable Previously Deemed Impaired
Miscellaneous Income
Other Income
Loss on Foreign Exchange
Impairment of Other Receivables
Miscellaneous Expenses
Other Expenses
Gain on Financial Assets at Fair Value through Profit or Loss
(2017 and 2016: Gain on Available-for-sale Financial Assets and Bonds)
Interest Income on Other Financial Assets at Amortized Cost
Gain on Derivatives
Finance Income
Loss on Financial Assets at Fair Value through Profit or Loss
(2017 and 2016: Loss on Available-for-sale Financial Assets and Bonds)
Interest Expenses for Other Financial Assets at Amortized Cost
Interest Expenses for Financial Liabilites at Amortized Cost
Loss on Derivatives
Bank Fees
Finance Expenses
The following net gains or losses resulted from financial instruments
in the fiscal year.
2018
153
677
350
0
465
1,645
(457)
0
(232)
(689)
5
91
322
418
(85)
(53)
(126)
(444)
(46)
(754)
2017
157
485
0
76
402
1,120
(844)
0
(827)
(1,671)
35
236
441
712
(120)
(374)
0
(1,360)
(41)
(1,895)
in 000’ €
2018
2017
Financial Assets at Fair Value through Profit or Loss
Other Financial Assets at Amortized Cost
Shares at Fair Value through Other Comprehensive Income
Financial Liabilities at Amortized Cost
Available-for-sale Financial Assets
Financial Assets classified as Loans and Receivables
TOTAL
Net gains or losses mainly comprised gains and losses on derivatives,
interest income and expenses as well as valuation effects from changes
in fair value.
INCOME TAX EXPENSE S/ BENEF I T
4 .4
MorphoSys AG is subject to corporate taxes, the solidarity surcharge
and trade taxes. The Company’s corporate tax rate in 2018 remained
unchanged (15.0 %) as did the solidarity surcharge (5.5 %) and the effec-
tive trade tax rate (10.85 %).
MorphoSys US Inc. is subject to Federal Corporate Income Tax (21 %)
and the State Income Tax for Princeton, New Jersey (9 %).
(202)
(978)
(127)
(126)
0
0
(1,433)
(919)
0
0
0
(190)
(164)
(1,273)
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 %. De-
pending on certain conditions, a tax rate of previously 5 % and from
January 1, 2018, 7 % may be applicable under what is known as the
“Innovation Box.”
Notes
2016
327
192
0
15
175
709
(400)
(7)
(147)
(554)
294
1,017
74
1,385
(1,209)
(20)
0
(44)
(35)
(1,308)
2016
30
0
0
0
(1,069)
918
(121)
F inancial Statements
149
2018
1
4,304
4,305
0
0
0
2017
(534)
(502)
(1,036)
0
0
0
2016
45
(564)
(519)
(82)
(112)
(194)
Notes
Income taxes consist of the items listed below.
in 000’ €
Current Tax Income/(Expense) (Thereof Regarding Prior Years: k€ 1; 2017: k€ 171; 2016: k€ (60))
Deferred Tax Benefit/(Expenses)
Total Income Tax Benefit/(Expenses)
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
The deferred tax benefit in 2018 mainly resulted from the impairment
on intangible assets within the cash-generating unit, the Lanthio
Group (€ 3.8 million). Further information can be found in Item 5.7.5*
in the Notes.
*C R O S S - R E F E R E N C E to page 156
The following table reconciles the expected income tax expense to the
actual income tax expense as presented in the consolidated financial
statements. The combined income tax rate of 26.675 % in the 2018 finan-
cial year (2017: 26.675 %) was applied to profit before taxes to calculate
the statutory income tax expense. This rate consisted of corporate
income tax of 15.0 %, a solidarity surcharge of 5.5 % on the corporate
tax and an average trade tax of 10.85 % applicable to the Group.
in 000’ €
2018
2017
2016
(60,477)
26,675 %
16,132
(363)
(126)
3,716
(349)
(14,497)
(268)
1
59
4,305
(68,790)
26,675 %
18,350
(290)
(134)
37
3,256
(22,007)
(71)
(171)
(6)
(1,036)
(59,864)
26,675 %
15,969
5
(135)
812
(3,766)
(13,354)
(46)
0
(4)
(519)
Earnings Before Income Taxes
Expected Tax Rate
Expected Income Tax
Tax Effects Resulting from:
Share-based Payment
Non-Tax-Deductible Items
Differences in Profit or Loss-Neutral Adjustments
Non-Recognition of Deferred Tax Assets on Temporary Differences
Non-Recognition of Deferred Tax Assets on Current Year Tax Losses
Tax Rate Differences to Local Tax Rates
Prior Year Taxes
Other Effects
Actual Income Tax
The differences in profit or loss-neutral adjustments mainly contained
the permanent differences of the issuance costs from the Nasdaq IPO.
As of December 31, 2018, neither deferred tax assets on tax loss carry-
forwards in the amount of € 51.0 million (December 31, 2017: € 37.4 mil-
lion) nor deferred tax assets on temporary differences in the amount of
€ 0.7 million (December 31, 2017: € 0.5 million) were recognized by
MorphoSys Group due to losses to be incurred as a result of continued
substantial investments in proprietary product development and related
business development.
F inancial Statements
150
Notes
Deferred tax assets and deferred tax liabilities are composed as follows.
in 000’s €, as of December 31
Intangible Assets
Receivables and Other Assets
Prepaid Expenses and Deferred Charges
Other Provisions
Other Liabilities
TOTAL
in 000’s €, as of December 31
Intangible Assets
Receivables and Other Assets
Prepaid Expenses and Deferred Charges
Other Provisions
Other Liabilities
TOTAL
Deferred Tax
Asset 2018
Deferred Tax
Asset 2017
Deferred Tax
Liability 2018
Deferred Tax
Liability 2017
0
319
0
278
213
810
0
0
0
253
236
489
4,317
0
0
0
0
4,317
8,297
0
3
0
0
8,300
Changes in Deferred Taxes in 2018
Recognized in Profit or Loss
Income/(Expense)
Recognized in Other
Comprehensive Income
3,980
319
3
25
(23)
4,304
0
0
0
0
0
0
As of December 31, 2018, temporary differences of € 1.0 million (De-
cember 31, 2017: € 0.2 million) existed in connection with investments
in subsidiaries (known as outside basis differences) for which no de-
ferred tax assets were recognized (2017: no deferred tax liabilities).
Notes
F inancial Statements
151
5 Notes to the Assets of the
Balance Sheet
5.1
C ASH AND C ASH EQUIVAL EN T S
in 000’ €
12/31/2018
12/31/2017
Bank Balances and Cash in Hand
Impairment
Cash and Cash Equivalents
45,476
(16)
45,460
76,589
0
76,589
Restricted cash of € 0.7 million mainly consisted of rent deposits (2017:
€ 1.1 million). The presentation of the development of the expected
twelve-month loss for cash and cash equivalents to be recognized
under IFRS 9 can be found in Item 2.3.1* of the Notes.
*C R O S S - R E F E R E N C E to page 129
EARNINGS PER SHARE
4 .5
Earnings per share are computed by dividing the 2018 consolidated
net loss of € 56,172,121 (2017: consolidated net loss of € 69,826,469;
2016: consolidated net loss of € 60,382,776) by the weighted-average
number of ordinary shares outstanding during the respective year
(2018: 31,338,948; 2017: 28,947,566; 2016: 26,443,415).
The table below shows the calculation of the weighted-average number
of ordinary shares.
SHARES IS SUED ON JANUARY 1
29,420,785
29,159,770
2018
2017
Effect of Treasury Shares Held
on January 1
Effect of Share Issuance
Effect of Transfer of Treasury Stock to
Members of the Management Board
Effect of Transfer of Treasury Stock/
Shares Issued in January
Effect of Transfer of Treasury Stock/
Shares Issued in February
Effect of Transfer of Treasury Stock/
Shares Issued in March
Effect of Transfer of Treasury Stock/
Shares Issued in April
Effect of Transfer of Treasury Stock/
Shares Issued in May
Effect of Transfer of Treasury Stock/
Shares Issued in June
Effect of Transfer of Treasury Stock/
Shares Issued in July
Effect of Transfer of Treasury Stock/
Shares Issued in August
Effect of Transfer of Treasury Stock/
Shares Issued in September
Effect of Transfer of Treasury Stock/
Shares Issued in October
Effect of Transfer of Treasury Stock/
Shares Issued in November
Effect of Transfer of Treasury Stock/
Shares Issued in December
(319,678)
2,208,146
(396,010)
0
0
278
0
0
7,759
0
0
0
1,863
154,250
4,128
756
1,874
17,754
2,818
76
85
63
3,778
1,094
2,038
2,669
3,976
2,566
5,549
127
WEIG HTED - AVER AG E NUMBER OF
SHARES OF C OMMON STO CK
31,338,948
28,947,566
In 2018 and 2017, diluted earnings per share equaled basic earnings
per share. The effect of 52,930 potentially dilutive shares in 2018
(2017: 87,904 dilutive shares; 2016: 99,764 dilutive shares) resulting
from stock options granted to the Management Board, the Senior Man-
agement Group and employees of the Company who are not members
of the Senior Management Group, has been excluded from the diluted
earnings per share because it would result in a decrease in the loss per
share and is therefore not to be treated as dilutive.
F inancial Statements
Notes
152
5.2
F INANC IAL ASSE T S AT FAIR VAL UE , WI T H CHANGE S
RECO GNI ZED IN PROF I T OR L O SS AND O T HER F INANC IAL
INCOME AT AMOR T I ZED CO S T S
in 000’ €
DECEMBER 31, 2018
Money Market Funds
TOTAL
DECEMBER 31, 2017
Money Market Funds
TOTAL
Maturity
Cost
Gains
Losses
Market Value
Gross Unrealized
daily
44,718
daily
86,644
0
0
(137)
(106)
44,581
44,581
86,538
86,538
As of January 1, 2019, realized and unrealized gains and losses on
money market funds held or sold were recognized in the finance result
in profit or loss in accordance with IFRS 9. The sale of financial assets
in 2018 resulted in net losses of less than € 0.1 million. In 2017, in ac-
cordance with IAS 39, the Group recognized a net gain of less than
€ 0.1 million in profit or loss resulting from the sale of financial assets
previously recognized in equity (2016: net gain of € 0.3 million).
in 000’ €
DECEMBER 31, 2018
Term Deposits, Current Portion
Commercial Papers
Term Deposits, Net of Current Portion
TOTAL
DECEMBER 31, 2017
Term Deposits, Current Portion
TOTAL
Maturity
Cost
Unrealized
Interest Gain
Impairment
Carrying
amount
4 – 12 Months
4 – 12 Months
More than
12 Months
219,720
50,000
96,090
4 – 12 Months
149,000
2
0
12
59
(744)
(55)
(353)
0
218,978
49,945
95,749
364,672
149,059
149,059
In 2018, current and non-current financial assets were categorized as
“at amortized cost” in accordance with IFRS 9 “Financial Instruments”,
and in 2017 as “loans and receivables” in accordance with IAS 39
“Financial Instruments”. These assets mainly consisted of term de-
posits with fixed or variable interest rates as well as corporate bonds
without interest, in which the nominal value invested is credited at
their maturity. The increase in financial assets resulted mainly from
the capital increases executed in April 2018 in connection with the IPO
on the Nasdaq.
Interest income from financial assets “at amortized cost” in 2018
amounted to € 0.1 million in 2018 (2017: € 0.2 million from financial
assets “loans and receivables”; 2016: € 0.9 million from financial as-
sets “loans and receivables”) and were recorded in the finance result.
The risk associated with these financial instruments primarily re-
sulted from bank credit risks. The presentation of the development of
the expected twelve-month loss and the lifetime expected credit loss
for term deposits and commercial papers, which must be recognized
under IFRS 9 can be found in Item 2.3.1* of the Notes.
*C R O S S - R E F E R E N C E to page 129
Further information on the accounting for financial assets is provided
in Item 2.8.1* in the Notes.
*C R O S S - R E F E R E N C E to page 140
Notes
F inancial Statements
153
5.3 ACCOUN T S RECEIVABL E
All accounts receivable are non-interest bearing, and generally have
payment terms of between 30 and 45 days. As of December 31, 2018
and December 31, 2017, accounts receivable included unbilled receiv-
ables amounting to € 14.1 million and € 5.3 million, respectively. Un-
billed receivables increased mainly due to unbilled amounts related to
royalties and the provision of services in connection with the transfer
of projects to customers.
The presentation of the development of the risk provisions to be recog-
nized in accordance with IFRS 9 in the 2018 financial year for accounts
receivable using the simplified impairment model can be found in
Item 2.3.1* of the Notes.
*C R O S S - R E F E R E N C E to page 129
Based on the Management Board’s assessment, no net loss for allow-
ances for doubtful receivables was recognized in profit or loss in 2017.
5.4 O T HER RECEIVABL E S
Other receivables as of December 31, 2018, mainly consisted of receiv-
ables from unrealized gross gains on forward rate agreements in the
amount of € 0.1 million (December 31, 2017: € 0.3 million unrealized
gross loss, included under provisions for onerous contracts. This can
be found in Item 6.2* of the Notes.). The forward rate agreements were
classified as financial assets at fair value through profit or loss in ac-
cordance with IFRS 9.
*C R O S S - R E F E R E N C E to page 158
As of December 31, 2018 and December 31, 2017, there were no impair-
ments recognized for other receivables.
5.5
INCOME 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, 2018 income tax receivables amounted to € 0.2 mil-
lion (December 31, 2017: € 0.7 million) and consisted of receivables
from capital gain taxes withheld and income taxes for prior years.
Inventories amounting to € 0.2 million as of December 31, 2018 (De-
cember 31, 2017: € 0.3 million) were stored at the Planegg location and
consisted of raw materials and supplies. As in the previous year, there
were no inventories recognized at fair value less selling costs as of the
reporting date.
As of December 31, 2018, prepaid expenses and other current assets
mainly consisted of combination compounds in the amount of € 5.4 mil-
lion (December 31, 2017: € 11.2 million), receivables towards tax au-
thorities from input tax surplus of € 2.7 million (December 31, 2017:
€ 2.4 million), upfront fees for external laboratory services of € 1.9 mil-
lion (December 31, 2017: € 0.6 million), upfront fees for sublicenses of
€ 0.4 million (December 31, 2017: € 0.4 million), restricted cash for
rent deposits of € 0.0 million (December 31, 2017: € 0.4 million) and
other prepayments amounting to € 1.3 million (December 31, 2017:
€ 1.1 million). An impairment of € 4.5 million was recognized on com-
bination compounds in 2018.
F inancial Statements
154
5.6 PROPER T Y, PL AN T AND EQUIPMEN T
in 000’ €
Cost
JANUARY 1, 2018
Additions
Disposals
DECEMBER 31, 2018
Accumulated Depreciation and Impairment
JANUARY 1, 2018
Depreciation Charge for the Year
Disposals
DECEMBER 31, 2018
Carrying Amount
JANUARY 1, 2018
DECEMBER 31, 2018
Cost
JANUARY 1, 2017
Additions
Disposals
DECEMBER 31, 2017
Accumulated Depreciation and Impairment
JANUARY 1, 2017
Depreciation Charge for the Year
Impairment
Disposals
DECEMBER 31, 2017
Carrying Amount
JANUARY 1, 2017
DECEMBER 31, 2017
No impairment losses on property, plant and equipment were recog-
nized in the 2018, 2017 and 2016 financial years.
No borrowing costs were capitalized during the reporting period, and
there were neither restrictions on retention of title nor property, plant
and equipment pledged as security for liabilities. There were no mate-
rial contractual commitments for the purchase of property, plant and
equipment as of the reporting date.
Depreciation is included in the following line items of profit or loss.
in 000’ €
Research and Development
Selling
General and Administrative
TOTAL
Notes
Total
19,836
1,821
(3,060)
18,597
16,310
1,812
(3,056)
15,066
3,526
3,531
19,047
1,317
(528)
19,836
14,858
1,969
0
(517)
16,310
4,189
3,526
Office and
Laboratory
Equipment
Furniture and
Fixtures
17,335
1,780
(1,457)
17,658
14,490
1,723
(1,455)
14,758
2,845
2,900
16,658
1,205
(528)
17,335
13,120
1,887
0
(517)
14,490
3,538
2,845
2,501
41
(1,603)
939
1,820
89
(1,601)
308
681
631
2,389
112
0
2,501
1,738
82
0
0
1,820
651
681
2018
1,398
87
327
1,812
2017
1,672
0
297
1,969
2016
1,518
0
268
1,786
Notes
5.7
IN TANGIBL E ASSE T S
F inancial Statements
155
in 000’ €
Patents
License
Rights
In-process R&D
Programs
Software
Goodwill
Total
Cost
JANUARY 1, 2018
Additions
Disposals
DECEMBER 31, 2018
Accumulated Amortization
and Impairment
JANUARY 1, 2018
Amortization Charge for the Year
Impairment
Disposals
DECEMBER 31, 2018
Carrying Amount
JANUARY 1, 2018
DECEMBER 31, 2018
Cost
JANUARY 1, 2017
Additions
Disposals
DECEMBER 31, 2017
Accumulated Amortization
and Impairment
JANUARY 1, 2017
Amortization Charge for the Year
Impairment
Disposals
DECEMBER 31, 2017
Carrying Amount
JANUARY 1, 2017
DECEMBER 31, 2017
16,995
590
0
17,585
12,326
1,320
0
0
13,646
4,669
3,939
16,419
640
(64)
16,995
11,096
1,230
64
(64)
12,326
5,323
4,669
23,896
0
0
23,896
20,897
112
360
0
21,369
2,999
2,527
23,896
0
0
23,896
20,749
148
0
0
20,897
3,147
2,999
52,159
0
0
52,159
0
0
15,140
0
15,140
52,159
37,019
60,960
11,140
(19,941)
52,159
10,141
0
9,800
(19,941)
0
50,819
52,159
5,853
55
(264)
5,644
5,198
506
0
(264)
5,440
655
204
5,800
53
0
5,853
4,515
683
0
0
5,198
1,285
655
11,041
0
0
11,041
3,676
0
3,689
0
7,365
7,365
3,676
11,041
0
0
11,041
3,676
0
0
0
3,676
7,365
7,365
109,944
645
(264)
110,325
42,097
1,938
19,189
(264)
62,960
67,847
47,365
118,116
11,833
(20,005)
109,944
50,177
2,061
9,864
(20,005)
42,097
67,939
67,847
Impairment losses of € 0.4 million were recognized on licenses in the
2018 financial year. In the 2017 financial year, € 0.1 million of impair-
ment losses were recognized on patents and licenses. No impairment
on patents and licenses was recognized in the 2016 financial year.
As of December 31, 2018, in-process research and development pro-
grams were subject to an impairment test as required by IAS 36. This
test indicated a need for impairment. Further details on the impair-
ment of in-process research and development programs and goodwill
can be found in Items 5.7.3* and 5.7.5* in the Notes.
*C R O S S - R E F E R E N C E to page 156
The carrying amount of intangible assets pledged as security amounts
to € 13.1 million and relates to a government grant in the amount of
€ 1.5 million.
F inancial Statements
156
Notes
Amortization is included in the following line items of profit or loss.
in 000’ €
Research and Development
Research and Development (Write-off)
Selling
General and Administrative
TOTAL
2018
2017
2016
1,822
19,189
25
91
21,127
1,958
9,864
0
103
11,925
1,872
10,141
0
106
12,119
5.7.1 PATE NTS
In the 2018 financial year, the carrying amount of patents declined by
€ 0.8 million from € 4.7 million to € 3.9 million. This was the result of
additions amounting to € 0.6 million for patent applications, particu-
larly for proprietary programs and technologies, which were offset by
straight-line amortization of € 1.3 million.
5.7.2 LICE NSES
In the 2018 financial year, the carrying amount of licenses declined by
€ 0.5 million from € 3.0 million to € 2.5 million as a result of sched-
uled and unscheduled amortization.
5.7.3 IN - PRO CES S R&D PRO GR AMS
The carrying amount of in-process R&D programs decreased in 2018
by € 15.1 million to € 37.0 million. This was due to impairments in a
total amount of € 15.1 million. These included € 1.7 million in the sec-
ond quarter of 2018 and € 13.4 million in the fourth quarter of 2018
(see section Lanthio Group in Item 5.7.5* of these Notes).
*C R O S S - R E F E R E N C E to page 156
As of December 31, 2018, this balance sheet item contained capitalized
upfront payments from the in-licensing of one compound for the Pro-
prietary Development segment as well as subsequent milestone pay-
ments for this compound that were paid at a later point in time. This
line item also included one compound resulting from an acquisition
(see Item 5.7.5* in the Notes).
*C R O S S - R E F E R E N C E to page 156
M O R 20 8
As an intangible asset with indefinite useful life (no foreseeable limit
to the period over which this compound is expected to generate cash
flows) and a carrying amount of € 23.9 million, MOR208 was subject
to an annual impairment test on September 30, 2018, as required
by IAS 36. The recoverable amount of the MOR208 cash-generating
unit was determined on the basis of value-in-use calculations, which
concluded that the recoverable amount of the cash-generating unit
exceeded its carrying amount. The cash flow forecasts took into ac-
count expected cash inflows from the potential commercialization of
MOR208, the cash outflows for anticipated research and development,
and the costs for MOR208’s commercialization. The cash flow forecasts
are based on the period of patent protection for MOR208. For this rea-
son, a planning horizon of approximately 20 years is considered appro-
priate for the value-in-use calculation. The values of the underlying
assumptions were determined using both internal (past experience)
and external sources of information (market information). Based on
the updated cash flow forecast, the value-in-use was determined as
follows: A beta factor of 1.2 (2017: 1.2) and WACC before taxes of 10.0 %
(2017: 9.4 %). A detailed sensitivity analysis was performed for the dis-
count rate. A sensitivity analysis for changes in the cash flows was not
performed since the cash flows from research and development and
the commercialization of the compound have already been probability-
adjusted in the value-in-use calculations so as to reflect the probabili-
ties of success in phases of clinical trials. The analysis did not reveal
any need for impairment. The values ascribed to the assumptions cor-
respond to the Management Board’s forecasts for future development
and are based on internal planning scenarios as well as external
sources of information. No indicators of impairment were identified at
December 31, 2018.
5.7.4 SOF T WARE
In the 2018 financial year, additions to this line item totaled € 0.1 mil-
lion. The carrying amount decreased by € 0.5 million from € 0.7 mil-
lion in 2017 to € 0.2 million in 2018. Additions were offset by amortiza-
tion of € 0.6 million.
5.7.5 G O ODWILL
The annual goodwill impairment test was performed on Septem-
ber 30, 2018.
S LO N O M I C S T EC H N O LO GY
As of September 30, 2018, goodwill of € 3.7 million from the 2010 ac-
quisition of Sloning BioTechnology GmbH was subject to an impairment
test as required by IAS 36. The recoverable amount of the cash-gener-
ating unit Slonomics technology, which is part of the Partnered Dis-
covery segment, was determined on the basis of value-in-use calcula-
tions. The calculation showed that the recoverable amount was higher
than the carrying amount of the cash-generating unit. The cash flow
forecasts took into account the payments expected under existing con-
tracts as well as the future free cash flows from the contribution of the
Slonomics technology to partnered programs and was offset by ex-
pected 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, upfront pay-
ments, milestone payments, funded development services and royal-
ties 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 cash flow forecasts are largely
based on the assumption that the Slonomics technology is very benefi-
cial for existing customers. The values of the underlying assumptions
were determined using both internal (past experience) and external
sources of information (market information). Based on the updated
ten-year cash flow forecast, the value-in-use was determined as follows:
Notes
F inancial Statements
157
changes in the cash flows has not been performed since the cash flows
had already been probability-adjusted in the value-in-use calculations
so as to reflect the probabilities of success in phases of clinical trials.
This analysis did not reveal the need for any additional 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
No indicators for additional impairments were identified at Decem-
ber 31, 2018.
5.8
INVE S T MEN T S AT FAIR VAL UE , WI T H CHANGE S
RECO GNI ZED IN O T HER COMPREHENSIVE INCOME
This line item consisted of an investment in adivo GmbH, Martinsried,
amounting to 19.9 %, which was purchased by MorphoSys AG in July
2018 in the context of start-up financing. MorphoSys paid a cash con-
tribution of € 9,458 and a contribution in kind of € 350,000, which con-
sisted of the adivo brand and a license to a fully synthetic canine-based
antibody library.
A beta factor of 1.2 (2017: 1.2), WACC before taxes of 9.6 % (2017: 10.6 %)
and a perpetual growth rate of 1 % (2017: 1 %). A detailed sensitivity
analysis was performed for the growth rate and the discount rate for
calculating value-in-use. The sensitivity analysis took into account the
change in one assumption, with the remaining assumptions remain-
ing unchanged from the original calculation. A sensitivity analysis for
changes in the cash flows has not been performed since the cash flows
have already been probability-adjusted in the value-in-use calcula-
tions so as to reflect the probabilities of success in phases of clinical
trials. 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.
L A N T H I O G RO U P
As a result of a regular review of the Company's proprietary portfolio
it was decided in the second quarter of 2018 to discontinue a project in
the research stage of the cash-generating unit, the Lanthio Group, in
the Proprietary Development operating segment. Accordingly, an im-
pairment of € 1.7 million was recorded in research and development
expenses as of June 30, 2018.
On September 30, 2018, goodwill of € 3.7 million and the related intan-
gible asset with indefinite useful life (no foreseeable limit to the period
over which MOR208 is expected to generate cash flows) of € 26.5 mil-
lion from the Lanthio Group acquisition were subject to an annual im-
pairment test. This did not result in an impairment loss as of Septem-
ber 30, 2018.
In the fourth quarter of 2018, updated study data led to the need for
further studies, and the existing development plan was adjusted ac-
cordingly. This resulted in the expectation of a delayed market entry
and a delay in the occurrence of future cash flows compared to previ-
ous assumptions. The cash flow forecasts included planned cash inflows
from the potential sale of compounds based on lanthipeptides expected
to achieve market approval. These cash inflows were 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 consideration. Cash
flow forecasts are based on a period of 30 years as the Management
Board believes that after the successful approval of compounds, the
drugs that follow can generate free cash flows within that period of
time. The recoverable amount resulting from this adjusted cash flow
forecast 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 and amounted to € 13.3 million, i.e., the
recoverable amount of the cash-generating unit was lower than its
carrying amount. This resulted in an impairment of € 17.1 million,
consisting of € 3.7 million attributed to goodwill and € 13.4 million to
in-process R&D programs. After impairment, the carrying amount of
in-process R&D programs amounted to € 13.1 million. The values of
the underlying assumptions were determined using both internal
(past experience) and external sources of information (market infor-
mation). On the basis of the updated cash flow forecast, the value-in-
use was determined as follows: A beta factor of 1.2 (2017: 1.2) and WACC
before taxes of 11.5 % (2017: 12.1 %). A detailed sensitivity analysis was
performed with regard to the discount rate. A sensitivity analysis for
F inancial Statements
158
Notes
The change in investments in the 2018 financial year is shown below.
in 000’ €
Shareholdings
01/01/2018
Additions
Disposals
Through
Other Com-
prehensive
Income
Through
Profit or Loss
12/31/2018
0
359
0
(127)
0
232
As of December 31, 2018, the fair value of the investment was mea-
sured at € 0.2 million. The decrease of € 0.1 million was recognized
directly in equity.
6 Notes to Equity and Liabilities of the
Balance Sheet
The significant unobservable input parameters used in the measure-
ment were corporate planning assumptions, the probability-weighted
estimate of cash flows and the discount rate. From the information cur-
rently available, a material change in corporate planning is not consid-
ered likely and therefore the cash flow forecasts used are considered as
a suitable basis for determining the fair value. A change in the pre-tax
WACC of +/–1.0 % would cause a € 0.1 million lower or € 0.1 million
higher amount of equity. A sensitivity analysis for changes in cash
flows was not performed because the cash flows have already been
probability-adjusted in the fair value calculation to reflect the proba-
bilities of success in the various stages of development. There are no
significant relationships between the significant unobservable input
parameters.
5.9
PREP AID EXPENSE S AND O T HER ASSE T S,
NE T OF CURREN T P OR T ION
6.1 ACCOUN T S P AYABL E AND ACCRUAL S
Accounts payable and licenses payable were non-interest-bearing
and, under normal circumstances, have payment terms of no more
than 30 days.
Accounts payable are listed in the table below.
in 000’ €
12/31/2018
12/31/2017
Trade Accounts Payable
Licenses Payable
Accruals
Other Liabilities
TOTAL
7,215
184
36,530
832
44,761
4,622
196
36,408
3,586
44,812
This line item included the non-current portion of prepaid expenses
and other assets and mainly resulted from prepaid rent for the prem-
ises in Semmelweisstraße 7 in Planegg. The Group classified certain
line items in other assets as “restricted cash” that are not available for
use in the Group’s operations (see Items 2.8.1* and 5.1* in the Notes). As
of December 31, 2018, the Group held long-term restricted cash in the
amount of € 0.7 million for issued rent deposits (December 31, 2017:
€ 0.7 million) and of € 0.1 million for convertible bonds granted to em-
ployees (December 31, 2017: € 0.1 million).
*C R O S S - R E F E R E N C E to page 140 and page 151
Accruals consisted mainly of accruals for external laboratory services
in the amount of € 26.2 million (December 31, 2017: € 26.3 million),
accrued personnel expenses for payments to employees and manage-
ment amounting to € 5.1 million (December 31, 2017: € 5.0 million),
provisions for outstanding invoices in the amount of € 2.8 million
(December 31, 2017: € 2.6 million), expenses for legal advice in the
amount of € 1.5 million (December 31, 2017: € 2.1 million), audit fees
and other audit-related costs in the amount of € 0.5 million (Decem-
ber 31, 2017: € 0.2 million) and license payments in the amount of
€ 0.1 million (December 31, 2017: € 0.2 million).
The breakdown of this line item is shown in the table below.
in 000’ €
12/31/2018
12/31/2017
Prepaid Expenses, Net of Current
Portion
Other Current Assets
TOTAL
2,199
783
2,982
2,546
798
3,344
At the Company’s Annual General Meeting in May 2018, the Price-
waterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC GmbH),
Munich, was appointed as the auditor. The Supervisory Board engaged
the PwC GmbH to audit the financial statements.
In the 2018 financial year, PwC GmbH received a total fee from
MorphoSys in the amount of € 1,274,165, including audit fees in the
amount of € 468,803, audit-relatd fees of € 516,408, as well as all other
fees for other services in the amount of € 288,954. PwC GmbH did not
provide tax services in 2018.
TAX PROVI SIONS AND O T HER PROVI SIONS
6.2
As of December 31, 2018, the Group recorded tax provisions and other
provisions of € 0.4 million (2017: € 1.5 million).
Tax provisions mainly consisted of income tax expenses and other pro-
visions mainly included expenses for personnel recruitment.
As of December 31, 2018, tax provisions and other provisions were
uncertain in their amount and are expected to be utilized in 2019.
Notes
F inancial Statements
159
The table below shows the development of tax provisions and current
and non-current other provisions in the 2018 financial year.
in 000’ €
Tax Provisions
Other Provisions
TOTAL
01/01/2018
Additions
Utilized
Released
12/31/2018
315
1,209
1,524
0
773
773
72
1,192
1,264
35
606
641
208
184
392
6.3 CON T RAC T L IABIL I T IE S
Contract liabilities related to transaction prices paid by customers,
which were allocated to the performance obligations not fulfilled as of
December 31, 2018. It is expected that current contract liabilities will
be realized in the 2019 financial year and non-current contract liabili-
ties mainly in the 2020 financial year. The changes in this item are set
out below.
in 000’ €
2018
2017
OPENING BAL ANCE BEFORE
APPLICATION OF IFRS 15
Application of IFRS 15
OPENING BAL ANCE AF TER
APPLICATION OF IFRS 15
Prepayments Received in the
Fiscal Year
Revenues Recognized in the
Reporting Period that was included
in the Contract Liability at the
Beginning of the Period
Revenues Recognized for Received
Prepayments and Services
Performed in the Fiscal Year
CLOSING BAL ANCE
thereof short-term
thereof long-term
1,695
(1,135)
560
2,386
2,905
0
2,905
18,386
(306)
0
(1,688)
952
794
158
(19,596)
1,695
1,389
306
6.4 O T HER L IABIL I T IE S
Other liabilities exclusively consisted of the deferred amount related to
the rent-free period for the building located at Semmelweisstraße 7,
Planegg, as agreed in the lease contract. This item is released over the
contractually agreed minimum rent period.
The current portion amounting to € 0.1 million of this liability was
included in the item accounts payable and accruals.
increased by € 32,537 as a result of the exercise of 32,537 convertible
bonds that were granted to the Management Board and the Senior
Management Group. The weighted-average exercise price of the con-
vertible bonds exercised amounted to € 31.88.
6.5.2 AUTHORIZE D CAPITAL
Compared to December 31, 2017, the number of authorized ordinary
shares increased from 14,579,885 to 14,684,291. This overall change
comprised a decline in the number of authorized ordinary shares as a
result of the two capital increases from Authorized Capital 2017-II to-
taling 2,386,250 ordinary shares in April 2018 in the context of the
IPO in the United States. At the Annual General Meeting on May 17,
2018, Authorized Capital 2018-I in the amount of € 11,768,314 was
created and the remaining Authorized Capital 2017-II in the amount
of € 9,277,658 was canceled. Under the terms of Authorized Capital
2018-I, the Management Board, with the Supervisory Board’s consent,
was authorized to increase the Company’s share capital once or several
times until April 30, 2023, (inclusive) by a total of € 11,768,314 by issu-
ing up to 11,768,314 new no-par-value bearer shares.
Pursuant to the Company’s articles of association, the shareholders
may authorize the Management Board to increase the share capital
with the consent of the Supervisory Board within a period of five years
by issuing shares for a certain total amount, which are referred to as
authorized capital (genehmigtes Kapital) and are a concept under
German law that enables the Company to issue shares without going
through the process of obtaining another shareholders’ resolution. The
aggregate nominal amount of the authorized capital created by the
shareholders may not exceed half of the share capital existing at the
time of registration of the authorized capital with the commercial
register.
6.5.3 C ONDITIONAL CAPITAL
The number of ordinary shares of conditional capital compared to De-
cember 31, 2017 decreased from 6,491,683 to 6,459,146 shares due to
the exercise of 32,537 conversion rights in 2018. The reduction in ordi-
nary shares of conditional capital through the exercise of 32,537 con-
version rights was entered in the commercial register in February 2019.
6.5 S T O CKHOL DERS’ EQUI T Y
6.5.1 C OMMON STO CK
As of December 31, 2018, the Company’s common stock including trea-
sury stock amounted to € 31,839,572, which represents an increase of
€ 2,418,787 compared to € 29,420,785 on December 31, 2017. Each
share of common stock grants one vote. The increase in common stock
resulted from the capital increases carried out in April 2018 following
the IPO on the Nasdaq Global Market. The capital increases were made
through American Depositary Shares (“ADS”), with each ADS repre-
senting 1/4 of a MorphoSys ordinary share. A total of 2,075,000 new
shares were issued from Authorized Capital 2017-II on April 18, 2018
followed by 311,250 new shares on April 26, 2018. Common stock also
The shareholders may resolve to amend or create conditional capital
(Bedingtes Kapital). However, they may do so only to issue conversion
or subscription rights to holders of convertible bonds, in preparation
for a merger with another company or to issue subscription rights to
employees and members of the Management Board of the Company or
of an affiliated company by way of a consent or authorization resolu-
tion. According to German law, the aggregate nominal amount of the
conditional capital created at the shareholders’ meeting may not ex-
ceed half of the share capital existing at the time of the shareholders’
meeting adopting such resolution. The aggregate nominal amount of the
conditional capital created for the purpose of granting subscription
F inancial Statements
160
Notes
rights to employees and members of the management of our Company
or of an affiliated company may not exceed 10 % of the share capital ex-
isting at the time of the shareholders’ meeting adopting such resolution.
6.5.4 TRE ASURY STO CK
In the years 2018 and 2017, the Group did not repurchase any of its
own shares. The composition and development of this line item is listed
in the following table.
In addition, a total of 1,318 treasury shares in the amount of € 48,713
were transferred to related parties. As a result, the number of
MorphoSys shares owned by the Company as of December 31, 2018,
was 281,036 (December 31, 2017: 319,678). 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.
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
Purchase in 2016
Transfer in 2016
As of 12/31/2016
Transfer in 2017
As of 12/31/2017
Transfer in 2018
As of 12/31/2018
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
52,295
(90,955)
396,010
(76,332)
319,678
(38,642)
281,036
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
2,181,963
(3,361,697)
14,648,212
(2,821,231)
11,826,981
(1,428,208)
10,398,773
As of December 31, 2018, the Company held 281,036 shares of treasury
stock valued at € 10,398,773, representing a decline of € 1,428,208
compared to December 31, 2017 (319,678 shares; € 11,826,981). The
reason for this decline was the transfer of 17,219 shares of treasury
stock to the Management Board and Senior Management Group from
the 2014 Long-Term Incentive plan (LTI plan) in the amount of
€ 636,414. The vesting period for this LTI program expired on April 1,
2018 and all beneficiaries had or have the option within six months to
receive a total of 17,219 shares.
In May 2018, the Management Board, the Senior Management Group
and certain employees of the Company who are not members of the
Senior Management Group received a one-time entitlement in a total
fixed amount of € 2.1 million. This entitlement was settled in treasury
shares of the Company when the option was exercised by the benefi-
ciaries. Beneficiaries were free to choose the exercise day within a
vesting period expiring on December 31, 2018. Upon exercise, the
fixed amount of the entitlement was divided by the XETRA closing
price on the exercise date and the resulting number of treasury shares
was transferred to the beneficiary. As of December 31, 2018, a total of
20,105 shares valued at € 2.1 million were transferred as part of this
entitlement.
6.5.5 ADDITIONAL PAID - IN CAPITAL
On December 31, 2018, additional paid-in capital amounted to
€ 619,908,453 (December 31, 2017: € 438,557,857). The total increase
of € 181,350,597 resulted mainly from two capital increases in April
2018 with total proceeds of € 176,189,256. The allocation of person-
nel expenses resulting from share-based payments amounted to
€ 5,584,969, and the exercise of convertible bonds totaled an amount
of € 1,004,580. There was an offsetting effect from the decline in the
reclassification of treasury shares in the context of the allocation of
shares under the 2014 performance-based share plan in the amount of
€ 636,414 and the allocation of treasury shares to related persons in
the amount of € 763,076.
6.5.6 RE VALUATION RESE RVE
On December 31, 2018, the revaluation reserve amounted to € 0
(December 31, 2017: € –105,483). The change by € 105,483 resulted
from the adoption of the new IFRS 9 standard for financial instru-
ments. Hence, since January 1, 2018, the reporting of this equity posi-
tion is no longer required.
6.5.7 OTHE R C OMPRE HE NSIVE INC OME RESE RVE
The other comprehensive income reserve is being reported for the first
time as of January 1, 2018. On December 31, 2018, this reserve con-
tained changes in the fair value of equity instruments through other
comprehensive income in the amount of € 127,458, and currency
losses from consolidation of € 83,432. The currency losses from consol-
idation include exchange differences from the revaluation of foreign
currency financial statements of Group companies and differences be-
tween the exchange rates used in the balance sheet and profit or loss.
As of December 31, 2017, the Group consisted solely of companies with
financial statements prepared in euros.
6.5.8 AC CUMUL ATE D DE FICIT
The consolidated net loss for the year of € –56,172,121 is reported under
accumulated deficit. The first-time adoption of IFRS 9 and IFRS 15 re-
sulted in an adjustment of € –248,000 and € 1,135,014, respectively.
Further details can be found in Item 2.1.2* of the Notes. The accumu-
lated deficit being a result of the effects above therefore increased from
€ –97,375,138 in 2017 to € –152,765,728 in 2018.
*C R O S S - R E F E R E N C E to page 125
Notes
F inancial Statements
161
7 Remuneration System for the
Management Board and Employees
of the Group
7.1
S T O CK OP T ION PL ANS
7.1.1 2017 STO CK OP TION PL AN
On April 1, 2017, MorphoSys established a stock option plan (SOP) for
the Management Board, the Senior Management Group and selected
employees of the Company who are not members of the Senior Manage-
ment Group (beneficiaries). In accordance with IFRS 2, the program is
considered an equity-settled share-based payment and is accounted
for accordingly. The grant date was April 1, 2017 and the vesting pe-
riod/performance period is four years. Each stock option grants up to
two subscription rights to shares of the Company. The subscription
rights vest each year by 25 % within the four-year vesting period, pro-
vided that the performance criteria specified for the respective period
have been 100 % fulfilled. The number of subscription rights vested per
year is calculated based on the key performance criteria of the absolute
MorphoSys share price performance and the relative MorphoSys share
price performance compared to the Nasdaq Biotechnology Index and
the TecDAX Index. The performance criteria can be met annually up to
a maximum of 200 %. If the share price development falls short of the
program’s performance parameters, the target achievement for that
year is 0 %.
The exercise price, derived from the average market price of the Com-
pany’s shares in the XETRA closing auction on the Frankfurt Stock
Exchange from the 30 trading days prior to the issue of the stock op-
tions, is € 55.52.
MorphoSys reserves the right to settle the exercise of stock options
through newly created shares from Conditional Capital 2016-III, the
issuance of treasury shares or in cash. The exercise period is three
years after the end of the four-year vesting period/performance pe-
riod, which is March 31, 2024.
If a member of the Management Board ceases to hold an office at
MorphoSys Group through termination (or the Management Board
member terminates the employment contract), resignation, death, in-
jury, disability or the attainment of retirement age (receipt of a stan-
dard retirement pension, early-retirement pension or disability pen-
sion, as long as the requirements for the disability pension entitlement
are met) or under other circumstances subject to the Supervisory
Board’s discretion, the Management Board member (or the member’s
heirs) is entitled to a precise daily pro rata amount of subscription
rights.
If a member of the Management Board ceases to hold an office at
MorphoSys Group for good reason as defined by Section 626 (2) of the
German Civil Code (BGB), all unexercised stock options will be for-
feited without any entitlement to compensation.
If a change of control occurs during the four-year vesting period, the
stock options will become fully vested. In this case, however, the right
to exercise the stock options arises only at the end of the four-year
vesting period.
As of April 1, 2017, a total of 81,157 stock options had been granted to
the beneficiaries, of which 40,319 had been granted to the Manage-
ment Board (further details can be found in the “Stock Options” table
in Note 7.4* “Related Parties”), 37,660 to the Senior Management
Group and 3,178 to selected Company employees who do not belong to
the Senior Management Group. The original number of stock options
granted was based on 100 % target achievement. Based on the perfor-
mance criteria that have been met to date, the target achievement is
expected to be 125 %. For performance criteria that have not yet been
met, 100 % target achievement is assumed. Under this assumption, the
total number of subscription rights to be exercised, i.e., the total num-
ber of shares to be issued at the end of the four-year holding period/
performance period would currently increase to 90,949 shares. The
fair value of the stock options on the grant date (April 1, 2017) was
€ 21.41 per stock option. In the period from the grant date to Decem-
ber 31, 2018, seven beneficiaries left MorphoSys, resulting in the for-
feiture of 8,398 stock options. For the calculation of personnel expenses
resulting from share-based payment under the 2017 Stock Option Plan,
the assumption is that two beneficiaries would leave the Company
during the four-year period. This assumption was updated in 2018.
*C R O S S - R E F E R E N C E to page 167
In 2018, personnel expenses from stock options under the Group’s
2017 SOP amounted to € 436,154 (2017: € 801,330).
7.1.2 2018 STO CK OP TION PL AN
On April 1, 2018, MorphoSys established a stock option plan (SOP) for
the Management Board, the Senior Management Group and selected
Company employees who are not members of the Senior Management
Group (beneficiaries). In accordance with IFRS 2, the program is con-
sidered an equity-settled share-based payment and is accounted for
accordingly. The grant date was April 1, 2018 and the vesting period/
performance period is four years. Each stock option grants up to two
subscription rights to shares of the Company. The subscription rights
vest each year by 25 % within the four-year vesting period, provided
that the performance criteria specified for the respective period have
been 100 % fulfilled. The number of subscription rights vested per year
is calculated based on the key performance criteria of the absolute
MorphoSys share price performance and the relative MorphoSys share
price performance compared to the Nasdaq Biotechnology Index and
the TecDAX Index. The program’s performance criteria can be met
annually up to a maximum of 200 %. If the share price development
falls short of the performance parameters, the target achievement for
that year is 0 %.
The exercise price, derived from the average market price of the Com-
pany’s shares in the XETRA closing auction on the Frankfurt Stock
Exchange from the 30 trading days prior to the issue of the stock op-
tions, is € 81.04.
MorphoSys reserves the right to settle the exercise of stock options
through either newly created shares from Conditional Capital 2016-III
or, alternatively, through the issuance of treasury shares or in cash
should the exercise from Conditional Capital 2016-III not be possible.
The exercise period is three years after the end of the four-year vesting
period/performance period, which is March 31, 2025.
If a member of the Management Board ceases to hold an office at
MorphoSys Group prior to the end of the four-year vesting period/
performance period, the Management Board member (or the mem-
ber’s heirs) is entitled to a precise daily pro rata amount of subscrip-
tion rights.
F inancial Statements
162
Notes
If a member of the Management Board ceases to hold an office at
MorphoSys Group for good reason as defined by Section 626 (2) of the
German Civil Code (BGB), all unexercised stock options will be for-
feited without any entitlement to compensation.
If a cumulative absence of more than 90 days occurs during the four-
year vesting period/performance period, the beneficiary is entitled to
a precise daily pro rata amount of subscription rights. Absence is de-
fined as either a continued period of lost work time due to illness or
inactivity of a beneficiary or employment relationship without contin-
ued pay.
If a change of control occurs during the four-year vesting period, the
stock options will become fully vested. In this case, however, the right
to exercise the stock options arises only at the end of the four-year
vesting period.
As of April 1, 2018, a total of 67,778 stock options had been granted to
beneficiaries, of which 29,312 had been granted to the Management
Board (further details can be found in the “Stock Options” table in
Note 7.4* “Related Parties”), 34,276 to the Senior Management Group
and 4,190 to selected Company employees who do not belong to the
Senior Management Group. The stated number of stock options granted
is based on 100 % target achievement. The fair value of the stock options
on the grant date (April 1, 2018) was € 30.43 per stock option. In the
period from the grant date to December 31, 2018, two beneficiaries left
MorphoSys, resulting in the forfeiture of 2,136 stock options. For the
calculation of personnel expenses resulting from share-based pay-
ment under the 2018 Stock Option Plan, the assumption is that four
beneficiaries would leave the Company during the four-year period.
*C R O S S - R E F E R E N C E to page 167
In 2018, personnel expenses from stock options under the Group’s
2018 SOP amounted to € 925,635.
The fair value of the stock options from the 2018 and 2017 stock option
plans was determined using a Monte Carlo simulation. The expected
volatility is based on the development of the share volatility of the last
four years. Furthermore, the calculation of fair value equally consid-
ered the performance criteria of the absolute and relative performance
of MorphoSys shares compared to the development of the Nasdaq Bio-
tech Index and the TecDAX Index. The parameters of each program are
listed in the table below.
Share Price on Grant Date in €
Strike Price in €
Expected Volatility of the
MorphoSys share in %
Expected Volatility of the Nasdaq
Biotech Index in %
Expected Volatility of the TecDAX
Index in %
Performance Term of Program
in Years
Dividend Yield in %
April 2017
Stock Option
Plan
April 2018
Stock Option
Plan
55.07
55.52
37.49
25.07
16.94
4.0
n/a
81.05
81.04
35.95
25.10
17.73
4.0
n/a
Risk-free Interest Rate in %
between
0.03 and 0.23
between
0.02 and 0.15
CONVER T IBL E B OND S – 2013 PRO GRAM
7.2
On April 1, 2013, MorphoSys AG granted the Management Board and
members of the Senior Management Group (beneficiaries) convertible
bonds with a total nominal value of € 225,000, divided into 449,999
no-par-value 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 no-par-value bearer shares equal to the proportional
amount of common stock, which currently stands at € 1. Exercise of the
convertible bonds is subject to several conditions, such as the achieve-
ment of performance targets, the expiration of vesting periods, the ex-
ercisability 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
Company’s share price in the XETRA closing auction of the Frankfurt
Stock Exchange on the trading day preceding the issue of the convert-
ible bonds. The exercise of the conversion rights is admissible since, on
at least one trading 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 following table shows the development of the convertible bond
plans for Group employees in the 2018, 2017 and 2016 financial years.
Convertible
Bonds
Weighted-
average
Price (€)
OU TSTANDIN G ON
JANUARY 1, 2016
Granted
Exercised
Forfeited
Expired
OU TSTANDIN G ON
DECEMBER 31, 2016
OU TSTANDIN G ON
JANUARY 1, 2017
Granted
Exercised
Forfeited
Expired
OU TSTANDIN G ON
DECEMBER 31, 2017
OU TSTANDIN G ON
JANUARY 1, 2018
Granted
Exercised
Forfeited
Expired
OU TSTANDIN G ON
DECEMBER 31, 2018
449,999
0
0
(13,414)
0
436,585
436,585
0
(261,015)
0
0
175,570
175,570
0
(32,537)
0
0
143,033
31.88
0.00
0.00
31.88
0.00
31.88
31.88
0.00
31.88
0.00
0.00
31.88
31.88
0.00
31.88
0.00
0.00
31.88
Notes
F inancial Statements
163
From the grant date until December 31, 2018, one beneficiary left
MorphoSys and, therefore, 13,414 convertible bonds were forfeited. As
of December 31, 2018, the number of vested convertible bonds totaled
143,033 shares (December 31, 2017: 175,570 shares; December 31,
2016: 327,439 shares).
The following overview includes the weighted-average exercise price
as well as information on the contract duration of significant groups of
convertible bonds as of December 31, 2018.
Range of Exercise Prices
€ 25.00 - € 40.00
Number
Outstanding
Remaining
Contractual
Life (in Years)
Weighted-
average Exer-
cise Price (€)
Number
Exercisable
Weighted-
average Exer-
cise Price (€)
143,033
143,033
1.25
1.25
31.88
31.88
143,033
143,033
31.88
31.88
The Group recognized personnel expenses resulting from convertible
bonds on a straight-line basis in accordance with IFRS 2 and IAS 32.28.
The equity component of the convertible bonds is presented separately
under additional paid-in capital. The corresponding amount was recog-
nized as personnel expenses from convertible bonds. Compensation
expenses related to convertible bonds amounted to € 0 in 2018, to
€ 287.601 in 2017 and to € 40.375 in 2016.
7.3
L ONG -T ERM INCEN T IVE PRO GRAMS
7.3.1 2013 LONG -TE RM INCE NTIVE PL AN
On April 1, 2013, MorphoSys established a long-term incentive plan
(LTI plan) for the Management Board and the Senior Management
Group (beneficiaries). The vesting period of this plan expired on
April 1, 2017. 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 is paid out in ordinary shares (performance shares) of
MorphoSys AG if predefined key performance criteria are achieved.
The key performance criteria are based on the absolute MorphoSys
share price performance and the relative MorphoSys share price
performance compared to the Nasdaq Biotechnology Index and the
TecDAX Index. These criteria are approved annually by the Super-
visory Board. The fulfillment of these criteria was set at 200 % for one
year, 54 % for one year and 0 % for two years. The Supervisory Board set
the “company factor” at 1.57, meaning the number of performance
shares to be allocated was scaled by a factor of 1.57. This factor resulted
in an adjustment of previously recognized personnel expenses of
€ 1.0million in the 2017 financial year. Previously, personnel expenses
resulting from the 2013 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 61,323 performance shares of MorphoSys AG
was transferred to beneficiaries until October 2, 2017 after the expira-
tion of the four-year vesting period. The Management Board received
36,729 performance shares (for further information, please see the
tables titled “Shares” and “Performance Shares” in Item 7.4* “Related
Parties”), the Senior Management Group received 21,248 performance
shares and former members of the Senior Management Group who
have since left the Company received 3,346 performance shares.
*C R O S S - R E F E R E N C E to page 167
On October 1, 2013, MorphoSys established another long-term incen-
tive plan (LTI plan) for Senior Management Group members (beneficia-
ries). The vesting period of this plan expired on October 1, 2017. The
terms of this plan were identical to the plan granted as of April 1, 2013.
The fulfillment of the performance criteria was set at 200 % for one
year, 54.8 % for one year and 0 % for two years. The Supervisory Board
set the “company factor” at 1.57, meaning the number of performance
shares to be allocated was scaled by a factor of 1.57. This factor resulted
in an adjustment of previously recognized personnel expenses of
€ 0.02 million in the 2017 financial year. Previously, personnel ex-
penses resulting from the 2013 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 548 performance shares of MorphoSys AG
was allocated to beneficiaries after the expiration of the four-year vest-
ing period in December 2017. The Senior Management Group received
all of the 548 performance shares.
In 2018, personnel expenses from performance shares under the
Group’s 2013 LTI plan amounted to € 0 (2017: € 1,038,639; 2016:
€ –23,571).
7.3.2 2014 LONG -TE RM INCE NTIVE PL AN
On April 1, 2014, MorphoSys established a Long-Term Incentive plan
(LTI plan) for the Management Board and the Senior Management
Group (beneficiaries). The vesting period of this plan expired on
April 1, 2018. 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 is paid out in ordinary shares (performance shares) of
MorphoSys AG if predefined key performance criteria are achieved.
The key performance criteria are based on the absolute MorphoSys
share price performance and the relative MorphoSys share price
performance compared to the Nasdaq Biotechnology Index and the
TecDAX Index. These criteria are approved annually by the Super-
visory Board. The fulfillment of these criteria was set at 200 % for one
year, 54 % for one year and 0 % for two years. The Supervisory Board set
the “company factor” at 1.0, meaning the number of performance
shares to be allocated was scaled by a factor of 1.0. Based on these
terms and the company factor, a total of 17,219 performance shares of
MorphoSys AG was transferred to beneficiaries until October 10, 2018
after the expiration of the four-year vesting period. The Management
Board received 6,969 performance shares (for further information,
please see the tables titled “Shares” and “Performance Shares” in
Item 7.4* “Related Parties”), the Senior Management Group received
8,216 performance shares and former members of the Management
Board and Senior Management Group, who have since left the Com-
pany, received 2,034 performance shares.
*C R O S S - R E F E R E N C E to page 167
F inancial Statements
164
Notes
In 2018, personnel expenses resulting from performance shares under
the Group’s 2014 LTI plan amounted to € 6.388 (2017: € 55,759; 2016:
€ 178.518).
7.3.3 2015 LONG -TE RM INCE NTIVE PL AN
On April 1, 2015, MorphoSys established a Long-Term Incentive plan
(LTI plan) for the Management Board and the Senior Management
Group (beneficiaries). 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 (performance
shares) of MorphoSys AG if predefined key performance 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 criteria 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 per-
formance shares vested per year is calculated based on key perfor-
mance criteria comprising the absolute MorphoSys share price perfor-
mance and the relative MorphoSys share price performance compared
to the Nasdaq Biotechnology Index and the TecDAX Index. The number
of performance 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 achieve-
ment of the performance criteria has exceeded 100 % (maximum
200 %). If in one year the performance criteria are met by less than
50 %, no performance 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 re-
garded as unreasonable in view of the general development of the
Company. The right to receive a certain allocation of performance
shares under the LTI plan, however, occurs only at the end of the four-
year vesting period.
At the end of the four-year waiting period, there is a six-month exercise
period during which the Company can transfer the shares to the bene-
ficiaries. Beneficiaries are free to choose the exercise date within this
exercise 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 ceases to hold an office at
MorphoSys Group because of termination (or if the Management Board
member terminates the employment contract), resignation, death, in-
jury, disability, by reaching retirement age (receipt of a normal retire-
ment pension, early-retirement pension or disability pension, as long
as the requirements for the disability pension entitlement are met) or
under other circumstances subject to the Supervisory Board’s discre-
tion, the Management Board member (or the member’s heirs) is enti-
tled to a precise daily pro rata amount of performance shares.
If a member of the Management Board ceases to hold an office at
MorphoSys Group for good reason as defined by Section 626 (2) of the
German Civil Code (BGB) and/or as defined by Section 84 (3) of the
German Stock Corporation Act (AktG), the beneficiary will not be enti-
tled to performance shares.
If a change of control occurs during the four-year vesting period, all
performance shares will become fully vested. In this case, the right to
receive a certain allocation of performance shares under the LTI plan
occurs only at the end of the four-year vesting period.
A total of 40,425 of these shares were allocated to beneficiaries on
April 1, 2015 with 21,948 performance shares allocated to the Manage-
ment Board (further details may be found in the table titled “Perfor-
mance Shares” in Item 7.4* “Related parties”) and 18,477 performance
shares to the Senior Management Group. The original number of perfor-
mance shares allocated was based on the full achievement of the per-
formance criteria and a company factor of 1. Based on the performance
criteria that have been met to date, the overall achievement of the tar-
get is expected to be 123.5 %. For performance criteria that have not yet
been met, 100 % target achievement is assumed. Under this assump-
tion, the total number of performance shares to be allocated at the end
of the four-year holding period/performance period would currently
increase to 44,599 shares. The fair value of the performance shares on
the grant date (April 1, 2015) was € 61.40 per share. No dividends were
included in the determination of the fair value of the performance
shares because the Group does not intend to distribute any dividends
in the foreseeable future. From the grant date until December 31, 2018,
five beneficiaries left MorphoSys, and therefore 3,093 performance
shares were forfeited. For the calculation of the personnel expenses
from share-based payment under the 2015 LTI plan, it was initially
assumed that one beneficiary would leave the Company during the
four-year period. This assumption was updated in 2018.
*C R O S S - R E F E R E N C E to page 167
In 2018, personnel expenses resulting from performance shares under
the Group’s 2015 LTI plan amounted to € 109,511 (2017: € 201,608:
2016: € 837.153).
7.3.4 2016 LONG -TE RM INCE NTIVE PL AN
On April 1, 2016, MorphoSys established a Long-Term Incentive plan
(LTI plan) for the Management Board and the Senior Management
Group (beneficiaries). 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 (performance
shares) of MorphoSys AG if predefined key performance criteria are
achieved. These criteria are evaluated annually by the Supervisory
Board. The grant date was April 1, 2016 and the vesting/performance
period is four years. If the predefined key performance criteria 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 per-
formance shares vested per year is calculated based on key perfor-
mance criteria comprising the absolute MorphoSys share price perfor-
mance and the relative MorphoSys share price performance compared
to the Nasdaq Biotechnology Index and the TecDAX Index. The number
of performance 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 achieve-
ment of the performance criteria has exceeded 100 % (maximum 200 %).
Notes
F inancial Statements
165
If in one year the performance criteria are met by less than 50 %, no
performance 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. How-
ever, 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 performance shares under
the LTI plan, however, occurs only at the end of the four-year vesting/
performance period.
At the end of the four-year waiting period, there is a six-month exercise
period during which the Company can transfer the shares to the bene-
ficiaries. Beneficiaries are free to choose the exercise date within this
exercise 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 ceases to hold an office at
MorphoSys Group because of termination (or if the Management Board
member terminates the employment contract), resignation, death, in-
jury, disability, by reaching retirement age (receipt of a normal retire-
ment pension, early-retirement pension or disability pension, as long
as the requirements for the disability pension entitlement are met) or
under other circumstances subject to the Supervisory Board’s discre-
tion, the Management Board member (or the member’s heirs) is enti-
tled precise daily pro rata amount of performance shares.
If a member of the Management Board ceases to hold an office at
MorphoSys Group for good reason as defined by Section 626 (2) of the
German Civil Code (BGB) and/or as defined by Section 84 (3) of the
German Stock Corporation Act (AktG), the beneficiary will not be enti-
tled to performance shares.
If a change of control occurs during the four-year vesting period, all
performance shares will become fully vested. In this case, the right to
receive a certain allocation of performance shares under the LTI plan
occurs only at the end of the four-year vesting period.
A total of 68,143 of these shares were allocated to beneficiaries on
April 1, 2016 with 35,681 performance shares allocated to the Manage-
ment Board (further details may be found in the table titled “Perfor-
mance Shares” in Item 7.4* “Related parties”) and 32,462 performance
shares to the Senior Management Group. The original number of perfor-
mance shares allocated was based on the full achievement of the per-
formance criteria and a company factor of 1. Based on the performance
criteria that have been met to date, the overall achievement of the tar-
get is expected to be 123.5 %. For performance criteria that have not yet
been met, 100 % target achievement is assumed. Under this assump-
tion, the total number of performance shares to be allocated at the end
of the four-year holding period/performance period would currently
increase to 68,595 shares. The fair value of the performance shares on
the grant date (April 1, 2016) was € 46.86 per share. No dividends were
included in the determination of the fair value of the performance
shares because the Group does not intend to distribute any dividends
in the foreseeable future. From the grant date until December 31, 2018,
eight beneficiaries left MorphoSys, and therefore 10,998 performance
shares were forfeited. For the calculation of the personnel expenses
from share-based payment under the 2016 LTI plan, it was initially
assumed that one beneficiary would leave the Company during the
four-year period. This assumption was updated in 2018.
*C R O S S - R E F E R E N C E to page 167
In 2018, personnel expenses resulting from performance shares under
the Group’s 2016 LTI plan amounted to € 330,727 (2017: € 663,624;
2016: € 1.483.694).
7.3.5 2017 LONG -TE RM INCE NTIVE PL AN
On April 1, 2017, MorphoSys established another Long-Term Incentive
plan (LTI plan) for the Management Board, the Senior Management
Group and selected employees of the Company who are not members of
the Senior Management Group (beneficiaries). According to IFRS 2,
this program is considered a share-based payment program with set-
tlement 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 (performance shares) of MorphoSys AG if predefined
key performance criteria are achieved. The grant date was April 1,
2017 and the vesting/performance period is four years. If the pre-
defined performance criteria 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 performance shares vested per year
is calculated based on key performance criteria comprising the absolute
MorphoSys share price performance and the relative MorphoSys share
price performance compared to the Nasdaq Biotechnology Index and
the TecDAX Index. The performance criteria can be met annually up
to a maximum of 300 % and up to 200 % for the entire four-year period.
If the specified performance criteria are met by less than 0 % in one
year, no shares will be earned for that year (entitlement). 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. How-
ever, 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 performance shares under the
LTI plan, however, occurs only at the end of the four-year vesting/per-
formance period.
At the end of the four-year vesting period, there is a six-month exercise
period during which the Company can transfer the shares to the bene-
ficiaries. Beneficiaries are free to choose the exercise date within this
exercise 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 ceases to hold an office at
MorphoSys Group because of termination (or if the Management Board
member terminates the employment contract), resignation, death, in-
jury, disability, by reaching retirement age (receipt of a normal retire-
ment pension, early-retirement pension or disability pension, as long
as the requirements for the disability pension entitlement are met) or
under other circumstances subject to the Supervisory Board’s discre-
tion, the Management Board member (or the member’s heirs) is enti-
tled to performance shares determined on a precise daily pro rata basis.
F inancial Statements
166
Notes
If a member of the Management Board ceases to hold an office at
MorphoSys Group for good reason as defined by Section 626 (2) of the
German Civil Code (BGB) and/or as defined by Section 84 (3) of the
German Stock Corporation Act (AktG), the beneficiary will not be enti-
tled to performance shares.
If a change of control occurs during the four-year vesting period, all
performance shares will become fully vested. In this case, the right to
receive a certain allocation of performance shares under the LTI plan
occurs only at the end of the four-year vesting period.
A total of 31,549 of these shares were allocated to beneficiaries on
April 1, 2017 with 15,675 performance shares allocated to the Manage-
ment Board (further details may be found in the table titled “Perfor-
mance Shares” in Item 7.4* “Related parties”), 14,640 performance
shares allocated to the Senior Management Group and 1,234 perfor-
mance shares allocated to selected employees of the Company who are
not members of the Senior Management Group. The original number of
performance shares allocated was based on the full achievement of the
performance criteria and a company factor of 1. Based on the perfor-
mance criteria that have been met to date, the overall achievement of
the target is expected to be 150 %. For performance criteria that have
not yet been met, 100 % target achievement is assumed. Under this as-
sumption, the total number of performance shares to be allocated at
the end of the four-year holding period/performance period would
currently increase to 43,196 shares. The fair value of the performance
shares on the grant date (April 1, 2017) was € 70.52 per share. From
the grant date until December 31, 2018, seven beneficiaries left
MorphoSys, and therefore 1,711 performance shares were forfeited. For
the calculation of the personnel expenses from share-based payment
under the 2017 LTI plan, the assumption is that two beneficiaries
would leave the Company during the four-year period. This assump-
tion was updated in 2018.
*C R O S S - R E F E R E N C E to page 167
In 2018, personnel expenses resulting from performance shares under
the Group’s 2017 LTI plan amounted to € 558,446 (2017: € 1,026,037)
7.3.6 2018 LONG -TE RM INCE NTIVE PL AN
On April 1, 2018, MorphoSys established another Long-Term Incentive
plan (LTI plan) for the Management Board, the Senior Management
Group and selected employees of the Company who are not members of
the Senior Management Group (beneficiaries). According to IFRS 2,
this program is considered a share-based payment program with set-
tlement 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 (performance shares) of MorphoSys AG if predefined
key performance criteria are achieved. The grant date was April 1,
2018 and the vesting/performance period is four years. If the pre-
defined performance criteria 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 performance shares vested per
year is calculated based on key performance criteria comprising
the absolute MorphoSys share price performance and the relative
MorphoSys share price performance compared to the Nasdaq Biotech-
nology Index and the TecDAX Index. The performance criteria can be
met annually up to a maximum of 300 % and up to 200 % for the entire
four-year period. If the specified performance criteria are met by less
than 0 % in one year, no shares will be earned for that year (entitle-
ment). 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 pay-
ment is regarded as unreasonable in view of the general development
of the Company. The right to receive a certain allocation of perfor-
mance shares under the LTI plan, however, occurs only at the end of
the four-year vesting/performance period.
At the end of the four-year vesting period, there is a six-month exercise
period during which the Company can transfer the shares to the bene-
ficiaries. Beneficiaries are free to choose the exercise date within this
exercise 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 ceases to hold an office at
MorphoSys Group prior to the end of the four-year vesting period, the
Management Board member (or the member’s heirs) is entitled to a
precise daily pro rata amount of performance shares.
If a member of the Management Board ceases to hold an office at
MorphoSys Group for good reason as defined by Section 626 (2) of the
German Civil Code (BGB), the beneficiary will not be entitled to perfor-
mance shares.
If a cumulative absence of more than 90 days occurs during the four-
year vesting period/performance period, the beneficiary is entitled to
a precise daily pro rata amount of performance shares. Absence is de-
fined as either a continued period of lost work time due to illness or
inactivity of a beneficiary or employment relationship without contin-
ued pay.
If a change of control occurs during the four-year vesting period, all
performance shares will become fully vested. In this case, the right to
receive a certain allocation of performance shares under the LTI plan
occurs only at the end of the four-year vesting period.
A total of 20,357 of these shares were allocated to beneficiaries on
April 1, 2018 with 8,804 performance shares allocated to the Manage-
ment Board, 10,291 performance shares allocated to the Senior Man-
agement Group and 1,262 performance shares allocated to selected
employees of the Company who are not members of the Senior Manage-
ment Group. The number of performance shares allocated is based on
100 % achievement of the performance criteria and a company factor
of 1. The fair value of the performance shares on the grant date (April 1,
2018) was € 103.58 per share. From the grant date until December 31,
2018, two beneficiaries left MorphoSys, and therefore 641 performance
shares were forfeited. For the calculation of the personnel expenses
from share-based payment under the 2018 LTI plan, the assumption is
that four beneficiaries would leave the Company during the four-
year period.
In 2018, personnel expenses resulting from performance shares under
the Group’s 2018 LTI plan amounted to € 946,346.
Notes
F inancial Statements
167
April 2015 Long-
Term Incentive
Program
April 2016 Long-
Term Incentive
Program
April 2017 Long-
Term Incentive
Program
April 2018 Long-
Term Incentive
Program
57.18
n/a
33.09
20.70
20.10
4.0
n/a
0.07
43.28
n/a
34.637
23.39
17.01
4.0
n/a
55.07
n/a
37.49
25.07
16.94
4.0
n/a
81.05
n/a
35.95
25.10
17.73
4.0
n/a
between
between
0.05
0.03 und 0.23
0.02 und 0.15
The fair value of the performance shares from the Long-Term Incentive
plans 2015 until 2018 has been determined using a Monte Carlo simu-
lation. The expected volatility is based on the development of the share
volatility of the last four years. Furthermore, the calculation of fair
value equally considered the performance criteria of the absolute and
relative performance of MorphoSys shares compared to the develop-
ment of the Nasdaq Biotech Index and the TecDAX Index. The parame-
ters of each program are listed in the table below.
Share Price on Grant Date in €
Strike Price in €
Expected Volatility of the MorphoSys share in %
Expected Volatility of the Nasdaq Biotech Index in %
Expected Volatility of the TecDAX Index in %
Performance Term of Program in Years
Dividend Yield in %
Risk-free Interest Rate in %
7.3.7 INITIAL EQUIT Y GR ANT
On September 10, 2018, MorphoSys established an initial equity grant
for one employee of MorphoSys US Inc. According to IFRS 2, this pro-
gram is considered a share-based payment program with settlement
in equity instruments (treasury shares of MorphoSys AG) and is ac-
counted for accordingly. The grant date was September 25, 2018 and
the total vesting/performance period is one year with the shares vest-
ing on a monthly basis, provided that the beneficiary is still with the
company as of the respective vesting date. A portion of the shares is
transferred to the beneficiary as soon as a monthly vesting period has
ended. The total number of shares granted was calculated by dividing
the overall grant value of US$ 370,000 by the average closing price of
MorphoSys shares as quoted in Xetra on the Frankfurt Stock Exchange
on the 30 trading days prior to the start date of the grant (€ 102.95). As
a result, the grant comprised a maximum of 3,104 shares. The fair
value as of the grant date amounted to € 91.90 per share.
7.4 REL AT ED P AR T IE S
Related parties that can be influenced by the Group or can have a
significant influence on the Group can be divided into subsidiaries,
members of the Supervisory Board, members of management in key
positions and other related entities.
The Group engages in business relationships with members of the
Management Board and Supervisory Board as related parties respon-
sible for the planning, management and monitoring of the Group. In
addition to cash compensation, the Group has granted the Management
Board convertible bonds and performance shares. The tables below
show the shares, stock options, convertible bonds and performance
shares held by the members of the Management Board and Supervi-
sory Board, as well as the changes in their ownership during the 2018
financial year.
F inancial Statements
168
SHARE S
MANAG EMENT B OARD
Dr. Simon Moroney
Jens Holstein
Dr. Malte Peters
Dr. Markus Enzelberger
TOTAL
SUPERVISORY B OARD
Dr. Marc Cluzel
Dr. Frank Morich
Krisja Vermeylen
Wendy Johnson
Dr. George Golumbeski1
Michael Brosnan1
Dr. Gerald Möller2
Klaus Kühn2
TOTAL
S T O C K OP T IONS
MANAG EMENT B OARD
Dr. Simon Moroney
Jens Holstein
Dr. Malte Peters
Dr. Markus Enzelberger
TOTAL
CONVER T IBL E B OND S
MANAG EMENT B OARD
Dr. Simon Moroney
Jens Holstein
Dr. Malte Peters
Dr. Markus Enzelberger
TOTAL
PERF ORMANC E SHARE S
MANAG EMENT B OARD
Dr. Simon Moroney
Jens Holstein
Dr. Malte Peters
Dr. Markus Enzelberger
TOTAL
Notes
01/01/2018
Additions
Sales
12/31/2018
483,709
11,000
9,505
7,262
511,476
500
1,000
350
500
-
-
11,000
0
13,350
8,928
36,554
3,313
3,248
52,043
0
0
0
0
0
0
900
0
900
8,928
30,537
0
8,834
48,299
0
0
0
0
0
0
0
0
0
483,709
17,017
12,818
1,676
515,220
500
1,000
350
500
0
0
-
-
2,350
01/01/2018
Additions
Forfeitures3
Exercises
12/31/2018
12,511
8,197
8,197
5,266
34,171
9,884
6,476
6,476
6,476
29,312
0
0
0
0
0
0
0
0
0
0
22,395
14,673
14,673
11,742
63,483
01/01/2018
Additions
Forfeitures3
Exercises
12/31/2018
88,386
60,537
0
0
148,923
0
0
0
0
0
0
0
0
0
0
0
30,537
0
0
30,537
88,386
30,000
0
0
118,386
01/01/2018
Additions
Forfeitures3
Allocations4
12/31/2018
30,060
20,086
3,187
5,987
59,320
2,969
1,945
1,945
1,945
8,804
2,182
1,495
0
329
4,006
3,797
2,600
0
572
6,969
27,050
17,936
5,132
7,031
57,149
1 Dr. George Golumbeski and Michael Brosnan have joined the Supervisory Board of MorphoSys AG on May 17, 2018.
2 Dr. Gerald Möller and Klaus Kühn have left the Supervisory Board of MorphoSys AG on May 17, 2018. Changes in the number of shares after resignation from
the Supervisory Board of MorphoSys AG are not presented in the tables.
3 Forfeited performance Shares are a result of the KPI achievement rate of 63.5 % and a company factor of 1.0 as determined at the end of the performance period
of the LTI plan 2014.
4 Allocations are made as soon as performance shares are transferred within the six-month exercise period after the end of the four-year waiting period.
Notes
F inancial Statements
169
If a Management Board member’s employment contract terminates due
to 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 of control, Management Board members are enti-
tled to exercise their extraordinary right to terminate their employ-
ment contracts and receive any outstanding fixed salary and the an-
nual bonus for the remainder of the agreed contract period, but at least
200 % of the annual gross fixed salary and the annual bonus. Moreover,
in such a case, all stock options and performance shares granted will
become vested immediately and can be exercised after the expiration
of the statutory vesting periods. A change of control has occurred
when (i) MorphoSys transfers assets or a substantial portion of its as-
sets to unaffiliated third parties, (ii) MorphoSys merges with an unaf-
filiated company, (iii) an agreement pursuant to § 291 AktG is entered
into with MorphoSys as a dependent company or MorphoSys is incor-
porated pursuant to § 319 AktG or (iv) a shareholder or third party
holds 30 % or more of MorphoSys’s voting rights.
While in the management report the remuneration of the Management
Board and Supervisory Boards as members in key management posi-
tions is presented in accordance with the provisions of the German
Corporate Governance Code, the following tables show the expense-
based view in accordance with IAS 24.
In May 2018, the Management Board was granted a one-time entitle-
ment to treasury shares of the Company with a fixed total amount of
€ 1.5 million, which could be exercised by December 31, 2018. Further
details can be found in Item 6.5.4* of the Notes. Dr. Moroney exercised
5,131 shares with a value of € 483,597 from this program, Mr. Holstein
exercised 3,417 shares with a value of € 358,785, Dr. Peters exercised
3,313 shares with a value of € 354,822 and Dr. Enzelberger exercised
2,676 shares valued at € 285,600.
*C R O S S - R E F E R E N C E to page 160
The Supervisory Board of MorphoSys AG does not hold any stock op-
tions, convertible bonds or performance shares.
The remuneration system for the Management Board is intended to
encourage sustainable, results-oriented corporate governance. The
Management Board’s total remuneration consists of several compo-
nents, including fixed compensation, an annual cash bonus that is
dependent upon the achievement of corporate targets (short-term in-
centives – STI), variable compensation components with long-term in-
centives (LTI) and other remuneration components. Variable remuner-
ation components with long-term incentive consist of Long-Term
Incentive plans (LTI plan) from previous years and the current year, a
convertible bond program from 2013 and stock option plans from the
prior and current years. The members of the Management Board addi-
tionally receive fringe benefits in the form of benefits in kind, essen-
tially consisting of a company car and insurance premiums. All total
remuneration packages are reviewed annually by the Remuneration
and Nomination Committee and compared to an annual Management
Board remuneration analysis to check the scope and appropriateness of
the remuneration packages. The amount of remuneration paid to mem-
bers of the Management Board is based largely on the duties of the re-
spective Management Board member, the financial situation and the
performance and business outlook for the Company versus its compe-
tition. All resolutions on adjustments to the overall remuneration pack-
ages are passed by the plenum of the Supervisory Board. The remuner-
ation of the Management Board and the pension contract were last
adjusted in July 2018.
F inancial Statements
170
Notes
MANAGEMEN T B OARD REMUNERAT ION F OR T HE Y EARS 2018 AND 2017 ( IA S 24) :
Dr. Simon Moroney
Chief Executive Officer
Jens Holstein
Chief Financial Officer
Dr. Malte Peters
Chief Development Officer
Appointment: March 1, 2017
Dr. Markus Enzelberger3
Chief Scientific Officer
Appointment (Interim-CSO):
April 15, 2017
Dr. Marlies Sproll 4
Chief Scientific Officer
Temporary Leave: April 15,
2017 - October 31, 2017
Dr. Arndt Schottelius
Chief Development Officer
Appointment: November 1, 2017
Resignation: October 31, 2017
Resignation: February 28, 2017
Total
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
Fixed Compensation
Fringe Benefits1
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))
One-Time Bonus in Shares
Multi-Year Variable Compensation2:
2013 Convertible Bonds 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)
2016 Long-Term Incentive Program
(Vesting Period 4 Years)
2017 Long-Term Incentive Program
(Vesting Period 4 Years)
2018 Long-Term Incentive Program
(Vesting Period 4 Years)
2017 Stock Option Plan
(Vesting Period 4 Years)
2018 Stock Option Plan
(Vesting Period 4 Years)
Total Share-Based Payment
(IAS 24.17 (e))
Total Compensation
500,876
35,912
368,144
904,932
149,567
149,567
0
58,224
202,349
22,460
67,635
542,074
32,654
455,343
1,030,071
158,788
158,788
483,616
0
0
1,452
26,657
372,652
42,905
273,899
689,456
99,949
99,949
0
59,641
138,585
15,383
46,324
171,688
86,435
112,481
402,235
46,725
337,877
786,837
111,233
111,233
358,857
0
0
994
18,257
56,632
281,500
568,644
206,903
1,057,047
60,967
60,967
-
0
0
0
0
0
163,906
104,449
107,395
68,437
107,395
0
140,040
0
127,997
81,566
83,861
0
136,980
0
91,595
53,441
89,593
0
83,861
0
397,800
30,613
334,152
762,565
76,190
76,190
354,900
0
0
0
0
0
68,437
91,595
53,441
89,593
814,259
1,868,758
1,061,195
2,250,054
563,670
1,353,075
737,806
1,635,876
191,256
1,309,270
657,966
1,496,721
122,854
895,584
655,245
1,346,163
496,088
884,686
(19,507)
144,642
2,168,620
6,456,015
204,698
417,158
121,688
743,544
29,186
29,186
–
0
0
0
0
0
0
0
53,875
321,300
31,211
269,892
622,403
68,515
68,515
286,650
0
0
0
0
0
91,595
82,185
89,593
222,450
20,427
67,745
310,622
77,976
77,976
0
39,879
138,585
15,383
46,324
112,481
62,898
0
0
68,979
105,222
80,538
103,253
9,161
23,490
135,904
28,245
28,245
0
39,879
138,585
(42,038)
(79,105)
(76,828)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,685,429
1,094,207
1,061,869
3,841,505
445,890
445,890
0
197,623
618,104
11,188
81,178
1,663,409
141,203
1,397,264
3,201,876
414,726
414,726
1,484,023
0
0
2,446
44,914
405,759
3,112,212
6,728,814
319,822
143,067
528,213
346,545
0
414,825
412,492
270,633
1 In 2017, the fringe benefits of Dr. Malte Peters und Dr. Markus Enzelberger each included a one-time compensation in the form of MorphoSys shares as an incentive to join
the Management Board of MorphoSys AG.
2 The fair value was determined pursuant to the regulations of IFRS 2 “share-based payment”. This table shows the pro-rata share of personnel expenses resulting from
share-based payment for the respective financial year. Further details can be found in Sections 7.1*, 7.2*. and 7.3*.
3 The figures presented for 2017 for Dr. Markus Enzelberger do not include any compensation granted for his activities as a member of the Senior Management Group as they
do not relate to his appointment as a member of the Management Board.
4 Dr. Marlies Sproll left the Management Board of MorphoSys AG on October 31, 2017. Since November 1, 2017, Dr. Marlies Sproll has taken on a new part-time role at
MorphoSys as Special Adviser to the CEO. Therefore, the figures presented for Dr. Marlies Sproll do not include any remuneration granted for these activities.
*C R O S S - R E F E R E N C E to page 161–163
MANAGEMEN T B OARD REMUNERAT ION F OR T HE Y EARS 2018 AND 2017 ( IA S 24) :
Dr. Simon Moroney
Chief Executive Officer
Jens Holstein
Chief Financial Officer
Dr. Malte Peters
Chief Development Officer
Appointment: March 1, 2017
Dr. Markus Enzelberger3
Chief Scientific Officer
Appointment (Interim-CSO):
April 15, 2017
Appointment: November 1, 2017
Dr. Marlies Sproll 4
Chief Scientific Officer
Temporary Leave: April 15,
2017 - October 31, 2017
Resignation: October 31, 2017
Dr. Arndt Schottelius
Chief Development Officer
Resignation: February 28, 2017
Total
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
Notes
F inancial Statements
171
204,698
417,158
121,688
743,544
29,186
29,186
–
0
0
0
0
0
321,300
31,211
269,892
622,403
68,515
68,515
286,650
0
0
0
0
0
222,450
20,427
67,745
310,622
77,976
77,976
0
39,879
138,585
15,383
46,324
112,481
163,906
104,449
107,395
68,437
107,395
68,979
105,222
80,538
0
53,875
0
122,854
895,584
91,595
82,185
89,593
655,245
1,346,163
0
62,898
0
496,088
884,686
Fixed Compensation
Fringe Benefits1
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))
One-Time Bonus in Shares
Multi-Year Variable Compensation2:
2013 Convertible Bonds 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)
2016 Long-Term Incentive Program
(Vesting Period 4 Years)
2017 Long-Term Incentive Program
(Vesting Period 4 Years)
2018 Long-Term Incentive Program
(Vesting Period 4 Years)
2017 Stock Option Plan
(Vesting Period 4 Years)
2018 Stock Option Plan
(Vesting Period 4 Years)
Total Share-Based Payment
(IAS 24.17 (e))
Total Compensation
500,876
35,912
368,144
904,932
149,567
149,567
0
58,224
202,349
22,460
67,635
0
0
542,074
32,654
455,343
1,030,071
158,788
158,788
483,616
0
0
1,452
26,657
140,040
136,980
1,061,195
2,250,054
372,652
42,905
273,899
689,456
99,949
99,949
0
59,641
138,585
15,383
46,324
0
0
402,235
46,725
337,877
786,837
111,233
111,233
358,857
0
0
994
18,257
56,632
91,595
53,441
89,593
281,500
568,644
206,903
1,057,047
60,967
60,967
-
0
0
0
0
0
0
0
397,800
30,613
334,152
762,565
76,190
76,190
354,900
0
0
0
0
0
68,437
91,595
53,441
89,593
171,688
86,435
112,481
127,997
81,566
83,861
83,861
814,259
1,868,758
563,670
1,353,075
737,806
1,635,876
191,256
1,309,270
657,966
1,496,721
1 In 2017, the fringe benefits of Dr. Malte Peters und Dr. Markus Enzelberger each included a one-time compensation in the form of MorphoSys shares as an incentive to join
the Management Board of MorphoSys AG.
2 The fair value was determined pursuant to the regulations of IFRS 2 “share-based payment”. This table shows the pro-rata share of personnel expenses resulting from
share-based payment for the respective financial year. Further details can be found in Sections 7.1*, 7.2*. and 7.3*.
3 The figures presented for 2017 for Dr. Markus Enzelberger do not include any compensation granted for his activities as a member of the Senior Management Group as they
do not relate to his appointment as a member of the Management Board.
4 Dr. Marlies Sproll left the Management Board of MorphoSys AG on October 31, 2017. Since November 1, 2017, Dr. Marlies Sproll has taken on a new part-time role at
MorphoSys as Special Adviser to the CEO. Therefore, the figures presented for Dr. Marlies Sproll do not include any remuneration granted for these activities.
*C R O S S - R E F E R E N C E to page 161–163
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
103,253
9,161
23,490
135,904
28,245
28,245
0
39,879
138,585
(42,038)
(79,105)
(76,828)
–
–
–
–
(19,507)
144,642
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,685,429
1,094,207
1,061,869
3,841,505
445,890
445,890
0
197,623
618,104
11,188
81,178
1,663,409
141,203
1,397,264
3,201,876
414,726
414,726
1,484,023
0
0
2,446
44,914
319,822
143,067
528,213
346,545
0
414,825
412,492
270,633
405,759
3,112,212
6,728,814
2,168,620
6,456,015
F inancial Statements
172
Notes
In the years 2018 and 2017, there were no other long-term benefits in
accordance with IAS 24.17 (c) or benefits upon termination of employ-
ment in accordance with IAS 24.17 (d) accruing to the Management
Board or Supervisory Board.
In 2018, the total remuneration for the Supervisory Board, excluding
reimbursed travel costs, amounted to € 525,428 (2017: € 523,015).
SUPERVI S OR Y B OARD REMUNERAT ION F OR T HE Y EARS 2018 AND 2017:
Fixed Compensation
Attendance Fees1
Total Compensation
in €
2018
2017
2018
2017
2018
2017
Dr. Marc Cluzel
Dr. Frank Morich
Krisja Vermeylen
Wendy Johnson
Dr. George Golumbeski2
Michael Brosnan2
Dr. Gerald Möller3
Klaus Kühn3
Karin Eastham4
TOTAL
76,742
61,004
49,916
46,160
28,961
28,961
36,558
17,326
–
345,628
52,160
57,240
28,961
46,160
–
–
95,156
46,160
19,578
345,415
32,400
23,200
24,400
37,400
25,200
18,600
11,800
6,800
–
179,800
26,800
23,200
16,000
38,000
–
–
36,800
22,000
14,800
177,600
109,142
84,204
74,316
83,560
54,161
47,561
48,358
24,126
–
525,428
78,960
80,440
44,961
84,160
–
–
131,956
68,160
34,378
523,015
1 The attendance fee contains expense allowances for the attendence at the Supervisory Board and the Committee meetings.
2 Dr. George Golumbeski and Michael Brosnan have joined the Supervisory Board of MorphoSys AG on May 17, 2018.
3 Dr. Gerald Möller and Klaus Kühn have left the Supervisory Board of MorphoSys AG AG on May 17, 2018.
4 Karin Eastham has left the Supervisory Board of MorphoSys AG AG on May 17, 2017.
No other agreements presently exist with current or former members
of the Supervisory Board.
8 Additional Notes
As of December 31, 2018, the Senior Management Group held 72,604
stock options (December 31, 2017: 35,978 shares), 11,233 convertible
bonds (December 31, 2017: 13,233 convertible bonds) and 83,660 per-
formance shares (December 31, 2017: 67,149 performance shares),
which had been granted by the Company. In 2018, a new stock option
program and a new performance share program were issued to the
Senior Management Group (see paragraphs 7.1.2* and 7.3.6*). In May
2018, the Senior Management Group was granted a one-time entitle-
ment to treasury shares of the Company with a fixed total amount of
€ 0.5 million, which could be exercised by December 31, 2018. Further
details can be found in Item 6.5.4* of the Notes. By December 31, 2018,
4,685 shares under this entitlement worth € 0.5 million had been
transferred to the Senior Management Group. On April 1, 2018, the
Senior Management Group was granted 9,360 shares under the 2014
LTI program, which had the option to receive these shares within six
months. As of December 31, 2018, the option was exercised by the
Senior Management Group for 9,360 shares.
*C R O S S - R E F E R E N C E to page 161, page 166 and page 160
8.1 OBL IGAT IONS ARI SING F ROM OPERAT ING L EASE 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 2018 and 2017, leasing expenses amounted to
€ 3.2 million and € 2.6 million. Leasing expenses for the financial
years 2018 and 2017 include expenses for company cars and machin-
ery totaling € 0.2 million and € 0.2 million, respectively. The majority
of these contracts can be renewed on a yearly or quarterly basis. Some
of these agreements may be terminated prematurely.
In 2016 a rental agreement was signed for the premises at Semmel-
weisstraße 7, Planegg. The contract includes a minimum rental period
of ten years.
The future minimum payments under non-terminable operating
leases, insurance contracts and other services as of December 31, 2018
are shown in the table below.
in 000’ €
Up to One Year
Between One and
Five Years
More than
Five Years
TOTAL
Rent and
Leasing
Other
2,935
1,577
Total
4,512
11,091
8,504
22,530
0
11,091
0
1,577
8,504
24,107
Notes
F inancial Statements
173
Additionally, the future payments shown in the table below may be-
come due for outsourced studies after December 31, 2018. These
amounts could be shifted or substantially lower due to changes in the
study timeline or premature study termination.
in million €
Up to One Year
Between One and Five Years
More than Five Years
TOTAL
Total
2018
51.4
45.6
0.0
97.0
8.2 CON T INGEN T ASSE 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 obliga-
tions 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.
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.
If certain milestones are achieved in the Proprietary Development seg-
ment, such as filing an application for an investigational new drug
(IND) for specific target molecules, this may trigger milestone pay-
ments to licensors of up to an aggregate of US$ 287 million related to
regulatory events and achievement of sales targets. The next milestone
payment of US$ 12.5 million will presumably be due in approximately
12 to 18 months.
If a partner achieves certain milestones in the Partnered Discovery
segment, 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 fur-
ther details can be published since the timing, and the achievement of
such milestones are uncertain.
Obligations may arise from enforcing the Company’s patent rights
versus third parties. It is also conceivable that competitors may chal-
lenge the patents of MorphoSys Group or MorphoSys may also come to
the conclusion that MorphoSys’s patents or patent families have been
infringed upon by competitors. This could prompt MorphoSys to take
legal action against competitors or lead competitors to file counter-
claims against MorphoSys. Currently, there are no specific indications
such obligations have arisen.
8.3 CORP ORAT E G OVERNANCE
The Group has submitted the Declaration of Conformity with the rec-
ommendations of the Government Commission on the German Corpo-
rate Governance Code for the 2018 financial year under Section 161 of
the German Stock Corporation Act (AktG). This declaration was pub-
lished on the Group’s website (www.morphosys.com) on November 30,
2018 and made permanently available to the public.
8.4 RE SEARCH AND DEVEL OPMEN T AGREEMEN T S
The Group has entered numerous research and development agree-
ments as part of its proprietary research and development activities
and its partnered research strategy. The following information describes
the agreements that have a material effect on the Group and the devel-
opments under the research and development agreements in the 2018
financial year.
8.4.1 PROPRIE 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): Galapagos, GlaxoSmithKline, I-Mab Biopharma,
Immatics Biotechnologies, Merck Serono, MD Anderson Cancer Center,
Novartis and Xencor.
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 activities ranging from the probing of target molecules to
the completion of clinical trials for novel therapeutic antibodies. After
demonstrating clinical efficacy in humans, the programs may be out-
licensed to partners for further development, approval, and commer-
cialization. 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 develop-
ment of antibodies, Galapagos provided access to target molecules
already identified that are associated with bone and joint diseases.
MorphoSys provided access to its antibody technologies used for gen-
erating fully human antibodies directed against these target mole-
cules. Under the terms of the agreement, Galapagos and MorphoSys
will share the research and development costs. In July 2014, the col-
laboration advanced into the preclinical development of MOR106, an
antibody from MorphoSys’ next-generation library Ylanthia directed
against a novel Galapagos target molecule.
On July 19, 2018, MorphoSys announced an exclusive global agreement
between MorphoSys and Galapagos with Novartis Pharma AG for the
development and commercialization of MOR106. Under the agreement,
the companies will work together to significantly expand the existing
development plan for MOR106. Novartis exclusively holds all rights to
the product’s commercialization resulting from the agreement. With
the signing of the agreement, all future research, development, manu-
facturing and marketing costs for MOR106 will be borne by Novartis.
Included in this is the ongoing phase 2 trial “IGUANA” in patients with
atopic dermatitis, as well as the phase 1 trial also initiated to evaluate
the safety and efficacy of the subcutaneous administration of MOR106
F inancial Statements
174
Notes
in healthy volunteers and patients with atopic dermatitis. MorphoSys
and Galapagos also intend to conduct further studies to support the
development of MOR106 in atopic dermatitis. As part of this agree-
ment, Novartis will explore the potential of MOR106 in other indica-
tions beyond atopic dermatitis. In addition to receiving financing from
Novartis’ for the current and future development program for MOR106,
MorphoSys and Galapagos also jointly received an upfront payment of
€ 95 million. Of this amount, MorphoSys recognized its 50 % share of
€ 47.5 million as revenue in 2018. MorphoSys and Galapagos will con-
tinue to jointly receive significant milestone payments of up to approx-
imately US$ 1 billion (based on the current euro-dollar exchange rate
at the time the agreement was signed) when specific development,
regulatory, commercial and revenue milestones are met. MorphoSys
and Galapagos also stand to jointly receive tiered royalties ranging
up to a low 10 % to low 20 % range of net sales. According to their 2008
agreement, MorphoSys and Galapagos will share in all payments
equally (50/50).
In June 2013, MorphoSys announced it had entered into a global agree-
ment with GlaxoSmithKline (GSK) for the development and commer-
cialization of MOR103. MOR103/GSK3196165 is MorphoSys’s propri-
etary HuCAL antibody against the GM-CSF target molecule. Under the
agreement, GSK assumes responsibility for the compound’s entire de-
velopment and commercialization. MorphoSys has already received an
upfront payment of € 22.5 million under this agreement and, next to
tiered double-digit royalties on net sales, is still eligible to receive ad-
ditional payments from GSK in an amount of up to € 423 million, depend-
ing on the achievement of certain developmental stages and regula-
tory, commercial and revenue-related milestones. GSK has clinically
tested MOR103 in rheumatoid arthritis (RA) and inflammatory hand
osteoarthritis in, among others, a phase 2b study in RA and a 2a study
in patients with inflammatory hand osteoarthritis. The respective
study data was presented in October 2018 at the annual conference of
the American College of Rheumatology (ACR). At the same time, GSK
also announced that it does not intend to continue to pursue further
development in the indication of hand osteoarthritis.
In 2017, MorphoSys announced it had signed an exclusive regional
licensing agreement with I-Mab Biopharma to develop and commer-
cialize MOR202 in China, Taiwan, Hong Kong and Macao. MOR202 is
MorphoSys’s proprietary antibody targeting CD38. MOR202 was eval-
uated in a phase 1/2a clinical trial in Europe in patients with multiple
myeloma. MorphoSys is currently evaluating the further development
of the antibody in autoimmune diseases. Under the terms of the
agreement, I-Mab Biopharma has the exclusive rights for the later
development and commercialization of MOR202 in the agreed regions.
MorphoSys received an upfront payment of US$ 20.0 million and is
also entitled to receive additional success-based clinical and commer-
cial milestone payments from I-Mab of up to roughly US$ 100 million.
In addition, MorphoSys will also be entitled to receive double-digit,
staggered royalties on net revenue of MOR202 in the agreed regions.
I-Mab now plans to launch a pivotal study in early 2019.
In the reporting year, MorphoSys announced the completion of an ex-
clusive strategic development collaboration and regional licensing
agreement with I-Mab Biopharma for the MOR210 antibody. MOR210 is
a preclinical antibody candidate developed by MorphoSys against
C5aR with the potential for development in immuno-oncology. I-Mab
has exclusive rights to develop and market MOR210 in China, Hong
Kong, Macao, Taiwan and South Korea, while MorphoSys retains the
rights for the rest of the world. Under the terms of the agreement,
I-Mab will exercise the exclusive rights to develop and market MOR210
in its contracted territories. With the support of MorphoSys, I-Mab will
undertake and fund all global development activities, including clinical
trials in China and the United States, to clinical proof of concept in can-
cer medicine. MorphoSys received an upfront payment of US$ 3.5 mil-
lion and is further eligible to receive performance-related clinical and
sales-based milestone payments of up to US$ 101.5 million. MorphoSys
recognized the upfront payment of US$ 3.5 million (€ 3.1 million) as
revenue in 2018. In addition, MorphoSys will receive tiered royalties in
the mid-single-digit percentage range of net sales on the contracted
territory of I-Mab. In return for conducting a successful clinical proof
of concept trial, I-Mab is entitled to low-single-digit royalties on net
sales of MOR210 outside the I-Mab territory, as well as staggered
shares of proceeds from the further out-licensing of MOR210.
In August 2015, MorphoSys announced a strategic alliance in the field
of immuno-oncology with the German company Immatics Biotechnolo-
gies 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 proprietary tumor-associated peptides (TUMAPs). In re-
turn, 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 companies’ development 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 se-
lected target molecules. Merck Serono is contributing its expertise in
the field of immuno-oncology and clinical development and will assume
full project responsibility starting with phase 1 of clinical development.
In May 2016, MorphoSys and the University of Texas MD Anderson Can-
cer Center announced a long-term strategic alliance. With MorphoSys
applying its Ylanthia technology platform, the partners will work to-
gether to identify, validate and develop novel anti-cancer antibodies
through to clinical proof of concept by researching targets in a variety
of oncology indications. MorphoSys and MD Anderson will conduct
early clinical studies of therapeutic antibody candidates after which
MorphoSys has the option to continue developing selected antibodies
in later stages of clinical development for its own proprietary pipeline.
Notes
F inancial Statements
175
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 responsible for further clinical development after the success-
ful completion of the phase 1 clinical trial. Xencor received an upfront
payment of US$ 13.0 million (approx. € 10.5 million) from MorphoSys,
which was capitalized under in-process R&D programs. Xencor is enti-
tled to development, regulatory and commercially-related milestone
payments as well as tiered royalties on product sales.
8.4.2 PAR 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
duration of the agreements or recognized in full as revenue when
reaching a predefined target or milestone. These payments include up-
front 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 2018 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
designed so that they can be continued by the partner and, therefore,
still result in performance-based payments for the achievement of the
defined milestones.
Partnerships in the Partnered Discovery segment that ended before
the beginning of 2018 but where drug development programs were
still being pursued, include (in alphabetical order): Astellas, Bayer AG,
Boehringer Ingelheim, Daiichi-Sankyo, Fibron Ltd. (continuation of con-
tract with Prochon Biotech Ltd.), Janssen Biotech, Merck & Co., Novartis,
OncoMed Pharmaceuticals, Pfizer, Roche and Schering-Plough (a sub-
sidiary of Merck & Co.).
Partnerships that were still active in 2018 include (in alphabetical or-
der): GeneFrontier Corporation/Kaneka, Heptares and LEO Pharma.
In the year under review, MorphoSys announced that it expanded its
existing strategic alliance with LEO Pharma to include peptide-based
therapeutics. The goal of the partnership is to discover new, pep-
tide-based drugs for the treatment of diseases with high unmet medi-
cal needs and that are a valuable addition to the development pipelines
of both companies. The collaboration extends the two companies’ part-
nership to discover and develop antibody-based therapies for derma-
tology, which has already been in place since November 2016. Under
this agreement, LEO Pharma will select therapeutic target molecules
against which MorphoSys will identify target molecules using its
proprietary peptide technology platform. LEO Pharma will then either
choose to further develop these target molecules or use them to create
other drug candidates. LEO Pharma will retain exclusive worldwide
rights to the active ingredients and be responsible for the development
and commercialization of the dermatology medicines that result.
MorphoSys will retain an exclusive option to secure worldwide rights
to all oncology medicines stemming from the collaboration.
The Group’s alliance with Novartis AG for the research and develop-
ment of biopharmaceuticals came to an end in November 2017. The
companies’ collaboration began in 2004 and led to the creation of sev-
eral ongoing therapeutic antibody programs against a number of dis-
eases. MorphoSys receives performance-based milestones, contingent
upon the successful clinical development and regulatory approval of
several products. In addition to these payments, MorphoSys is also
entitled to royalties on any future product sales.
8.5 SUBSEQUEN T EVEN T S
On January 26, 2019, we announced that in our lawsuit against Janssen
Biotech and Genmab A/S, the United States (U.S.) District Court of
Delaware, based on a hearing held November 27, 2018, ruled in a Court
Order on January 25, 2019, that the asserted claims of three MorphoSys
patents with U.S. Patent Numbers 8,263,746, 9,200,061 and 9,758,590
are invalid. The Court thus granted a motion for Summary Judgement
of invalidity filed by Janssen Biotech and Genmab, A/S against the
three patents held by MorphoSys. As a result of this decision, the jury
trial scheduled for February 2019 to consider Janssen’s and Genmab’s
alleged infringement and the validity of the MorphoSys patents did not
take place. On January 31, 2019 we announced that we had settled the
dispute with Janssen Biotech and Genmab A/S. The parties agreed to
drop the mutual claims related to the litigation: MorphoSys dismissed
claims for alleged patent infringement against Janssen Biotech and
Genmab A/S and agreed not to appeal from the court order dated
January 25, 2019. Janssen and Genmab dismissed their counterclaims
against MorphoSys.
In early February 2019, we announced the appointment of David Trexler
as President and Member of the Board of Directors of MorphoSys US
Inc. effective February 6, 2019. Mr. Trexler will lead the further devel-
opment of MorphoSys's U.S. subsidiary with a focus on building com-
mercial capabilities. Mr. Trexler joins MorphoSys from EMD Serono, a
subsidiary of Merck KGaA, Darmstadt. AT EMD Serono, he was respon-
sible, among other things, for establishing the first commercial organi-
zation of Merck KGaA's oncology division in the U.S. and for the market
launch of the cancer drug avelumab for the treatment of metastatic
Merkel cell carcinoma.
On February 19, 2019, Simon Moroney, CEO and co-founder of
MorphoSys AG (informed the Company’s Supervisory Board that he
has decided not to renew his contract as a member of the company’s
Management Board. As a result of his decision, Dr. Moroney will step
down as CEO on expiry of his current contract on June 30, 2020, or
when a successor is appointed, whichever comes sooner.
At the end of February 2019, our partner Janssen announced that it
had received U.S. FDA approval for Tremfya® One-Press, a single-dose,
patient-controlled injector for adults with moderate-to-severe plaque
psoriasis. This is a device that allows patients to administer the drug
subcutaneously by themselves and is thus intended to provide a higher
convenience to psoriasis patients with respect to the treatment of their
chronic disease.
F inancial Statements
176
Notes
On March 7, 2019 MorphoSys announced that during the first quarter
of 2019, the Company in agreement with the FDA implemented an
amendment of the B-MIND study by introducing a co-primary endpoint
into the trial. The scientific rationale for the amendment is based on
published literature as well as MorphoSys’s own pre-clinical data,
which indicate that MOR208 might be particularly active in patients
who can be characterized by the presence of a certain biomarker. Dis-
cussions with the FDA regarding the biomarker assay are currently
being planned and are expected to take place in the middle of 2019.
The pre-planned, event-driven interim analysis of B-MIND remains
projected to take place in the second half of 2019. Depending on the
outcome of the interim analysis, an increase from 330 to 450 patients
may be required, in which case an event-driven primary analysis of
the study is expected in the first half of 2021.
8.6 RE SP ONSIBIL I T Y S TAT EMEN T
To the best of our knowledge, and in accordance with the applicable
reporting principles, the consolidated financial statements give a true
and fair view of the Group’s net assets, financial position and results of
operations, and the group management report provides a fair review
of the development and performance of the business and the position of
the Group together with a description of the principal opportunities
and risks associated with the Group’s expected development.
Planegg, March 13, 2019
Dr. Simon Moroney
Chief Executive Officer
Jens Holstein
Chief Financial Officer
Dr. Malte Peters
Chief Development Officer
Dr. Markus Enzelberger
Chief Scientific Officer
Independent Auditor ’s Repor t
Additional Infor mation
177
Independent Auditor’s Report
To MorphoSys AG, Planegg
Report on the Audit of the Consoli-
dated Financial Statements and of
the Group Management Report
AUDI T OPINIONS
We have audited the consolidated financial statements of
MorphoSys AG, Planegg, and its subsidiaries (the Group), which
comprise the consolidated balance sheet as of December 31,
2018, and the consolidated statement of profit or loss, consoli-
dated statement of comprehensive income, consolidated state-
ment of changes in equity and consolidated cash flow statement
for the financial year from January 1, to December 31, 2018, and
notes to the consolidated financial statements including a sum-
mary of significant accounting policies . In addition, we have
audited the group management report of MorphoSys AG for the
financial year from January 1, to December 31, 2018. We have
not audited the content of those parts of the group management
report listed in the “Other Information” section of our auditor’s
report in accordance with the German legal requirements.
In our opinion, on the basis of the knowledge obtained in the
audit,
• the accompanying consolidated financial statements comply,
in all material respects, with the IFRSs as adopted by the EU,
and the additional requirements of German commercial law
pursuant to § [Article] 315e Abs. [paragraph] 1 HGB [Handels-
gesetzbuch: German Commercial Code] and, in compliance
with these requirements, give a true and fair view of the
assets, liabilities, and financial position of the Group as at
December 31, 2018, and of its financial performance for the
financial year from January 1, to December 31, 2018, and
• the accompanying group management report as a whole pro-
vides an appropriate view of the Group’s position. In all mate-
rial respects, this group management report is consistent with
the consolidated financial statements, complies with German
legal requirements and appropriately presents the opportuni-
ties and risks of future development. Our audit opinion on the
group management report does not cover the content of those
parts of the group management report listed in the “Other
Information” section of our auditor’s report.
Pursuant to § 322 Abs. 3 Satz [sentence] 1 HGB, we declare that
our audit has not led to any reservations relating to the legal
compliance of the consolidated financial statements and of the
group management report.
BASIS F OR T HE AUDI T OPINIONS
We conducted our audit of the consolidated financial statements
and of the group management report in accordance with § 317
HGB and the EU Audit Regulation (No. 537/2014, referred to sub-
sequently as “EU Audit Regulation”) and in compliance with
German Generally Accepted Standards for Financial State-
ment Audits promulgated by the Institut der Wirtschaftsprüfer
[Institute of Public Auditors in Germany] (IDW). Our responsi-
bilities under those requirements and principles are further
described in the “Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements and of the Group Manage-
ment Report” section of our auditor’s report. We are indepen-
dent of the group entities in accordance with the requirements
of European law and German commercial and professional law,
and we have fulfilled our other German professional responsi-
bilities in accordance with these requirements. In addition, in
accordance with Article 10 (2) point (f) of the EU Audit Regula-
tion, we declare that we have not provided non-audit services
prohibited under Article 5 (1) of the EU Audit Regulation. We
believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinions on the
consolidated financial statements and on the group manage-
ment report.
KEY AUDI T MAT T ERS IN T HE AUDI T OF T HE CONSOL IDAT ED
F INANC IAL S TAT EMEN T S
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the consoli-
dated financial statements for the financial year from January 1
to December 31, 2018. These matters were addressed in the
context of our audit of the consolidated financial statements as
a whole, and in forming our audit opinion thereon; we do not
provide a separate audit opinion on these matters.
In our view, the matters of most significance in our audit were
as follows:
1. Impairment of goodwill and intangible assets with indefinite
useful lives
2. Revenue recognition related to the outlicensing of drug pro-
gramm MOR106
3. Accounting for the capital raise in the financial year 2018
Our presentation of these key audit matters has been structured
in each case as follows:
1) Matter and issue
2) Audit approach and findings
3) Reference to further information
Additional Infor mation
178
Independent Auditor ’s Repor t
Hereinafter we present the key audit matters:
1. Impairment of goodwill and intangible assets with in-
definite useful lives
1) In the consolidated financial statements of the Company,
an amount of € 3.7 million is reported under the balance
sheet item “Goodwill”. In addition, intangible assets with
an indefinite useful life totaling € 37.0 million are re-
ported under the item “Research and development pro-
grams under development”. This balance sheet item con-
tains capitalized prepayments from the in-licensing of
active substances and active substances from acquisi-
tions. The assets are not yet available for use and are
therefore not yet amortized. Goodwill and intangible as-
sets with an indefinite useful life are tested for impair-
ment by the Company once a year or on an ad hoc basis in
order to determine the potential need for depreciation. The
impairment test is carried out at the level of the cash-
generating units. As part of the impairment test, the book
values of the respective goodwill or intangible assets with
an indefinite useful life are compared with the corre-
sponding recoverable amount. This is the higher of the
value in use and the fair value less costs of disposal. The
basis for measuring goodwill is regularly the present
value of future cash inflows and outflows of the respective
group of cash-generating units. The bases of valuation of
the research and development programs under develop-
ment are the present values of future cash inflows and
outflows of the cash-generating unit. The cash values
are determined using discounted cash flow models. The
adopted cash flow forecast of the Group is the starting
point, which is updated with assumptions about long-term
growth rates. This also takes into account expectations
about future market developments and assumptions about
the development of macroeconomic factors. Discounting
is done using the weighted average cost of capital. As a
result of the impairment test, an impairment charge of
€ 18.8 million was identified for the cash-generating unit
Lanthio Group. The result of this valuation depends to a
large extent on the assessment of future cash inflows by
the legal representatives as well as the discount rate
used and is therefore subject to considerable uncertainty.
Against this background and due to the underlying com-
plexity of the applied valuation models, this issue was of
particular importance during our audit.
2) During our audit, we reviewed, among other things, the
methodology used to carry out the impairment tests and
assessed the determination of the weighted capital costs.
Among other things, the appropriateness of the future
cash inflows used in the valuation is matched with the
current budgets from the group's cash flow forecast drawn
up by the legal representatives and acknowledged by the
Supervisory Board, as well as through coordination with
general auditors and industry-specific market expectations.
With the knowledge that even relatively small changes in
the discount rate used can have a material effect on the
amount of the recoverable amount determined in this way,
we dealt in detail with the parameters used to determine
the discount rate used and followed the calculation method.
In addition, due to the significant importance of goodwill
and capitalized research and development programs, we
conducted additional sensitivity analyzes for the cash-
generating units (book value in comparison with the re-
coverable amount). In order to assess the unscheduled
depreciation in the cash-generating unit Lanthio Group,
we reviewed the planning documents and assessed the
resulting triggering event for the extraordinary deprecia-
tion. Furthermore, on the basis of the findings from the
planning documents, we have reconstructed the determi-
nation of the amount of unscheduled depreciation and its
accrual accounting. Overall, the valuation parameters and
assumptions used by the legal representatives are in line
with our expectations.
3) The information provided by the Company on goodwill
and intangible assets with an indefinite useful life is con-
tained in sections 5.7.3 and 5.7.5 of the notes to the con-
solidated financial statements.
2. Revenue recognition related to the outlicensing of drug
programm MOR106
1) The consolidated financial statements of the Company in-
clude € 47.5 million in revenue from the contractual agree-
ment signed on July 19, 2018 for the development and com-
mercialization of the MOR106 drug program with Novartis
Pharma AG. The drug program MOR106 was developed by
MorphoSys in collaboration with Galapagos N.V. Novartis
Pharma AG now exclusively holds all rights to market the
products resulting from the collaboration. All research, de-
velopment, manufacturing and marketing costs are borne
by Novartis Pharma AG in the future. The revenue gener-
ated by MorphoSys in 2018 is mainly related to the trans-
fer of rights to the MOR106 drug program. In return for
this transfer, MorphoSys received a licence payment from
Novartis Pharma AG. Realization of the revenue from the
license fee in 2018 was timely, as control of the drug pro-
gram MOR106 was transferred to Novartis Pharma AG
with the transfer of the license. Revenue recognition in
connection with the out-licensing of the MOR106 drug
program is associated with significant risk in view of the
extensive and complex contractual agreement and is also
partly based on the judgment of the legal representatives.
Considering this background information, this issue was
of particular importance for our audit.
2) Among other things, we assessed the appropriateness and
effectiveness of the Group’s established internal control
system with regard to the complete and correct recording
and realization of the revenues in connection with out-
licensing, taking into account the IT systems used. In
addition, we have gained an understanding of the under-
lying contractual agreement and have assessed it with
respect to the realization of the revenue in accordance
with the provisions of IFRS 15. In order to assess revenue
Independent Auditor ’s Repor t
Additional Infor mation
179
recognition, we have used and awarded corresponding
contract documents. We were able to satisfy ourselves that
the systems and processes in place and the controls that
were put in place were adequate and that the assessments
and assumptions made by the legal representatives were
sufficiently documented and justified to ensure the proper
recording of revenues in connection with these exemptions.
3) The Company's revenue disclosures are included in sec-
tions 3.3 and 4.1 of the notes to the consolidated financial
statements.
3. Accounting for the capital raise in the financial year 2018
1) In the consolidated financial statements of the Company,
the targeted gross proceeds of € 194 million ($ 239 mil-
lion) from the capital increase in the 2018 financial year
are reported under the item “Equity”. This was achieved in
connection with the IPO on the US stock exchange Nasdaq
in April 2018. The transaction was made through two
successive capital increases from the authorized capital,
excluding existing shareholders’ subscription rights, at a
price of $ 25.04 per American Depository Share. Each of
these shares represents one quarter of a MorphoSys com-
mon share. In a first step, a basic offer was issued to issue
2,075,000 new ordinary shares in the form of 8.3 million
American Depository Shares. Subsequently, an option was
offered by the underwriting banks to acquire a further
311,250 new ordinary shares in the form of 1.2 million
American Depository Shares. The net proceeds from the
capital increase after deduction of bank commissions and
other fees amounted to € 178.6 million, of which € 2.4 mil-
lion resulted in an increase in share capital, a further
€ 176.2 million less transaction costs of € 15.0 million
the capital reserve is discontinued. The capital increase
is associated with a significant degree of risk given the
complex accounting requirements, in particular to narrow
the picture of direct and indirect transaction costs and the
assessment of whether transaction costs are incremental,
high transaction volumes and legal requirements, and is
also partly based on estimates the legal representative.
Considering this background information, this issue was
of particular importance for our audit.
2) In our audit, we assessed the accounting treatment of
the capital increase in accordance with the provisions of
IAS 32 in conjunction with IFRS 9. The focus of our assess-
ment was on the presentation of gross proceeds and the
assessment of the accounting of direct and indirect costs
in connection with the capital increase. First, we assessed
whether the transaction costs associated with the capi-
tal increase are incremental and directly attributable to
them, and whether the discretionary powers of the legal
representatives were properly exercised in this allocation.
Among other things, we have agreed the costs incurred
with invoices and framework agreements with the under-
writing banks and have subsequently carried out a re-
calculation of the costs. In addition, we assessed the con-
sideration of exchange rate effects in accordance with
IAS 21 and reviewed the conversion rate using external
sources. In addition, we have recorded the entry in the
commercial register with regard to the amount and the
date of registration of the capital increase and have
checked the corresponding incoming payments by means
of the bank statements of the participating credit institu-
tions. From our point of view, the disclosure of the capital
increase and the associated assessments of the legal rep-
resentatives are sufficiently documented and justified.
3) The Company's capital raise disclosures are included in
sections 6.5.1, 6.5.2 and 6.5.5 of the notes to the consoli-
dated financial statements.
O T HER INF ORMAT ION
The executive directors are responsible for the other informa-
tion. The other information comprises the following non-audited
parts of the group management report, which we obtained prior
of the date of our auditor’s report:
• the group statement on corporate governance pursuant to
§ 315d HGB included in the group management report
• the corporate governance report pursuant to No. 3.10 of the
German Corporate Governance Code (except for the remuner-
ation report)
The annual report is expected to be made available to us after
the date of the auditor’s report.
Our audit opinions on the consolidated financial statements and
on the group management report do not cover the other infor-
mation, and consequently we do not express an audit opinion or
any other form of assurance conclusion thereon.
In connection with our audit, our responsibility is to read the
other information and, in so doing, to consider whether the
other information
• is materially inconsistent with the consolidated financial
statements, with the group management report or our knowl-
edge obtained in the audit, or
• otherwise appears to be materially misstated.
RESPONSIBILITIES OF THE EXECUTIVE DIREC TORS AND THE
SUPERVISORY BOARD FOR THE CONSOLIDATED FINANCIAL
STATEMENTS AND THE GROUP MANAGEMENT REPORT
The executive directors are responsible for the preparation of
the consolidated financial statements that comply, in all mate-
rial respects, with IFRSs as adopted by the EU and the addi-
tional requirements of German commercial law pursuant to
§ 315e Abs. 1 HGB and that the consolidated financial state-
ments, in compliance with these requirements, give a true
and fair view of the assets, liabilities, financial position, and
financial performance of the Group. In addition, the executive
directors are responsible for such internal control as they have
determined necessary to enable the preparation of consolidated
financial statements that are free from material misstatement,
whether due to fraud or error.
Additional Infor mation
180
Independent Auditor ’s Repor t
In preparing the consolidated financial statements, the execu-
tive directors are responsible for assessing the Group’s ability to
continue as a going concern. They also have the responsibility
for disclosing, as applicable, matters related to going concern.
In addition, they are responsible for financial reporting based
on the going concern basis of accounting unless there is an in-
tention to liquidate the Group or to cease operations, or there is
no realistic alternative but to do so.
Furthermore, the executive directors are responsible for the
preparation of the group management report that, as a whole,
provides an appropriate view of the Group’s position and is, in
all material respects, consistent with the consolidated finan-
cial statements, complies with German legal requirements, and
appropriately presents the opportunities and risks of future
development. In addition, the executive directors are respon-
sible for such arrangements and measures (systems) as they
have considered necessary to enable the preparation of a group
management report that is in accordance with the applicable
German legal requirements, and to be able to provide sufficient
appropriate evidence for the assertions in the group manage-
ment report.
The supervisory board is responsible for overseeing the Group’s
financial reporting process for the preparation of the consoli-
dated financial statements and of the group management report.
AUDI T OR’S RESP ONSIBIL I T IES F OR T HE AUDI T OF T HE
CONS OL IDAT ED F INANC IAL S TAT EMEN T S AND OF T HE
GROUP MANAGEMEN T REP OR T
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error,
and whether the group management report as a whole provides
an appropriate view of the Group’s position and, in all material
respects, is consistent with the consolidated financial state-
ments and the knowledge obtained in the audit, complies with
the German legal requirements and appropriately presents the
opportunities and risks of future development, as well as to
issue an auditor’s report that includes our audit opinions on the
consolidated financial statements and on the group manage-
ment report.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with § 317
HGB and the EU Audit Regulation and in compliance with
German Generally Accepted Standards for Financial Statement
Audits promulgated by the Institut der Wirtschaftsprüfer (IDW)
will always detect a material misstatement. Misstatements can
arise from fraud or error and are considered material if, individ-
ually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of
these consolidated financial statements and this group man-
agement report.
We exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the
consolidated financial statements and of the group manage-
ment report, whether due to fraud or error, design and per-
form audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our audit opinions. The risk of not detecting a mate-
rial misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal control.
• Obtain an understanding of internal control relevant to the
audit of the consolidated financial statements and of arrange-
ments and measures (systems) relevant to the audit of the
group management report in order to design audit procedures
that are appropriate in the circumstances, but not for the pur-
pose of expressing an audit opinion on the effectiveness of
these systems.
• Evaluate the appropriateness of accounting policies used by
the executive directors and the reasonableness of estimates
made by the executive directors and related disclosures.
• Conclude on the appropriateness of the executive directors’
use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant
doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are re-
quired to draw attention in the auditor’s report to the related
disclosures in the consolidated financial statements and in
the group management report or, if such disclosures are
inadequate, to modify our respective audit opinions. Our con-
clusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or condi-
tions may cause the Group to cease to be able to continue as a
going concern.
• Evaluate the overall presentation, structure and content of
the consolidated financial statements, including the disclo-
sures, and whether the consolidated financial statements
present the underlying transactions and events in a manner
that the consolidated financial statements give a true and
fair view of the assets, liabilities, financial position and finan-
cial performance of the Group in compliance with IFRSs as
adopted by the EU and the additional requirements of German
commercial law pursuant to § 315e Abs. 1 HGB.
• Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities
within the Group to express audit opinions on the consoli-
dated financial statements and on the group management
report. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible
for our audit opinions.
Independent Auditor ’s Repor t
Additional Infor mation
181
German Public Auditor Responsible
for the Engagement
The German Public Auditor responsible for the engagement is
Stefano Mulas.
Munich, March 13, 2019
PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft
(signed Stefano Mulas)
Wirtschaftsprüfer
(German Public Auditor)
(signed Holger Lutz)
Wirtschaftsprüfer
(German Public Auditor)
• Evaluate the consistency of the group management report
with the consolidated financial statements, its conformity with
German law, and the view of the Group’s position it provides.
• Perform audit procedures on the prospective information pre-
sented by the executive directors in the group management
report. On the basis of sufficient appropriate audit evidence
we evaluate, in particular, the significant assumptions used
by the executive directors as a basis for the prospective infor-
mation, and evaluate the proper derivation of the prospective
information from these assumptions. We do not express a
separate audit opinion on the prospective information and on
the assumptions used as a basis. There is a substantial un-
avoidable risk that future events will differ materially from
the prospective information.
We communicate with those charged with governance regard-
ing, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a state-
ment that we have complied with the relevant independence
requirements, and communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, the related safeguards.
From the matters communicated with those charged with gover-
nance, we determine those matters that were of most signifi-
cance in the audit of the consolidated financial statements of
the current period and are therefore the key audit matters. We
describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter.
Other Legal and Regulatory
Requirements
F UR T HER INF ORMAT ION PURSUAN T T O AR T ICL E 10
OF T HE EU AUDI T REGUL AT ION
We were elected as group auditor by the annual general meet-
ing on May 17, 2018. We were engaged by the supervisory
board on July 4, 2018. We have been the group auditor of the
MorphoSys AG, Planegg, without interruption since the finan-
cial year 2011.
We declare that the audit opinions expressed in this auditor’s
report are consistent with the additional report to the audit
committee pursuant to Article 11 of the EU Audit Regulation
(long-form audit report).
Additional Infor mation
182
Repor t of the Super v isor y B oard
Report of the Supervisory Board
COOPERAT ION OF T HE MANAGEMEN T BOARD AND
SUPERVIS ORY BOARD MEE T INGS IN T HE 2018 F INANC IAL
SUPERVIS ORY BOARD
During the 2018 financial year, the Supervisory Board compre-
hensively performed the duties assigned to it by law, the Articles
of Association, Rules of Procedure and – with one exception –
the recommendations of the German Corporate Governance
Code (hereinafter referred to as the “Code”). We regularly ad-
vised 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 Man-
agement Board fulfilled its duty to inform and furnish us with
periodic written and verbal reports containing timely and de-
tailed information on all business transactions and events of
significant relevance to the Company. The Management Board
prepared these reports in collaboration with the respective de-
partments. In our Committee meetings and plenary sessions,
we had the opportunity to discuss the Management Board’s
reports and the proposed resolutions in full. 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 involved at an early stage in all decisions relevant to
the Company.
An appropriate resolution was passed when the Supervisory
Board’s approval for individual actions was required by law, the
Articles of Association or the Rules of Procedure. The Super-
visory Board members approved all actions by the Management
Board requiring Supervisory Board approval based on the
documentation provided in advance by the Management Board.
When necessary, the Supervisory Board received the support of
the relevant committees and, together with the Management
Board, discussed any projects requiring decision. All matters
requiring approval were submitted for review by the Manage-
ment Board to the Supervisory Board on a timely basis.
Outside of the meetings of the Supervisory Board plenum and
the Committees, the chairman of the Supervisory Board regu-
larly exchanged information and ideas with the Management
Board and especially the Chief Executive Officer, Dr. Simon
Moroney. The Supervisory Board chairman was always kept
promptly informed of the current business situation and any
significant business transactions. The other Supervisory Board
members also had regular contact with the individual Manage-
ment Board members.
YEAR AND KEY I T EMS OF DIS CUSSION
A total of eight Supervisory Board meetings were held in the
2018 financial year, whereby two meetings were conducted by
telephone. With the exception of one meeting, all Supervisory
Board members were present at all Supervisory Board meetings.
In urgent cases occurring outside of meetings, the Supervisory
Board passed resolutions by written procedure.
In addition to the above, a one-day strategy meeting took place
between the Management Board and the Supervisory Board in
July 2018 that primarily addressed
• the Company’s strategic focus; and
• the further development of the Company’s product portfolio
and its impact on the net assets, financial position and results
of operations.
During the 2018 financial year, the Supervisory Board paid
particular attention to the following topics and passed resolu-
tions on these topics after a thorough review and discussion:
• evaluation of the Company’s achievement of the 2017 financial
year corporate targets, an interim review and minor adjust-
ments to the corporate targets defined by the Super visory
Board at the end of 2017 for the 2018 financial year and defin-
ing the corporate targets for the 2019 financial year;
• commencing and executing an initial public offering in the
United States of up to 8,300,000 American Depositary Shares
(“ADSs”) pursuant to a Registration Statement on Form F-1
(“Initial Public Offering”) and granting the underwriters a
30-day option to purchase up to 1,245,000 additional ADSs
following the offering (“Greenshoe”);
• increasing the share capital of the Company by issuing
2,075,000 new ordinary shares (each ADS representing 1/4 of
a MorphoSys ordinary share, i.e. in total 8,300,000 ADSs)
from the authorized capital 2017-II, excluding pre-emptive
rights of existing shareholders, to implement the Initial
Public Offering, and further increasing the share capital of
the Company by issuing 311,250 additional new ordinary
shares (each ADS representing 1/4 of a MorphoSys ordinary
share, i.e. in total 1,245,000 ADSs) from the authorized capi-
tal 2017-II, excluding pre-emptive rights of existing share-
holders, to implement the Greenshoe;
Repor t of the Super v isor y B oard
Additional Infor mation
183
• modification of the rules of procedure of the Supervisory
Board as well as the charter of the Audit Committee and the
charter of Remuneration and Nomination Committee to reflect
changes required by Nasdaq and US securities law;
• agenda and proposed resolutions for the 2018 Annual Gen-
eral Meeting, particularly the nominations of Dr. George
Golumbeski, Michael Brosnan and Dr. Marc Cluzel as Super-
visory Board candidates for election and re-election at the
2018 Annual General Meeting;
• election of the chair and re-election of the deputy chair of the
Supervisory Board and establishment and staffing of the
Committees in the Board’s constituent meeting following the
2018 Annual General Meeting;
• award of the audit contract to the auditor for the 2018 finan-
cial year;
• founding of the subsidiary MorphoSys US Inc., which fo-
cuses on establishing the Company’s commercial capabilities
in the US;
• conclusion of a worldwide exclusive agreement between
MorphoSys and Galapagos NV as licensors and Novartis
Pharma AG as licensee covering the development and com-
mercialization of our joint program MOR106;
• expansion of our strategic alliance to develop peptide-derived
therapeutics with LEO Pharma;
• conclusion of a strategic partnering agreement with I-Mab
granting exclusive rights to develop and commercialize our
novel immuno-oncology agent MOR210 in China, Hong Kong,
Macao, Taiwan and South Korea;
• budget for the 2019 financial year.
We also passed a resolution in the Supervisory Board plenum
on the remuneration of Management Board members for the
period July 1, 2018 to June 30, 2019 taking external bench-
marking into consideration. We evaluated the achievement of
the 2017 corporate targets that were agreed with the Manage-
ment Board and discussed the corporate targets for 2019. We
commissioned an independent remuneration consultant to con-
firm the appropriateness of the Management Board’s compen-
sation and its comparison to the remuneration of various levels
of employees. We discussed and adopted the key performance
indicators for the long-term incentive plans for both the Manage-
ment Board and the Senior Management Group. Furthermore,
we approved the financial statements for the 2017 financial
year and dealt with the Corporate Governance Report and the
Statement on Corporate Governance.
Our regular discussions in the Supervisory Board’s plenary
meetings were focused on MorphoSys’s revenue and earnings
development, the financial reports, the progress of the two
business segments Partnered Discovery and Proprietary Devel-
opment, the results and progress of the clinical programs for
the development of proprietary drugs, the future development
strategy and the development of new technologies. Furthermore,
we discussed the financial outlook for the 2020/2021 financial
years and MorphoSys’s associated future potential financing
needs. In addition, we carried out an efficiency review of the
Supervisory Board’s work. And lastly, we kept ourselves regu-
larly informed with respect to the Company’s cash investment
policy, risk management, internal audit results, internal control
system and compliance management system.
CONF L IC T S OF IN T ERES T WI T HIN T HE
SUPERVIS ORY BOARD
No conflicts of interest arose within the Supervisory Board in
the 2018 financial year.
AC T IVI T IES AND MEE T INGS OF SUPERVIS ORY BOARD
COMMI T T EES
To ensure that its duties are performed efficiently, the Super-
visory Board has established three committees – the Audit
Committee, the Remuneration and Nomination Committee and
the Science and Technology Committee – to prepare the issues
that fall within the Supervisory Board’s respective areas of re-
sponsibility for the Supervisory Board plenum. In each Super-
visory Board meeting, the chairs of the Committees report to
the Supervisory Board on the Committees’ work. The minutes
of the Committee meetings are made available to all Supervisory
Board members. The composition of these committees can be
found in the “Statement on Corporate Governance,” which is
available on the Company’s website under the heading “Media &
Investors > Corporate Governance > Statement on Corporate
Governance,” and in the Annual Report on pages 85 to 90.
The Audit Committee met on five occasions in the 2018 finan-
cial year, one of those meetings was held by telephone. All
Committee members were present at all Audit Committee
meetings. The Committee dealt mainly with accounting issues,
quarterly reports, financial statements and consolidated finan-
cial statements. The Committee discussed these topics with
the Management Board and recommended the approval of the
financial statements to the Supervisory Board. The auditor took
part in four Audit Committee meetings and informed its mem-
bers of the audit results. Against the background of the Auditors
Reform Act and the requirements for the external and internal
rotation of the auditor, in 2017 the Audit Committee carried out
a public tender for the 2018 annual audit on a voluntary basis.
As a result, the Audit Committee made a recommendation to
the Supervisory Board with respect to the Supervisory Board’s
proposal at the Annual General Meeting for the election of the
independent auditor for the 2018 financial year. In addition, the
Additional Infor mation
184
Repor t of the Super v isor y B oard
Audit Committee dealt with the annual update of a list of per-
mitted and pre-approved non-audit services of the auditor. The
Committee also discussed the risk management system, the
compliance management system and the results of the internal
audit conducted in the 2018 financial year, as well as specific
accounting issues under International Accounting Standards
(IFRS) relevant to the Company. In addition, the Committee reg-
ularly discussed the Company’s asset management policy and
the investment recommendations made by the Management
Board. The Committee also discussed in depth the 2019 budget
and the financial outlook for the 2020/2021 financial years, as
well as options for the commercialization strategy for the Com-
pany’s most advanced proprietary drug candidate MOR208. In
addition, the Audit Committee discussed in depth IT security
measures undertaken in 2018 and the company’s plan to change
the ERP landscape from Mircosoft Dynamics AX to SAP Busi-
ness by Design. As in previous years, the Audit Committee dis-
cussed the proposed impairment tests in preparation for the
annual audit.
To increase efficiency, there is a joint Remuneration and Nomi-
nation Committee, which deliberates on matters relating to
remuneration and nomination. The Committee met on five occa-
sions in the 2018 financial year, each time by telephone. All
Committee members participated at all Committee meetings.
In its function as a remuneration committee, the Committee
mainly dealt with the Management Board’s remuneration sys-
tem and level of compensation. In this context, the Committee
also commissioned an independent remuneration expert with
the task of preparing a Management Board remuneration re-
port to verify the appropriateness of the Management Board’s
remuneration. Based on this report, the Committee prepared a
recommendation on 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 re-
viewed by the commissioned remuneration expert. This expert
confirmed the appropriateness of these “vertical” compensation
ratios. In addition, the Committee gave careful consideration
to the corporate targets as a basis for the Management Board’s
short-term variable remuneration and offered appropriate rec-
ommendations to the Supervisory Board for resolution. The
Committee discussed the key performance indicators of the
long-term incentive plans for the Management Board, Senior
Management Group and other employees in key positions. In its
function as the Nomination Committee, the Committee recom-
mended the re-appointment of Dr. Malte Peters as Chief Devel-
opment Officer for the duration of three years, effective July 1,
2019 until June 30, 2022. In addition, this Committee dealt
with succession planning within the company.
The Science and Technology Committee met on five occasions
during the 2018 financial year. All Committee members partici-
pated in all Committee meetings. The Committee dealt mainly
with the Company’s discovery activities as well as overall strat-
egy to expand the proprietary drug pipeline, the development
of new technologies, the Company’s drug development plans
and future development strategy, progress in the clinical trials
as well as required budget resources. One major focus was the
approval strategy for MOR208 and the interactions with the
FDA. The Committee also addressed the production of clinical
trial and commercial materials for the Company’s proprietary
drug candidates including readiness for commercial supply
and the competitive and patent situations of the Company’s pro-
prietary drug candidates. Finally, the Committee discussed the
development and partnering of MOR106 as well as the further
development of MOR202 in autoimmune diseases.
CORP ORAT E GOVERNANCE
The Supervisory Board devoted its attention to the further de-
velopment of MorphoSys’s corporate governance, taking into
consideration the Code’s amendments made by the Regierungs-
kommission Deutscher Corporate Governance Kodex (Govern-
ment Commission for the German Corporate Governance Code)
in February 2017. The detailed Corporate Governance Report,
including the Corporate Governance Statement according to
Section 289f HGB and the Group Statement on Corporate Gover-
nance according to Section 315d HGB (German Commercial
Code), can be found on the Company’s website under the head-
ing “Media & Investors > Corporate Governance > Corporate
Governance Report” and in the Annual Report on pages 84
to 112.
We also discussed with the Management Board the Company’s
compliance with the Code’s recommendations and in one justi-
fied case approved an exception to the Code’s recommenda-
tions. Based on this consultation, the Management Board and
the Supervisory Board submitted the annual Declaration of
Conformity on November 30, 2018. The current version of the
Declaration of Conformity can be found in this Annual Report
and is permanently available to MorphoSys’s shareholders on
the Company’s website under the heading “Media & Investors >
Corporate Governance > Declaration of Conformity.”
Repor t of the Super v isor y B oard
Additional Infor mation
185
CHANGES IN T HE COMP OSI T ION OF T HE MANAGEMEN T
BOARD AND SUPERVIS ORY BOARD
There were no changes in the composition of the Management
Board during the reporting period.
However, the Chief Executive Officer, Dr. Simon Moroney, in-
formed the Supervisory Board on February 19, 2019 that he has
decided not to renew his contract as a member of the company’s
Management Board. As a result of his decision, Dr. Moroney will
step down as CEO on expiry of his current contract on June 30,
2020, or when a successor is appointed, whichever comes sooner.
The following changes in the composition of the Supervisory
Board took place during the reporting period. Klaus Kühn re-
signed from his office as a member of the Supervisory Board
for personal reasons as of the conclusion of the 2018 Annual
General Meeting. Dr. Marc Cluzel was re-elected and Dr. George
Golumbeski and Michael Brosnan were newly elected to the
Supervisory Board by the 2018 Annual General Meeting.
AUDI T OF T HE ANNUAL F INANC IAL S TAT EMEN T S AND
CONS OL IDAT ED F INANC IAL S TAT EMEN T S
For the 2018 financial year, the Company commissioned Price-
waterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft,
Munich (“PwC”) as its auditor. The audit contract was awarded
by the Supervisory Board in accordance with the resolution of
the Annual General Meeting on May 17, 2018. In accordance
with Item 7.2.1 of the Code, the Supervisory Board obtained a
declaration of independence from the auditor in advance.
The annual financial statements and the consolidated financial
statements of MorphoSys AG, as well as the Management Report
and Group Management Report for the 2018 financial year, were
properly audited by PwC and issued with an unqualified Audi-
tor’s Report. The key topics of the audit for the consolidated and
annual financial statements for the 2018 financial year were
the revenue accounting for complex out-licensing arrange-
ments and the completeness of revenue recognition in general,
the measurement of the carrying amounts of goodwill and in-
tangible assets that have indefinite useful lives, the recognition
and measurement of the 2018 share-based payment programs,
the accounting for accruals for outstanding invoices for exter-
nal laboratory funding and external services, the presentation
and measurement of financial assets, the effectiveness of inter-
nal controls, as well as the capital increase in connection with
the US Initial Public Offering on the Nasdaq (dual listing).
In addition, the auditor confirmed that the Management Board
had established an appropriate reporting and monitoring system
that is suitable in 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 annual finan-
cial statements and consolidated financial statements were pro-
vided on a timely basis to all Supervisory Board members for
review. The audit report, the consolidated financial statements,
the Group Management Report of the MorphoSys Group and the
audit report, the annual financial statements and the Manage-
ment Report of MorphoSys AG were discussed in detail at the
Audit Committee meeting on March 12, 2019, and the meeting of
the Supervisory Board on March 13, 2019. The auditor attended
all meetings concerning the financial statements and quarterly
statements and reported on the key results of his audit. The
auditor also explained the scope and focus of the audit and was
available to the Audit Committee and the Supervisory Board to
answer questions and provide further information.
The Audit Committee discussed the audit results in detail and
recommended 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 re-
ports in accordance with the statutory provisions. Following its
own examination, the Supervisory Board also determined that
it sees no cause for objection. The annual financial statements
and consolidated financial statements prepared by the Manage-
ment Board and reviewed by the auditor, as well as the Manage-
ment Report and Group Management Report, were subsequently
approved by the Supervisory Board. Thus, the annual financial
statements were adopted.
RECO GNI 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
financial year. Through their efforts, MorphoSys’s portfolio has
continued to mature and expand and important milestones
have been achieved.
Planegg, March 13, 2019
Dr. Marc Cluzel
Chairman of the Supervisory Board
Additional Infor mation
186
Super v isor y B oard of Mor phoSys AG
Supervisory Board
of MorphoSys AG
DR. MARC CL UZEL
Chairman, Montpellier, France
member of the supervisory board of:
Griffon Pharmaceuticals Inc., Canada (Member of the Board of Directors)
Moleac Pte. Ltd., Singapore (Member of the Board of Directors)
DR. F RANK MORICH
Deputy Chairman, Berlin, Germany
member of the supervisory board of:
Cue Biopharma Inc., Cambridge, MA, USA (Member of the Board of Directors)
MICHAEL BRO SNAN
Board Member, Westford, MA, USA
member of the supervisory board of:
Fresenius Medical Care Holdings, Inc., USA (Member of the Board of Directors)
Vifor Fresenius Medical Care Renal Pharma Ltd., Switzerland (Member of the
Board of Administration)
The CVs of our Supervisory Board Members can be found on the Company’s website under the heading “Company > Management > Supervisory Board”.
Super v isor y B oard of Mor phoSys AG
Additional Infor mation
187
KRI SJA VERME YL EN
Board Member, Hellerup, Denmark
no other supervisory board memberships
WEND Y JOHNS ON
Board Member, San Diego, CA, USA
member of the supervisory board of:
AmpliPhi Biosciences Corp., USA (Member of the Board of Directors)
DR. GEORGE G OL UMBE SK I
Board Member, Far Hills, NJ, USA
member of the supervisory board of:
Carrick Therapeutics Ltd., Ireland (Chairman of the Board of Directors)
Enanta Pharmaceuticals, Inc., USA (Member of the Board of Directors)
Grail Inc., USA (Member of the Board of Directors)
KSQ Therapeutics, Inc., USA (Member of the Board of Directors)
Sage Therapeutics, USA (Member of the Board of Directors)
Shattuck Labs, Inc., USA (Member of the Board of Directors)
Additional Infor mation
188
Glossary
A
B
AD – Atopic dermatitis; Chronic autoimmune disease
of the skin; formerly also called neurodermatitis
B cells – White blood cells, part of the immune
system, capable of generation antibodies
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 cyto-
toxicity; 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
ADCP – Antibody-dependent cellular phagocytosis
ALL – Acute lymphoblastic leukemia; a form of
cancer of the white blood cells characterized by
excess lymphoblasts
Amyloid beta – Protein produced by the body that
can be deposited in the brain and is associated with
the development of Alzheimer’s disease
Antibody – Proteins of the immune system that
recognize antigens, thereby triggering an immune
response
B-MIND – Study to evaluate Bendamustine-MOR208
IN DLBCL
Biosimilars – Term used to describe officially
approved new versions of innovator biopharmaceu-
tical products, following patent expiration
Bispecific – Antibody consisting of parts from two
different antibodies, thereby being able to bind two
different antigens
BTD – Breakthrough Therapy Designation; Status
granted by the U.S. Food and Drug Administration
FDA given to a drug candidate for the treatment of
a serious or life-threatening disease if there is initial
clinical evidence that the drug could represent a sig-
nificant improvement over available therapies
BTK inhibitor – Bruton’s tyrosine kinase, a key
kinase of the B cell receptor signaling pathway that
plays a significant role in the proliferation, differen-
tiation and survival of B cells
Antibody library – A collection of genes that
encode corresponding human antibodies
C
Antigen – Foreign substance stimulating antibody
production; binding partner of antibody
ASCT – Autologous stem cell transplantation; Treat-
ment with stem cells from a patients own body for the
treatment of lymphomas
C5a – Part of the immune system; involved in growth
of certain cancers
C5aR – Receptor for C5a
G lossar y
CI – Conficence interval; statistical quantity indicat-
ing the range which, with a certain probability (the
confidence level), includes the true position of the
parameter when a random experiment is repeated
indefinitely
Clinical trial – Clinical trials allow safety and effi-
cacy 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, fol-
lowed by larger-scale studies in patients
CLL – Chronic lymphocytic leukemia; most common
type of cancer of the blood and bone marrow, affect-
ing the B cells
CMC – Chemistry, manufacturing and controls
CMO – Contract manufacturing organization
COSMOS – CLL patients assessed for ORR / Safety in
MOR208 Study
CR – Complete response
CRO – Contract research organization
Crohn’s Disease – Chronic inflammatory bowel
disease
CRP – C-reactive protein; Inflammatory marker that
can be measured in the blood in various diseases,
including RA
CAR-T technology – New therapeutic approach in
which immune cells are reprogrammed
CTO – Contract testing organization
Autoimmune disease – Disease caused by an
im mune response by the body against one of its own
tissues, cells or molecules
Cash flow – Key performance indicator in the cash
flow statement used to assess the financial and
earning capacity
D
CD19 – Therapeutic target for the treatment of B cell
lymphomas and leukemias
CD20 – Therapeutic target for the treatment of B cell
lymphomas and leukemias
CD38 – Therapeutic target for the treatment of mul-
tiple myeloma, certain leukemias and solid tumors
Discounted cash flow model – Method of valu-
ing assets, especially for due diligence
DLBCL – Diffuse large B cell lymphoma, a subform
of ›› NHL
DoR – duration of response
G lossar y
Additional Infor mation
189
E
H
L
EASI – Exczema area and severity Index; Value for
measuring the severity of atopic dermatitis
HDCT – High-Dose Chemotherapy; High-dose chemo-
therapy used in conjunction with ›› ASCT to treat
›› DLBCL
Lanthipeptides – Novel class of therapeutics
with high target selectivity and improved drug-like
properties
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 recep-
tor is a receptor tyrosine kinase
EMA – European Medicines Agency
F
HS – Hidradenitis Suppurativa; a skin disease that
causes inflammation of the hair follicles; also known
as acne inversion
L-MIND – Study to evaluate Lanalidomide-MOR208
IN DLBCL
HTH – Helix-Turn-Helix; specific structure and fold-
ing of a peptide which confer stability
M
HuCAL – Human Combinatorial Antibody Library;
pro prietary antibody library enabling rapid genera-
tion of specific human antibodies for all applications
Market capitalization – Value of a com pany’s
outstanding shares, as measured by shares times
current price
Fab format – The antigen binding fragment of the
antibody
Human – Of human origin
Fc part – Constant part of an antibody known as
the Fc (fragment, crystallizable) region
I
Mesothelioma – Diffusely growing tissue tumor
affecting for example the pleura
Monoclonal antibody – Homogeneous antibody
origin ating from a single clone, produced by a
hybrid oma cell
FDA – Food and Drug Administration; US federal
agency for the supervision of food and drugs
IFRS – International Financial Reporting Stan-
dards; accounting standards issued by the IASB and
adopted by the EU
MRD – Minimal Residual Disease; minimal amount
of residual tumor cells
G
GCP – Good clinical practice; an inter national ethi-
cal and scientific quality standard for designing,
conduct ing, recording and reporting trials that in-
volve the par ticipation of human subjects
IL-12 – Cytokine involved in inflammatory processes
IL-23 – Cytokine involved in inflammatory processes;
target of guselkumab
Multiple myeloma – Type of cancer that develops
in a subset of white blood cells called plasma cells
formed in the bone marrow; abbreviation: MM
Immuno-oncology – New class of compounds
that stimulate the immune system to attack tumors
N
GLP – Good laboratory practice; a formal framework
for the implementation of safety tests on chemical
products
IND – Investigational New Drug; application for
permission to test a new drug candidate on humans,
i.e. in clinical studies
NHL – Non-Hodgkin’s lymphoma; diverse group of
blood cancers that include any kind of lymphoma
except Hodgkin’s lymphoma
GM-CSF – Granulocyte-macrophage colony-stimu-
lating factor; underlying target molecule of MOR103
program
IRR – Infusion-related reactions; Response of the
immune system to intravenous administration of a
drug
GMP – Good manufacturing practice; term for the
control and management of manufacturing and
quality control testing of pharmaceutical products
and medical devices
iv – Intravenous infusion
O
ORR – Overall response rate
OS – Overall survival
Additional Infor mation
190
Glossary
G lossar y
P
R
T
Palmoplantar pustulosis – Psoriasis on hands
and feet
r/r – relapsed/refractory
Target – Target molecule for therapeutic interven-
tion, e.g. on the surface of diseased cells
PASI – Psoriasis area and severity Index; value for
determining the extent and severity of the psoriasis
disease
R-CHOP – Rituximab, Cyclophosphamid, Doxorubi-
cin, Vincristin and Prednison; Combination treat-
ment with rituximab and combination chemotherapy
as standard first-line treatment of ›› DLBCL
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 im-
mune defense
PFS – Progression-free survival
Rheumatoid arthritis – Inflammatory disease of
the joints; abbreviation: RA
TTP – Time to progression
Pharmacodynamics – Study of the effects of
drugs on the body
Pharmacokinetics – Determination of the fate
of substances administered externally to a living
organism
PoC – Proof-of-Concept; clinical evidence that its
active substance leads to an improvement of a dis-
ease
PR – Partial response
Preclinic – Preclinical stage of drug development;
tests in animal models as well as in laboratory
essays
Protein – Polymer consisting of amino acids, e. g.
antibodies and enzymes
Psoriasis – A chronic, non-contagious autoimmune
disease which affects the skin and joints
Psoriatic arthritis (PsA) – Chronic joint inflam-
mation that occures in connection with psoriasis
Royalties – Percentage share of ownership of the
rev enue generated by drug products
Toxicity – Poisonousness
S
SAEs – Severe adverse events
U
UC – Ulcerative Colitis; chronic inflammatory bowel
disease; Crohn’s disease
sc – subkutan; administration via an injection under
the skin
SD – Stable disease; stable state of the cancer disease
V
SD KPI – Sustainable Development Key Performance
Indicators; sustainability indicators in corporate
management
SLL – Small lymphocytic lymphoma
VGPR – Very good partial response
Y
Slonomics – DNA engineering and protein library
gene ration platform acquired by MorphoSys in 2010
Ylanthia – The novel next-generation antibody
platform of MorphoSys
Small molecules – Low molecular compounds
SOP system – SOP = standard operating procedure
List of F igures and Tables
Additional Infor mation
191
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 Total Headcount of the MorphoSys Group
05 Employees by Gender
06 Seniority
07 Workforce Turnover Rate
08 Revenues by Region
Tables
01 Development of Financial Performance Indicators
02 Sustainable Development Key Performance Indicators
(SD KPIs) at MorphoSys
03 Multi-Year Overview – Statement of Profit or Loss
04 Multi-Year Overview – Financial Situation
05 Multi-Year Overview – Balance Sheet Structure
06 Contractual Obligations
07 Comparison of Actual Business Results Versus Forecasts
08 Closing Prices of MorphoSys Shares and ADS
09 Key Data for the MorphoSys Share
10 Analyst Recommendations
11 Summary of MorphoSys’s Key Short- and
Medium-Term Risks
29
30
30
44
46
46
46
48
26
27
54
57
58
59
60
68
69
70
82
09 Revenues Proprietary Development and Partnered Discovery 48
10 Selected R&D Expenses
51
11 Performance of the MorphoSys Share in 2018
68
12 Performance of the MorphoSys Share 2014 – 2018
68
13 Occupational Safety at MorphoSys
72
14 Quality Management System at MorphoSys
74
15 Risk and Opportunity Management System at MorphoSys
78
16 Compliance Management System (CMS)
106
12 Summary of MorphoSys’s Key Long-Term Risks
13 Summary of MorphoSys’s Key Opportunities
14 Composition of the Supervisory Board until Termination
of the 2018 Annual General Meeting
83
83
86
15 Composition of the Supervisory Board since Termination
of the 2018 Annual General Meeting
86
16 Participation of Supervisory Board Members
88
17 Compensation of the Management Board in 2018 and 2017 94
18 Compensation of the Supervisory Board in 2018 and 2017 101
19 Directors’ Holdings
102
20 Managers Transactions in 2018
104
Additional Infor mation
192
Imprint
MorphoSys AG
Semmelweisstrasse 7
82152 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
+49-89-89927-5404
Fax:
investors@morphosys.com
Email:
Impr int
Concept and Design
3st kommunikation GmbH, Mainz
Photography/Picture Credits
Andreas Pohlmann, Munich
Matthias Haslauer, Hamburg
Getty Images
Translation
Klusmann Communications, Niedernhausen
Lennon.de Language Services, Münster
Editorial Office
Götz Translations and Proofreading GmbH,
Hamburg
Typesetting and Lithography
Knecht GmbH, Ockenheim
Printer
Woeste Druck + Verlag GmbH & Co. KG,
Essen-Kettwig
Copy Deadline
March 12, 2019
(except financial statements)
This financial report is also published
in German and is available for download
on our website.
For better readability, the masculine form has
been used in this report equally to all genders.
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.
Tremfya® is a registered trademark of
Janssen Biotech, Inc.
Rituxan® is a registered trademark of
Biogen MA Inc.
MabThera® is a registered trademark of
F. Hoffmann-La Roche AG.
Gazyva® is a registered trademark of
F. Hoffmann-La Roche AG and Genentech, Inc.
Blincyto® is a registered trademark of Amgen Inc.
Darzalex® is a registered trademark of
Johnson & Johnson.
Cosentyx® is a registered trademark of Novartis AG.
Key Figures (IFRS)
MorphoSys Group (in million €, if not stated otherwise)
12/31/18
12/31/17
12/31/16
12/31/15
12/31/14
12/31/13
12/31/12
12/31/11
12/31/10
12/31/09
RESULTS1
Revenues
Cost of Sales
R&D Expenses
Selling Expenses2
G&A Expenses
Personnel Expenses (Excluding
Stock-Based Compensation)
Capital Expenditure
Depreciation of Tangible Assets
Amortization of Intangible Assets
EBIT
Net Profit/(Loss)
Net Profit/(Loss) from
Discontinued Operations
BAL ANCE SHEE T
Total Assets
Cash and Financial Assets
Intangible Assets
Total Liabilities
Stockholders’ Equity
Equity Ratio (in %)
MORPHOSYS SHARE
76.4
1.8
106.4
6.4
21.9
39.2
2.5
1.8
1.9
(59.1)
(56.2)
66.8
0.0
113.3
4.8
15.7
37.1
13.1
2.0
2.1
(67.6)
(69.8)
49.7
0.0
94.0
2.4
13.4
33.7
2.9
1.8
2.0
(59.9)
(60.4)
106.2
0.0
78.7
0
15.1
32.4
8.8
1.5
1.9
17.2
14.9
64.0
0.0
56.0
0
14.1
26.7
20.5
1.4
2.7
(5.9)
(3.0)
78.0
0.0
49.2
0
18.8
51.9
0.0
37.7
0
12.1
82.1
0.0
55.9
0
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
–
–
–
–
–
6.0
(0.4)
538.8
454.7
47.4
50.4
488.4
91 %
415.4
312.2
67.8
56.7
359.0
86 %
463.6
359.5
67.9
48.1
415.5
90 %
400.1
298.4
79.6
37.3
362.7
91 %
426.5
352.8
46.0
77.7
348.8
82 %
447.7
390.7
35.1
95.5
352.1
79 %
224.3
135.7
35.0
22.3
202.0
90 %
87.0
7.3
46.9
0
23.2
29.6
13.8
2.1
4.0
13.1
9.2
81.0
6.7
39.0
0
23.9
26.1
3.8
1.6
3.8
12.8
9.0
–
–
209.8
108.4
69.2
23.9
185.9
89 %
206.1
135.1
17.4
32.2
173.9
84 %
2.9
1.7
3.8
9.8
8.2
0.0
228.4
134.4
66.0
31.3
197.1
86 %
Number of Shares Issued
31,839,572
29,420,785
29,159,770 26,537,682 26,456,834 26,220,882 23,358,228 23,112,167 22,890,252 22,660,557
Group Earnings/(Loss) per Share,
Basic and Diluted (in €)
Dividend (in €)
Share Price (in €)
PERSONNEL DATA
(1.79)
(2.41)
(2.28)
–
–
–
0.57
–
(0.12)
–
88.95
76.58
48.75
57.65
76.63
0.54
–
55.85
0.08
–
29.30
0.36
–
17.53
0.40
–
18.53
0.40
–
17.04
Total Group Employees (Number3)
329
326
345
365
329
299
421
446
464
404
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 Profit/(Loss) from Discontinued Operations.”
All other line items consist of amounts from continuing operations.
2 In 2018, selling expenses were presented for the first time. In order to provide comparative information for
the previous year, the figures for 2017 and 2016 have been adjusted accordingly.
3 2009 to 2012 including employees from the discontinued operations of AbD Serotec.
Financial Calendar 2019
March 13
p u b l i c at i o n o f 2 0 1 8
y e a r - e n d r e s u lt s
May 22
2 0 1 9 a n n ua l g e n e r a l
m e e t i n g i n m u n i c h
May 7
publication of first quarter
interim statement 2 0 1 9
August 6
p u b l i c at i o n o f 2 0 1 9
h a l f - y e a r r e p o r t
8
1
0
2
t
r
o
p
e
R
l
a
u
n
n
A
October 29
publication of third quarter
interim statement 2 0 1 9
MorphoSys AG
Semmelweisstrasse 7
82152 Planegg
Germany
Phone: +49-89-89927-0
Fax: +49-89-89927-222
www.morphosys.com