Annual Report
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Our Clinical Pipeline
Most advanced
development stage
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3
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Program
Indication
Tafasitamab (MOR208)1
L-MIND / Relapsed or refractory (r/r)
diffuse large B-cell lymphoma (DLBCL)
B-MIND / r/r DLBCL
firstMIND / First-line DLBCL
frontMIND / First-line DLBCL
inMIND / r/r follicular lymphoma /
marginal zone lymphoma
Felzartamab (MOR202)
M-PLACE / Anti-PLA2R-positive
membranous nephropathy
New-PLACE / Anti-PLA2R-positive
membranous nephropathy
1 Global Collaboration and License Agreement with Incyte Corporation; co-commer-
cialization in the U.S.; Incyte has exclusive commercialization rights outside the U.S.
2 Not conducted, as not necessary.
Trial initiation expected H1 2021
Current status
Expected study
Clinical Programs Developed by Partners (Selection)
Program / Partner
Indication
Most advanced
development stage
1
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P
2
3
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P
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A
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P
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L
Tremfya® (guselkumab) / Janssen/J&J
Psoriasis
Felzartamab (MOR202) 1 / I-Mab
Multiple myeloma
Otilimab (MOR103/GSK3196165) / GlaxoSmithKline
Rheumatoid arthritis
Severe pulmonary COVID-19 related disease
Gantenerumab / Roche
Alzheimer’s disease
Anetumab ravtansine (BAY94-9343) / Bayer
Solid tumors
Ianalumab (VAY736) / Novartis
Inflammation
MAA868 / Anthos Therapeutics
Atrial fibrillation
Most advanced
development stage
1
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Program / Partner
Indication
NOV-8 (CMK389) / Novartis
Pulmonary sarcoidosis
NOV-9 (LKA651) / Novartis
Diabetic eye diseases
Setrusumab (BPS804) / Mereo/Novartis/Ultragenyx
Brittle bone syndrome
Utomilumab (PF-05082566) / Pfizer
Solid tumors
Xentuzumab (BI-836845) / BI
Solid tumors
NOV-14 (CSJ117) / Novartis
Asthma
MOR2102 / I-Mab
r/r advanced solid tumors
1 Sublicensed to I-Mab for development in China, Hong Kong, Macao and Taiwan.
2 Sublicensed to I-Mab for development in China, Hong Kong, Macao, Taiwan and
South Korea.
© MorphoSys, March 2021
Pipeline products are under clinical investigation and there is
no guarantee any investigational product will be approved by
regulatory authorities.
Key Figures (IFRS)
MorphoSys Group (in million
, if not stated otherwise)
12/31/20 12/31/19 12/31/18 12/31/17 12/31/16 12/31/15 12/31/14 12/31/13 12/31/12 12/31/11
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
Balance Sheet
Total Assets
Cash and Financial Assets
Intangible Assets
Total Liabilities
Stockholders’ Equity
Equity Ratio (in %)
MorphoSys Share
327.7
9.2
141.4
107.7
51.4
122.9
49.2
2.5
2.2
27.4
97.9
71.8
12.1
76.4
1.8
108.4
106.4
22.7
36.7
57.1
3.7
2.0
1.5
6.4
21.9
39.2
2.5
1.8
1.9
66.8
0.0
113.3
4.8
15.7
37.1
13.1
2.0
2.1
49.7
0.0
94.0
2.4
13.4
33.7
2.9
1.8
2.0
(107.9)
(103.0)
(59.1)
(56.2)
(67.6)
(69.8)
(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
27.4
5.6
1.5
3.3
9.9
13.3
51.9
0.0
37.7
0
12.1
24.1
1.8
1.7
3.5
2.5
1.9
82.1
0.0
55.9
0
14.9
27.7
2.9
1.7
3.8
9.8
8.2
–
–
–
–
–
–
–
6.0
(0.4)
0.0
1,659.5
1,244.0
71.0
1,038.2
621.3
37 %
496.4
357.4
44.8
101.7
394.7
80 %
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 %
228.4
134.4
66.0
31.3
197.1
86 %
Number of Shares Issued
32,890,046
31,957,958
31,839,572
29,420,785
29,159,770
26,537,682
26,456,834
26,220,882
23,358,228
23,112,167
Group Earnings/(Loss) per Share,
Basic and Diluted (in €)
Earnings per Share, Basic (in €)
Earnings per Share, Diluted (in €)
Dividend (in €)
Share Price (in €)
Personnel Data
–
3.01
2.97
–
(3.26)
(1.79)
(2.41)
(2.28)
0.57
(0.12)
0.54
0.08
0.36
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
93.82
126.80
88.95
76.58
48.75
57.65
76.63
55.85
29.30
17.53
Total Group Employees (Number3)
615
426
329
326
345
365
329
299
421
446
1 Due to the agreement between Bio-Rad and MorphoSys, signed in December 2012, to acquire sub-
stantially 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 Dis-
continued 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 informa-
tion for the previous year, the figures for 2017 and 2016 have been adjusted accordingly.
3 2010 to 2012 including employees from the discontinued operations of AbD Serotec.
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Annual Report
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20
Non-Financial Report
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Annual Report
https://reports.morphosys.com/2020
Non-Financial Report
https://csr.morphosys.com/2020
Financial StatementsGroup Management ReportThe Company Contents
Magazine
03
12
What we stand for
The Road to Monjuvi
The Company
28
36
42
45
49
Letter to the Shareholders
Report of the Supervisory Board
Supervisory Board of MorphoSys AG
MorphoSys on the Capital Market
Non-Financial Group Report
Group Management Report
53
70
71
88
92
102
103
Fundamentals of the MorphoSys Group
Macroeconomic and Sector-Specific Conditions
Analysis of Net Assets, Financial Position and
Results of Operations
Outlook and Forecast
Risk and Opportunity Report
Subsequent Events
Statement on Corporate Governance,
Group Statement on Corporate Governance
and Report on Corporate Governance
Financial Statements
136
137
138
140
142
144
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
Additional information
207
208
216
218
Responsibility Statement
Independent Auditor’s Report
Glossary
List of Figures and Tables
Annual Report
https://reports.morphosys.com/2020
What
we
stand
for
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020
What
we
stand
for
Financial StatementsGroup Management ReportThe Company We are curious, fast and brave. We are scien-
tific experts who want to improve the lives of
patients. We rely on our outstanding scientific
know-how, our leading antibody technology
and novel therapeutic approaches to discover,
develop and deliver transformative therapies
for people who are impacted by cancer and
autoimmune diseases.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Ground-
breaking
Financial StatementsGroup Management ReportThe Company Trustful
We are a reliable partner committed
to the highest quality in everything we
do. We provide top-quality products
and services and are dedicated to ex-
cellence and safety in all processes
of our value chain. We are fully aware
that we bear a great responsibility.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Financial StatementsGroup Management ReportThe Company We firmly believe that advanced anti-
body-based therapies are a key to treating
cancer and autoimmune diseases. We love
science, but even more so, we love helping
patients who are impacted by these dis-
eases. Every day we come to work driven
to make a difference.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Dedicated
Financial StatementsGroup Management ReportThe Company The
patient
in mind
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Being able to help patients, give them
hope and provide them with the best
treatment available is our strongest
motivation. Therefore, everything we
do, every product, process, contact
and service, needs to be of the highest
quality to meet patients’ needs.
Financial StatementsGroup Management ReportThe Company Magazine
12
The Road to Monjuvi
The Road to
Monjuvi
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 The Road to Monjuvi
Magazine
13
Monjuvi’s accelerated
U.S. FDA approval marked
the transform ation of
MorphoSys from a research
organization to a fully
inte grated biopharmaceu -
tical company.
Up close, it resembles something like a Y, and
its two upper “arms” can do one thing above
all else: form a very specific and lasting bond.
The antibody. A very particular antibody called
tafasitamab (MOR208) is the focus of the next
few pages. We invite you to join the MorphoSys
team on an accelerated journey spanning ten
years. It begins in 2010 with an idea, and thanks
to a tremendous amount of dedication, passion,
strategic vision, and perseverance – even in
the face of unexpected obstacles such as the
COVID-19 pandemic – it finally reaches its des-
tination in July 2020 with the accelerated U.S.
FDA approval of the drug Monjuvi® (tafasita-
mab-cxix), which brings a new treatment option
to patients in need. In the U.S., where Monjuvi
is currently approved, this drug can offer thou-
sands of patients battling with diffuse large
B cell lymphoma (DLBCL) the hope for better
treatment.
Discover, optimize and produce novel anti-
bodies for use as reagents, diagnostics and
therapeutics was the idea that led to MorphoSys’
foundation almost 30 years ago. Now with
Monjuvi, MorphoSys has brought its first pro-
prietary medicine to patients after ten years of
successful development and, as a fully inte-
grated biopharmaceutical company, is now
playing a leading role in a key area of medicine.
But let’s start from the beginning.
Financial StatementsGroup Management ReportThe Company Magazine
14
The Road to Monjuvi
In 2010, MorphoSys already had one proprietary
compound in clinical development and numerous
others in early preclinical stages. But the am-
bitious biotech company wanted to go beyond
this. “We wanted to expand our pipeline even
further and develop medicines for patients in
need, and were actively looking for a compound
with convincing preclinical or first clinical data,”
explains Barbara Krebs-Pohl, Ph.D., Senior Vice
President and Global Head of Business Devel-
opment & Licensing and Alliance Management.
Krebs-Pohl and her team scanned databases,
evaluated recently published studies with can-
didates, approached their contacts, and partic-
ipated in congresses and conferences. Then, at
a U.S. biotech conference, the U.S. company
Xencor introduced Krebs-Pohl and her team to
the antibody tafasitamab. “It won us over right
from the start,” says Krebs-Pohl, for several
reasons.
How it started
Tafasitamab is a humanized and Fc-modified
monoclonal antibody directed against the target
antigen CD19, which is selectively present on
the surface of B cells, a type of white blood cell.
CD19 enhances B cell receptor signaling, which
in turn exerts an important influence on B cell
survival and growth. CD19 was not very well
understood at the time – unlike the similar
receptor, CD20 – so there was little competition.
In addition, the receptor is present in many
B cell tumor types and some autoimmune dis-
eases. Most importantly, Xencor had optimized
the so-called Fc-part of the antibody, which
led to improved eradication of tumor cells in
preclinical studies. As Krebs-Pohl recalls, “All
this and the available data gave us hope that
tafasitamab, as a therapeutic targeting this
molecule, could become ‘best-in-class’.”
On June 28, 2010, a deal was announced. And
both parties were satisfied. Tafasitamab – also
called MOR208 – became part of MorphoSys’
pipeline.
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Magazine
15
Barbara Krebs-Pohl, Ph.D.,
Senior Vice President and
Global Head of Business Development &
Licensing and Alliance Management
“Tafasitamab offered
us just the right balance
of risk and reward: it
was still early in the de-
velopment stage and
no clinical data existed
yet, but the preclinical
data was promising and
we were hopeful that it
could potentially change
the lives of patients.”
Financial StatementsGroup Management ReportThe Company Magazine
16
The Road to Monjuvi
“Patients with relapsed
and refractory DLBCL
often face a poor prognosis
and are in need of new
treatment options. We be-
lieve tafasitamab has the
potential to transform
the standard of care and
are proud to be driving
innovation in this space.”
Malte Peters, M.D.
Chief Research and Development Officer
Clinical Development
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Magazine
17
The focus of preclinical research soon turned
to non-Hodgkin’s lymphoma (NHL). And when
MorphoSys received the latest interim results
from one of the first clinical studies with tafa-
sitamab, the message was clear: “We have a
drug.” Some of the patients, as many as 30 %,
had responded – and that was with tafasitamab
as monotherapy.
In preclinical studies, we had already shown
that the combination of the immunomodulator
lenalidomide and tafasitamab showed promis-
ing efficacy which led to the decision to assess
this combination in a clinical study.
The developers then set up a phase 2 clinical
trial in DLBCL, called L-MIND, to investigate
the efficacy of the tafasitamab-lenalidomide
combination. It quickly became clear that it
had the potential to be a promising combination.
In 2017, based on the first interim results, the
FDA granted breakthrough therapy designation,
which is an important milestone for accelerated
approval.
“This was enormously motivating for us,” says
Mark Winderlich, Ph.D., Vice President and Head
of Biostatistics & Data Management. However,
there was one challenge: The L-MIND study,
which was designed to be an exploratory study,
was a single-arm study. To avoid losing any
time, we pioneered a new approach in discussion
with the FDA: To compare the data of the L-MIND
combination study with data obtained with
lenalidomide treatment alone, we generated a
synthetic control arm from real-world data.
Collecting enough data from a prospectively
designed retrospective study to assess the ef-
fectiveness of lenalidomide monotherapy com-
pared to the tafasitamab-lenalidomide combi-
nation proved to be an exciting task: “We reached
out to physicians in various countries and they
reviewed hundreds of patient charts to identify
patients treated with lenalidomide alone who
also had comparable characteristics to those in
L-MIND”.
Step-by-step, patient-by-patient, things pro-
gressed. And then, at the very end of 2019, on
December 30, the application for approval, to-
gether with the necessary data, was submitted
to the FDA.
While the team was focused on responding to
the FDA’s inquiries along the way, the work
continued to get ready for the launch. On Janu-
ary 13, 2020, MorphoSys and Incyte entered
into a collaboration and license agreement to
further develop tafasitamab and make it avail-
able to patients worldwide. Incyte is an attrac-
tive partner due not only to its experience with
developing and commercializing hematology
products, but also its vision, goals and scientific
culture, which aligned with those of MorphoSys.
The two companies are jointly responsible for
the commercialization of Monjuvi which is the
brand name within the U.S., whereas Incyte
has the commercialization rights outside the
U.S. This marked another step in preparing for
the potential approval, which was granted by
the FDA at the end of July 2020, one month ahead
of the Prescription Drug User Fee Act (PDUFA)
date. Monjuvi has since been available in the
U.S. as the first and, to date, only second-line
therapy in combination with lenalidomide for
adult patients with relapsed or refractory DLBCL
not otherwise specified, including DLBCL aris-
ing from low grade lymphoma, and who are not
eligible for autologous stem cell transplant
(ASCT).
Financial StatementsGroup Management ReportThe Company
Magazine
18
The Road to Monjuvi
Prior to the approval of Monjuvi, several objec-
tives had to be met. The first was to understand
the patient journey and educate healthcare
professionals on the scientific rationale of tar-
geting the CD19 antigen in DLBCL with a mono-
clonal antibody. Secondly, the team had to be
comprehensively trained on the DLBCL clinical
management and the Monjuvi profile. “Our goal
all along was to ensure that this treatment
regimen was getting to the right patients who
could benefit from it,” says David Trexler, Pres-
ident of MorphoSys US Inc.
When the U.S. FDA granted the accelerated
approval of Monjuvi, the MorphoSys’ field team
was certified within days and began reaching
out to physicians to introduce the new treatment
option within the first week knowing that every
day counts for patients with this aggressive
form of blood cancer. On July 31, 2020, MorphoSys
and Incyte announced that the U.S. FDA had
approved Monjuvi. Monjuvi was shipped to
specialty distributors in the U.S. on August 5,
the first customer order was received on August
7, and the first patient was dosed on August
13, less than two weeks after approval.
By 2019, MorphoSys had the critical element
it needed to launch into the DLBCL space –
tafasitamab – a compound that could potentially
fill a significant unmet need. And thousands
of patients relapsing with DLBCL were waiting
for effective treatment options. That was when
MorphoSys made the decision to open MorphoSys
US Inc. in Boston in preparation for the launch
of the new blood cancer therapy. The goal for
the team was clear. “We needed to get prepared
to educate healthcare professionals about the
new treatment option so the first patients could
benefit from the treatment in a timely manner,”
says Nuwan Kurukulasuriya, Ph.D., Senior Vice
President and Global Head of Medical Affairs.
MorphoSys US Inc. grew from a team of one in
2019 to a commercial and medical organization
of 150 in 2020, sparking the transformation of
MorphoSys into a fully integrated biopharma
company.
Launch
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Magazine
19
Roland Wandeler, Ph.D.
Chief Operating Officer
“It was inspiring to see
our team come together
from different functions
and geographies, guided
by a singular shared
mission to bring Monjuvi –
an important new cancer
therapy – to healthcare
providers and patients in
urgent need across the
U.S.”
Financial StatementsGroup Management ReportThe Company Magazine
20
The Road to Monjuvi
“We were able to build a robust supply chain for
Monjuvi in record time, thanks to a high sense
of urgency, courage and collaboration of our
colleagues and partners,” says Daniel Palmacci,
Senior Vice President and Global Head of Tech-
nical Operations. This success was made pos-
sible by the team in Technical Operations. “Back
in 2010, in parallel with the preclinical research
on tafasitamab, we started the technical devel-
opment of a manufacturing process, which over
the years was engineered towards a highly
sophisticated, robust and large-scale process,
reliably delivering Monjuvi today,” says Ralf
Ostendorp, Ph.D., Senior Vice President and
Head of CMC (Chemistry, Manufacture and
Control). An efficient commercial supply chain
also had to be built from the ground up prior
to Monjuvi’s approval. Ann Merchant, Vice
President and Head of Global Supply Chain,
took charge of that process. “In the beginning,
we just had the two ends. On one end was the
unlabeled product and on the other, the patients
in need of this medicine,” Merchant explains.
Slowly, the supply network took shape: The
antibodies are produced and bottled in Germany
and then shipped to a central distribution center
in the United States. Specialty distributors
obtain Monjuvi from this warehouse and they,
in turn, sell it to the clinics that have submitted
orders.
Ann Merchant,
Vice President and
Head of Global Supply Chain
Prior to approval, many trial runs and coordi-
nation processes were required. To this day,
Merchant and the Technical Operations broader
team function as a coordination point for all
supply topics to ensure that all processes mesh
neatly together and that the quantity and tim-
ing of supply are right. “We conferred once a
week with everyone involved for several months,
and then daily as the launch date neared. This
required a lot of patience and stamina, but we
were all dedicated to delivering our very best.
It was clear to us that we were at the start of
something special.”
When the time finally came, spirits were high.
The U.S. FDA granted accelerated approval on
a Friday afternoon, and the supply chain was
set in motion over the weekend. Three business
days later, the first vials were shipped to spe-
cialty distributors.
And now? With the supply chain in place and
everything up and running, time to relax?
Merchant smiles. “Every supply chain can be
optimized in terms of speed, cost and reliabil-
ity. That’s what we’re focusing on now.” And
for any approvals received by MorphoSys down
the line, Merchant already knows which part-
ners she will be approaching.
Supply Chain
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The Road to Monjuvi
Magazine
21
“We were able to build
a robust supply chain for
Monjuvi in record time
thanks to a high sense of
urgency, courage and
collaboration of our col-
leagues and partners.”
Daniel Palmacci,
Senior Vice President and
Global Head of Technical Operations
Financial StatementsGroup Management ReportThe Company Magazine
22
The Road to Monjuvi
Christopher Mancill,
Senior Vice President and
Head Global & U.S. Value, Access & Policy
Christopher Mancill, Senior Vice President and
Head Global & U.S. Value, Access & Policy, and
Jill Robinson, Senior Director Public Policy &
Advocacy, are also focused on understanding
the views of external stakeholders. They want
to know: What do DLBCL patients struggle with
in particular? How might those with inadequate
insurance coverage be helped? What are the
special challenges that the treating physicians
are faced with daily?
As with all diseases, there are various groups
and organizations that support people impacted
by blood cancer, each with individual interests
“We are building
bridges with other
DLBCL stakeholders
every day. This helps
not only the company,
but also patients
and physicians in a
very tangible way.”
and needs. These include research groups,
patient organizations, foundations and political
stakeholders. MorphoSys, as the developer and
supplier of a potentially life-prolonging therapy
for DLBCL, also belongs to this universe – at
least since Monjuvi’s approval.
Since 2019, Christopher Mancill and Jill Robin-
son have been working on sustainably anchor-
ing MorphoSys within this universe. They
organize meetings with stakeholders, build
networks and get connected. “We are constantly
building bridges,” says Mancill.
Interactions
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 The Road to Monjuvi
Magazine
23
“All of this is about a mutual exchange and, at
the same time, a beneficial relationship. It’s
about supporting each other and achieving
something together,” says Robinson. MorphoSys
provides targeted support where needed. Dur-
ing the current COVID-19 pandemic, for exam-
ple, many patients are finding it difficult to get
safely to the clinic for treatment. MorphoSys
is stepping in and providing financial assistance
through a partner organization to facilitate
low-risk transportation for eligible patients.
Treating physicians also still need support
when it comes to making the best treatment
decisions for their patients. Here MorphoSys
lends its support to an organization designing
independent practical daily guidelines based
on a decision tree. “These are just two of the
many examples where we have listened and
are working to make a difference,” says Mancill.
For some time now, Mancill and Robinson have
been inviting patients to speak to MorphoSys
personnel. “After these visits, I often get thank-
you e-mails from colleagues I did not know
previously,” says Robinson. “When patients tell
their stories, we can see for ourselves how much
they rely on us and hear about the potential of
Monjuvi. We are often literally their last hope.
It’s very moving. It is also an enormous moti-
vational boost for my colleagues and me to see
that what we do saves lives.”
“Sometimes it makes all
the difference when a
patient is provided with
safe transport to the
clinic. That's when I know
I can literally make a
difference with my work.”
Jill Robinson,
Senior Director Public Policy & Advocacy
Financial StatementsGroup Management ReportThe Company
Magazine
24
The Road to Monjuvi
Jean-Paul Kress, M.D.
Chief Executive Officer
Patients are at the center of everything we do.
They are the motivation driving the entire
MorphoSys team to rise above themselves and
ensure that our first proprietary drug, Monjuvi,
is the success it is today.
There is a great unmet medical need for patients
with r/r DLBCL: in the U.S., where Monjuvi is
currently approved, potentially 10,000 patients
a year with relapsed or refractory DLBCL not
otherwise specified, or previously considered
almost out of treatment options, may have new
hope. At the invitation of Jill Robinson and
Christopher Mancill, some patients have the
opportunity to come to MorphoSys, sit down,
and share their own personal story and the
hope they have related to Monjuvi.
“With the approval, a successful marathon
stretching over ten years has reached a peak.
We are more energized than ever by this mile-
stone and full of optimism for the next level on
our journey, developing tafasitamab as a po-
tential backbone therapy of choice for B cell
malignancies,” says Jean-Paul Kress, M.D.,
Chief Executive Officer.
Buoyed by the success in the U.S., MorphoSys
and Incyte are now working on making tafasit-
amab available to DLBCL patients worldwide.
Applications for approvals have already been
filed in the EU, Switzerland and Canada, with
other countries to follow.
Based on the recently confirmed data on Mon-
juvi’s efficacy, tolerability and side effects,
additional clinical studies are underway for
further and earlier applications in the treatment
of blood cancer.
A milestone on the road to Monjuvi has been
reached. And with the achievement of this mile-
stone, many new opportunities are within reach.
Patient
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 The Road to Monjuvi
Magazine
25
“With the approval
of Monjuvi, MorphoSys
has brought its first
proprietary medicine
to market and has be-
come a fully integrated
biopharmaceutical
company. In light of its
comprehensive develop-
ment program, this
is just the beginning of
a promising future
for Monjuvi, and for
MorphoSys.”
Jean-Paul Kress, M.D., Chief Executive Officer
Financial StatementsGroup Management ReportThe Company The Company
26
Contents
01
The
Company
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 y
n
a
p
m
o
C
e
h
T
28
36
42
Letter to the Shareholders
Report of the Supervisory Board
Supervisory Board of MorphoSys AG
45
MorphoSys on the Capital Market
Non-Financial Report
https://csr.morphosys.com/2020
Financial StatementsGroup Management Report
The Company
28
Letter to the Shareholders
Jean-Paul Kress, M.D.
Chief Executive Officer
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Letter to the Shareholders
The Company
29
Dear Ladies and Gentlemen,
Dear Shareholders,
As we reflect upon 2020, it was an unprecedented year with the global pandemic
that impacted all of our lives and continues to challenge our everyday normalcy.
Despite the many challenges we faced, 2020 was a year of significant achievements
for MorphoSys. We delivered one of our most successful years as a company and
brought new hope to patients. A transformative accomplishment was the acceler-
ated U.S. approval and successful launch of Monjuvi for the treatment of an
aggressive form of blood cancer where there remains a large unmet need. The
Monjuvi launch accomplished a major goal of transforming the company into
an integrated, commercial-stage biopharmaceutical company.
Bringing our first therapy to the market
At the start of the year as we moved closer to potential FDA approval for Monjuvi,
we found a global partner with whom we could align our efforts. We were excited
to announce a global collaboration and licensing agreement with Incyte in Janu-
ary 2020. This is a collaborative partnership where the two companies share a
vision for tafasitamab as a potential pipeline in a product and backbone therapy
in non-Hodgkin lymphoma (NHL). The agreement comprised an upfront pay-
ment of US$ 750 million plus an equity investment by Incyte of US$ 150 million;
up to US$ 1.1 billion in potential development, regulatory and commercial mile-
stones; plus, royalties on ex-U.S. sales. We are co-commercializing Monjuvi in the
U.S. in coordination with Incyte leveraging our newly-formed commercial team
and Incyte’s established footprint.
During 2020, we continued to successfully build our U.S. commercial organization.
Roland Wandeler, Ph.D., joined the Management Board as our Chief Operating
Officer in May 2020 and is leading both our global commercial team and our U.S.
operations. He brings with him a wealth of experience and proven track record
from his prior international roles at Amgen. His commercial and operational
leadership will be key as we continue to execute on the Monjuvi launch and our
future commercial endeavors.
Financial StatementsGroup Management Report The Company
30
Letter to the Shareholders
The accelerated U.S. FDA approval for Monjuvi on July 31 was a significant mile-
stone. We are proud of this success and hope to build upon it as we execute
on the Monjuvi launch and also work to bring other therapies to the market. The
launch of Monjuvi was the culmination of a tremendous amount of effort across
the organization and in tandem with our partner Incyte. We executed the launch
in an expeditious fashion by being prepared well in advance thanks to the ex-
pertise of our development, regulatory, legal, medical affairs, market access,
commercial colleagues, and beyond.
Monjuvi is the first and only FDA-approved second-line therapy for adult patients
with relapsed or refractory diffuse large B-cell lymphoma (DLBCL). DLBCL is
the most common type of non-Hodgkin lymphoma in adults worldwide. It is an
aggressive disease with about one in three patients not responding to initial
therapy or relapsing thereafter. We believe Monjuvi has the potential to transform
the standard of care in DLBCL, given its approved indication, combinability and
accessibility.
Since the approval, our team has been laser-focused on bringing Monjuvi to
patients who have limited treatment options. We are encouraged by the initial
uptake of Monjuvi despite the challenges we have faced launching a therapy
during the COVID-19 pandemic. We have been able to adapt and overcome many
hurdles, for example by utilizing digital technologies to engage healthcare pro-
viders and drive individual and peer-to-peer interaction.
In May 2020, the Marketing Authorization Application (MAA) for tafasitamab plus
lenalidomide for the EU was validated, and a potential approval decision is
anticipated in the second half of 2021. In January 2021, the health authorities in
Switzerland and Canada accepted our New Drug Submissions for tafasitamab.
We believe tafasitamab has the potential to transform the standard of care and
could hold significant promise not just as a potential backbone in DLBCL, but
also as a combination partner of choice in other hematological malignancies. We
are developing tafasitamab as a potential first line treatment in DLBCL and are
actively pursuing combination options with existing and novel modalities. Our
plan is to continue to pursue a broad development plan for tafasitamab to truly
advance and provide cancer patient care.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Letter to the Shareholders
The Company
31
Malte Peters, M.D.
Chief Research and Development Officer
Expanding our pipeline
We are committed to expanding our pipeline through our internal research as
well as through external opportunities. Beyond tafasitamab, we have a growing
internal development pipeline. We are currently studying felzartamab, formerly
called MOR202, in a phase 1/2 proof-of-concept trial, called M-PLACE. The trial
is exploring felzartamab in anti-PLA2R-positive membranous nephropathy, an
autoimmune disease affecting the kidneys. Patients with this disease could de-
velop end stage renal disease – and ultimately require dialysis or kidney trans-
plant. With a lack of effective treatment options, 30-40 % of patients typically
progress to end stage renal disease within 5-15 years. In late 2020, the safety
run-in phase of the M-PLACE study was completed, and the full enrollment phase
opened. As part of our business development activities, Incyte and MorphoSys
signed a clinical collaboration with Xencor in November 2020. Xencor will be ex-
ploring tafasitimab in combination with lenalidomide along with their bispecific
CD20xCD3 candidate, plamotamab, focused on relapsed or refractory DLBCL,
first-line DLBCL, and relapsed or refractory follicular lymphoma (FL).
Financial StatementsGroup Management Report The Company
32
Letter to the Shareholders
Rejuvenated research platform
MorphoSys has its foundation in cutting edge antibody technologies and discov-
ery. With innovation a top priority, we continue to rejuvenate and look for com-
plimentary technologies. A perfect example is our recent agreement signed in
November 2020 with Cherry BioLabs for the use of their Hemibody technology in
the context of our CyCAT ® (Cytotoxic Cell Activation at Tumor) Dual Targeting
Concept to discover and advance novel treatment options for patients with hema-
tological as well as solid cancers. Another exciting new technology is our innova-
tive and pro prietary OkapY™ bispecific antibody platform. Designed to be simple
and modular in its use, this ver satile format could enable several distinct classes
of bispecifics with unique modes of action. With our strong internal R&D capabil-
ities and business development acumen, I am excited about the prospects for
our pipeline over the long-term.
Roland Wandeler, Ph.D.
Chief Operating Officer
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Letter to the Shareholders
The Company
33
Growing revenue from our pharmaceutical license agreements
In addition to our own pipeline, we also saw progress with several licensed
programs which create value through royalties and milestone payments, such as
Janssen’s Tremfya®.
Tremfya is the first approved product generated from our discovery engine and
is already a blockbuster. Janssen has the development and commercialization
rights, and MorphoSys receives royalties from the sales. We are pleased by
Janssen’s commitment to expand the indications for this drug beyond its first
approval in plaque psoriasis. In 2020, Tremfya was approved in both the U.S.
and the EU for the treatment of adult patients with active psoriatic arthritis.
Janssen also presented promising interim data during 2020 from an ongoing
study in Crohn’s disease.
Highlighting a few other partnerships, GlaxoSmithKline (GSK) started a clinical
trial to evaluate the efficacy and safety of otilimab in patients with severe pul-
monary COVID-19-related disease – in addition to ongoing pivotal clinical trials
with otilimab for rheumatoid arthritis. It is our hope that an antibody generated
with MorphoSys’ technology could help patients deal with this devastating virus.
We are pleased that our licensing partner GSK shared in February the prelimi-
nary results of the OSCAR study using otilimab for the treatment of severe pulmo-
nary COVID-19 related disease and is expanding the study in order to further
explore otilimab as a potential treatment option for older adults suffering from
severe forms of COVID-19. The dosing of the first patient in the expanded study
triggered milestone payments of
16 million to MorphoSys.
Roche is conducting pivotal trials for gantenerumab for Alzheimer’s disease with
a readout expected in 2022. Our partner, I-Mab, is respon sible for developing
and commercializing felzartamab (MOR202) for China, Hong Kong, Taiwan and
Macao. In April 2020, their ongoing phase 3 trial in patients with relapsed/re-
fractory multiple myeloma (MM) was expanded into mainland China. We were
also pleased to see several programs from our long-standing agreement with
Novartis enter the clinic, triggering milestone payments to MorphoSys.
Corporate developments
In early 2021, Sung Lee joined MorphoSys as our new Chief Financial Officer (CFO)
and member of the Management Board. Sung brings more than 20 years of finance
leadership experience in biopharmaceutical and technology businesses. I am
convinced that his transformative mindset will be instrumental in executing our
ambitious growth strategy and the accelerated development of our pipeline for
the benefit of patients. Sung Lee replaces Jens Holstein, who stepped down as CFO
at the end of 2020. On behalf of the Management Board and the MorphoSys
team, I want to express my sincere appreciation for his significant contributions
over the last decade and wish him all the best for the next chapter that lies ahead.
As a growing, commercial organization with an increasing global footprint, we
place significant importance on being a responsible corporate citizen. With this
in mind, we will be publishing our first Non-Financial Group Report that covers
Financial StatementsGroup Management Report The Company
34
Letter to the Shareholders
Sung Lee
Chief Financial Officer
relevant Environmental, Social and Governance (ESG) topics for MorphoSys.
ESG is ingrained in the DNA of MorphoSys, but this inaugural report will be our
opportunity to articulate our important efforts in this regard. We look forward
to building upon this update over the years to both showcase our progress and
also to highlight the areas where we are making a meaningful impact. This
is certainly an endeavor that is a priority for the leadership team and entire
company.
With the new year unfolding we would be remiss not to reflect upon the impact of
COVID-19 and recognize how all of our employees have tackled things head-on
and problem-solved to responsibly ensure business continuity and patient access.
Very early on, the global leadership team worked to put a risk mitigation plan
in place to proactively try to address the impact of this virus. The safety and
well-being of our employees, healthcare workers and patients remains of top im-
portance. Launching our first drug during a pandemic has posed significant
challenges on all fronts, and I am very proud of how our team rose to the occasion
and still managed to exceed our internal expectations.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Letter to the Shareholders
The Company
35
Wrapping up an incredible year
We are proud of our European roots and looking forward to further building out
our U.S. organization. We continue to expand in the U.S., where more recently
we have opened a second clinical development hub at our Boston location to ac-
celerate our global drug development capabilities. We remain highly focused
on the successful commercialization of Monjuvi and advancing a comprehensive
development program for tafasitamab. We believe tafasitamab is uniquely suited
as a combination partner or a backbone of choice, given its safety profile. At the
same time, we are growing our long-term pipeline both organically through our
innovative discovery work and externally as we evaluate business development
opportunities. We will continue to leverage our strong balance sheet in a disci-
plined and focused manner to maximize shareholder value.
On behalf of the Management Board, I would like to express our heartfelt thanks
to all of MorphoSys’ employees for their ongoing efforts and commitment to our
company’s success, and to their flexibility as we adapted to the changing health
situation throughout 2020. Everyone’s dedication is truly appreciated and a tes-
tament to the values embedded in the fabric of the company.
I would also like to thank you, our shareholders, for your continued support
and for your belief in the company. We look forward to engaging with you in 2021
and beyond.
We are extremely gratified to be able to bring a new treatment option to patients,
who are at the core of all we do. We will continue to work hard to deliver truly
transformative therapies to improve the lives of people suffering from cancer and
autoimmune diseases.
We look forward to sharing our progress and achievements with you in the year
ahead.
Sincerely,
Jean-Paul Kress, M.D.
Chief Executive Officer
Financial StatementsGroup Management Report The Company
36
Report of the Supervisory Board
Report of the Supervisory Board
Cooperation of the Management
Board and Supervisory Board
During the 2020 financial year, the Supervisory Board com-
prehensively performed the duties assigned to it by law, the
Articles of Association, Rules of Procedure and the recom-
mendations of the German Corporate Governance Code (here-
inafter referred to as the “Code”) with one justified exception
as regards the Code in its version dated February 7, 2017
(hereinafter referred to as the “Code 2017”) and with two jus-
tified exceptions as regards the Code in its version dated De-
cember 16, 2019 (hereinafter referred to as the “Code 2020”).
We regularly advised and continually oversaw the Manage-
ment Board in its management of the Company and dealt ex-
tensively with the operational and strategic development of
the Group. The Management Board fulfilled its duty to inform
and furnish us with periodic written and verbal reports con-
taining timely and detailed information on all business trans-
actions and events of significant relevance to the Company.
The Management Board prepared these reports in collabora-
tion with the respective departments. In our Committee meet-
ings and plenary sessions, we had the opportunity to discuss
the Management Board’s reports and the proposed resolu-
tions 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 man-
ner. 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
Supervisory Board members approved all actions by the Man-
agement 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 deci-
sion. All matters requiring approval were submitted for re-
view by the Management 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
regularly exchanged information and ideas with the Man-
agement Board and especially the Chief Executive Officer,
Dr. Jean-Paul Kress. The Supervisory Board chairman was
always kept promptly informed of the current business situa-
tion and any significant business transactions. The Chairs of
the Committees have also had regular contact with the Man-
agement Board members in their respective areas of responsi-
bility and individual Management Board members on demand.
Supervisory Board Meetings in the
2020 Financial Year and Key Items
of Discussion
A total of 10 Supervisory Board meetings were held in the
2020 financial year, whereby the majority of those meetings
were held by video call due to the Covid-19 pandemic. The
Supervisory Board regularly held closed sessions without
participation of the Management Board as part of their Super-
visory Board meetings. All Supervisory Board members were
present at all Supervisory Board meetings. A detailed over-
view of the participation of all Supervisory Board members in
the respective Supervisory Board and Committee meetings
can be found in the “Statement on Corporate Governance,”
which is available on the Company’s website under the head-
ing “Media & Investors > Corporate Governance > Statement
on Corporate Governance,” and in the Annual Report on
pages 108 to 109. In urgent cases occurring outside of meet-
ings, the Supervisory Board passed resolutions by written
procedure.
In addition to the above, a one-day strategy meeting took place
in November 2020 that primarily addressed
• the Company’s corporate strategy & financial outlook;
• the product strategy for Monjuvi and felzartamab;
• filling the pipeline for sustainable growth; and
• building a compelling global operating model of the Company.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Report of the Supervisory Board
The Company
37
During the 2020 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:
• conclusion of the Global Collaboration and License Agree-
ment with Incyte Corporation for Monjuvi, including a reso-
lution for a capital increase from authorized capital to imple-
ment the purchase of 3,629,764 American Depositary Shares
by Incyte as part of the Global Collaboration and License
Agreement;
• evaluation of the Company’s achievement of the 2019 finan-
cial year corporate targets and minor adjustments to the
corporate targets defined by the Supervisory Board at the
end of 2019 for the 2020 financial year;
• terms and conditions of the long-term incentive plan 2020
and of the stock option plan 2020 as well as the number of
performance shares and stock options to be granted to the
individual Management Board members under these plans;
• agenda and proposed resolutions for the 2020 Annual
General Meeting, particularly the nominations of Wendy
Johnson, Dr. George Golumbeski and Michael Brosnan as
Supervisory Board candidates for re-election at the 2020
Annual General Meeting;
• confirmation of Dr. Marc Cluzel as chair and re-election of
Dr. George Golumbeski as deputy chair of the Supervisory
Board and establishment and staffing of the Committees in
the Board’s constituent meeting following the 2020 Annual
General Meeting;
• appointment of the new Chief Operating Officer, Dr. Roland
Wandeler, and conclusion of a corresponding management
board contract;
• revision of the rules of procedure of the Supervisory Board
as well as of the Management Board, including schedules of
responsibilities;
• sale of Morphosys’ shares of Lanthio Pharma B.V. to Lanthio
Participatie B.V., a newly established entity founded by the
former Managing Director of Lanthio Pharma B.V.
• conclusion of a release agreement with the former Chief
Financial Officer, Jens Holstein, in the course of his step-
ping down as of December 31, 2020;
• award of the audit contract to the auditor for the 2020 finan-
cial year and selection of the auditor to be proposed to the
Annual General Meeting 2021 for the audit of the 2021 finan-
cial year;
• issuance of convertible bonds due 2025 in an aggregate
principal amount of EUR 325 million;
• conclusion of a commercial supply agreement for tafasitamab
with Lonza Sales AG;
• budget for the 2021 financial year.
We also passed a resolution in the Supervisory Board plenum
on the remuneration of Dr. Jean-Paul Kress, Jens Holstein and
Dr. Malte Peters, taking external benchmarking into consid-
eration. As set out above, we evaluated the achievement of the
2019 corporate targets that were agreed with the Manage-
ment Board and discussed and defined the corporate targets
for 2021. We commissioned an independent remuneration
consultant to confirm the appropriateness of the Management
Board’s compensation and its comparison to the remunera-
tion of various levels of employees. We discussed and agreed
on the key performance indicators for the long-term incentive
plans for the Management Board, the Senior Management
Group and other employees in key positions. Furthermore, we
approved the financial statements for the 2019 financial year,
acknowledged the half-year results for 2020 and discussed
the first and third quarter reports as well as dealt with the
Statement on Corporate Governance and the Corporate Gover-
nance Report.
Further, we dealt with the development of a new remunera-
tion system for the members of the Management Board,
which is in line with the new provisions of the German Stock
Corporation Act (AktG) and the Code and which shall be
submitted for approval to the Annual General Meeting 2021
as well as with the appointment of the new Chief Financial
Officer, Sung Lee, and the conclusion of a corresponding man-
agement board contract.
Our regular discussions in the Supervisory Board’s plenary
meetings were focused on MorphoSys’ long term develop-
ment strategy, revenue and earnings development and the
regular financial reports, the communication to the investor
community, the progress of the two business segments Part-
nered Discovery and Proprietary Development, the results
and progress of the clinical programs for the development of
proprietary drugs, interactions with regulatory authorities and
the development of new technologies. Further focal points of
discussion were the FDA approval for Monjuvi, the readiness
of US organization to launch Monjuvi and the review of the
US launch status of Monjuvi following the approval. Further-
more, we discussed the financial outlook for the 2022/2023
financial years and MorphoSys’ associated future potential
financing needs. In addition, we carried out an evaluation on
how effective the Supervisory Board and its committees ful-
fill their tasks, which was performed via a questionnaire
that included a joint self-evaluation of the Supervisory Board,
its Committees and also the Management Board. Further-
more, we kept ourselves regularly informed with respect to
Financial StatementsGroup Management Report The Company
38
Report of the Supervisory Board
the Company’s asset management policy, risk management,
internal audit results and the internal control and compliance
management system as well as the further development and
adaptation to new processes and transactions of the system of
Internal Control over Financial Reporting (ICoFR) to ensure
continuous SOX compliance by end of 2020.
Conflicts of Interest within the
Supervisory Board
No conflicts of interest arose within the Supervisory Board in
the 2020 financial year.
Activities and Meetings of
Supervisory Board Committees
To ensure that its duties are performed efficiently, the Super-
visory Board has established three permanent 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 responsibility for the Supervisory Board
plenum. In each Supervisory Board meeting, the chairs of the
Committees report to the Supervisory Board on the Commit-
tees’ 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 Cor-
porate 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 105 to 110.
The Audit Committee met on five occasions in the 2020 finan-
cial year, whereby the majority of those meetings were held
by video call due to the Covid-19 pandemic. All Committee
members were present at all Audit Committee meetings. The
Committee dealt mainly with accounting issues, quarterly
reports, annual 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
members of the audit results. 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 2020 finan-
cial year. Based on the Auditors Reform Act and the require-
ments for the external and internal rotation of the auditor, the
Audit Committee carried out in 2020 a public tender for the
2021 annual audit and half-year review. 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 2021 financial year. In addition, the Audit Committee
dealt with the annual update of a list of permitted 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 con-
ducted in the 2020 financial year, as well as specific account-
ing issues under International Financial Reporting Standards
(IFRS) relevant to the Company. In addition, the Committee
regularly discussed the Company’s asset management policy
and the investment recommendations made by the Manage-
ment Board. The Committee also discussed in depth the 2021
budget and the financial outlook for the 2022/2023 financial
years. Furthermore, the Committee monitored the further
development and adaptation to new processes and transactions
of the system of Internal Control over Financial Reporting
(ICoFR) to ensure continuous SOX compliance by end of 2020.
To increase efficiency, there is a joint Remuneration and Nom-
ination Committee, which deliberates on matters relating to
remuneration and nomination. The Committee met on seven
occasions in the 2020 financial year, whereby all these meet-
ings were held by video call due to the Covid-19 pandemic. 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
system and level of compensation. In particular, the Commit-
tee dealt with the implementation of a new remuneration
system for the members of the Management Board. Further,
the Committee also commissioned an independent remunera-
tion expert with the task of preparing a Management Board
remuneration report to verify the appropriateness of the
Management Board’s remuneration. Based on this report, the
Committee prepared a recommendation on the Management
Board’s compensation and submitted this to the Supervisory
Board for approval. The Committee also dealt with the ratio
of compensation between the Management Board and the
Senior Management Group and the staff overall and had this
ratio reviewed by the commissioned remuneration expert.
This expert confirmed the appropriateness of these “vertical”
compensation ratios. In addition, the Committee gave care-
ful consideration to the corporate targets as a basis for the
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Report of the Supervisory Board
Management Board’s short-term variable remuneration and
offered appropriate recommendations to the Supervisory
Board for resolution. The Committee discussed the key per-
formance 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 recommended the appointment of
Dr. Roland Wandeler as the new Chief Operating Officer and
prepared the corresponding management board contract. In
addition, this Committee prepared the release agreement
with the Chief Financial Officer, Jens Holstein. Further, the
Nomination Committee recommended the nominations of
Wendy Johnson, Dr. George Golumbeski and Michael Brosnan
as Supervisory Board candidates for re-election at the 2020
Annual General Meeting. In addition, this Committee dealt
with succession planning within the Company, in particular
as regards the succession of the departed Management
Board member Jens Holstein. In this context, the Committee
recommended the appointment and prepared the respective
management board contract of Sung Lee as the new Chief
Financial Officer, who has been appointed as member of the
Management Board by the Supervisory Board.
The Science and Technology Committee was held on six
occasions during the 2020 financial year, whereby due to the
Covid-19 pandemic the majority of those were virtual meet-
ings. All Committee members participated in all Committee
meetings. The Committee dealt mainly with the Company’s
research activities as well as overall strategy to expand the
proprietary drug pipeline, the development of novel technolo-
gies, 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 develop-
ment of Monjuvi up to approval and successful launch in US,
as well as the expansion into other indications and lines of
therapy, in combination with established or novel anti-cancer
agents. The Committee also addressed the further develop-
ment of felzartamab in autoimmune diseases. Additionally, at
one occasion a combined Science and Technology Committee
and Deal Committee Meeting was held, and the activities and
execution to complement the company portfolio with innova-
tive technologies, potential new research programs, develop-
ment collaborations as well as in-licensing and merger and
acquisition opportunities were reviewed.
The Company
39
Corporate Governance
The Supervisory Board devoted its attention to the further
development of MorphoSys’ corporate governance, taking into
consideration the Code 2017 and the Code 2020. The Corpo-
rate Governance Statement according to Section 289f HGB
(German Commercial Code), including the detailed Corporate
Governance Report, and the Group Statement on Corporate
Governance according to Section 315d HGB, can be found on
the Company’s website under the heading “Media & Investors
> Corporate Governance > Corporate Governance Report” and
in the Annual Report on pages 103 to 133.
We also discussed with the Management Board the Compa-
ny’s compliance with the Code’s recommendations and in one
justified case approved an exception to the recommendations
of the Code 2017 and in two justified cases approved an ex-
ception to the recommendations of the Code 2020. Based on
this consultation, the Management Board and the Supervi-
sory Board submitted the annual Declaration of Conformity
on November 29, 2020. The current version of the Declaration
of Conformity can be found in this Annual Report and is
permanently available on the Company’s website under the
heading “Media & Investors > Corporate Governance > Decla-
ration of Conformity.”
Changes in the Composition
of the Management Board and
Supervisory Board
The Chief Scientific Officer of the Company, Dr. Markus
Enzelberger, resigned as member of the Management Board
and CSO in November 2019 with effect as of February 29,
2020. By decision of the Supervisory Board of March 30,
2020, Dr. Roland Wandeler was appointed as Chief Operating
Officer for a term of office of three years from May 5, 2020
until April 30, 2023. In the course of these changes in the
composition of the Management Board, Dr. Malte Peters as-
sumed the role of Chief Research and Development Officer,
effective March 1, 2020, and the Supervisory Board newly
adopted the Schedule of Responsibilities for the Management
Board. Further, the Chief Financial Officer Jens Holstein
resigned in September 2020 with effect as of December 31,
2020. No further changes in the composition of the Manage-
ment Board took place during the 2020 financial year.
Financial StatementsGroup Management Report The Company
40
The following changes in the composition of the Supervisory
Board took place during the 2020 financial year: The deputy
chair of the Supervisory Board, Mr. Frank Morich, resigned
as member of the Supervisory Board with effect as of April 11,
2020. Hereinafter, the Company decided to reduce the compo-
sition of the Supervisory Board to six members. Further,
Wendy Johnson, Dr. George Golumbeski and Michael Brosnan
were re-elected as members of the Supervisory Board by the
2020 Annual General Meeting, following the expiry of their
terms of office. The Company has established a handbook to
support the onboarding of new Supervisory Board members
by outlining principal rights and duties of Supervisory Board
members as well as relevant legal documents, such as Rules
of Procedure of the Supervisory Board and its Committees.
Audit of the Annual Financial
Statements and Consolidated
Financial Statements
For the 2020 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 27, 2020. The Supervisory
Board obtained a declaration of independence from the audi-
tor in advance.
The consolidated financial statements and the annual finan-
cial statements of MorphoSys AG, as well as the Group Man-
agement Report and the Management Report for the 2020
financial year, were properly audited by PwC and issued
with an unqualified audit opinion. The key topics of the audit
for the consolidated and annual financial statements for the
2020 financial year were management override of controls and
fraud in revenue recognition, revenue accounting for complex
out-licensing and collaboration arrangements, revenue recog-
nition of the sale of Monjuvi, the initial and subsequent rec-
ognition valuation of the financial liability from collaboration,
the valuation of the deferred tax asset, the accounting and
measurement of the financial liability for the convertible
bond, accounting for accruals for outstanding invoices for
external laboratory funding and external services, valuation
of financial assets, as well as the assessment of the design
and effectiveness of internal controls in accordance with
SOX404. In addition, the auditor confirmed that the Manage-
ment Board had established an appropriate reporting and
monitoring system that is suitable in its design and adminis-
tration for the early detection of developments that could
threaten the Company’s existence.
Report of the Supervisory Board
The audit reports and documents relating to the consolidated
financial statements and the annual financial statements
were provided on a timely basis to all Supervisory Board
members for review. The audit report, the consolidated finan-
cial statements, the Group Management Report of the
MorphoSys Group and the audit report, the annual financial
statements and the Management Report of MorphoSys AG
were discussed in detail at the Audit Committee meeting on
March 10, 2021, and the meeting of the Supervisory Board on
March 11, 2021. The auditor attended all meetings concern-
ing the consolidated and annual financial statements, the
half-year report and quarterly interim statements and re-
ported on the key results of his audit and review, respectively.
The auditor also explained the scope and focus of the audit
and review 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 approves
the consolidated and annual financial statements prepared by
the Management Board. The Supervisory Board also took
note of the audit results and, in turn, reviewed the consoli-
dated and annual 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 consolidated and annual
financial statements as well as the Group Management Report
and the Management Report as prepared by the Management
Board and audited by the auditor, were subsequently approved
by the Supervisory Board. Thus, the annual financial state-
ments were adopted.
The Company has prepared a separate non-financial group
report in accordance with Section 315b (3) of the German
Commercial Code (HGB) for the fiscal year 2020. The Super-
visory Board has commissioned PwC to perform a separate
limited assurance engagement of this report. All members of
the Supervisory Board received the separate non-financial
group report and the Independent Practitioner’s Assurance
Report in a timely manner. The assurance results and the
assurance report of PwC were discussed at the Supervisory
Board’s plenary meeting on March 11, 2021. PwC’s auditor
participated in this discussion and presented the assurance
results. The Supervisory Board took note of the results of the
assurance engagement with approval.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 The Company
41
Report of the Supervisory Board
Recognition for Dedicated Service
On behalf of the entire Supervisory Board, I would like to
thank the members of the Management Board and the em-
ployees of MorphoSys for their achievements, their dedicated
service and the inspirational work environment witnessed
during this past financial year. Through their efforts,
MorphoSys’ portfolio has continued to mature and expand,
and important milestones have been achieved.
The Supervisory Board would also like to thank the departed
Management Board member Jens Holstein for his excellent
contribution and commitment. The Supervisory Board fur-
ther thanks Supervisory Board member Frank Morich for his
commitment and cooperation.
Planegg, March 11, 2021
Marc Cluzel, M.D., Ph.D.
Chairman of the Supervisory Board
Financial StatementsGroup Management Report The Company
42
Supervisory Board of MorphoSys AG
Supervisory Board
of MorphoSys AG
M a rc Cl u ze l , M . D. , Ph . D.
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)
G e o rg e G o l u m b es k i , Ph . D.
Deputy Chairman, Far Hills, NJ, USA
Member of the Supervisory Board of:
Carrick Therapeutics Ltd., Dublin, Ireland (Chairman of the Board of Directors)
Sage Therapeutics, Cambridge, MA, USA (Member of the Board of Directors)
Shattuck Labs, Inc., Austin, TX, USA (Member of the Board of Directors)
K ri sj a Ve rm eyl e n
Board Member, Herentals, Belgium
Member of the Supervisory Board of:
Diaverum AB, Lund, Sweden (Member of the Board of Directors)
The CVs of our Supervisory Board Members can be found on the Company’s website
under the heading “Company > Management > Supervisory Board.”
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Supervisory Board of MorphoSys AG
The Company
43
M i c h a e l B ros n a n
Board Member, Westford, MA, USA
No other Supervisory Board Memberships
S h a ro n Cu rra n
Board Member, Dublin, Ireland
Member of the Supervisory Board of:
CAT Capital Topco Limited, Saint Peter Port, Guernsey
(Member of the Board of Directors)
CAT Capital Bidco Limited, Dublin, Ireland (Member of the Board of Directors)
Circassia Pharmaceuticals plc., Oxford, United Kingdom
(Member of the Board of Directors)
We n d y Jo h n so n
Board Member, San Diego, CA, USA
Member of the Supervisory Board of:
Exagen, Inc., Vista, CA, USA (Member of the Board of Directors)
Financial StatementsGroup Management Report The Company
44
Sustainability at MorphoSys
Sustainability at MorphoSys
We are aware of our responsibility to current and future generations and believe that sustainable
action is a prerequisite for long-term business success. Read more on this topic in our Group’s 2020
Non-Financial Report.
Non-Financial Report
20
20
You can find our 2020 Non-Financial Report
online at:
https://csr.morphosys.com/2020
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 MorphoSys on the Capital Market
The Company
45
MorphoSys on the
Capital Market
Stock Market Environment and
Morphosys Share Performance
The 2020 trading year was characterized by historically un-
usual high volatility. Following the outbreak of the COVID 19
pandemic, numerous stock indices around the world fell,
often to multi-year lows, but turned around and recovered as
the year progressed. At the end of 2020, many were even
trading close to their multi-year or even all-time highs. The
DAX index closed the year with a year-on-year gain of just
under 4 %, the TecDAX rose by almost 7 %, and the MDAX in-
creased by just below 9 %. The NASDAQ Biotechnology Index
closed the year almost 26 % higher than at the beginning of
the year as companies in the biotechnology sector were able
to decouple themselves from the general stock market trend –
as the importance of the biotechnology industry was rein-
forced by the pandemic.
MorphoSys AG shares have been trading on the Frankfurt
Stock Exchange since 1999. In 2018, MorphoSys issued Ameri-
can Depositary Shares (ADSs*) on the U.S. NASDAQ exchange
based on MorphoSys’ common stock. The Company’s ticker
symbol is “MOR” on both exchanges.
MorphoSys’ shares opened the 2020 trading year in Xetra
trading at € 129.60. The share performance was highly vola-
tile, particularly in the first quarter of 2020. Following the
announcement of the collaboration and licensing agreement
with Incyte, the share price on Xetra increased temporarily
and almost reached the all-time high of € 148.13 recorded in
2000. In the wake of the COVID 19 pandemic, the share price
saw intraday declines as low as € 65.25, but was able to re-
cover. MorphoSys’ shares started to stabilize in May, climb-
ing to above € 100.00 and ended the trading year on Xetra
at € 93.82.
›› see figure 01 – Performance of the MorphoSys Share in 2020 (page 47)
›› see figure 02 – Performance of the MorphoSys Share 2016 – 2020
(page 47)
Liquidity and Index Membership
The average daily trading volume of the MorphoSys share
across all regulated trading platforms increased significantly
to € 33.5 million in 2020 (previous year: € 25.6 million), cor-
responding to a year-on-year increase of more than 30 %. For
the TecDAX and MDAX selection indices, trading volumes
were up year-on-year by 28 % and 47 %, respectively. In the
TecDAX, MorphoSys ranked 11th in terms of trading volume
at year-end 2020 (unchanged from the previous year) and
13th in terms of market capitalization* (previous year: 9th).
In the MDAX, MorphoSys ranked 64th in terms of market
capitalization (previous year: 55th) and 54th in terms of trad-
ing volume (2019: 57th). The rankings refer to the TecDAX30
and MDAX60 companies, respectively. MorphoSys is also a
component of the NASDAQ Composite Index through its ADS
program and is included in various other indices, such as the
NASDAQ Health Care Index, the Loncar Cancer Immunother-
apy Index and the S-Network Medical Breakthrough Index.
*see glossary – page 216
In addition to the trading on the regulated platforms, an
average of approximately 217,000 of MorphoSys’ shares with
a value of approximately € 22.4 million were traded daily
on alternative trading venues (“dark pools”) in 2020 (2019:
196,000 shares; € 19.1 million). This figure corresponds to a
year-on-year increase in trading outside of the regulated
markets of approximately 18 %. The MorphoSys ADSs reached
a volume of US$ 3 million per trading day in the reporting
year (previous year: US$ 1.7 million), for an increase of ap-
proximately 73 %.
Capital Structure
The Company’s common stock increased to 32,890,046 shares
or € 32,890,046 in the reporting year due to the purchase of
ADSs and shares by Incyte, created from a capital increase,
as well as the exercise of convertible bonds granted to the
Management Board and certain Company employees in 2013.
A detailed description of the capital increase and convertible
bond program can be found in Notes 4 and 8.2.
Financial StatementsGroup Management Report The Company
46
Table 01
Key Data for the MorphoSys Share (December 31)
MorphoSys on the Capital Market
Figure 01
Performance of the MorphoSys Share in 2020 (January 1, 2020 = 100 %)
2020
2019
2018
2017
2016
MorphoSys Xetra
MorphoSys Nasdaq
TecDAX
MDAX
Nasdaq Biotech
Total stockholders’ equity (in million €)
629.2
394.7
488.4
358.7
415.5
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)
32,890,046
31,957,958
31,839,572
29,420,785
29,159,770
3,086
93.82
33.5
0.98
4,052
126.80
25.6
0.81
2,832
88.95
22.5
0.77
2,253
76.58
15.6
0.83
1,422
48.75
9.7
0.78
Various voting rights notifications were made pursuant to
Section 33 (1) of the German Securities Trading Act (WpHG)
during the reporting year. The notifications were published
on the MorphoSys website under Media and Investors – Stock
Information – Recent Voting Rights Notifications.
At the end of the reporting year, the free float in MorphoSys AG
shares, as per the definition of Deutsche Börse, was 99.60 %.
digital environment. During the reporting year, MorphoSys
was still able to participate in 25 international investor con-
ferences, starting with the J.P. Morgan Healthcare Confer-
ence in San Francisco in early 2020, where it announced its
collaboration with Incyte and the joint development and com-
mercialization plans for tafasitamab*. As the year progressed,
the majority of the conferences were held virtually, instead of
in person as in prior years.
Dividend Policy
We have not distributed dividends since our inception, and
we do not expect to set or distribute any cash dividends in
the foreseeable future. It is our intention to invest any future
profits in the growth and development of our business. Unless
otherwise required by law, the future determination of any
cash dividends will be at the sole discretion of the Manage-
ment Board and Supervisory Board and will depend on our
net assets, financial position, results of operations, capital
requirements and other factors that the Management Board
and Supervisory Board deem relevant.
Investor Relations Activities
In the 2020 reporting year and with the emergence of the
COVID 19 pandemic, our exchange with shareholders, inves-
tors and analysts has been taking place digitally to a much
greater extent than before. This is particularly true in the
case of investor conferences, whose added value in the past
has been the personal dialog with a broad spectrum of market
participants and the related networking. While the pandemic
has demonstrated that increased digitization can save travel
time and costs, it has also shown that established processes
and interaction need to adapt even more to the transformed
During the 2020 reporting year, MorphoSys held conference
calls to accompany the publication of annual, half-year and
quarterly reports. All of these calls could be followed on the
Internet. On these calls, the Management Board reported on
the Company’s business developments and answered partici-
pants’ questions.
The main topics of the analyst and investor meetings included
the collaboration with Incyte, the build-up of U.S. operations,
the progress of the regulatory filing, approval and market
launch of tafasitamab*, as well as the progress of the clinical
development of tafasitamab and felzartamab (MOR202). Later
in the year, the departure of the previous Chief Financial
Officer (CFO), Jens Holstein, and the convertible bond issue
were also topics of discussion.
On September 29, 2020, MorphoSys and Incyte co-hosted a
conference call and webcast addressing the global commer-
cial opportunities for tafasitamab and the unmet medical
needs in non-Hodgkin’s lymphoma. Senior executives from
MorphoSys and Incyte were joined by Dr. Gilles Salles, the
principal investigator for the L-MIND* study, lead author of
the data presentation at ICML 2019 and EHA 2020, as well as
the lead author of the publication in Lancet Oncology 2020.
These virtual events generated significant interest from the
analysts following MorphoSys.
*see glossary – page 216
140
130
120
110
100
90
80
70
60
50
250
200
150
100
50
0
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Figure 02
Performance of the MorphoSys Share 2016–2020 (January 1, 2016 = 100 %)
MorphoSys
TecDAX
Nasdaq Biotech
2016
2017
2018
2019
2020
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020
MorphoSys on the Capital Market
Figure 01
Performance of the MorphoSys Share in 2020 (January 1, 2020 = 100 %)
The Company
47
MorphoSys Xetra
MorphoSys Nasdaq
TecDAX
MDAX
Nasdaq Biotech
140
130
120
110
100
90
80
70
60
50
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Figure 02
Performance of the MorphoSys Share 2016–2020 (January 1, 2016 = 100 %)
MorphoSys
TecDAX
Nasdaq Biotech
250
200
150
100
50
0
2016
2017
2018
2019
2020
Financial StatementsGroup Management Report MorphoSys on the Capital Market
The Company
48
At the end of 2020, a total of 20 analysts (previous year: 16)
were monitoring and evaluating the performance of MorphoSys
shares. This was an encouraging increase of 25 % compared to
the prior year. At the end of 2020, these analysts had the fol-
lowing recommendations:
Table 02
Analyst Recommendations (December 31, 2020)
Buy/Overweight/Market Outperform
Hold/Neutral
Reduce/Underperform
15
5
0
Buy/Overweight/Market Outperform = buy/positive; Hold/Neutral = neutral; Reduce/Underperform = sell/negative.
More detailed information on MorphoSys shares, key finan-
cial figures, its pipeline and strategic direction, as well as the
current Group developments, can be found on the Company’s
website under Media and Investors.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Non-Financial Group Report
The Company
49
Non-Financial Group Report
MorphoSys is aware of its responsibility to current and future
generations and believes that sustainable action is a prerequi-
site for long-term business success.
A detailed explanation of our view of sustainable corporate
governance and the specific measures we have taken during
the reporting year can be found in the “Separate Non-Financial
Group Report,” available on our website https://csr.morphosys.
com/2020.
Financial StatementsGroup Management Report Contents
Group Management Report
50
02
Group
Management
Report
53
70
71
88
92
102
103
Fundamentals of the MorphoSys Group
Macroeconomic and Sector-Specific Conditions
Analysis of Net Assets, Financial Position and
Results of Operations
Outlook and Forecast
Risk and Opportunity Report
Subsequent Events
Statement on Corporate Governance,
Group Statement on Corporate Governance
and Report on Corporate Governance
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 t
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Financial Statements
Group Management Report
Fundamentals of the MorphoSys Group
52
The year 2020 was a very successful one for MorphoSys. Our goal is to discover, develop and commer-
cialize outstanding, innovative therapies for critically ill patients. The focus of our entrepreneurial
activities is on cancer and autoimmune diseases. We received accelerated approval in July 2020 from
the U.S. FDA for Monjuvi® (tafasitamab-cxix)* in combination with lenalidomide for the treatment of
adult patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL) not otherwise speci-
fied, including DLBCL arising from low grade lymphoma, and who are not eligible for autologous stem
cell transplant (ASCT). This indication is approved under accelerated approval based on overall response
rate. Continued approval for this indication may be contingent upon verification and description of
clinical benefit in a confirmatory trial(s). Monjuvi is the first and, so far, the only drug approved for
second-line therapy for adult patients with relapsed or refractory DLBCL in the U.S. In January 2020,
we announced a global collabo ration and license agreement with Incyte for the development and commer-
cialization of tafasitamab. Together with Incyte, we are co-promoting Monjuvi in the United States.
Incyte holds exclusive rights for development and commercialization outside the U.S. In 2020, we also
successfully set up our U.S. organization, which was established to support the launch and ongoing
commercialization of Monjuvi. In addition, in 2020, the marketing authorization application (MAA) for
tafasitamab was validated in Europe. Preliminary data from the ongoing firstMIND study evaluating
tafasitamab as a first-line treatment for DLBCL was also presented in December 2020.
In November 2020, together with Incyte, we announced a clinical collaboration agreement with Xencor
to evaluate the combination of tafasitamab, lenalidomide and plamotamab – a tumor-targeted bispecific
antibody from Xencor – in multiple diseases as part of a broad development plan for tafasitamab.
Our product candidate felzartamab (MOR202) is in a phase 1/2 M-PLACE (proof-of-concept) trial in
anti-PLA2R-positive membranous nephropathy, an autoimmune disease of the kidneys. In November
2020, the safety run-in phase of this study was completed and the recruitment phase was opened. In
April 2020, our partner I-Mab expanded its ongoing phase 3 trial in patients with relapsed or refractory
multiple myeloma to mainland China.
In September 2020, we announced the U.S. FDA approval of the IND (Investigational New Drug) applica-
tion together with I-Mab for our product candidate MOR210 for the treatment of patients with advanced
solid tumors.
As part of our plans to expand our long-term pipeline, we announced a licensing agreement in Novem-
ber 2020 with Cherry Biolabs for the use of their Hemibody technology. We are applying the Hemibody
technology as part of our CyCAT® dual-targeting approach to explore and advance novel Hemibody-based
treatment options for patients with hematological and solid cancers.
Our partner Janssen continued to work on the extension of the previous approval for plaque psoriasis
of Tremfya® (guselkumab), the first approved and marketed therapeutic antibody based on MorphoSys’
proprietary technology. Tremfya was approved in 2020 in both the U.S. and the EU for the treatment of
adult patients with active psoriatic arthritis. Janssen also presented promising interim results from an
ongoing study in patients with Crohn’s disease in 2020.
Several programs from our long-standing agreement with Novartis entered clinical development in 2020
and resulted in milestone payments to MorphoSys.
In 2020, we achieved our goal of becoming a fully integrated biopharmaceutical company with the
launch of our first proprietary product. Major advances in other areas are helping to build our long-
term success.
*see glossary – page 216
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Fundamentals of the MorphoSys Group
Group Management Report
53
Fundamentals of the
MorphoSys Group
Organizational Structure and
Business Model
The MorphoSys Group, consisting of MorphoSys AG and its
subsidiary, discovers, develops and commercializes innovative
therapies for patients suffering from cancer and autoimmune
diseases.
The registered office of MorphoSys AG is located in Planegg,
near Munich, Germany. MorphoSys AG’s wholly owned U.S.
subsidiary, MorphoSys US Inc., was founded in Boston, Massa-
chusetts, USA, to advance the commercialization of tafasitamab.
The Planegg site houses the central corporate functions such as
accounting, controlling, human resources, legal, patent, pur-
chasing, corporate communications and investor relations, as
well as the two segments Proprietary Development and Part-
nered Discovery.
Further information on the Group’s structure can be found in
Note 2.2.1.
Legal Structure of the MorphoSys Group:
Group Management and Supervision
The parent company of the MorphoSys Group is MorphoSys AG,
a German stock corporation listed in the Prime Standard seg-
ment of the Frankfurt Stock Exchange and on the NASDAQ
Global Market. In accordance with the German Stock Corpora-
tion Act, the Company has a dual management structure with
the Management Board as the governing body with its four
members (after the departure of Jens Holstein effective Novem-
ber 13, 2020, the Management Board consists of three mem-
bers. Following the end of the reporting period, Sung Lee has
been appointed as Chief Financial Officer (CFO) and member of
the Management Board, effective February 2, 2021) appointed
and overseen by the Supervisory Board. The Supervisory Board
of MorphoSys AG is elected by the Annual General Meeting and
currently consists of six members. Detailed information con-
cerning the Group’s management and control and its corporate
governance principles can be found in the Corporate Gover-
nance Report.
Targets and Strategy
MorphoSys AG’s mission is to discover, develop and commer-
cialize innovative therapies for patients suffering from serious
diseases. MorphoSys is a fully integrated commercial biopharma-
ceutical company. Its activities focus on hematology-oncology
and autoimmune diseases. The Company aims to balance both
the short- and long-term potential for growth. Part of the busi-
ness model is a comprehensive partnering strategy. The pipe-
line is strategically expanded through targeted in-licensing
and co-development. In the majority of cases, development
programs are carried out jointly with partner companies. The
revenues MorphoSys generates, or intends to generate, from
these partnerships are to be used to expand the Company’s pro-
prietary portfolio.
MorphoSys possesses extensive knowledge of antibody, protein
and peptide technologies and has developed over 100 thera-
peutic product candidates from the basic principles to clinical
phase 3, together with its partners. Three programs are in the
most advanced phase 3; two products (Monjuvi and Tremfya) have
already received regulatory approvals and have been launched.
A total of 28 programs are currently in clinical development.
Currently, the business activities are reported in two segments,
the Proprietary Development and Partnered Discovery of anti-
body candidates. The Proprietary Development segment com-
prises the development of therapeutic agents based on propri-
etary technology platforms and on product candidates in-licensed
from other companies or co-developed with partners. A deci-
sion is made on a case-by-case basis during the clinical phase
to determine whether, and at what point, a partnership will be
sought for further development and commercialization. Drug
candidates can be either fully out-licensed, co-developed with a
partner, or developed in-house.
Financial Statements Group Management Report
Fundamentals of the MorphoSys Group
Financial Performance Indicators
The development of the financial performance indicators in the
reporting year is described in detail in the chapter “Analysis of
Net Assets, Financial Position and Results of Operations”. The
key financial indicators used to measure the Company’s operat-
ing performance are revenues, research and development ex-
penses, and earnings before interest and taxes (EBIT – defined
as earnings before finance income, finance expenses, income
from reversals of impairment/expenses from impairment losses
on financial assets, and income taxes).
MorphoSys’ business performance is additionally influenced by
factors such as liquidity (presented in the following balance
sheet items: “cash and cash equivalents,” “financial assets at
fair value, with changes recognized in profit or loss” and “other
financial assets at amortized cost”), operating expenses and
segment results. These indicators are also routinely analyzed
and evaluated.
In future periods, key figures like revenues, operating ex-
penses as well as research and development expenses will be
used as financial performance indicators. A reporting of operat-
ing segments will be omitted in the future.
The budget for the respective financial year is approved by the
Management Board and Supervisory Board. Subsequent to the
approval of the budget, a forecast is made three times within
the year, to assess if the Company is on track to achieve its
financial goals and progress towards financial guidance. The
forecast informs decision making and enables management to
take actions to achieve its goals.
54
MorphoSys also develops antibody candidates on behalf of
other companies in the pharmaceutical and biotechnology in-
dustries (Partnered Discovery). The resulting contractual pay-
ments may include technology and research license fees, suc-
cess-based milestone payments, and royalties* on product sales.
Revenues generated from these partnerships support MorphoSys’
long-term business model and help fund proprietary develop-
ment activities.
In the future, the development of antibody candidates on behalf
of other companies will no longer be a focus of business activi-
ties. In the first quarter of 2021, MorphoSys will no longer use
the Propiretary Development and Partnered Discover segments
as part of its regular internal reporting. The previous segment
reporting will therefore be reported for the last time on Decem-
ber 31, 2020 for external purposes.
The development of drug candidates is based almost exclusively
on MorphoSys’ innovative technologies. These include our estab-
lished antibody and technology platforms HuCAL ®*, Ylanthia®*
and Slonomics®*, as well as the bispecific technologies OkapY™*
and CyCAT. Under the agreement signed with Cherry Biolabs,
MorphoSys receives exclusive access to the Hemibody technol-
ogy*, a novel multispecific antibody technology for the recruit-
ment of effector cells (T cell engager), for several target* mole-
cules. We continue to leverage our resources and know-how so
that we can extend and expand these technologies. We intend
to complement our portfolio through both internal research and
development as well as in-licensing and acquisitions.
Group Management and
Performance Indicators
MorphoSys uses financial indicators to steer the Group. These
indicators help to monitor the success of strategic decisions and
give the Group 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 as-
sess a project’s progress and act promptly should a problem
occur. Material non-financial aspects are taken into account in
a “Separate Non-Financial Group Report.”*
* This information is not part of the management report that is subject to audit.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Fundamentals of the MorphoSys Group
Group Management Report
55
Table 03
Development of Key Financial Performance Indicators1
in million €
MorphoSys Group
Revenues
Operating Expenses
EBIT 2
Liquidity3
Proprietary Development
Segment Revenues
Segment EBIT
Partnered Discovery
Segment Revenues
Segment EBIT
2020
2019
2018
2017
2016
327.7
(309.7)
27.4
1,244.0
278.6
22.9
49.1
37.4
71.8
(179.9)
(107.9)
357.4
34.3
(109.1)
37.5
26.8
76.4
66.8
49.7
(136.5)
(133.8)
(109.8)
(59.1)
454.7
53.6
(53.3)
22.8
13.3
(67.6)
312.2
17.6
(81.3)
49.2
30.2
(59.9)
359.5
0.6
(77.6)
49.1
31.0
1 Differences may occur due to rounding.
2 Contains unallocated expenses (see also Item 3.3 of the Notes): 2020: € 32.9 million; 2019: € 25.7 million; 2018: € 19.2 million
3 Liquidity presented in the following balance sheet items: as of December 31, 2020. 2019, 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 and 2016 “cash and cash equivalents,” “available-for-sale financial assets and bonds”
as well as “financial assets classified as loans and receivables.”
Non-Financial Aspects
The FDA* approval and U.S. marketing launch of Monjuvi in
collaboration with Incyte has seen MorphoSys complete its
transformation from technology provider to fully integrated
biopharmaceutical company. The core task of our Company,
however, remains the same: to develop effective and safer drugs
for the well-being of patients with serious illnesses. In addition
to financial performance indicators, selected non-financial as-
pects are also taken into account in order to ensure long-term
economic success.
*see glossary – page 216
Innovation in research and development remains a key aspect
for MorphoSys. Our research and development strategy focuses
on high unmet medical need indications, where patients’ lives
depend on novel treatment options. We aim to improve the lives
of these patients by focusing on therapeutic areas that best fit
our expertise and at the same time allow us to make best use of
our resources.
access to our medicines became a key factor in the year under
review. We make considerable investments in developing poten-
tial medicines for patients in need, and do so without guarantee
of clinical and commercial success, as many products in re-
search and development phases fail to achieve market authori-
zation. Sustainable revenues from approved and commercially
viable products facilitate future investments in our research
and development efforts. At MorphoSys, our philosophy is to
responsibly price our medicines by balancing the value of the
outcomes and innovation they bring to patients and the health-
care system. MorphoSys is dedicated to supporting patients
throughout their treatment journeys, and we are working to-
gether to help remove access barriers for patients with limited
or no insurance coverage. As part of this commitment, MorphoSys
provides patient support programs offering financial assistance,
ongoing education and other resources to eligible patients who
are prescribed MorphoSys medicines.
The approval and U.S. marketing launch of Monjuvi have en-
abled us to reach patients directly, and for this reason securing
Detailed information on the sustainability strategy and key
areas of activity of MorphoSys can be found in the “Separate
Non-Financial Group Report.”*
* This information is not part of the management report that is subject to audit.
Financial Statements
Group Management Report
Fundamentals of the MorphoSys Group
56
Leading Indicators
MorphoSys follows a variety of leading indicators to monitor the
macroeconomic environment, the industry and the Company
itself. 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 macroeconomic indicators such as in-
dustry transactions, changes in the legal environment and the
availability of research funds and reviews these data carefully.
Market analyses that assess the medical need for innovative
therapies for serious diseases, with a focus on cancer and auto-
immune diseases, but also generally in relation to new technol-
ogies in the market, serve as early indicators of business devel-
opment. By continuously monitoring the market, MorphoSys can
quickly respond to trends and requirements and initiate its own
activities or partnerships.
For active collaborations, a joint steering committee meets
regularly (usually two to four times per year) to update and
monitor the programs’ progress. These ongoing reviews give
the Company a chance to intervene at an early stage if there are
any negative developments and provide it with information
about expected interim goals and related milestone payments
well in advance. Partners in non-active collaborations regularly
provide (once per year) MorphoSys with written reports so that
the Company can follow the progress of therapeutic programs.
Commercialization
In July 2018, MorphoSys established a subsidiary in the United
States – MorphoSys US Inc. – in preparation for the potential
marketing approval of tafasitamab. The subsidiary’s registered
office is located in Boston, Massachusetts, USA. In the course of
the reporting year, MorphoSys hired a Chief Operating Officer
to lead global commercial operations and oversee the Compa-
ny’s U.S. operations and completed the staffing of its sales orga-
nization well ahead of an anticipated launch.
During the first half of 2020, MorphoSys continued to ramp up
its activities to prepare for an anticipated accelerated approval
and U.S. launch of tafasitamab. Approaches were successfully
adapted to the special circumstances encountered with the
COVID 19 pandemic, which included a variety of virtual tools
to onboard team members and to initiate, maintain and grow
connections with key stakeholders. The sales organization was
fully staffed with oncology sales representatives who know
the hematology-oncology market and the key experts very well.
MorphoSys conducted comprehensive market research to better
understand customer needs and develop product differentiation.
With a deep understanding of the landscape based on previous
experience, MorphoSys’ market access team engaged with the
relevant stakeholders. The medical affairs team continuously
engaged with key opinion leaders using virtual platforms, sup-
porting scientific exchanges and sponsoring continuing medi-
cal education (CME) programs. They also participated in virtual
symposia, lectures and clinical trial* engagements. At the end
of 2020, MorphoSys US Inc. had 136 people employed as part of,
or to support, its commercial structure.
On July 31, 2020, Monjuvi in combination with lenalidomide was
approved by the FDA for the treatment of adult patients with
relapsed or refractory diffuse large B-cell lymphoma (DLBCL*)
not otherwise specified, including DLBCL arising from low
grade lymphoma, and who are not eligible for autologous stem
cell transplant (ASCT*). This is the first FDA approval of a second-
line treatment for adult patients with relapsed or refractory
DLBCL in the U.S. The safety and tolerability profile supports a
paradigm shift towards treating patients to progression, poten-
tially allowing for long-term disease control. Monjuvi is acces-
sible to patients in both community care and academic settings
as an off-the-shelf product administered by a standard intrave-
nous infusion that is easy to administer and does not require
hospitalization or heavy monitoring.
Following approval, Monjuvi was shipped within days and the
first patient was treated in less than two weeks. The sales and
medical teams of MorphoSys and Incyte continue to use a com-
bination of virtual forms of communication and in-person inter-
actions to be able to adapt to challenges related to the COVID 19
pandemic in the U.S.
Upon approval, MorphoSys and Incyte launched My Mission
Support, a robust patient support program offering financial
assistance, ongoing education and other resources to eligible
patients who are prescribed Monjuvi in the U.S. The program
was launched to support patients throughout their treatment
journeys and to help lower patient access barriers.
In August 2020, Monjuvi was included in the latest National
Comprehensive Cancer Network® Clinical Practice Guidelines
(NCCN Guidelines®) in Oncology for B-cell Lymphomas. Specifi-
cally, the NCCN Guidelines in the United States were updated
to include Monjuvi in combination with lenalidomide with a
Category 2A designation as an option for the treatment of adult
patients with relapsed or refractory DLBCL not otherwise speci-
fied, including DLBCL arising from low grade lymphoma who
are ineligible for ASCT. Inclusion in these guidelines increases
awareness of a product within the oncology community and
also drives certain formulary decisions.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Fundamentals of the MorphoSys Group
Group Management Report
Research and Development
2020 Business Performance
As a fully integrated biopharmaceutical company, MorphoSys
made solid progress in the 2020 financial year in advancing
product candidates at various stages of development.
The key measures of value for MorphoSys’ research and devel-
opment activities include:
• Project launches and the advancement of individual develop-
ment programs
• Clinical and preclinical research results
• Regulatory guidance of healthcare authorities for the approval
of individual therapeutic programs
• Collaborations and partnerships with other companies to
expand our technology base and expand our drug pipeline, as
well as to commercialize our therapeutic programs
• Strong patent protection to secure MorphoSys’ market position
Proprietary Development
As of December 31, 2020, there were eleven proprietary devel-
opment programs, four of which were either fully out-licensed
or out-licensed in specific regions only. A total of three of these
programs were in clinical development, one was in preclinical
development and six were in the drug discovery phase. The
clinical development of MOR106 is currently stopped. Monjuvi
is already available on the market.
Our activities in the Proprietary Development segment are cur-
rently focused on the following clinical candidates:
• Tafasitamab – an antibody for the treatment of B-cell malig-
nancies and the most advanced program in the Proprietary
Development segment. On July 31, 2020, Monjuvi in combina-
tion with lenalidomide received FDA accelerated approval for
the treatment of adult patients with relapsed or refractory dif-
fuse large B-cell lymphoma (DLBCL) not otherwise specified,
including DLBCL arising from low-grade lymphoma, and who
are not eligible for autologous stem cell transplantation (ASCT).
• Felzartamab* (MOR202) – MorphoSys currently evaluates the
therapeutic potential in autoimmune diseases. In November
2017 MorphoSys entered into a regional license agreement
with I-Mab for the development in China, Hong Kong, Macao
and Taiwan I-Mab is currently pursuing development in
multiple myeloma.
• Otilimab*, the antibody for which GlaxoSmithKline (GSK) is
currently conducting clinical trials for the treatment of rheu-
matoid arthritis*. The program originated as a proprietary
MorphoSys program and was fully out-licensed to GSK in 2013.
57
In addition to the programs listed above, several proprietary
programs are in the early stages of research and development.
These include MOR210/TJ210, an antibody that was out-licensed
to I-Mab in November 2018 for China and certain other coun-
tries in Asia. On September 17, 2020, the FDA approved the
IND* application for MOR210/TJ210 for the treatment of patients
with relapsed or refractory advanced solid tumors, and on
January 25, 2021, we announced with I-Mab that the first pa-
tient was dosed in the U.S.
Tafasitamab
Overview
Tafasitamab (MOR208, formerly Xmab5574) is a humanized
monoclonal antibody directed against the CD19* antigen*. CD19
is selectively expressed on the surface of B-cells*, which belong
to a group of white blood cells. CD19 enhances B-cell receptor
signaling, which is an important factor in B-cell survival and
growth, making CD19 a potential target structure for the treat-
ment of B-cell malignancies.
Clinical development of tafasitamab is currently focused on
B-cell non-Hodgkin’s lymphoma (NHL*) and diffuse large B-cell
lymphoma (DLBCL) in particular.
Lymphomas collectively represent approximately 5 % of all
cancers diagnosed in the United States. The group of NHL dis-
eases are the most prevalent of all lymphoproliferative diseases.
According to the National Cancer Institute, an estimated 77,240
new cases occurred in the United States in 2020 (“Cancer Stat
Facts 2020: Non-Hodgkin’s Lymphoma”). DLBCL is the most
frequent type of NHL in adults and accounts for approximately
one-third of all NHL cases globally. The current first-line treat-
ment of B-cell lymphomas, including DLBCL, most commonly
consists of a combination chemotherapy regimen plus the anti-
body rituximab, also referred to commonly as R-CHOP* (R, rituxi-
mab; CHOP, cyclophosphamide, doxorubicin, vincristine and
prednisone). Yet, despite the therapeutic success of frontline
R-CHOP in DLBCL, up to 40 % of patients either do not respond
to the treatment (are refractory) or relapse after initial treat-
ment with fast disease progression.
*see glossary – page 216
The market research and consulting firm GlobalData expects
the therapeutic market for non-Hodgkin’s lymphoma (NHL) to
reach approximately US$ 9 billion in 2024 (report “B-cell NHL:
Opportunity Analysis 2017–2027”).
Financial Statements Group Management Report
Fundamentals of the MorphoSys Group
58
Operational development
Tafasitamab is being developed pursuant to a collaboration and
license agreement entered into with Xencor, Inc. (Xencor) in
June 2010. Under this agreement, Xencor grants MorphoSys an
exclusive worldwide license to tafasitamab for all indications.
On January 13, 2020, MorphoSys and Incyte announced the
signing of a collaboration and license agreement for the global
further development and commercialization of MorphoSys’ pro-
prietary anti-CD19 antibody tafasitamab. Under the terms of
the agreement, MorphoSys and Incyte will develop tafasitamab
broadly in relapsed or refractory (r/r*) DLBCL and first-line
DLBCL, as well as in additional indications beyond DLBCL, such
as follicular lymphoma (r/r FL*), marginal zone lymphoma (r/r
MZL*) and chronic lymphocytic leukemia (r/r CLL*). Incyte is re-
sponsible for initiating a phase 1b combination study of its PI3K
delta inhibitor parsaclisib with tafasitamab in r/r B-cell dis-
ease, as well as for a pivotal phase 3 study in r/r FL. MorphoSys
continues to be responsible for its ongoing clinical trials of
tafasitamab in non-Hodgkin’s lymphoma (NHL) as well as in CLL,
r/r DLBCL and the first-line treatment of patients with DLBCL.
MorphoSys and Incyte share responsibility for initiating addi-
tional global clinical trials, and Incyte intends to pursue devel-
opment in other territories such as Japan and China.
MorphoSys submitted a Biologics License Application (BLA*) to
the U.S. Food and Drug Administration (FDA) in late Decem-
ber 2019 for tafasitamab in combination with lenalidomide in
the treatment of r/r DLBCL. In early March 2020, MorphoSys
announced that the FDA had formally accepted the application
and had granted tafasitamab priority review. The FDA set a Pre-
scription Drug User Fee Act (PDUFA*) goal date of August 30,
2020.
On July 31, 2020, the FDA approved Monjuvi in combination
with lenalidomide in the U.S. for the treatment of adult patients
with relapsed or refractory diffuse large B-cell lymphoma
(DLBCL) not otherwise specified, including DLBCL arising from
low-grade lymphoma, and who are not eligible for autologous
stem cell transplantation (ASCT). This was the first FDA ap-
proval of a second-line therapy for adult patients with relapsed
or refractory DLBCL in the United States. Monjuvi was approved
by the FDA under an accelerated approval process one month
prior to the PDUFA date. This indication is approved under ac-
celerated approval based on overall response rate. Continued
approval for this indication may be contingent upon verification
and description of clinical benefit in a confirmatory trial(s).
MorphoSys and Incyte are co-commercializing Monjuvi in the
United States.
On May 20, 2020, MorphoSys and Incyte announced the vali-
dation of the European Marketing Authorization Application
(MAA*) for tafasitamab in combination with lenalidomide for
the treatment of adult patients with relapsed or refractory dif-
fuse large B-cell lymphoma (DLBCL) not otherwise specified,
including DLBCL arising from low grade lymphoma, and who
are not eligible for autologous stem cell transplant (ASCT). The
validation of the MAA by the European Medicines Agency
(EMA*) confirmed that the formal review process could begin.
Clinical development
The focus of tafasitamab’s clinical development is on NHL. In
DLBCL, MorphoSys intends to position tafasitamab as a back-
bone treatment for all patients suffering from DLBCL, irrespec-
tive of the line of treatment or a possible combination treat-
ment. Both the L-MIND and B-MIND* studies are focused on
those patients with r/r DLBCL who are not candidates for high-
dose chemotherapy (HDC*) and ASCT. For this group of patients,
the treatment options prior to the approval of tafasitamab in the
U.S. were limited and not sufficiently effective. The firstMIND*
study includes patients with newly diagnosed DLBCL and is
expected to pave the way for frontMIND*, a pivotal phase 3 study
in first-line patients that will begin in 2021.
In May 2020, MorphoSys and Incyte announced follow-up re-
sults from the ongoing phase 2 L-MIND study investigating the
combination of tafasitamab and lenalidomide for the treatment
of patients with r/r DLBCL. The data, based on a November 30,
2019 cut-off date, confirmed previously reported primary analy-
sis data. In this long-term analysis of the L-MIND data, 80 pa-
tients were included in the efficacy analysis. After a minimum
follow-up period of two years, the results were consistent with
the primary analysis and confirmed the duration of response
(DoR*) and overall survival (OS*). An assessment by an indepen-
dent review committee (IRC) at data cut-off showed an objective
response rate (ORR*) of 58.8 % and a complete response (CR) rate
of 41.3 %. Median duration of response (mDOR) was 34.6 months,
with median overall survival* (mOS) of 31.6 months and median
progression-free survival (mPFS) of 16.2 months. The safety
profile was consistent with that observed in the primary analy-
sis. The full results were presented at the 25th European Hema-
tology Association (EHA) Annual Congress held virtually in
June 2020.
The efficacy of the tafasitamab-lenalidomide combination ther-
apy from the L-MIND study was compared to the efficacy results
of lenalidomide monotherapy based on real-world data of patients
(RE-MIND*, retrospective observational study). To carry out
this comparison, RE-MIND collected the efficacy data from 490
r/r DLBCL patients who met L-MIND’s key qualification criteria
and had received lenalidomide monotherapy in the U.S. or the
EU. To match these with patients from the L-MIND trial, the
qualifying characteristics for matched patients in both trials
were specified in detail in advance. As a result, 76 eligible RE-
MIND patients were identified and matched 1:1 to 76 of 80
L-MIND patients based on important baseline characteristics.
Objective response rates (ORR) were validated based on this
subset of 76 patients for RE-MIND and L-MIND, respectively.
Results comparing L-MIND to RE-MIND were presented at the
American Society of Clinical Oncology (ASCO) Annual Meeting,
held as a virtual conference in May 2020. The primary endpoint
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Fundamentals of the MorphoSys Group
Group Management Report
of RE-MIND was met, demonstrating a statistically significant
superior best ORR of the tafasitamab-lenalidomide combination
compared to lenalidomide monotherapy. The ORR was 67.1 % for
the tafasitamab-lenalidomide combination compared to 34.2 %
for lenalidomide monotherapy. Superiority was consistently
observed across all secondary endpoints, including complete
response (CR*) rate (39.5 % for tafasitamab-lenalidomide combi-
nation versus 11.8 % for lenalidomide monotherapy) and in
pre-specified statistical sensitivity analyses. There was also a
significant difference observed in median overall survival
(mOS), which had not yet been reached in the tafasitamab-lena-
lidomide combination as compared to 9.3 months in the lenalid-
omide monotherapy (hazard ratio 0.47).
Based on the data from the primary analysis of both studies
and the results of the tafasitamab monotherapy study in NHL,
MorphoSys submitted a Biologics License Application (BLA) to
the FDA for tafasitamab in combination with lenalidomide for
the treatment of r/r DLBCL in late December 2019. In March
2020, MorphoSys announced that the BLA had been accepted
for submission by the FDA and granted priority review. The
goal date for PDUFA was August 30, 2020. On July 31, 2020, the
FDA approved Monjuvi in combination with lenalidomide in the
U.S. for the treatment of adult patients suffering from relapsed or
refractory diffuse large B-cell lymphoma (DLBCL) not otherwise
specified, including DLBCL arising from low-grade lymphoma,
who are not candidates for ASCT (see section “Operational Devel-
opment” above). The approval was based primarily on data from
the MorphoSys-sponsored phase 2 L-MIND study (primary
analysis cut-off date: November 30, 2018). Clinical data in the
FDA prescribing information showed an ORR of 55 % (primary
endpoint) and a CR of 37 %. The mDOR was 21.7 months (key
secondary endpoint).
In May 2020, MorphoSys and Incyte announced the validation
of the European Marketing Authorization Application (MAA) for
tafasitamab in combination with lenalidomide for the treatment
of adult patients with relapsed or refractory diffuse large B-cell
lymphoma (DLBCL) not otherwise specified, including DLBCL
arising from low grade lymphoma, and who are not eligible for
autologous stem cell transplant (ASCT). The validation of the
MAA by the European Medicines Agency (EMA) confirmed that
the formal assessment process could begin. As in the U.S., the
marketing authorization application submitted by MorphoSys
was based on data from the L-MIND study and supported by
RE-MIND as described above. If approved, Incyte will receive the
marketing authorization as well as exclusive marketing rights
for tafasitamab in Europe.
In December 2020, long-term data analyses of the L-MIND study
were presented at the 62nd American Society of Hematology
Annual Meeting & Exposition (ASH). It was shown that treat-
ment with tafasitamab in combination with lenalidomide had
resulted in long-lasting remissions after a follow-up of at least
two years. At the time of analysis, patients continued to expe-
59
rience long median duration of response (mDoR) of 34.6 months
and median overall survival (mOS) of 31.6 months. The data
also showed that treatment with tafasitamab plus lenalidomide
taken for 12 cycles, followed by monotherapy with tafasitamab
until disease progression, caused no unexpected adverse effects.
The phase 2/3 study, B-MIND, initiated in September 2016, is
evaluating the safety and efficacy of administering tafasitamab
in combination with the chemotherapeutic agent bendamustine
in comparison to administering the anticancer drug rituximab
plus bendamustine in patients with r/r DLBCL who are not can-
didates for HDC or ASCT. The study has been in the phase 3 part
since mid 2017. MorphoSys expects top-line results from the
study to be available in 2022.
In addition to the aforementioned clinical development in r/r
DLBCL, MorphoSys initiated a randomized phase 1b clinical
trial in first-line therapy in patients with DLBCL (firstMIND) at
the end of 2019. The study completed enrollment earlier than
anticipated and is evaluating the safety (primary endpoint) and
preliminary efficacy of tafasitamab or tafasitamab plus lenalid-
omide in combination with R-CHOP (the current standard of
care) in patients with newly diagnosed DLBCL. This study is
expected to pave the way to frontMIND, a pivotal phase 3 trial
of tafasitamab in first-line DLBCL that is expected to begin in
2021 and enroll up to 880 patients. Preliminary data from the
firstMIND study were presented at the December 2020 ASH
meeting and indicated that tafasitamab plus lenalidomide in
combination with R-CHOP had an expected safety profile and
that adding tafasitamab plus lenalidomide to R-CHOP did not
impair the dosing of R-CHOP. An interim evaluation regarding
response was performed in 45 patients after three cycles. In
both study arms combined, 41 of 45 patients (91.1 %) had an
objective response according to the Lugano 2014 classification.
MorphoSys and Incyte plan to initiate the phase 3 frontMIND
study evaluating tafasitamab plus lenalidomide in combination
with R-CHOP versus R-CHOP as first-line treatment for patients
with newly diagnosed DLBCL.
In addition to these combination studies in DLBCL, MorphoSys
has been investigating tafasitamab in a phase 2 combination
study in the indications CLL or small B-cell lymphoma (SLL*)
since December 2016. The COSMOS* study is evaluating specifi-
cally the safety of tafasitamab in combination with the antican-
cer drugs idelalisib (cohort A) and venetoclax (cohort B). The
study enrolled patients who either did not respond to or did not
tolerate prior therapy with a Bruton tyrosine kinase inhibitor*.
Data from the primary analysis of both cohorts were presented
at the ASH conference in Orlando in December 2019.
Incyte is responsible for initiating a combination study of its
PI3K delta inhibitor parsaclisib with tafasitamab in relapsed or
refractory B-cell malignancies, as well as initiating a pivotal
phase 3 study (inMIND*) in patients with relapsed or refractory
follicular lymphoma (r/r FL) as well as in patients with relapsed
*see glossary – page 216
Financial Statements Group Management Report
Fundamentals of the MorphoSys Group
60
or refractory marginal zone lymphoma (r/r MZL). The global
randomized study, which is expected to begin in 2021 and en-
roll approximately 600 patients, will compare the safety and
efficacy of tafasitamab in combination with rituximab and lena-
lidomide to the safety and efficacy of rituximab in combination
with lenalidomide.
In November 2020, MorphoSys and Incyte announced a clinical
collaboration agreement with Xencor to investigate the combina-
tion of tafasitamab, lenalidomide and plamotamab – a tumor-
targeted bispecific antibody from Xencor with both a CD20*-
binding domain and a cytotoxic T-cell (CD3*) binding domain –
in patients with relapsed or refractory diffuse large B-cell
lymphoma (DLBCL), first-line DLBCL and relapsed or refractory
follicular lymphoma (FL). Under the agreement, the companies
plan to initiate a phase 1/2 trial evaluating the combination of
tafasitamab, plamotamab and lenalidomide in patients with re-
lapsed or refractory DLBCL. The companies also plan to evaluate
this combination in relapsed or refractory FL and first-line DL-
BCL patients in multiple phase 1b trials. MorphoSys and Incyte
will provide tafasitamab for the studies, which will be sponsored
and funded by Xencor and are planned to be conducted in North
America, Europe and Asia-Pacific.
Felzartamab (MOR202)
Overview
Felzartamab (MOR202) is a recombinant human monoclonal
HuCAL-IgG1-antibody directed against a unique epitope of the
target molecule CD38*. CD38 is a surface antigen broadly ex-
pressed on malignant myeloma cells as well as on antibody pro-
ducing plasmablasts and plasma cells, the latter playing an
important role in the pathogenesis of antibody-mediated auto-
immune diseases.
Recently, data from a MorphoSys sponsored, phase 1/2a study
investigating felzartamab (MOR202) in relapsed or refractory
multiple myeloma patients were published (Raab et al., 2020). In
this study, felzartamab (MOR202) induced a distinct reduction of
M-protein, an abnormal IgG fragment (paraproteine) secreted by
multiple myeloma cells known to have deleterious effects on kid-
ney and immune system functioning. Felzartamab’s (MOR202)
ability to deplete plasma cells was indirectly demonstrated by a
reduction of Tetanus Toxoid vaccination titers no later than 2
weeks after treatment start.
Preclinical and clinical results suggest that felzartamab
(MOR202) could have therapeutic activity in autoantibody
caused autoimmune diseases, such as but not limited to mem-
branous nephropathy.
Ongoing clinical studies
In October 2019, we initiated a phase 1/2 trial for the treatment
of anti-PLA2R-positive membranous nephropathy*, an autoim-
mune disease affecting the kidneys. This proof-of-concept trial
called M-PLACE* is an open-label, multi-center study and will
primarily evaluate the safety and tolerability of felzartamab
(MOR202). Secondary endpoints are the effect of felzartamab
(MOR202) on serum antibodies against PLA2R and the evalua-
tion of the immunogenicity and pharmacokinetics of felzartamab
(MOR202); an exploratory goal is to determine clinical efficacy.
Due to the COVID 19 pandemic, MorphoSys had temporarily
paused the screening and enrollment of patients for the M-PLACE
trial in the spring of 2020. MorphoSys has since resumed patient
enrollment, and the first patient was dosed in the U.S. in late
July 2020. In November 2020, the safety run-in phase of the
study ended and the further enrollment phase was opened. In
February 2021, MorphoSys achieved the milestone First Patient
Treated in the Phase 2 New-PLACE* study, which in coherence
with M-PLACE is designed to identify the optimal felzartamab
(MOR202) dosing schedule for the treatment of patients with
anti-PLA2R-positive membranous nephropathy.
In April 2020, MorphoSys and I-Mab announced that the first
patient had received treatment in a phase 3 clinical trial in
mainland China to evaluate felzartamab (MOR202/TJ202) in
combination with lenalidomide plus dexamethasone in patients
with relapsed or refractory (r/r) MM*. This study (NCT03952091)
is a randomized, open-label, parallel-controlled, multi-center
study to evaluate the efficacy and safety of the combination of
felzartamab (MOR202/TJ202), lenalidomide and dexamethasone
versus the combination of lenalidomide and dexamethasone in
patients with r/r MM who received at least one prior line of
treatment. The multi-center study had been previously initiated
in April 2019 at sites in Taiwan, and has officially started in
mainland China as part of a coordinated effort to accelerate the
study. I-Mab is also evaluating felzartamab (MOR202/TJ202) as
a third-line therapy in patients with r/r MM in a phase 2 trial
that started in March 2019. Both studies are considered pivotal
in this region.
Regional agreement with I-Mab Biopharma
MorphoSys has an exclusive regional licensing agreement for
felzartamab (MOR202) with I-Mab Biopharma (I-Mab). Under the
terms of the agreement signed in November 2017, I-Mab has the
exclusive rights to develop and commercialize felzartamab
(MOR202) in China, Taiwan, Hong Kong and Macao. Upon sign-
ing the agreement, MorphoSys received an immediate upfront
payment of US$ 20 million. We are also entitled to receive addi-
tional success-based clinical and commercial milestone pay-
ments from I-Mab of up to US$ 100 million, as well as tiered
double-digit royalties on net sales of felzartamab (MOR202) in
the agreed regions.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Fundamentals of the MorphoSys Group
Group Management Report
Otilimab
Overview
Otilimab (formerly MOR103/GSK3196165) is a fully human
HuCAL-IgG1-antibody directed against granulocyte-macro-
phage 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 those in rheumatoid arthritis (RA). RA is a chronic
inflammatory disease that affects the synovial membrane of
the joints and is accompanied by painful swelling that can lead
to bone destruction and joint deformity.
MorphoSys discovered otilimab and advanced the antibody into
clinical development before fully out-licensing the program to
GlaxoSmithKline (GSK) in 2013. GSK is now independently de-
veloping the antibody for the treatment of RA and bears all
costs incurred. MorphoSys participates in the potential devel-
opment and commercialization success of the program through
milestone payments totaling up to € 423 million and tiered,
double-digit royalties on net sales. In 2013, MorphoSys received
a payment of € 22.5 million.
The total market for RA drugs is growing steadily. According to
the market research and consulting firm Decision Resources, the
market for RA drugs will reach € 26.9 billion (US$ 33.1 billion)
in 2020 in G7 countries (report entitled “Market Forecast As-
sumptions Rheumatoid Arthritis 2019–2029”). MorphoSys be-
lieves that otilimab has the potential to become the first anti-
GM-CSF antibody to receive marketing approval for the
treatment of RA.
Ongoing clinical studies
In mid 2019, GSK announced the initiation of a phase 3 program
in RA called ContRAst, which resulted in a milestone payment
of € 22.0 million to MorphoSys. This phase 3 program includes
three pivotal studies as well as a long-term extension study,
and is evaluating the antibody in patients with moderate to se-
vere RA. In addition, GSK has initiated in 2020 a clinical trial
(OSCAR) to evaluate the efficacy and safety of otilimab in patients
with severe pulmonary disease associated with COVID 19. GSK
reported in preliminary results of the OSCAR study in February
2021. Given these data suggest an important clinical benefit in
a pre-defined sub-group of high-risk patients and the urgent
public health need, GSK has amended the OSCAR study to ex-
pand this cohort to confirm these potentially significant find-
ings. The dosing of the first patient in the expanded study trig-
gered milestone payments of € 16 million to MorphoSys.
MOR210
Overview
MOR210 is a human antibody directed against C5aR*, derived
from our HuCAL library. C5aR, the receptor of complement factor
C5a*, is being investigated as a potential new drug target in the
61
fields of immuno-oncology and autoimmune diseases. Tumor
cells generate high levels of C5a, which is believed to contribute
to an immuno-suppressive and, consequently, tumor growth-pro-
moting microenvironment by recruiting and activating myeloid
suppressor cells (MDSCs). MOR210 is engineered to neutralize
the immuno-suppressive function of MDSCs by blocking the
interaction between C5a and its receptor and enabling the im-
mune system to fight the tumor.
Regional agreement with I-Mab Biopharma
In November 2018, we announced that we had entered into an
exclusive strategic collaboration and regional licensing agree-
ment with I-Mab. Under the agreement, I-Mab has exclusive
rights to develop and commercialize MOR210/TJ210 in China,
Hong Kong, Macao, Taiwan and South Korea, while MorphoSys
retains rights in the rest of the world. The agreement deepens
our existing partnership with I-Mab and builds on the existing
collaboration to develop felzartamab (MOR202).
Under the agreement, I-Mab will exercise exclusive rights to
develop and commercialize MOR210/TJ210 in the territories
covered by the agreement. With our support, I-Mab will conduct
and fund all worldwide development activities for MOR210/
TJ210, including clinical trials in China and the U.S., up to proof-
of-concept in oncology.
In September 2020, the FDA approved the IND application for
MOR210/TJ210 for the treatment of patients with relapsed or
refractory advanced solid tumors. The first patient has been
dosed in a phase 1 clinical study evaluating the safety, tolera-
bility, pharmacokinetics and pharmacodynamics of MOR210/
TJ210 in the United States in January 2021.
Partnered Discovery
At the end of 2020, one Partnered Discovery program had re-
ceived approval, 25 programs were in clinical development, 26
Partnered Discovery product candidates were in preclinical de-
velopment and 54 were in the drug discovery phase. Below, we
present our most advanced programs and a recently expanded
strategic partnership.
Tremfya – a HuCAL antibody targeting IL 23 developed and
commercialized by our partner Janssen in plaque psoriasis*
and other indications. Tremfya has been approved in the United
States, Canada, the European Union, Japan and a number of
other countries.
Gantenerumab – a HuCAL antibody targeting amyloid beta* in
phase 3 clinical development for the treatment of Alzheimer’s
disease by our partner Roche.
*see glossary – page 216
Financial Statements Group Management Report
Fundamentals of the MorphoSys Group
62
Other programs – in addition to the two programs described,
we have a large number of programs in various stages of re-
search and development stemming from our partnerships with
major pharmaceutical companies.
LEO Pharma – we have a strategic partnership with LEO
Pharma for the research and development of therapeutic anti-
bodies for the treatment of skin diseases.
In October 2020, Janssen presented interim data from the GAL-
AXI 1 study at the United European Gastroenterology Week
virtual congress, which demonstrated results at week 12 in
adult patients with moderately to severely active Crohn’s dis-
ease* (CD) treated with Tremfya. Tremfya produced significant
improvements compared to placebo across all key clinical and
endoscopic outcome measures, with a safety profile consistent
with approved indications.
Tremfya® (Guselkumab)
Overview
Tremfya is a human HuCAL antibody targeting the p19 subunit
of 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 for the treatment of patients with moder-
ate to severe psoriasis (plaque psoriasis) in the United States,
Canada, the European Union, Japan, China and a number of
other countries. In Japan, it is also approved for the treatment of
patients with various forms of psoriasis, psoriatic arthritis and
palmoplantar pustulosis.
In July 2020, Janssen announced FDA approval of Tremfya for the
treatment of adults with active psoriatic arthritis. In Decem-
ber 2020, Janssen reported approval by the European Commis-
sion for the use of Tremfya in the treatment of adult patients
with active psoriatic arthritis who have had an inadequate re-
sponse or have not tolerated prior disease-modifying antirheu-
matic drug (DMARD) therapy.
Psoriasis is a chronic, autoimmune inflammatory disorder of the
skin characterized by abnormal itching and physically painful
skin areas. It is estimated that around 125 million people world-
wide are affected by psoriasis, a quarter of who suffer from a
moderate to severe form of the disease. The market research
and consulting company Decision Resources estimates the
market for psoriasis drugs, which was worth approximately
€ 19 billion (approximately US$ 23 billion) in 2020, will rise to
approximately € 23 billion (approximately US$ 28 billion) in
2029 (in G7 countries) (report “Market Forecast Assumptions
Psoriasis 2019–2029”).
Psoriatic arthritis is an inflammatory arthritis characterized
by painful, swollen, stiff and tender joints and is associated with
psoriasis. According to market research and consulting firm De-
cision Resources (report entitled “Market Forecast Assumptions
Psoriatic Arthritis 2019–2029”), this market is expected to reach
approximately € 6.9 billion (approximately US$ 8.5 billion) in
2021 and approximately € 8 billion (approximately US$ 10 bil-
lion) in 2029 (in G7 countries).
In addition to the indications for which approval has already
been granted (psoriasis, psoriatic arthritis and palmoplantar
pustulosis), Tremfya is currently being evaluated in clinical tri-
als in a number of other indications: Crohn’s disease (phase 2/3
and phase 3 studies), ulcerative colitis* (phase 2 and phase 2b/3
studies), pityriasis rubra pilaris and hidradenitis suppurativa
(both phase 2 studies), and familial adenomatous polyposis
(phase 1b study).
MorphoSys receives royalties on net sales of Tremfya and is also
entitled to milestone payments on selected future development
activities.
Gantenerumab
Overview
Gantenerumab is a HuCAL antibody targeting amyloid beta and
is being developed by our partner Roche as a potential treat-
ment for Alzheimer’s disease. Amyloid beta refers to a group of
peptides that play an important role in Alzheimer’s disease as
they are the main component of the amyloid plaques found in
the brain of Alzheimer’s patients. Gantenerumab binds to the
N-terminus and a section in the middle of the amyloid beta pep-
tide. The antibody appears to prevent the formation of amyloid
plaques and amyloid oligomers and could also lead to their
elimination by recruiting microglial cells. According to the
market research and consulting company Decision Resources,
the value of the global market for the treatment of Alzheimer’s
disease is expected to reach approximately US$ 17.5 billion in
2029 (report entitled “Market Forecast Assumption Alzheimer’s
Disease 2019–2029”).
According to figures from the Alzheimer’s Association, more
than 5 million people in the United States live with Alzheimer’s
disease, and this number is expected to triple by 2050. Alzhei-
mer’s is the sixth-leading cause of death in the United States
(https://www.alz.org/alzheimers-dementia/facts-figures).
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Fundamentals of the MorphoSys Group
Group Management Report
Ongoing clinical studies
In June 2018, we announced that our partner Roche initiated a
new phase 3 development program for patients with Alzheimer’s
disease. The program consists of two phase 3 trials – GRADU-
ATE 1 and GRADUATE 2 – which are expected to enroll more
than 2,000 patients in up to 350 study centers in more than 30
countries worldwide. The two multi-center, randomized, double-
blinded, placebo-controlled studies are investigating the efficacy
and safety of gantenerumab in patients with early (prodromal
to mild) Alzheimer’s disease. The primary endpoint for both
studies is the assessment of the signs and symptoms of demen-
tia, measured as the clinical dementia rating-sum of boxes
(CDR-SOB) score. Both studies have an estimated primary com-
pletion date in 2022. Patients receive a significantly higher
dose of gantenerumab than in Roche’s previous trials as a sub-
cutaneous injection.
Other Programs
Other partnered discovery programs continued to make prog-
ress in 2020, including the advancing clinical development of
four programs from MorphoSys’ long-standing collaboration
with Novartis. In June and November 2020, the 15th and 16th
antibodies, respectively, from the collaboration with Novartis
entered clinical development, triggering two separate milestone
payments to MorphoSys. According to information on www.
clinicaltrials.gov, in September 2020, Novartis initiated a phase
2 clinical trial for NOV 14 (CSJ117) in 625 patients suffering
from severe uncontrolled asthma and for NOV 8 (CMK389) in
66 patients with chronic pulmonary sarcoidosis.
Patents
Our proprietary technologies and drug candidates derived
therefrom are our most valuable assets. It is therefore crucial to
our success that these assets are appropriately protected
through, for example, patents and patent filings. This is the
only way we can ensure that these assets are exclusively uti-
lized. It is also the reason our Intellectual Property (IP) depart-
ment seeks out the best strategy to protect our products and
technologies. The rights of third parties are also actively moni-
tored and respected.
63
Our core technologies form the basis for the Company’s success.
All our technologies are protected by numerous patent families.
For our Ylanthia antibody library*, patents have been granted in
all major territories, including Europe, the U.S. and Asian mar-
kets. For other technologies, such as the dual targeting-based
CyCAT concept, patents have been in-licensed to ensure free-
dom of action.
*see glossary – page 216
Our development programs are also protected by numerous pat-
ent families. Next to our patents protecting the drug candidates
themselves, we have filed additional patent applications that
cover other aspects of the programs. The relevant patents for
our development candidates otilimab (out-licensed to GSK) and
felzartamab (MOR202), which has been out-licensed to I-Mab
for China, Hong Kong, Macao and Taiwan, do not expire before
2026 (this date does not take into account possible additional
protection of up to five years through supplementary protection
certificates and lifetime extensions). The tafasitamab program is
also protected by numerous patents with core patents to expire
on schedule in 2029 (U.S.) and 2027 (Europe). These expirations
do not include the added protection of up to five years that is
possible through supplementary protection certificates or life-
time extensions. An application to extend the term in the U.S.
has been filed. Patents for the tafasitamab program are being
pursued in close coordination with our partner Incyte. All of
our development programs have also been granted regulatory
exclusivity.
The programs developed jointly with or for partner companies
are also fully protected by patents. Our patent department works
closely with the corresponding partners. The patents for these
drug development programs have a lifetime that far exceeds the
term of the underlying technology patents. We are also monitor-
ing our competitors’ activities so that we can take any steps
necessary if required.
During the 2020 financial year, we further consolidated the
patent protection of our development programs and growing
technology portfolio, which are the core value drivers of our
Company. We currently have more than 70 different proprietary
patent families worldwide, in addition to the numerous patent
families we pursue with our partners.
Financial Statements Group Management Report
Fundamentals of the MorphoSys Group
64
Other Business Activities
Technologies
MorphoSys has developed a number of technologies that provide
direct access to human antibodies for the treatment of diseases.
MorphoSys has historically used these technologies for pro-
grams in both its Proprietary Development and Partnered Dis-
covery segments, and is now primarily focused on expanding its
own pipeline with these and other technologies. MorphoSys’
most important technologies include HuCAL, a collection of sev-
eral billion fully human antibodies, and a system for their opti-
mization. Another important platform is Ylanthia: a large anti-
body library representing the next generation of antibody
technologies. Ylanthia is based on an innovative concept for
generating highly specific and fully human antibodies. With
Ylanthia, MorphoSys has set a new standard in therapeutic an-
tibody development and will continue to preferentially use this
technology to identify antibody candidates for its proprietary
pipeline. With Slonomics, MorphoSys has a patent-protected,
fully automated gene synthesis and modification technology to
generate highly diverse gene libraries in a controlled process,
for example to improve antibody properties.
Another pioneering technology recently developed by MorphoSys
is the OkapY bispecific antibody technology. MorphoSys’ OkapY
technology is a new proprietary “2+1” bispecific antibody for-
mat that has excellent physicochemical properties that contrib-
ute significantly to the ease of development and large-scale
production of such molecules. MorphoSys’ innovative effector
T-cell recruiting bispecific antibody platform is based on OkapY
technology. In these molecules, a novel CD3 binder identified
from the Ylanthia library is combined with the OkapY format,
ensuring optimal effector T-cell recruitment and activation,
allowing maximum tumor cell killing.
In November 2020, MorphoSys and Cherry Biolabs, a spin-off of
the University Hospital of Würzburg, Germany, announced the
signing of a licensing agreement granting MorphoSys the rights
to apply Cherry Biolabs’ innovative, multispecific Hemibody
technology to six exclusive targets. Combined with MorphoSys’
expertise in antibody technologies, the Hemibody technology
offers the potential to generate novel T-cell engaging medicines
with higher precision and better safety profiles for the treatment
of cancer patients. We intend to further develop Hemibody tech-
nology in the context of our CyCAT dual-targeting platform to
advance novel Hemibody-based treatment options for patients
with hematological and solid cancers.
Drug Development
MorphoSys has a broad development pipeline and develops
drugs using its own research and development (R&D) and in
collaboration with pharmaceutical and biotechnology partners
and academic institutions.
Our core business is the development of new therapies for pa-
tients suffering from serious diseases. The first therapeutic
agent Tremfya, based on MorphoSys’ proprietary technology
and developed by our licensee Janssen, received marketing au-
thorization in 2017 for the treatment of psoriasis. Tremfya is
currently approved in 76 countries for the treatment of adults
with moderate to severe plaque psoriasis who are eligible for
systemic therapy or phototherapy. It is also approved in Brazil,
Canada, Ecuador, Japan, Taiwan and the U.S. for the treatment
of adult patients with active psoriatic arthritis (PsA*). Figure 03
shows the revenue development of the MorphoSys Group bro-
ken down into the two business segments Proprietary Develop-
ment and Partnered Discovery. These segments are presented
in more detail in the chapter “Targets and Strategy” above.
›› see figure 03 – Revenues of the Morphosys Group by Segment (page 65)
*see glossary – page 216
We have become a fully integrated biopharmaceutical company
developing and commercializing proprietary medicines. Our
programs in the Proprietary Development segment have been
crucial in achieving this. Our activities focus on cancer treat-
ments, but we also conduct selected programs in inflammatory
diseases.
The ability of monoclonal antibodies to bind to specific antigens
on tumors or activate the immune system against cancer to un-
leash a therapeutic effect in patients has led to their dominant
role in targeted cancer therapies. According to the report “2019
Global Oncology Trends” published by the IQVIA Institute,
spending to treat cancer patients in 2018 reached almost
€ 122 billion (almost US$ 150 billion). The global market for
oncology therapies is predicted to reach nearly € 195 billion
(nearly US$ 240 billion) by the end of 2023. Chronic inflamma-
tory and autoimmune diseases affect millions of patients world-
wide and impose an enormous social and economic burden.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Fundamentals of the MorphoSys Group
Group Management Report
Figure 03
Revenues of the MorphoSys Group by Segment (in million )1
1 Diff erences due to rounding.
65
Partnered Discovery
Proprietary Development
Total
49.7
66.8
76.4
71.8
327.7
278.6
49.1
49.2
49.1
53.6
37.5
34.3
22.8
17.6
0.6
2016
2017
2018
2019
2020
MorphoSys’ most advanced Proprietary Development programs
are described in the Research and Development section.
Our clinical-stage Partnered Discovery programs are devel-
oped entirely under the control of our partners. These programs
include not only those in our core area of oncology but also in
indications where we have not established proprietary expertise.
The most advanced Partnered Discovery programs are outlined
in the Research and Development section.
Influential Factors
Good public medical care is a political goal in many countries.
The need for new forms of therapy is growing as a result of demo-
graphic change. Certain cost containment measures in Europe
and the U.S. risk limiting access to innovation for patients and
could slow the industry’s investment in the development of new
therapies.
Regulatory approval processes in the U.S., Europe and elsewhere
are lengthy, time-consuming and largely unpredictable. Approv-
al-related laws, regulations and policies and 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.
MorphoSys recognizes the impact of the global COVID 19 pan-
demic on healthcare systems and society worldwide, as well as
the resulting potential impact on preclinical and clinical pro-
grams, specifically clinical trials. In spring 2020, MorphoSys
activated its existing business continuity plans to minimize
any disruptions to ongoing operations caused by the COVID 19
pandemic and to take the necessary actions to protect its employ-
ees. In addition, MorphoSys is continuously monitoring the sit-
uation as a whole as well as each clinical program individually
and decides on the necessary course of action to ensure the
Financial Statements Group Management Report
Fundamentals of the MorphoSys Group
66
safety of patients, personnel and other stakeholders, as well as
on the correct collection of data. The Company is making ad-
justments where necessary to comply with regulatory, institu-
tional and governmental requirements and guidelines related
to COVID 19. The top priority is to guarantee the safety of all
clinical program participants and ensure that the studies in
which they participate are conducted correctly and in accor-
dance with the study protocol. Despite the rapid changes in
conditions worldwide and the potential impact they may have
on clinical trials, MorphoSys continues to work diligently to
maintain its drug development plans. Preparations for the com-
mercialization of Monjuvi had incorporated the use of digital
channels. In addition, the sales and medical teams are using a
combination of virtual and face-to-face communication to mar-
ket Monjuvi, which enables them to take the right response to
the uncertainty caused by the COVID 19 pandemic in the U.S.
Corporate Developments
On March 4, 2020, MorphoSys announced that the Company’s
Management Board had resolved, with the Supervisory Board’s
consent, to increase the common stock of MorphoSys AG by
issuing 907,441 new ordinary shares from Authorized Capital
2017-I, excluding the subscription rights of existing sharehold-
ers, to facilitate the purchase of 3,629,764 American Depositary
Shares by Incyte. Each ADS represents one-quarter of one
MorphoSys ordinary share. The new ordinary shares underly-
ing the ADSs represent 2.84 % of the registered common stock of
MorphoSys prior to the implementation of the capital increase.
On April 6, 2020, MorphoSys published a statement on the
impact of the COVID 19 pandemic, which has represented an
unprecedented challenge for the Company. The top priority for
MorphoSys in all decisions has been the well-being of employees
and patients. Business continuity plans were put in place to
counter the effects of COVID 19. These plans include a number
of actions to protect employees, including a work-from-home
policy, flexible work schedules, restrictions on in-person meet-
ings and business travel. In order to protect patients, the collab-
oration with clinics and investigators was intensified to ensure
the supply of urgently needed medicines without running avoid-
able risks of infection. Patient enrollment and screening for
the M-PLACE study (felzartamab (MOR202)), was temporarily
suspended. For studies with a potentially significant benefit in
life-threatening indications, enrollment continued. Due to the
unpredictable consequences of the pandemic, the Company
cannot rule out delays in clinical trials. During the 2020 finan-
cial year, MorphoSys was able to successfully manage the chal-
lenges presented by COVID 19 to the Group as a whole.
Effective April 11, 2020, Supervisory Board member Frank
Morich, M.D., resigned from his position on the Supervisory
Board of MorphoSys AG at his own request. He joined the Super-
visory Board in May 2015. A new Supervisory Board member
was not appointed to succeed Morich, M.D.; instead, the decision
was made to reduce the Supervisory Board by one member.
On April 21, 2020, MorphoSys announced the appointment
of Roland Wandeler, Ph.D. to the Management Board of
MorphoSys AG, effective May 5, 2020. As the new Chief Operat-
ing Officer, he is responsible for global sales and commercial
activities and the Company’s operations in the United States.
On May 27, 2020, MorphoSys held its Annual General Meeting
for the 2019 financial year. This was the first Annual General
Meeting held by the Company where shareholders and proxies
were not physically present. The participation rate amounted to
60.28 % of the share capital, and all proposals on the agenda
were approved. The Annual General Meeting resolved to reduce
the Supervisory Board to six members, adjust the Supervisory
Board’s remuneration and amend the Articles of Association
with respect to conducting and participating in the meeting
due to the COVID 19 pandemic. Resolutions were also passed to
cancel Authorized Capital 2017-I and create a new Authorized
Capital 2020-I. A resolution was also passed granting subscrip-
tion rights to members of the Management Board, the manage-
ment of domestic and foreign affiliated companies, and selected
employees of MorphoSys AG (2020 Stock Option Plan).
On September 30, 2020, Jens Holstein, Chief Financial Officer
(CFO), announced his intention to resign as CFO and member
of the Company’s Management Board in order to pursue new
challenges. He left MorphoSys effective December 31, 2020. On
January 6, 2021, following the end of the reporting period,
MorphoSys announced the appointment of Sung Lee as Chief
Financial Officer (CFO) and member of the Management Board,
effective February 2, 2021.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Fundamentals of the MorphoSys Group
Group Management Report
67
Figure 04
Total Headcount of the MorphoSys Group (December 31) (Number)
Total Employees
426
345
326
329
2016
2017
2018
2019
2020
615
423
Employees by Segment
249
116
61
Proprietary Development
Partnered Discovery
Unallocated
2019
2020
Employees by Function
300
133
59
351
86
2019
40
Administration
R & D
Sales
2020
122
142
Financial Statements Group Management Report
Fundamentals of the MorphoSys Group
68
On October 13, 2020, MorphoSys successfully placed convertible
bonds in the amount of € 325 million, with a coupon of 0.625 %
p.a., maturing on October 16, 2025. The bonds were issued with
the exclusion of shareholders’ subscription rights. Under certain
circumstances, the convertible bonds may be redeemed by the
Company on or after November 6, 2023. The proceeds of the of-
fering are to be used for general corporate purposes, including
proprietary development programs, in-licensing and/or M&A
activities.
On October 27, 2020, MorphoSys increased its financial guid-
ance for the 2020 financial year, following its latest preliminary
assessment of MorphoSys’ financial performance. Based on the
preliminary unaudited consolidated results for the first nine
months of 2020, MorphoSys increased its expectation for Group
revenues to € 317 to 327 million (previously: € 280 to 290 mil-
lion) and EBIT to € 10 to 20 million (previously: € 15 to +5 mil-
lion). R&D expenses were expected to remain unchanged at
€ 130 million to € 140 million. The updated guidance took into
account higher revenues from partnerships and collaborations
as well as royalties from sales of Tremfya, which were expected
to be at the upper end of the forecast. The update also took into
consideration the revenue from product sales of Monjuvi follow-
ing its approval and subsequent launch in the U.S.
Group Headcount Development
On December 31, 2020, the MorphoSys Group had 615 employ-
ees (December 31, 2019: 426), 189 of whom hold Ph.D. degrees
(December 31, 2019: 152). The MorphoSys Group employed an
average of 564 people in 2020 (2019: 374).
Of the current 615 employees, 351 worked in research and de-
velopment, 122 in general and administrative positions, and
142 in sales and marketing. All of these employees are based at
our locations in Germany and the United States. We do not have
collective wage agreements with our employees, and there were
no employee strikes during the reporting year.
At the end of the reporting year, our workforce comprised em-
ployees representing 39 different nationalities (2019: 40).
›› see figure 04 – Total Headcount of the MorphoSys Group (page 67)
›› see figure 05 – Employees by Gender (page 69)
To compete successfully for the best employees, MorphoSys
conducts an annual comparison of the Company’s compensa-
tion with that paid by other companies in the biotech industry
and similar sectors and makes adjustments when necessary.
The remuneration system at MorphoSys consists of fixed com-
pensation 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
higher-level corporate goals. A “spot bonus” (given “on the spot”)
is also promptly awarded to employees for outstanding accom-
plishments. We continued to use this instrument frequently
during the reporting year.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Fundamentals of the MorphoSys Group
Group Management Report
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Figure 05
Employees by Gender (December 31)
Total Employees (in %)
58
42
58
42
2019
2020
Executives (number)
Trainees (number)
50
46
6
5
6
34
33
4
2019
2020
2019
2020
Financial Statements Group Management Report
Macroeconomic and Sector-Specific Conditions
70
Macroeconomic and
Sector-Specific Conditions
Changes in the Business Environment
In January 2021, the International Monetary Fund (IMF) fore-
cast that the global economy would contract by 3.5 % for 2020
(report “World Economic Outlook January 2021”) with a devas-
tating pandemic hitting countries around the world for most of
the year. This projected contraction, however, is 0.9 percentage
point higher than projected in the previous forecast in October
2020, reflecting stronger-than-expected impact in the second
half of 2020. The pandemic has had particularly adverse effects
on economically more vulnerable people. This has been seen, for
example, in the U.S. and Europe but also in emerging markets
and developing economies.
The majority of our business transactions are conducted in euros
and U.S. dollars. As we conduct our commercial and roll-out
activities in the U.S., a strengthening of the U.S. dollar against
the euro, all other things remaining equal, would have a posi-
tive impact on our operating result. Conversely, if the euro in-
creased versus the US dollar, our royalties from sales of
Tremfya and revenues from sales of Monjuvi — both of which
are translated from U.S. dollars to euros — would decrease. We
manage this risk through various mechanisms, such as opti-
mizing our U.S. dollar assets against our U.S. dollar liabilities
and maintaining a relatively small amount of U.S. dollars in our
bank accounts.
Development of the Antibody Sector
In 2020, a total of 12 new antibodies were approved, including
our first proprietary product Monjuvi, by either the FDA in the
U.S. or the EMA in the EU. According to the article “Antibodies
to Watch in 2021,” published in the mAbs Journal in November
2020, 88 new antibodies are currently in late-stage clinical
development compared to 79 antibodies in the previous year. Of
the 88 antibodies, 44 were developed for the treatment of cancer.
We view the successful development and commercialization of
the antibody segment as a positive signal and a confirmation
of our strategy to focus our development activities on this class
of drugs. Still, we cannot predict the clinical or market success of
individual drug candidates.
The IMF’s growth forecast for the advanced economies in 2020
was –4.9 % (2019: 1.6 %), and the forecast for the emerging and
developing economies was –2.4 % (2019: +3.6 %). The IMF’s fore-
cast for growth in the euro area in 2020 was –7.2 % (2019:
+1.3 %), compared to –5.4 % for Germany (2019: +0.6 %); –3.4 %
for the U.S. (2019: +2.2 %); 2.3 % for China (2019: 6.0 %), –3.6 % for
Russia (2019: +1.3 %) and –4.5 % for Brazil (2019: +1.4 %).
When managing its business activities, MorphoSys takes a
number of potential macroeconomic risks and opportunities
into consideration. Our business activities remained unaffected
by the volatility in any one country.
Currency Development
The EUR/USD exchange rate increased significantly year-on-
year, and was quoted between US$ 1.20 and 1.23 at the end of
2020. The economic situation remains tense. The ongoing unre-
solved trade conflicts between the U.S. and China and the U.S.
and the EU, as well as the economic losses triggered by tougher
COVID 19 restrictions, are creating uncertainty, as are the re-
maining negotiations for the UK’s withdrawal from the Euro-
pean Union.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Analysis of Net Assets, Financial Position and Results of Operations
Group Management Report
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Analysis of Net Assets,
Financial Position and Results
of Operations
This report on the net assets, financial position and results of
operations should be read in conjunction with the annual con-
solidated financial statements and the notes thereto, which also
form part of this annual report. In addition to historical financial
information, the following report contains forward-looking
statements that reflect our plans, estimates and opinions. Our
actual results may differ materially from these forward-looking
statements. Factors that could cause or contribute to these dif-
ferences 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).
*see glossary – page 216
Results Of Operations
Revenues
Revenues in the reporting year increased by more than 100 % or
€ 255.9 million to € 327.7 million (2019: € 71.8 million). This
increase resulted first and foremost from revenues of € 255.8 mil-
lion stemming from the collaboration and license agreement
with Incyte. Revenues from royalties on net sales of Tremfya
amounted to € 42.5 million (2019: € 31.8 million). Revenues
from Monjuvi product sales totaled € 18.5 million, which were
recognized for the first time after receiving marketing authori-
zation in August 2020. Revenues in the 2019 financial year
were primarily attributable to royalties of € 31.8 million from
Janssen on the net sales of Tremfya and a milestone payment of
€ 22.0 million from GSK triggered by the dosing of the first
patient upon the initiation of a phase 3 clinical development
program.
On a regional basis, revenues from biotechnology and pharma-
ceutical companies in the U.S. and Canada increased by more
than 100 %, or € 286.8 million, from € 32.3 million in 2019 to
€ 319.1 million in the reporting year. This development was
driven primarily by revenue from the collaboration and license
agreement with Incyte. Revenues with customers in Europe and
Asia declined by 78 %, or € 30.7 million, to € 8.6 million in 2020
(2019: € 39.5 million). This decline resulted from the recognition
of a milestone payment from GSK of € 22.0 million in 2019.
In 2020, a total of 93 % of the revenues generated were attrib-
utable to activities with partners Incyte, Janssen and I-Mab
Biopharma. In 2019, 89 % of the revenues generated were at-
tributable to activities with partners Janssen, GSK and I-Mab
Biopharma.
Revenues in the 2019 reporting year declined by 6 %, or
€ 4.6 million, to € 71.8 million (2018: € 76.4 million). Revenues
were generated primarily from royalties received from Janssen
in the amount of € 31.8 million based on net sales of Tremfya
(2018: € 15.4 million). A milestone payment from GSK in the
amount of € 22.0 million also contributed to sales and was
triggered by the dosing of the first patient upon the initiation of
a phase 3 clinical development program. Revenues in 2018
resulted mainly from the receipt of a payment of € 47.5 million,
which was fully recognized in 2018 following the signing of an
exclusive worldwide license agreement with Novartis Pharma
AG for the development and commercialization of MOR106.
On a regional basis, revenues from biotechnology and pharma-
ceutical companies in the U.S. and Canada increased by 67 %, or
€ 12.9 million, from € 19.4 million in 2018 to € 32.3 million in
the 2019 financial year. This development was driven primarily
by success-based payments received mainly from Janssen. Rev-
enues with customers in Europe and Asia declined by 31 %, or
€ 17.6 million, to € 39.5 million in 2019 (2018: € 57.1 million),
mainly due to the fact that 2018 had contained a Novartis pay-
ment for MOR106. The absence of such a payment in the 2019
reporting year was partly compensated for by a milestone pay-
ment from GSK in the amount of € 22.0 million.
Financial Statements Group Management Report
Analysis of Net Assets, Financial Position and Results of Operations
72
Figure 06
Revenues by Region (December 31) (in %)
2016
10
2017
13
2018
2019
25
45
Europe and Asia
North America
2020
97
90
87
75
55
3
Figure 07
Revenues Proprietary Development and Partnered Discovery (December 31) (in million )1
1 Diff erences due to rounding.
Segment Partnered Discovery – funded research and licensing fees
Segment Partnered Discovery – success-based payments
Segment Proprietary Development
Total
49.7
66.8
76.4
71.8
327.7
278.6
46.4
43.6
41.9
53.6
33.2
34.3
17.6
19.3
5.6
0.6
7.3
3.5
4.3
2016
2017
2018
2019
2.6
2020
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Analysis of Net Assets, Financial Position and Results of Operations
Group Management Report
A total of 89 % of the revenues generated in 2019 were attribut-
able to activities with our partners Janssen, GSK and I-Mab Bio-
pharma. In 2018, 95 % of the revenues generated were attribut-
able to activities with our partners Novartis, I-Mab Biopharma
and Janssen.
›› see figure 06 – Revenues by Region (page 72)
Proprietary Development
In 2020, revenues in the Proprietary Development segment in-
creased by € 244.3 million to € 278.6 million (2019: € 34.3 mil-
lion). This increase was mainly due to revenues from the collab-
oration and license agreement with Incyte in the amount of
€ 255.8 million as well as revenues from Monjuvi product sales
in the amount of € 18.5 million.
In 2019, revenues in the Proprietary Development segment de-
creased by € 19.3 million to € 34.3 million (2018: € 53.6 mil-
lion). This decline was a result of the revenues recognized in
2018 from a payment MorphoSys received under the MOR106
agreement concluded with Novartis in 2018. The absence of
such a payment in 2019 was partially offset by € 29.1 million
higher success-based payments.
Partnered Discovery
The Partnered Discovery segment recorded an increase in
revenues of € 11.6 million to a total of € 49.1 million in 2020
(2019: € 37.5 million). This increase included primarily perfor-
mance-based payments of € 46.4 million in 2020 and € 33.2 mil-
lion in the previous year. The performance-based payments were
mainly related to royalties from Janssen for net sales with
Tremfya of € 42.5 million in 2020 and of € 31.8 million in 2019.
The Partnered Discovery segment also included revenues of
€ 2.6 million in the reporting year and € 4.3 million in 2019
from funded research and licensing fees.
The Partnered Discovery segment recorded an increase in rev-
enues of € 14.7 million to a total of € 37.5 million in 2019 (2018:
€ 22.8 million). These revenues included success-based pay-
ments, primarily from Janssen, of € 33.2 million in 2019 and
€ 19.3 million in the previous year. The success-based pay-
ments primarily included royalties on net sales of Tremfya in the
amount of € 31.8 million in 2019 and € 15.4 million in 2018. The
Partnered Discovery segment also included revenues in the
amount of € 4.3 million from funded research and licensing
fees in 2019 and € 3.5 million in 2018.
›› see figure 07 – Revenues Proprietary Development and Partnered
Discovery (page 72)
Operating Expenses
In 2020, operating expenses increased by 72 %, or € 129.8 mil-
lion, to € 309.7 million compared to € 179.9 million in 2019. An
increase in research and development expenses, selling ex-
penses and general and administrative expenses contributed to
73
this development. Research and development expenses in-
creased by 30 %, or € 33.0 million, to € 141.4 million in the re-
porting year (2019: € 108.4 million). In 2020, selling expenses
amounted to € 107.7 million compared with € 22.7 million in
2019. The main items responsible for this increase were higher
expenses for personnel and external services. General and ad-
ministrative expenses increased by 40 %, or € 14.7 million,
from € 36.7 million in 2019 to € 51.4 million in 2020, which was
also largely due to increased personnel expenses and expenses
for external services. Cost of sales decreased from € 12.1 mil-
lion in 2019 to € 9.2 million in 2020.
Operating expenses in the Proprietary Development segment
increased by 85 % or € 121.7 million in the reporting year and
amounted to € 265.2 million (2019: € 143.5 million). The main
reason for this increase was higher selling expenses due to the
establishment of the U.S. sales organization.
Operating expenses in the Partnered Discovery segment in
the 2020 financial year increased by 9 %, or € 1.0 million, to
€ 11.7 million (2019: € 10.7 million). This increase was mainly
a result of higher general and administrative expenses. At
€ 1.4 million in the reporting year, general and administrative
expenses in the Partnered Discovery segment were more than
100 %, or € 0.8 million, higher than the figure of € 0.6 million
reported in the prior year.
In 2019, operating expenses increased by 32 %, or € 43.4 mil-
lion, from € 136.5 million in 2018 to € 179.9 million. An in-
crease in cost of sales, research and development expenses,
selling expenses and general and administrative expenses
contributed to this development. Cost of sales increased from
€ 1.8 million in 2018 to € 12.1 million in 2019, primarily due to
an impairment of € 8.7 million to a net realizable value of zero
on inventory of tafasitamab that was manufactured prior to reg-
ulatory approval, but is available for subsequent commercial-
ization. Research and development expenses increased by 2 %,
or € 2.0 million, to € 108.4 million in 2019 (2018: € 106.4 mil-
lion). In 2019, selling expenses amounted to € 22.7 million com-
pared to € 6.4 million in 2018, mainly due to higher personnel
expenses and expenses for external services. General and
administrative expenses increased by 68 %, or € 14.8 million,
from € 21.9 million in 2018 to € 36.7 million in 2019, also pri-
marily as a result of higher personnel expenses and expenses
for external services.
Operating expenses in the Proprietary Development segment
increased by 34 %, or € 36.5 million, in 2019 and totaled
€ 143.5 million (2018: € 107.0 million). The main factors that led
to this increase were higher selling expenses and higher general
and administrative expenses as a result of establishing the sales
organization in the U.S.
Financial Statements Group Management Report
Analysis of Net Assets, Financial Position and Results of Operations
74
Figure 08
Selected R&D Expenses (December 31) (in million )
Total
94.0
113.3
106.4
108.4
141.4
71.3
External Laboratory Funding
Personnel
Consumables
Other – (includes expenses
for intangible assets,
technical infrastructure and
external services)
61.1
60.7
44.3
47.9
25.1
22.3
28.5
25.3
21.1
30.9
30.1
35.5
31.4
14.7
2.3
2.6
2.3
2.9
3.2
2016
2017
2018
2019
2020
Operating expenses in the Partnered Discovery segment in
2019 increased by 13 % or € 1.2 million to € 10.7 million (2018:
€ 9.5 million), mainly due to higher research and development
expenses. Research and development expenses in the Part-
nered Discovery segment increased by 14 %, or € 1.2 million, to
€ 9.7 million in 2019 (2018: € 8.5 million).
›› see figure 08 – Selected R&D Expenses (page 74)
Research and Development Expenses
Research and development expenses increased by 30 %, or
€ 33.0 million, to € 141.4 million in 2020 (2019: € 108.4 mil-
lion), specifically as a result of higher expenses for external
laboratory services. Expenses for external laboratory services
and legal and scientific consulting services increased from
€ 60.7 million in the previous year to € 71.3 million in the report-
ing year, mainly due to higher expenses for external laboratory
services in connection with the development of tafasitamab.
Personnel expenses were also higher, rising from € 30.1 million
in the previous year to € 35.5 million in the reporting year.
Expenses for intangible assets amounted to € 20.2 million in
2020 (2019: € 5.6 million). In the reporting year, these were in-
fluenced by impairment losses of € 11.7 million in connection
with an impairment of the MOR107 in-process research and
development program. Depreciation, amortization and other ex-
penses for infrastructure increased from € 5.9 million in 2019
to € 8.7 million in 2020, mainly due to higher expenses for in-
surance. Other expenses decreased from € 3.1 million in 2019
to € 2.5 million in 2020. Expenses for consumables increased
from € 2.9 million in the previous year to € 3.2 million in 2020.
In 2019, research and development expenses increased by 2 %,
or € 2.0 million, to € 108.4 million (2018: € 106.4 million). This
increase was mainly the result of higher expenses for external
laboratory services and personnel, which were partially offset
by lower expenses for intangible assets. Expenses for external
laboratory services, together with legal and scientific consulting
services, increased from € 47.9 million in 2018 to € 60.7 million
in 2019. The increase was primarily due to higher expenses for
external laboratory services in connection with the development
of tafasitamab. Personnel expenses rose from € 25.3 million in
2018 to € 30.1 million in 2019, mainly due to an increase in the
expenses related to the development of tafasitamab (totaling
€ 5.5 million).
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Expenses for intangible assets amounted to € 5.6 million in 2019
(2018: € 22.8 million). In 2019, these were mainly influenced by
impairment losses of € 1.3 million related to an impairment of
the in-process R&D program MOR107. Depreciation and other
expenses related to infrastructure increased from € 5.4 million
in 2018 to € 5.9 million in 2019, mainly due to higher insurance
expenses. Other expenses increased from € 2.8 million in 2018
to € 3.1 million. Expenses for consumable supplies rose from
€ 2.3 million in 2018 to € 2.9 million in 2019.
Selling Expenses
Selling expenses increased by more than 100 %, or € 85.0 mil-
lion, to € 107.7 million in 2020 (2019: € 22.7 million). This was
mainly due to higher expenses for external services and person-
nel expenses. The expenses for external services increased by
€ 36.4 million to € 50.6 million in 2020 due to the commercial-
ization of Monjuvi (2019: € 14.2 million). Driven by the market-
ing activities for Monjuvi personnel expenses increased to
€ 53.0 million (2019: € 7.0 million).
In 2019, selling expenses increased by more than 100 % or
€ 16.3 million to € 22.7 million (2018: € 6.4 million). This in-
crease primarily resulted from higher expenses for external
services and personnel expenses. The expenses for external
services increased by € 11.2 million to € 14.2 million in 2019
due to rising activities for the preparation of the commercial-
ization of tafasitamab (2018: € 3.0 million). Personnel expenses
increased to € 7.0 million (2018: € 2.5 million) due to intensified
marketing activities for tafasitamab.
General and Administrative Expenses
General and administrative expenses increased by 40 %, or
€ 14.7 million, in 2020 and amounted to € 51.4 million (2019:
€ 36.7 million). The main reason for this increase were higher
personnel expenses and expenses for external services. Person-
nel expenses increased from € 23.4 million in the previous year
to € 32.4 million in the reporting year. Higher expenses for
salaries were primarily responsible for this increase. Expenses
for external services increased from € 9.2 million in the previ-
ous year to € 13.1 million in the reporting year, which was par-
ticularly related to the commercialization of Monjuvi. Other
expenses decreased from € 1.9 million in 2019 to € 1.3 million
in 2020, mainly due to lower travel expenses.
75
General and administrative expenses increased by 68 %, or
€ 14.8 million, in 2019 and amounted to € 36.7 million (2018:
€ 21.9 million). The main sources of this increase were higher
personnel expenses and expenses for external services. Person-
nel expenses rose from € 15.0 million in 2018 to € 23.4 million
in 2019, largely due to higher expenses for share-based compen-
sation programs and salaries. Expenses for external services
rose from € 4.5 million in 2018 to € 9.2 million in 2019, especially
in connection with the preparation of the commercialization of
tafasitamab. Other expenses rose from € 1.0 million in 2018 to
€ 1.9 million in 2019, mainly due to higher travel expenses.
Other Income
Other income increased by more than 100 %, or € 13.8 million,
to € 14.6 million in the reporting year (2019: € 0.8 million) and
mainly resulted from exchange rate gains from operating activ-
ities of € 13.7 million (2019: € 0.2 million). In 2020, one-off
gains from the disposal of the Lanthio companies amounted to
€ 0.4 million.
Other income decreased by 50 %, or € 0.8 million, to € 0.8 million
in 2019 (2018: € 1.6 million) and mainly included currency
gains of € 0.2 million (2018: € 0.7 million), research grants of
€ 0.1 million (2018: € 0.2 million) and miscellaneous income of
€ 0.5 million (2018: € 0.4 million). The year 2018 included one-
time gains from the capitalization of previously unrecognized
intangible assets in the amount of € 0.4 million (resulting from
the contribution in kind in connection with the investment in
adivo GmbH).
Other Expenses
In the 2020 reporting year, other expenses increased by more
than 100 %, or € 4.6 million, rising from € 0.6 million in 2019 to
€ 5.2 million in 2020. This increase was mainly the result of
currency losses of € 4.6 million (2019: € 0.4 million) and other
expenses of € 0.6 million (2019: € 0.2 million).
In 2019, other expenses decreased by 14 %, or € 0.1 million, from
€ 0.7 million in 2018 to € 0.6 million mainly due to currency
losses of € 0.4 million (2018: € 0.5 million) and other expenses
of € 0.2 million (2018: € 0.2 million).
Financial Statements Group Management Report
Analysis of Net Assets, Financial Position and Results of Operations
76
EBIT
EBIT, defined as earnings before finance income, finance ex-
penses, income from impairment reversals/impairment losses
on financial assets and income taxes, amounted to € 27.4 million
in 2020, compared to € 107.9 million in 2019 and € 59.1 million
in 2018.
Finance Income
Finance income increased by more than 100 %, or € 89.2 million,
to € 92.0 million in the reporting year (2019: € 2.8 million) and
resulted from items amounting to € 82.0 million (2019: € 0 mil-
lion) in connection with the measurement of financial assets and
financial liabilities from collaborations. These items included
effects from currency translation and fair value measurement
(see section 4 entitled “Collaboration and license agreement with
Incyte” contained in the Notes to the Consolidated Financial
Statements). Also included is finance income from the invest-
ment of cash and cash equivalents and foreign currency trans-
lation gains from investing of funds amounting to € 9.3 million
(2019: € 1.3 million). Income of € 0.7 million (2019: € 1.5 million)
from financial derivatives was also recognized.
Finance income rose by more than 100 %, or € 2.4 million, to
€ 2.8 million in 2019 (2018: € 0.4 million), and mainly included
gains from derivatives in the amount of € 1.5 million (2018:
€ 0.3 million), gains from changes in the fair value of financial
assets recognized in profit or loss in the amount of € 1.1 million
(2018: € 0.1 million) and interest income of € 0.2 million (2018:
€ 0.1 million) from investments in term deposits with fixed or
variable interest rates.
Finance Expenses
Finance expenses increased by more than 100 %, or € 93.9 mil-
lion, to € 96.2 million in the reporting year (2019: € 2.3 million).
This increase was mainly due to the effects of financial assets
and financial liabilities from collaborations of € 45.4 million
(2019: € 0 million) and specifically from the difference in the
planning assumptions versus the actual results. The application
of the effective interest method and foreign currency valuation
(see Note 4 “Collaboration and license agreement with Incyte”
contained in the Notes to the Consolidated Financial Statements)
also contributed to the increase. Furthermore, this line item
included finance expenses from the investment of cash and
cash equivalents and foreign currency translation losses from
financing activities of € 42,2 million (2019: € 1.0 million).
Losses of € 5.0 million (2019: € 0.1 million) from financial deriv-
atives as well as of € 1.2 million (2019: € 0.9 million) in interest
expenses from the compounding of non-current lease liabilities
were also recognized in the reporting year.
Finance expenses increased by more than 100 %, or € 1.5 mil-
lion, to € 2.3 million in 2019 (2018: € 0.8 million) and primarily
consisted of losses from changes in the fair value of financial
assets recognized in profit or loss in the amount of € 0.3 million
(2018: € 0.1 million), interest expenses from financial assets
and liabilities at amortized cost in the amount of € 0.8 million
(2018: € 0.2 million), as well as losses from derivatives of
€ 0.1 million (2018: € 0.4 million). In 2019, with the application
of the new IFRS* 16 standard on leases, interest expenses of
€ 0.9 million from the compounding of non-current lease liabil-
ities were recognized for the first time.
*see glossary – page 216
Income Tax Expenses
The Group recorded total income tax benefits of € 75.4 million
in 2020 (2019: income tax benefits of € 3.5 million), which con-
sisted of current tax expenses of € 67.1 million (2019: € 0) and
deferred tax expenses from temporary differences of € 10.6 mil-
lion. These were more than offset by deferred tax benefits from
temporary differences of € 153.1 million. The effective income
tax rate equaled –335.2 % in the reporting year (2019: 3.3 %).
The difference compared to the expected tax rate of 26.7 % (which
would have resulted in an income tax expense of € 6.0 million
versus income tax benefits in 2019 of € 28.4 million) is primarily
due to the effect from utilization of loss carryforwards for which
no deferred tax assets were recognized in prior year and the
recognition of deferred tax assets on prior year temporary dif-
ferences, both amounting to € 73.0 million (2019: € 0.0 million).
In addition, the equity premium of the capital increase by Incyte
is a permanent difference amounting to € 14.2 million.
In 2019, income tax benefits amounted to € 3.5 million (2018:
€ 4.3 million). The difference to the expected tax rate of 26.7 %
(which would have resulted in income tax benefits of € 28.4 mil-
lion (2018: € 16.1 million) is mainly due to the fact that deferred
tax assets on tax losses in 2019 in the amount of € 27.0 million
(2018: € 14.5 million) were not recognized.
Consolidated Net Profit/
Loss for the Period
In 2020, consolidated net profit amounted to € 97.9 million (2019:
consolidated net loss of € 103.0 million; 2018: consolidated net
loss of € 56.2 million).
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Group Management Report
77
Table 04
Multi-Year Overview – Statement of Profit or Loss1
in million €
Revenues
Cost of Sales
Research and Development Expenses 2
Selling Expenses 2
General and Administrative Expenses 2
Other Income/Expenses
EBIT
Finance Income/Expenses
Income from Reversals of Impairment Losses/
(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 €)
2020
2019
2018
2017
2016
327.7
(9.2)
(141.4)
(107.7)
(51.4)
9.4
27.4
(4.2)
(0.7)
75.4
97.9
–
3.01
2.97
71.8
(12.1)
76.4
(1.8)
66.8
0.0
49.7
0.0
(108.4)
(106.4)
(113.3)
(94.0)
(22.7)
(36.7)
0.2
(107.9)
0.5
0.9
3.5
(103.0)
(3.26)
–
–
(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)
–
–
(2.4)
(13.4)
0.2
(59.9)
0.1
0.0
(0.5)
(60.4)
(2.28)
–
–
Shares Used in Computing Earnings per Share (in units), Basic and Diluted 3
–
31,611,155
31,338,948
28,947,566
26,443,415
Shares Used in Computing Earnings per Share, Basic
Shares Used in Computing Earnings per Share, Diluted
Dividends Declared per Share (in € and $)
32,525,644
33,167,852
–
–
–
–
–
–
–
–
–
–
–
–
–
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.
3 Basic and diluted earnings per share are the same in each of the years ended December 31, 2019, 2018, 2017, 2016, because the assumed exercise of outstanding stock options
and convertible bonds would be anti-dilutive due to our consolidated net loss in the respective period.
Liquidity and Capital Resources
Sources of Funding
We have funded our operations primarily through ordinary
share issues and cash proceeds from ongoing business opera-
tions, including upfront fees, milestone payments, license fees,
royalties, and service fees from strategic partners and govern-
ment grants.
Liquidity is defined as the sum of the balance sheet items “cash
and cash equivalents,“ “financial assets at fair value with
changes recognized in profit or loss“ and“ other financial assets
at amortized cost.“
On December 31, 2020, cash and cash equivalents amounted to
€ 109.8 million, financial assets at fair value with changes rec-
ognized in profit or loss amounted to € 287.9 million and other
current and non-current financial assets at amortized cost
amounted to € 846.3 million. On December 31, 2019, cash and
cash equivalents amounted to € 44.3 million, financial assets at
fair value with changes recognized in profit or loss amounted to
€ 20.5 million and other current and non-current financial assets
at amortized cost amounted to € 292.7 million.
Financial Statements Group Management Report
Analysis of Net Assets, Financial Position and Results of Operations
78
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.
On October 16, 2020, we placed unsubordinated, unsecured
convertible bonds maturing on October 16, 2025 for a nominal
amount of € 325.0 million, divided into 3,250 bonds with a par
value of € 100,000 each. The convertible bonds were issued at
100 % of their nominal amount and carry a semi-annual coupon
of 0.625 % per year. We raised gross proceeds of € 325.0 million
from the issuance of the convertible bonds; issue costs for this
transaction equaled € 5.1 million.
We are not subject to any operating covenants or capital
requirements.
Uses of Funds
Our primary use of cash is to fund research and development
costs related to the development of our product candidates and to
commercialize Monjuvi. Our primary future funding require-
ments include the development and commercialization of our
proprietary clinical pipeline (primarily tafasitamab and felz-
artamab (MOR202)) and the advancement of our earlier-stage,
wholly owned or co-developed product candidates.
We believe that we have sufficient cash and cash equivalents
and other financial assets (including cash invested in various
financial assets as described above) to cover expected operating
expenses for at least the next 12 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 investigating
product candidates in clinical trials and commercializing a
product are costly. Both the timing and progress of develop-
ment trials as well as the success of commercialization cannot
be predicted with certainty.
Since our product candidates are in various stages of develop-
ment and the outcome of our activities is uncertain, we cannot
estimate the amounts required to successfully complete the
development and commercialization of our product candidates.
For the implementation of our various projects, including pro-
prietary development programs, in-licensing and also possible
M&A transactions, additional capital requirements may also
arise in the short term. If we cannot generate revenues quickly
enough to cover pipeline developments, we may finance future
cash needs through public or private equity or bond offerings,
including convertible bonds. Additional capital may not be
available at 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 discon-
tinue the development or commercialization of one or more of
our product candidates. If we raise additional capital through
the issuance of debt or equity instruments, it could result in
dilution to our existing shareholders, increased fixed payment
obligations, or the securities 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 oper-
ations and potentially impair our competitiveness, such as lim-
itations on our ability to assume 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.
Cash Flows
Net Cash Provided by/(used in) Operating
Activities
In the reporting year, net cash provided by operating activities
amounted to € 35.3 million and was mainly attributable to the
consolidated net profit of € 97.9 million and changes in operating
assets and liabilities, including income taxes paid, totaling
€ 12.5 million. This was offset by non-cash income totaling
€ 75.1 million. The consolidated net profit of € 97.9 million re-
sulted mainly from revenues from the collaboration and license
agreement with Incyte, which was largely offset by expenses
incurred to finance MorphoSys’s ongoing operations, specifi-
cally cost of sales, research and development expenses, selling
expenses, and general and administrative expenses. Non-cash
income included income tax benefits in the amount of € 75.4 mil-
lion, income from the reversal of impairment of inventory in the
amount of € 13.3 million related to the receipt of regulatory ap-
proval for Monjuvi, income from the realization of contract lia-
bilities in the amount of € 12.5 million and the net change in
financial assets / liabilities from collaborations in the amount of
€ 36.6 million. These were offset by scheduled and unscheduled
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Group Management Report
79
liabilities. The contract liability incurred during the year was
largely related to prepayments received from contract partners.
The decrease in accounts receivable was due to a comparatively
lower level of receivables outstanding at year-end 2019. The in-
crease in prepaid expenses and other assets stemmed mainly
from higher prepayments and higher receivables due from tax
authorities from input tax surplus.
In 2018, the net cash used in operating activities amounted to
€ 32.8 million, primarily driven by the consolidated net loss of
€ 56.2 million, which was partially offset by non-cash expenses
of € 27.9 million, and changes in operating assets and liabilities
and taxes paid of € 4.5 million. The consolidated net loss of
€ 56.2 million was largely due to expenses we incurred to fund
our ongoing operations, particularly research and development
expenses, selling expenses and general and administrative ex-
penses. The main contributors to non-cash charges were im-
pairment on intangibles assets in the amount of € 24.0 million,
expenses for share-based payment of € 5.6 million and depreci-
ation and amortization of tangible and intangible 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 million, offset by
contract liabilities in the amount of € 2.4 million incurred in
2018 as well as an increase in accounts payable and accruals by
€ 1.9 million. The increase in accounts receivable was due to a
comparatively higher level of receivables outstanding at the end
of 2018. The decrease in other liabilities stemmed mainly from
the payment of tax liabilities and the repayment of a govern-
mental cost subsidy. The contract liability incurred in 2018 was
largely related to annual license fees. The increase in external
laboratory services outstanding at year-end 2018 was the pri-
mary driver of the higher trade payables and accrued liabilities.
depreciation and amortization of tangible and intangible assets
and rights of use amounting to € 24.8 million, net losses from
financial assets at fair value, with changes recognized in profit
or loss, amounting to € 13.4 million, net losses from other finan-
cial assets at amortized cost amounting to € 8.4 million, net
losses from derivative financial instruments amounting to
€ 4.3 million and expenses for share-based incentive programs
amounting to € 9.0 million. Changes in operating assets and
liabilities in 2020 mainly included an increase in accounts re-
ceivable of € 69.6 million and in inventories, prepaid expenses
and other assets of € 8.5 million. Accounts payable and accrued
liabilities increased by € 77.5 million. Contract liabilities in-
creased by € 13.4 million in the reporting year. The year-on-
year increase in accounts receivable was mainly due to lower
outstanding receivables at the end of the year. The increase in
inventories, prepaid expenses and other assets was due in par-
ticular to the recognition of inventories as a result of the market-
ing authorization for Monjuvi in the U.S. The increase in external
laboratory services outstanding at year-end, in particular related
to tafasitamab, was the main reason for the higher trade pay-
ables and accrued liabilities. Contract liabilities incurred in the
reporting year largely related to advance payments received
from contractors.
In the previous year, net cash used in operating activities
amounted to € 81.1 million, primarily driven by the consoli-
dated net loss of € 103.0 million, which was partially offset by
non-cash expenses of € 4.2 million, and changes in operating
assets and liabilities and taxes paid of € 17.8 million. The con-
solidated net loss of € 103.0 million was largely due to expenses
we incurred to fund our ongoing operations, particularly the cost
of sales, research and development expenses, selling expenses,
and general and administrative expenses. The main contributors
to non-cash charges were expenses for share-based payment of
€ 6.7 million and depreciation and amortization of tangible and
intangible assets and of right-of-use assets of € 6.2 million, off-
set by the recognition of contract liabilities of € 5.3 million and
income tax benefits of € 3.5 million. Changes in operating assets
and liabilities for 2019 consisted primarily of an increase in
accounts payable and accruals by € 13.2 million, contract liabil-
ities in the amount of € 6.1 million incurred during 2019, as
well as a decrease in accounts receivable by € 2.7 million. This
was offset by an increase in prepaid expenses and other assets
by € 4.4 million. The increase in external laboratory services
outstanding at the end of 2019, primarily related to tafasitamab,
was the primary driver of the higher trade payables and accrued
Financial Statements Group Management Report
Analysis of Net Assets, Financial Position and Results of Operations
80
Net Cash Provided by/(used in) Investing
Activities
In 2020, net cash used in investing activities amounted to
€ 879.6 million, primarily driven by payments to acquire secu-
rities amounting to € 1,745.7 million, of which € 1,249.7 million
were classified as measured at amortized cost and € 496.0 mil-
lion as financial assets at fair value through profit or loss. These
were offset by proceeds from the sale of securities amounting
to € 900.8 million, of which € 686.6 million were measured at
amortized cost and € 214.2 million were classified as financial
assets at fair value through profit or loss. The cash outflow from
investing activities was mainly due to a shift in the composition
of our investment portfolio, as securities matured and were sold
and new, comparable securities were acquired. In addition,
€ 44.9 million was used for the acquisition of intangible assets
in 2020.
In 2019, net cash provided by investing activities was € 79.5 mil-
lion, primarily driven by proceeds from the sale of financial
assets in the amount of € 371.9 million, of which € 318.7 million
were classified at amortized cost, partially offset by the purchase
of financial assets in the amount of € 274.8 million, of which
€ 246.5 million were classified at amortized cost. Cash provided
by investing activities primarily related to shifts in the compo-
sition in our investment portfolio as financial assets matured
and were sold and new, similar financial assets were purchased.
Additionally, in 2019, € 15.0 million were used to purchase a mi-
nority interest of 13.4 % in Vivoryon Therapeutics AG.
In 2018, the net cash used in investing activities amounted to
€ 177.8 million and resulted primarily from the purchase of
financial assets in the amount of € 451.3 million. Of this
amount, € 336.8 million were classified at amortized cost and
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 financial assets
matured and were sold and new, similar financial assets were
purchased.
Net Cash Provided by/(used in) Financing
Activities
Net cash provided by financing activities amounted to
€ 907.2 million in 2020 and consisted primarily of proceeds in
the amount of € 80.6 million from the issuance of shares, as
well as proceeds of € 510.2 million from financing collaborations,
both in connection with the collaboration and license agree-
ment with Incyte. Further proceeds came from the issuance of
convertible bonds in the amount of € 319.9 million, which were
offset by lease payments of € 2.8 million and interest payments
of € 1.4 million.
In 2019, net cash provided by financing activities was € 0.4 mil-
lion and mainly related to proceeds from the exercise of convert-
ible bonds by related parties in the amount of € 3.7 million offset
by lease and interest payments in the amount of € 3.4 million.
In 2018, net cash provided by financing activities was € 179.5 mil-
lion and mainly related to the gross proceeds from our initial
public offering on the NASDAQ of € 193.6 million offset by the
related issuance costs of € 15.0 million.
Investments
In 2020, MorphoSys invested € 4.3 million in property, plant and
equipment (2019: € 3.1 million), mainly laboratory equipment
(i.e. machinery) and tenant fixtures. Depreciation of property,
plant and equipment in 2020 increased to € 2.5 million (2019:
€ 2.0 million).
MorphoSys invested € 44.9 million in intangible assets in the
reporting year (2019: € 0.6 million). Of this amount, € 32.5 mil-
lion was spent on in-process R&D programs and € 12.0 million
on licenses. Amortization of intangible assets amounted to
€ 2.2 million in 2020 (2019: € 1.5 million). In 2020, impairment
losses of € 14.0 million were recognized on in-process R&D pro-
grams and patents and licenses, thereof € 11.7 million for the
MOR107 program. In 2019, impairment losses of € 1.6 million
were recognized on in-process R&D programs and patents.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Analysis of Net Assets, Financial Position and Results of Operations
Group Management Report
81
Table 05
Multi-Year Overview – Financial Situation1
in million €
2020
2019
2018
2017
2016
Net Cash Provided by/Used in Operating Activities2
Net Cash Provided by/Used in Investing Activities2
Net Cash Provided by/Used in Financing Activities
Cash and Cash Equivalents (as of 31 December)
Financial Assets at Fair Value through Profit or Loss 3
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-sale 3
Financial Assets Categorized as Loans and Receivables, Current Portion3
Financial Assets Categorized as Loans and Receivables, Net of Current Portion3
35.3
(879.6)
907.2
109.8
287.9
649.7
196.6
0.0
0.0
0.0
0.0
(81.1)
79.5
0.4
44.3
20.5
207.7
84.9
0.0
0.0
0.0
0.0
(32.8)
(177.8)
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
1 Differences due to rounding.
2 In 2020 cash inflows and outflows for derivative financial instruments were reclassified from operating activities to investing activities due to incorrect classification.
The figures for 2019 and 2018 were adjusted accordingly.
3 Since 2018, due to the first-time adoption of IFRS 9 Financial Instruments, the items representing liquidity are presented in different balance sheet items than in prior years.
Net Assets
Assets
At € 1,659.5 million, total assets as of December 31, 2020 were
€ 1,163.1 million higher compared to December 31, 2019
(€ 496.4 million). Current assets increased by € 903.1 million to
€ 1,206.8 million. This change was mainly due to the increase in
financial assets and cash and cash equivalents from the invest-
ment of the cash received under the collaboration and license
agreement with Incyte and the issuance of the convertible
bond. In addition, as a result of the collaboration and license
agreement with Incyte, the line item “financial assets from
collaborations“ was recorded for the first time in 2020, amount-
ing to € 42.9 million as of December 31, 2020 (see Note 4 “Col-
laboration and license agreement with Incyte“ contained in the
Notes to the Consolidated Financial Statements). Inventories
increased by € 9.7 million, consisting mainly of inventories of
Monjuvi for sale in the U.S.
As of December 31, 2020, a total of € 287.9 million (Decem-
ber 31, 2019: € 20.5 million) was invested in various money
market funds and reported under the item “financial assets at
fair value, with changes recognized in profit or loss.” The item
“other financial assets at amortized cost” include financial in-
struments totaling € 649.7 million (December 31, 2019:
€ 207.7 million) and consist primarily of term deposits with
fixed or variable interest rates.
Non-current assets increased by € 260,0 million to € 452.7 mil-
lion (December 31, 2019: € 192.7 million), mainly due to the in-
crease of € 111.7 million in the line item “Other financial assets
at amortized cost, net of current portion“ due to the long-term
investment of financial resources from the collaboration and
license agreement with Incyte and financial resources received
from the convertible bond issue. In addition, “deferred tax as-
sets“ in the amount of € 132.8 million were recognized, largely
as a result of the differing tax treatment of the collaboration
and license agreement with Incyte. Licenses also increased by
€ 9.5 million to € 11.8 million, mainly resulting from the acqui-
sition of a license in the amount of € 12.0 million. This was par-
tially offset by an impairment of € 2.0 million on a license. The
increase in non-current assets was partially offset by a decrease
of € 13.7 million in the line item “Shares at fair value through
other comprehensive income“ due to the sale of the minority
interest in Vivoryon Therapeutics AG.
Financial Statements Group Management Report
Analysis of Net Assets, Financial Position and Results of Operations
82
Liabilities
Current liabilities increased from € 61.6 million in the prior
year to € 200.5 million as of December 31, 2020, mainly as a
result of a € 65.6 million increase in the item “tax liabilities”
and a € 71.5 million increase in the line item “accounts payable
and accruals”.
Non-current liabilities (December 31, 2020: € 837.7 million; De-
cember 31, 2019: € 40.2 million) increased primarily as a result
of the first-time recognition of the line item “financial liabilities
from collaborations” in the amount of € 516.4 million as of De-
cember 31, 2020 under the collaboration and license agreement
with Incyte, as well as a deferred tax liability of € 5.1 million
resulting from this agreement. The carrying amount of the con-
vertible bond issued in October 2020 was € 272.8 million as of
December 31, 2020.
Stockholders’ Equity
As of December 31, 2020, Group equity totaled € 621.3 million
compared to € 394.7 million on December 31, 2019. The Compa-
ny’s equity ratio as of December 31, 2020 amounted to 37 %
compared to 80 % on December 31, 2019. This decrease in the
equity ratio resulted mainly from the first-time recognition of a
financial liability from collaborations in 2020 under the collab-
oration and license agreement with Incyte, as well as from a
liability from the convertible bond issued in October 2020.
The number of shares issued totaled 32,890,046 as of Decem-
ber 31, 2020, of which 32,758,632 shares were outstanding (De-
cember 31, 2019: 31,957,958 shares issued and 31,732,158
shares outstanding). Common stock was higher as a result of
the purchase of 3,692,754 ADSs, or 907,441 shares, by Incyte,
as well as the exercise of 24,647 convertible bonds from em-
ployees for a total of € 932,088.
On December 31, 2020, the Company held 131,414 treasury
shares with a value of € 4,868,744 — a decrease of € 3,488,506
compared to December 31, 2019 (225,800 shares, € 8,357,250).
The reason for this decrease was the transfer of 91,037 treasury
shares amounting to € 3,364,727 to the Management Board and
selected employees of the Company (beneficiaries) from the
2016 Long-Term Incentive Plan (LTI Plan). The vesting period
for this LTI Plan expired on April 1, 2020 and offered beneficia-
ries a six-month period until October 20, 2020 to receive a total
of 91,037 shares. In addition, 3,349 treasury shares for an
amount of € 123,779 from the 2019 Long-Term Incentive Plan
were transferred to certain employees of MorphoSys US Inc.
Table 06
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
12/31/2020 12/31/2019
12/31/2018
12/31/2017
12/31/2016
1.206.8
452.7
1.659.5
200.5
837.7
621.3
1.659.5
303.7
192.7
496.4
61.6
40.2
394.7
496.4
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
1 Differences due to rounding.
2 Includes common stock as of December 31, 2020: 32,890,046 €; December 31, 2019: € 31,957,958; December 31, 2018: € 31,839,572; December 31, 2017: € 29,420,785;
December 31, 2016: € 29,159,770.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020
Analysis of Net Assets, Financial Position and Results of Operations
Group Management Report
83
Contractual Obligations
The following table summarizes our contractual obligations as
of December 31, 2020:
Table 07
Contractual Obligations (December 31, 2020)
(in € thousands)
Leases
Other
Lease Obligations
We enter into long-term leases for facilities, company cars and
equipment. The majority of these leasing contracts can be re-
newed on a yearly or quarterly basis, and some agreements
may be terminated prematurely.
Other Commitments
Other commitments may become due for future payments for
outsourced studies. As of December 31, 2020, we expected to
incur approximately € 193.3 million of expenses for outsourced
studies, of which approximately € 111.7 million will be paid in
the next 12 months. Additionally, if certain milestones are
achieved in the Proprietary Development segment, for example,
by filing an application for an investigational new drug, or IND,
for specific target molecules, this may trigger milestone pay-
ments to licensors of up to an aggregate of US$ 249.0 million
related to regulatory events or the achievement of sales targets.
The next milestone payment amounting to US$ 12.5 million
could presumably occur in the next 12 months. No accrual has
been recorded in our consolidated balance sheet for this amount.
Payments due by period
Total
53,088
10,310
Less than
1 year
1 to
3 years
3 to
5 years
More than
5 years
4,150
7,450
8,013
2,860
8,012
0
32,913
0
Off-Balance-Sheet Arrangements
We do not currently have any off-balance-sheet arrangements
and did not have such arrangements in the years 2020 or 2019.
Comparison of Actual Business
Results versus Forecasts
MorphoSys demonstrated solid financial performance during
the 2020 reporting year. A detailed comparison of the Company’s
forecasts versus the actual results can be found in Table 08*.
*cross-reference to page 84
Financial Statements Group Management Report
Analysis of Net Assets, Financial Position and Results of Operations
84
Table 08
Comparison of Actual Business Results versus Forecasts
2020 Targets
2020 Results
Financial
targets
Group revenues between € 317 million and € 327 million (initial
Group revenues of € 327.7 million,thereof royalties from Tremfya
forecast of € 280–290 million; revised on October 27, 2020
of € 42.5 million
following an updated assessment of the financial performance
indicators), thereof royalties from Tremfya between € 37 million
and € 42 million
Research and development expenses of € 130–140 million
Research and development expenses of € 141.4 million
Selling expenses in the high double-digit million range
Selling expenses of € 107.7 million
General and administrative expenses:
Significant increase (2019: € 36.7 million)
General and administrative expenses of € 51.4 million
EBIT in the range of € 10 million to € 20 million (initial forecast:
EBIT of € 27.4 million
€ –15 million to € 5 million; revised on October 27, 2020 following
an updated assessment of the financial performance indicators)
EBIT exceeds forecast due to lower expenses in connection with
the Monjuvi launch which had been expected to be higher on an
interim basis
Partnered Discovery segment:
Partnered Discovery segment:
Positive operating result/EBIT (2019: € 26.8 million)
EBIT in the amount of € 37.4 million
Significant increase in liquidity (2019: € 357.4 million)
Liquidity in the amount of € 1,244.0 million
Proprietary
Tafasitamab
Tafasitamab
Development
• Market launch of tafasitamab in combination with lenalido-
• FDA approval in July of Monjuvi in combination with lenalido-
mide for r/r DLBCL in the U.S. planned for mid 2020 (given U.S.
mide for the treatment of adult patients with relapsed or re-
FDA approval), together with our partner Incyte under the
fractory diffuse large B-cell lymphoma (DLBCL) not otherwise
collaboration and license agreement signed in January 2020
specified, including DLBCL arising from low-grade lymphoma,
and who are not eligible for autologous stem cell transplant
(ASCT)
• Incyte’s support in the submission of a marketing authorization
• Validation of marketing authorization application (MAA) by
application for tafasitamab in combination with lenalidomide
EMA for tafasitamab in combination with lenalidomide for the
for r/r DLBCL to the European EMA by mid 2020; Incyte has
treatment of adult patients with relapsed or refractory diffuse
exclusive commercialization rights outside of the U.S.
large B-cell lymphoma in May
• Continued expansion of the commercial structures and strate-
• Necessary commercial infrastructures put in place and key
gic presence in the U.S. to ensure the readiness for the market-
positions filled in Boston, as well as preparations of the joint
ing of tafasitamab by mid 2020 following regulatory approval,
MorphoSys and Incyte team for early regulatory approval
complemented by the commercial expertise and infrastructure
successful
of Incyte
• Continuation of the phase 1b study with tafasitamab initiated
• Recruitment for firstMIND completed ahead of schedule
in December 2019 in first-line DLBCL (firstMIND)
• Continuation of the pivotal phase 3 study evaluating tafasitamab
• Continuation of B-MIND study: recruitment in order to
in combination with bendamustine in comparison to rituximab
increase number of patients to 450 was progressing well
and bendamustine in r/r DLBCL (B-MIND trial) and the increase
in number of patients to 450 patients
• Continuation of the phase 2 COSMOS study of tafasitamab
• Continuation of COSMOS study: treatment and follow up of
in CLL/SLL in combination with idelalisib or venetoclax
patients ongoing
• Expansion of tafasitamab’s clinical development beyond
• Preparations to expand clinical development of tafasitamab
DLBCL under the collaboration and licensing agreement
beyond DLBCL in additional indications, such as relapsed or
signed with Incyte in January 2020. This will include other
refractory follicular lymphoma (r/r FL) and marginal zone
indications as well as various investigator-initiated studies
lymphoma (r/r MZL) further advanced to enable study initia-
already scheduled
Felzartamab (MOR202)
tion in 2021; several investigator-initiated studies initiated or
in planning; collaboration agreement reached with Xencor
to study tafasitamab in combination with lenalidomide and
plamotamab
Felzartamab (MOR202)
• Continuation of clinical development of felzartamab
• Continuation of M-PLACE study in membranous nephropathy
(MOR202) in autoimmune kidney disease and, potentially, in
after the interruption due to COVID 19; first patient dosed in
other autoimmune indications
the U.S. in late July 2020
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020
Analysis of Net Assets, Financial Position and Results of Operations
Group Management Report
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2020 Targets
Proprietary
Otilimab/GSK
2020 Results
Otilimab/GSK
Development
• Continuation of clinical development in rheumatoid arthritis
• Continued execution of phase 3 clinical program in rheumatoid
by partner GSK
arthritis by GSK
MOR106
• Initiation of OSCAR clinical trial in Q2 to evaluate safety and
efficacy of otilimab in patients suffering from severe pulmonary
COVID 19-associated disease
MOR106
• Review of the further strategy for MOR106 together with
• Termination of development and commercialization agree-
Galapagos and Novartis
ment by Novartis; completion of ongoing activities related to
terminated studies jointly with Galapagos and Novartis
MOR107
MOR107
• Continuation of preclinical evaluation of MOR107 with focus
on oncology indications (MOR107 is a lanthipeptide being
developed by Lanthio Pharma B.V.)
• Event-related impairment test of lanthipeptide MOR107 (LP 2 3)
at the end of the second quarter; full impairment and discon-
tinuation of the program
• MorphoSys decided in November 2020 to sell its shares in Lan-
thio Pharma B.V. to Lanthio Participatie B.V., a newly formed
company established by the current Managing Director of
Lanthio Pharma B.V.
Continuation and/or initiation of development programs in the
• MOR210: FDA approval of IND application for MOR210/TJ210 for
field of antibody identification and preclinical development
the treatment of patients with relapsed or refractory advanced
Partnered
Discovery
solid tumors in September
• Vivoryon’s QPCTL* inhibitors: based on the comprehensive
analysis of data from preclinical validation studies, MorphoSys
decided in April not to exercise the exclusive license option
granted for Vivoryon’s small molecule QPCTL* inhibitors in the
field of oncology
• Continuation of programs in early-stage drug discovery
Progress in development programs with partners
Guselkumab (Tremfya; Partner: Janssen):
• FDA approval in July for the treatment of adult patients suffering
from active psoriatic arthritis (PsA)
• A positive CHMP recommendation in October for the treatment
of active psoriatic arthritis (PsA) in the European Union (EU)
• European Commission’s approval received in December for the
treatment of adult patients with active psoriatic arthritis (PsA)
Partner Novartis:
• 15th antibody from the collaboration started clinical develop-
ment in June
• Start of phase 2 clinical trial in September for NOV 14 (CSJ117)
in patients with severe uncontrolled asthma and NOV 8
(CMK389) clinical trial in patients with chronic pulmonary
sarcoidosis
• Start of clinical development in November of a further antibody
under the collaboration
*see glossary – page 216
Financial Statements
Group Management Report
Analysis of Net Assets, Financial Position and Results of Operations
86
The Management Board’s General
Assessment of Business Performance
The 2020 financial year was a special one for MorphoSys and its
employees. MorphoSys emerged from this eventful and dynamic
financial year even stronger, despite all the limitations. While
the pandemic constituted a major challenge to the Company
and its operations, as well as to the employees and their private
lives, we were able to successfully overcome these together.
In our operating business, we paved the way to decisively ad-
vance our transformation. In January 2020, for example, we
successfully concluded negotiations with the U.S. company
Incyte on a far-reaching collaboration and license agreement
and signed a partnership with Incyte for the further develop-
ment of the proprietary CD19 antibody tafasitamab. The collab-
oration with Incyte on the commercialization side is of strategic
importance.
This transaction was also an important step for the rapid, joint
preparation for the co-commercialization of tafasitamab in the
U.S. In July 2020, the FDA granted accelerated approval for
Monjuvi in combination with lenalidomide in the treatment of
adults with relapsed or refractory diffuse large B-cell lymphoma
(DLBCL) who are ineligible for autologous stem cell transplanta-
tion. Monjuvi has been the first and, so far, only FDA approval
of a second-line therapy for adult patients.
We are very proud of this approval and of the speed of Monjuvi’s
roll-out in the market. Monjuvi was immediately launched in
the U.S. for treating this type of blood cancer and supplied to
specialized distributors. In the first week following approval, the
first order was shipped and, in the second week, the first patient
was treated. Monjuvi product sales totaled US$ 22 million since
launch in mid-August 2020.
As the year progressed, we achieved further milestones with
tafasitamab: In May 2020, the marketing authorization applica-
tion for tafasitamab in combination with lenalidomide for the
treatment of adult patients with relapsed or refractory diffuse
large B-cell lymphoma was validated by the EMA, allowing the
assessment process to formally begin. Several clinical trials
were continued to establish tafasitamab as a standard therapy
for DLBCL and develop it for other indications.
In November 2020, we entered into a clinical collaboration agree-
ment with Incyte and Xencor to evaluate the combination of tafa-
sitamab, plamotamab and lenalidomide in patients with relapsed
or refractory diffuse large B-cell lymphoma (DLBCL), first-line
DLBCL and relapsed or refractory follicular lymphoma (FL).
In the 2020 financial year, revenues grew to € 327.7 million
and EBIT to € 27.4 million. Revenues consisted primarily of
€ 255.8 million in revenues from the collaboration and license
agreement with Incyte. In addition, revenues of Tremfya in-
creased in 2020, resulting in higher royalty payments com-
pared to the previous year. The year-on-year increase in EBIT
resulted from higher revenues offset by expenses for the devel-
opment and commercialization of tafasitamab. Cash provided
by operating activities amounted to € 35.3 million, mainly as a
result of the consolidated net profit. Our cash and cash equiva-
lents of € 1,244.0 million are a confirmation of the strength of
the Company’s financial resources.
In addition, significant progress was made in the other clinical
development programs during the financial year:
Research and development continued on the CD38 antibody fel-
zartamab (MOR202), which is a proprietary development based
on our HuCAL antibody technology. Felzartamab (MOR202) could
be used against autoimmune diseases, among other indications.
First data from the phase 1/2 M-PLACE (proof-of-concept) study
in membranous nephropathy (aMN*) are expected in H1 2021.
*see glossary – page 216
In April 2020, the first patient in mainland China was dosed with
felzartamab (MOR202/TJ202) in an ongoing phase 3 clinical
trial conducted by our partner I-Mab. This trial is evaluating
the human CD38 antibody felzartamab (MOR202/TJ202) in
combination with lenalidomide in patients with relapsed or
refractory multiple myeloma.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Analysis of Net Assets, Financial Position and Results of Operations
Group Management Report
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At the end of 2020, two products deriving from MorphoSys’ pipe-
line were on the market, 28 compounds were in clinical devel-
opment. The pipeline comprised a total of 116 drug candidates.
In July 2020, the FDA approved Tremfya for the treatment of
adult patients with active psoriatic arthritis (PsA), followed by
a corresponding approval from the European Commission in
December 2020. Tremfya was developed by Janssen using
MorphoSys’ antibody technology HuCAL and approved in 2017
for the treatment of psoriasis. MorphoSys receives royalties for
its contribution to the development of Tremfya.
In September 2020, we and our partner I-Mab announced the
approval of the Investigational New Drug (IND) application for
the MOR210/TJ210 antibody by the FDA. The phase 1 clinical
trial investigating safety, tolerability, pharmacokinetics and
pharmacodynamics started dosing the first patient in January
2021.
MorphoSys placed convertible bonds in the amount of € 325 mil-
lion with institutional investors in October. The proceeds will
be used for general corporate purposes, including proprietary
development programs, in-licensing and/or M&A transactions.
An exclusive license agreement was signed in November 2020
with Cherry Biolabs (based in Germany) to use Hemibody tech-
nology for up to six targets. Hemibody technology is expected to
enable us to develop novel drugs for effector T-cell recruitment
with higher precision and an improved tolerability profile in
cancer patients as part of the CyCAT platform.
For almost the entire 2020 financial year, MorphoSys dealt with
a novel and unpredictable situation: the COVID 19 pandemic. Ma-
neuvering this situation required prudent planning, which was
continuously adapted to sometimes rapidly changing conditions.
MorphoSys’ top priority is the well-being and safety of its em-
ployees, partners in healthcare and patients. Thanks to the
measures and efforts implemented, the impact of the pandemic
on our employees and operations became manageable. The
Company was able to avoid drastic restrictions in clinical trials,
for example, with regard to patient recruitment and monitor-
ing. Enrollment in all ongoing tafasitamab studies continued as
planned, as did the enrollment for the M-PLACE study with fel-
zartamab (MOR202), after an interruption. Sales and medical
team members used a combination of digital and face-to-face
communication to perform their duties without severe limita-
tions. In-house research was also only slightly affected by
COVID 19. MorphoSys was able to prove that it can manage a
decidedly demanding and large program very well, even under
the challenging conditions of the 2020 financial year.
Financial Statements Group Management Report
Outlook and Forecast
88
Outlook and Forecast
MorphoSys’ business model focuses on the development of in-
novative drug candidates using proprietary technologies such
as the HuCAL or the Ylanthia antibody library. The Company
develops drug candidates both in-house and in collaboration
with partners. The aim is to offer better treatment options to se-
riously ill patients. The Company’s own development activities
are mainly focused on compounds for the treatment of cancer
and autoimmune diseases, which are to be brought to market
and commercialized.
• Investment in proprietary technology development as well as
complementing and combining it with new technologies with
the goal of maintaining or expanding MorphoSys’ leading
position in the field of therapeutic antibodies and related
technologies
• Exploration of new strategic collaborations aimed at gaining
access to innovative targets and compounds
• Continued careful monitoring of COVID-19 pandemic and,
if necessary, adjustment through appropriate measures
necessary
General Statement on Expected
Development
The expected developments or development progress of the
pipeline are presented in detail below under “Future research
and development”.
MorphoSys has defined three strategic value drivers:
• Revenues from the commercialization of proprietary products,
Strategic Outlook
such as Monjuvi
• Milestone payments and royalties from the commercialization
and clinical development of products and product candidates
by partners, e.g. the royalty payments from sales of Tremfya,
which is developed and commercialized by partner Janssen
• Further development of proprietary products and the use of
in-licensed technology platforms to generate new pipeline
candidates and fully exploit the broad potential
The combination of the three pillars is central to MorphoSys’
transformation into a fully integrated biopharmaceutical com-
pany, which is expected to continuously contribute to attractive
value creation for its shareholders.
The Management Board expects the following developments
in 2021:
• Expansion of Monjuvi revenues in the U.S. for the full financial
year, with commercialization driven by its own capabilities
and strategic presence and supported by the expertise and
structures of partner Incyte
• Further clinical development of proprietary product candidates
tafasitamab and felzartamab (MOR202)
• Further expansion of the proprietary pipeline through own
development activities as well as potential in-licensing, cor-
porate acquisitions or development collaborations
• Investment of funds from successful clinical developments of
our partners as well as their product sales into the develop-
ment of our own programs
MorphoSys invests a significant portion of its financial resources
in its own research and development and in its own commercial-
ization structures. The focus of the Company’s entrepreneurial
activities is on cancer and autoimmune diseases. The strategy
is increasingly geared towards developing projects in-house
into the late phases of clinical research and, if necessary, taking
them through to commercialization. The Management Board
believes that this is the best way to increase the value of the
Company in the long term.
The strategic goal of the Management Board is to put the Group’s
revenues on a broad basis. Revenues from own research suc-
cesses, goal-oriented partnerships, and leveraging the full
potential of the Company’s own antibody libraries should con-
tribute to this. The aim of linking the three pillars – commer-
cialization, partnerships and technology platforms – is to achieve
the broadest possible pipeline of internal and external active
substances or product candidates.
The first of these three pillars is the generation of direct reve-
nues from the commercialization of internally developed prod-
ucts. Of central importance for MorphoSys is the value creation
from tafasitamab. Following the approval and launch of Monjuvi
in the U.S. in 2020, approval procedures are also underway for
Europe and other regions such as Switzerland and Canada.
There, tafasitamab would be marketed by Incyte and MorphoSys
is entitled to royalties.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Outlook and Forecast
Group Management Report
89
MorphoSys AG has implemented a business continuity plan to
largely prevent the collapse of critical business processes and
ensure their resumption in the case of a natural disaster, public
health emergency such as the novel coronavirus, or other serious
events. However, depending on the severity of the situation, it
may be difficult or, in some cases, impossible to avoid an inter-
ruption in our business for a significant period of time. Our
contingency plans for disaster recovery and business continu-
ity may prove inadequate in the event of a serious disaster or
similar event, and we may incur substantial costs that could
have a material adverse effect on our business.
Expected Development of the
Life Sciences Sector
In early December 2020, at the end of an unprecedented year,
BioCentury (“2021 Predictions: a BioCentury survey” Decem-
ber 18, 2020) surveyed a group of 18 biopharma C-suite execu-
tives, pharma R&D heads and investors based in the U.S., Eu-
rope and China. Two findings stood out: an overwhelming
confidence that mRNA technology would take off, and a strong
expectation for more consolidation among the mega-cap bio-
pharmaceutical companies. If the Group’s predictions hold true,
the IPO boom in 2020 could continue in 2021, and some new
targets and technologies could show clinical proof of concept.
At the end of 2020, an editorial was published by BioCentury
(“Innovations forged in the COVID crucible will reshape medi-
cine,” December 31, 2020), which reviewed the paradigm shifts
brought about by the 2020 COVID 19 pandemic, noting that an
entire decade’s worth of changes had been compressed into a
ten-month period. In order to realize the full potential of these
advances, however, the author cautioned that smart government
strategies, including government investment and regulation,
will be necessary. Investments in healthcare will need to in-
crease as well as the competence of government institutions
and the trust placed in them. The article also noted that bio-
pharmaceutical companies, regulators, academic researchers,
funders and payers as a whole must be willing to change the
way they work in order to incorporate some of the collaborative
ways of working demonstrated in the pandemic into their rou-
tine operations.
The Management Board is convinced that tafasitamab could offer
tremendous future potential, for example as a first-line therapy
in DLBCL as well as in other indications. Tafasitamab is antici-
pated to become a key component in the treatment of DLBCL and
in other therapies. MorphoSys and Incyte have also identified
significant unmet medical need and commercial opportunities
for tafasitamab in non-Hodgkin’s lymphoma outside DLBCL.
With felzartamab (MOR202), MorphoSys has another propri-
etary development candidate in autoimmune diseases.
Successful partnerships are a second driver of value generation
in that milestone payments and royalties (in the event of market
approval) provide a continuous revenue stream. One example is
Tremfya, which was developed by our partner Janssen to market
approval. Partnered programs such as otilimab with GSK, felz-
artamab (MOR202) in multiple myeloma with I-Mab or gan-
tenerumab with Roche are the next candidates that could reach
market maturity.
As a third pillar, the technology platforms and antibody libraries
will continue to deliver their added value as they have in the
past. These are anticipated to further expand the research pipe-
lines and open up future growth opportunities for MorphoSys.
Examples include the established proprietary platforms HuCAL,
Ylanthia and Slonomics, as well as the innovative technologies
OkapY and CyCAT.
To be successful in all three business areas, continuous in-
vestments in the Company’s further development is not only
sensible, but essential.
Expected Economic Development
In its January 2021 report, the International Monetary Fund
(IMF) projected global economic growth of 5.5 % in 2021, com-
pared to a forecast of –3.5 % for the year 2020. This forecast is
made with exceptional uncertainty: While recent vaccine ap-
provals have raised hopes of a turnaround in the pandemic later
this year, renewed waves and new variants of the virus are of
concern. On the positive side, in addition to the vaccines, there
is an expectation of additional policy support in a few large
economies. Growth in advanced economies is anticipated to
reach 4.3 % in 2021, compared to the forecast of –4.9 % for 2020.
The IMF expects growth in the euro area to 4.2 % in 2021 com-
pared to –7.2 % forecast for 2020. Growth in Germany is antici-
pated to rise to 3.5 % in 2021 (2020: –5.4 %), and the IMF projec-
tion for U.S. economic growth in 2021 is 5.1 % (2020: –3.4 %). The
IMF’s 2021 growth forecast for the emerging and developing
countries is 6.3 % (2020: –2.4 %), and growth in China in the
coming year is projected at 8.1 % (2020: 2.3 %). Russia’s econ-
omy is anticipated to grow 3.0 % (2020: –3.6 %). Brazil is ex-
pected to experience positive growth, projected at 3.6 % for
2021 (2020: –4.5 %).
Financial Statements Group Management Report
Outlook and Forecast
90
The high level of innovation in the biotechnology sector is re-
flected in the number of new FDA product approvals in 2020.
Despite the challenges posed by the COVID 19 crisis, 53 new
compounds were approved in comparison to 48 in 2019, and a
record of 59 in 2018. This figure does not include approvals
from the Center for Biologics Evaluation and Research (CBER).
The European Medicines Agency (EMA) recommended the ap-
proval of 39 new active ingredients in 2020, up from 30 in the
prior year.
According to the report by PricewaterhouseCoopers (PwC) enti-
tled “Pharma & Life Sciences Deals Insights: 2021 Outlook”,
there is optimism that 2021 will see a return to normalcy in the
pharmaceutical and healthcare sector. Deal activity in 2021 is
projected to reach between US$ 250 – 275 billion for the year.
The total value of deals in 2020 was US$ 184.2 billion, 48.6 %
lower in comparison to the prior year. In 2021, innovation and
the necessary economies of scale are the factors expected to
drive activity as a result of the headwinds from the pandemic
as well as uncertainty surrounding the regulatory and tax en-
vironment and drug pricing policies. Deal activity is expected
across all subsectors and transaction sizes, with large pharma
companies looking to continue to grow through M&A as compa-
nies look to make long-term investments in key therapeutic
categories such as oncology and cell and gene therapy.
Future Research and Development
and Expected Business Performance
MorphoSys’ investments in research and development will con-
tinue, with the majority to be directed towards developing the
Company’s proprietary drug candidates tafasitamab and felz-
artamab (MOR202), and new drug discovery. Most of these funds
will be used in the broad clinical development of tafasitamab in
the short- to medium-term, while further investments is planned
for target identification, related antibody development and tech-
nology development.
Planned investments in proprietary drug candidates and tech-
nologies are expected to continue to lead to progressive maturity
of product candidates in the pipeline.
The following events and development activities are planned in
the year 2021:
• Continue the phase 1b trial of tafasitamab in previously un-
treated DLBCL (firstMIND)
• Initiate a pivotal phase 3 trial of tafasitamab in previously
untreated DLBCL (frontMIND)
• Initiate a pivotal phase 3 trial (inMIND) of tafasitamab in
patients with indolent lymphoma (r/r FL/MZL)
• Investigate tafasitamab, plamotamab and lenalidomide in
patients with relapsed or refractory diffuse large B-cell lym-
phoma (DLBCL), first-line DLBCL and relapsed or refractory
follicular lymphoma (r/r FL) jointly with Incyte and Xencor
• Continue the L-MIND study of tafasitamab and evaluate the
long-term efficacy and safety data
• Continue the pivotal phase 3 trial (B-MIND) of tafasitamab in
combination with bendamustine for r/r DLBCL
• Continue the phase 2 COSMOS study with tafasitamab in
CLL/SLL in combination with idelalisib and venetoclax
• Support Incyte in its initiated regulatory submissions to the
EMA, Swissmedic and Health Canada for tafasitamab in com-
bination with lenalidomide for r/r DLBCL
• Also support Incyte in submitting marketing authorization
applications in other markets
• Generate data from the phase 1/2 M-PLACE (proof-of-con-
cept) study of felzartamab (MOR202) for the treatment of an-
ti-PLA2R-positive membranous nephropathy
• Continue dose schedule finding study (New-PLACE) in mem-
branous nephropathy
• Support partner I-Mab in the regulatory filing (BLA) for felz-
artamab (MOR202/TJ202) for multiple myeloma in China
• Continue and/or initiate development programs for antibody
identification and preclinical development
We also expect the following events to occur in 2021 for pro-
grams that are driven by partners and where we benefit in the
form of royalties and milestone payments if successful:
• Publication of preliminary results of the OSCAR study using
otilimab for the treatment of severe pulmonary COVID 19
related disease by partner GSK in February 2021
• As the clinical development of drug candidates progresses,
we expect individual product candidates in the partnered
pipeline to continue to mature. Whether, when and to what
extent any news will be published after the primary comple-
tion of the studies is solely at the discretion of our partners
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Outlook and Forecast
Group Management Report
91
At the end of the 2020 financial year, MorphoSys had cash and
investments of € 1,244.0 million (December 31, 2019: € 357.4 mil-
lion). MorphoSys possesses sufficient liquidity to fund the devel-
opment of its proprietary portfolio, execute the Monjuvi ongoing
launch and be opportunistic about the in-licensing of technolo-
gies and compounds, as well as partnerships with promising
companies.
Dividend
In the separate financial statements of MorphoSys AG, prepared
in accordance with German Generally Accepted Accounting
Principles (German Commercial Code), the Company is report-
ing an accumulated deficit, which prevents it from distributing
a dividend for the 2020 financial year. In view of the anticipated
losses in 2021, the Company expects to continue to report an
accumulated loss for the 2021 financial year. MorphoSys plans
to invest further in the development of proprietary drugs and to
pursue new in-licensing agreements and acquisitions 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
2021 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.
Expected Development of the
Financial Position and Liquidity
MorphoSys has transformed from a research and technology
platform focused business into a commercial biopharmaceuti-
cal company, with its first product launched in 2020. As our
business model has changed, we will adapt our guidance pa-
rameters and guide total revenues, operating expenses as well
as research and development expenses going forward. These
parameters place the right emphasis on the Company’s main
drivers: Sustainable revenue growth from product sales and
royalties as well as continued investment to expand our pipe-
line and support the ongoing launch of Monjuvi.
For the 2021 financial year, the Management Board is project-
ing Group revenues of € 150 million to € 200 million. This fore-
cast includes the recently announced € 16 million milestone
payments from GSK, but excludes other potential significant
milestones from development partners and/or licensing partner-
ships. This revenue guidance is subject to a number of uncer-
tainties including the potential for variability from the first full
year of the Monjuvi product launch, the limited visibility that
MorphoSys has on the Tremfya royalty stream as well as the
ongoing COVID-19 pandemic and the impact on our as well as
our partner’s business operations.
2021 operating expenses, inclusive of Incyte’s share of Monjuvi
selling costs, are expected to be in the range of € 355 million to
€ 385 million, with R&D representing 45 50 % of the total. The
R&D expenses represent our continued investment in the devel-
opment of tafasitamab, felzartamab (MOR202), early-stage devel-
opment programs, and further development of our technologies.
The overall guidance is subject to a number of uncertainties
including, but not limited to the ongoing COVID 19 pandemic
and its impact on MorphoSys’ business operations.
In the years ahead, events such as the in-licensing and out-li-
censing of development candidates and significant milestone
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, failures in drug devel-
opment could have negative consequences for the MorphoSys
Group. Negative effects from a further pandemic similar to
COVID 19 or from COVID 19 variants are also possible or cannot
be excluded. Revenue growth in the near- to medium-term will
depend on the Company’s ability to successfully commercialize
Monjuvi.
Financial Statements Group Management Report
Risk and Opportunity Report
92
Risk and Opportunity Report
We operate in an industry characterized by constant change and
innovation. The challenges and opportunities in the healthcare
sector are influenced by a wide variety of factors. Global demo-
graphic changes, medical advances, and the desire to improve
the quality of life provide excellent growth opportunities for
the pharmaceutical and biotechnology industries; however,
companies must also grapple with growing regulatory require-
ments in drug development and cost pressure on the healthcare
systems.
We make a great effort to systematically identify new opportu-
nities and leverage our business success to generate a lasting
increase in enterprise value. Entrepreneurial success, however,
is not achievable without conscious risk-taking. Through our
worldwide operations, we are confronted with a number of risks
that could affect our business performance. Our risk manage-
ment system identifies these risks and evaluates them and takes
suitable action to avert risk and reach our corporate objectives. A
periodic strategy review ensures that there is a balance between
risk and opportunity. We assume risk only when it involves an
opportunity to increase the Company’s value.
Risk Management System
The risk management system is an essential element of our
corporate governance and ensures adherence to good corpo-
rate governance principles and compliance with regulatory
requirements.
We have a comprehensive system in place to identify, assess,
communicate and deal with risk. Our risk management system
identifies risks as early as possible and details the actions we
can take to limit operating losses and avoid risks that could
jeopardize our Company. All actions to minimize risk are as-
signed 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 process that is carried out
twice a year. Risks are evaluated by comparing their financial
impact with their probability of occurrence and without initi-
ating a risk mitigation process. This method is applied over
assessment periods of 12 months and three years to include the
risk related to our proprietary development that has a longer
duration. Additionally, there is a long-term strategic risk as-
sessment that spans more than three years (qualitative assess-
ment). An overview of the current risk assessment can be found
in Tables 09* and 10*.
*cross-reference to page 100 and page 101
Risk managers enter their risks into an IT platform that makes
monitoring, analyzing and documenting risks much easier. The
risk management system distinguishes risk owners from risk
managers. For risks in relation to clinical development, the risk
owner is the responsible business team head for the respective
clinical program. For non-clinical risks, the risk owner is the
responsible department head. Employees from the respective
area of the risk owners are designated as risk managers if the
risks included in the risk management system fall within their
area of responsibility. Risk owners and risk managers are re-
quired to update their risks and assessments at half-yearly
intervals. This process is coordinated and led by the Group
Controlling & Risk Management Department, which is also
responsible for monitoring the evaluation process and sum-
marizing the key information. The information is presented
regularly to the Management Board, who presents the results
to the Supervisory Board twice a year. The entire evaluation
process is based on standardized evaluation forms. Risk man-
agement and monitoring activities are carried out by the relevant
managers. The changes in the risk profile resulting from these
activities are recorded at regular intervals. It is also possible to
report important risks on an ad hoc basis should they occur
outside of the regular intervals. The risk and opportunity man-
agement system combines a bottom-up approach for recognizing
both short- and medium-term risks with a top-down approach
that systematically identifies long-term global risks and oppor-
tunities. As part of the top-down approach, workshops are held
twice per year with selected members of the Senior Manage-
ment Group. These workshops assess and discuss the long-term
risks and opportunities, including those exceeding a period of
three years, in different areas of the Company. The evaluation
process is solely qualitative. The risks are listed in Table 10*.
*cross-reference to page 101
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Risk and Opportunity Report
Group Management Report
93
Principles of Risk and Opportunity
Management
Risks According to the Risk
Management System
We continually encounter both risks and opportunities that
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 brand name.
We define risk as an internal or external event that has a direct
impact. In handling risk, we include an assessment of the poten-
tial financial impact on our goals. There is a direct relationship
between opportunity and risk. Seizing opportunities has a pos-
itive influence on our goals, whereas the emergence of risk has
a negative influence.
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 Group Controlling & Risk Management Department coordi-
nates the risk management process and reports regularly to the
Management Board. The Supervisory Board has appointed the
Audit Committee to monitor the effectiveness of our risk man-
agement 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.
›› see figure 09 – Risk and Opportunity Management System
at MorphoSys (page 94)
Accounting-Related Internal
Control System
To ensure accurate bookkeeping and accounting and maintain
reliable financial reporting in the consolidated financial state-
ments and group management report, we use internal controls
through our financial reporting, which we have expanded
pursuant to the SOX* regulations (Sarbanes-Oxley Act of 2002,
Section 404), in addition to Group-wide reporting guidelines
and other measures, such as employee training and ongoing
professional education. This essential component of Group ac-
counting consists of preventative, monitoring and detection
measures intended to ensure adequate security and control in
accounting and operating functions. Detailed information about
the internal control system for financial reporting can be found
in the Corporate Governance Report.
*see glossary – page 216
Risk Categories
Within the scope of our risk assessment, we assign risks to six
categories, which are described below. The assessment of the
relevance of the risks is not distinguished according to cate-
gories but according to impact and probability of occurrence.
Consequently, Table 09*, which lists our greatest risks, does
not necessarily include risks from all six categories.
*cross-reference to page 100
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 connection with licensing agree-
ments, for example when the out-licensing or commercialization
of products does not materialize, is delayed, or is realized at
terms and conditions other than initially expected. Risk also
arises when revenues do not reach their projected level or when
costs are higher than planned due to higher resource require-
ments. Detailed project preparations, such as those made
through in-depth exchanges with internal and external partners
and consultants, ensure the optimal starting point early in the
process and are important for minimizing risk. The financial
risk relating to tafasitamab was minimized at the beginning of
2020 through the partnership with Incyte and in mid 2020
with tafasitamab’s approval in the United States by the U.S.
FDA. Nevertheless, there continues to be a risk that tafasitam-
ab’s approval in other countries may not be granted, may be
delayed, or may require further studies. There is also a risk that
the FDA could revoke its approval in certain circumstances,
that revenues and royalties may be delayed or lower than ex-
pected, and that investments in further clinical studies may not
achieve the desired success (such as further approvals in other
patient segments or indications) and that long-term product
supply commitments to our contract manufacturers may have to
be made before the success of tafasitamab can be more accu-
rately predicted. With regard to felzartamab (MOR202), we con-
tinue to bear the full financial risk related to the development
and subsequent commercialization outside China, Hong Kong,
Macao and Taiwan (partnered with I-Mab). The commitments to
manufacturers for this product are also progressively increas-
ing. Whether a further partnership will be pursued alongside
I-Mab for felzartamab (MOR202) will be decided at a later date
after carefully weighing the risks and opportunities of doing so.
For partnered programs, such as MOR210, there are some cases
in which we retain some risk related to clinical development.
For programs, such as those that are in-licensed or purchased,
there is a risk that the benefits may not materialize as antici-
pated after costs have been incurred. Detailed analyses of the
programs under consideration are conducted together with our
Financial Statements Group Management Report
Risk and Opportunity Report
94
Figure 09
Risk and Opportunity Management System at MorphoSys
Corporate
Governance
Supervisory
Board
Management
Board /
Executive
Committee
Compliance
Management
Risk and
Opportunity
Management
Internal
Control
System
Internal
Audit
Discussion
Discussion
ForumForum
Technology
Technology
Scouting
Scouting
Business
Business
Development
Development
Innovation
Innovation
Capital
Capital
Defi ne
Defi ne
Objectives
Objectives
Assess
Assess
RiskRisk
Implement
Implement
Measures
Measures
Monitor
Monitor
System
System
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Risk and Opportunity Report
Group Management Report
internal consultants and, if necessary, external consultants,
which ensures that we have made a thorough assessment,
which minimizes risk.
Continuing economic difficulties in Europe indicate that poten-
tial bank insolvencies still pose a financial risk. This is the rea-
son we continue to invest only in those funds and bank instru-
ments that are deemed safe – to the extent this is possible and
foreseeable – and that have a high rating and/or are secured by
a strong partner. We limit our dependence on individual finan-
cial institutions by diversifying and/or investing in lower-risk
money market funds. However, a strategy that eliminates all risk
of potential bank insolvency would be too costly and impractical.
German government bonds, for example, 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 key inter-
est rates. It is currently very difficult for us to invest within the
scope of our company policies and still avoid negative interest
rates. We invest, when possible, in instruments that yield posi-
tive interest rates. There is no guarantee, however, that secure
positive interest-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 approved in
2017 are difficult to predict and may lead to deviations from the
budgeted revenue.
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. Our current
financial resources and projected revenues are expected to be
sufficient to meet our current and short-term capital needs.
This does not guarantee, however, that sufficient funds will be
available over the long term at all times.
Operational Risk
Operational risk includes risks related to the exploration, devel-
opment and commercialization of proprietary drug candidates.
95
The termination of a clinical trial prior to receiving marketing
authorization from the authorities or before out-licensing to
partners – which does not necessarily imply the failure of an
entire program – can occur when the trial does not produce the
expected results, shows unexpected adverse side effects or the
data were 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 persuade regulatory agencies and possible
partners of the potential of the drug candidate. External experts
also contribute to our existing internal know-how. Special steer-
ing 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 or the ability to recruit patients quickly, as well as any
emerging alternative therapies, may lead to a delay in develop-
ment and, as a result, have a negative impact on the trial’s eco-
nomic feasibility and economic potential.
Our business may be adversely affected by the ongoing COVID 19
pandemic. As a result of the pandemic, we are experiencing
disruptions in our operations and business, and those of third
parties upon whom we rely. For instance, we are experiencing
disruptions in the conduct of our clinical trials, manufacturing
and commercialization efforts. We expect to continue experienc-
ing these disruptions in our operations for an unknown period
of time, as the trajectory of the COVID 19 pandemic remains
uncertain. The measure taken to cope with the COVID 19 pan-
demic are presented in the business activities described in
chapter “Infuencial factors”; we do not see any increased risk
due to the pandemic.
There is also a risk associated with proprietary programs should
a partnership fail or be delayed.
For tafasitamab, the partnership with Incyte represents both
an opportunity as well as a possible risk due to the complexity
inherent in co-development, manufacturing and commercial-
ization. This risk is minimized by managing the alliance in a
targeted manner and relying on joint steering committees. The
risk related to the manufacturing process is minimized by
counteracting possible material surpluses through contractu-
ally agreed flexibility with suppliers. Furthermore, the long
shelf life of tafasitamab offers additional options for responding
to changing market requirements.
Financial Statements Group Management Report
Risk and Opportunity Report
96
Programs in the drug discovery phase pose a risk, as they may
be delayed or terminated for various scientific reasons due to the
exploratory nature of early-stage research. Great care is taken
to ensure constant scientific monitoring and optimal project
management to ensure the quality and timing of the programs
and support the renewal of our pipeline.
Risks due to product shortages or vulnerabilities within the
procurement of materials are reduced by integrating additional
suppliers as an additional or back-up source. An additional flex-
ibility of the product allocation between the different distribu-
tion channels enables the avoidance of short-term product
shortages.
Strategic Risk
Access to sufficient financing options also represents a strategic
risk for the Company. Following our decision to develop a large
portion of our proprietary portfolio internally, our key focus is
now on financing research and development and organizing
the commercial activities of MorphoSys Inc. for the marketing
of Monjuvi in the U.S. Risks in this context may arise as a result
of our cost estimates, current losses, future revenues, capital
requirements and/or our ability to raise additional financing.
We have established an extensive budgeting process to miti-
gate such risks. We also have various departments and external
consultants working to ensure the smooth execution of capital
market transactions, if necessary. The potential lack of ability
to successfully commercialize Monjuvi in the U.S., to success-
fully develop felzartamab (MOR202) in autoimmune diseases,
to advance further drug candidates from our in-house research
department into clinical development, to further develop our
therapeutic technology platform, to identify, in-license or acquire
and successfully develop new products, and to enter into fur-
ther partnerships, if any, constitutes a certain strategic risk.
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 or a potential long-term loss of revenue due to
delayed market entry.
There is also a strategic risk that preliminary data from clinical
trials could lead to a trial’s termination or a change in the trial’s
design. In addition, regulatory authorities may decide not to
accept our proposed clinical development strategy or our appli-
cation based on the data. Authorities could also refuse to grant
us marketing authorization or, in certain circumstances, revoke
marketing authorization already granted.
External Risk
We face external risk in areas such as intellectual property. The
patent protection of our proprietary technologies and compounds
is especially important. To minimize risks in this area, we
monitor new patents and patent applications and analyze the
corresponding results. We also develop strategies to ensure
that the patents and patent applications of third parties do not
restrict our own activities. We strive to maintain as much flex-
ibility as possible for our proprietary technology platforms and
products. Risks in this context arise from the possibility of pat-
ents or patent applications from third parties not being recog-
nized or being assessed incorrectly. External risk can also
emerge through the enforcement of our intellectual property
rights vis-à-vis third parties. The accompanying processes may
be associated with high costs and require considerable re-
sources. There is also a risk that third parties may file counter-
claims. External risks may also arise as a result of changes in
the legal framework. This risk is minimized through continued
training of the relevant staff and discussions with external ex-
perts. It is also conceivable that competitors may challenge our
patents or infringe on our patents or patent families, which in
turn could cause us to take legal action against our competitors.
Such procedures are costly and represent a significant financial
risk, particularly when they take place in the U.S.
As a fully integrated biopharmaceutical company with numer-
ous partnerships and internal research and development for
developing drug candidates, we are subject to a number of
regulatory and legal risks. These risks include those related to
patents, potential liability claims from existing partnerships,
environmental protection and competition, tax and antitrust
laws. The Regulatory Affairs department is also affected by this
risk in terms of the feedback it receives from regulators on study
design or by price controls or restrictions on patient access.
Future legal proceedings are conceivable and cannot be antici-
pated. Therefore, we cannot rule out that we may incur ex-
penses for legal or regulatory judgments or settlements that are
not or cannot be partially or fully covered by insurance and
may have a significant impact on our business and results.
There is significant cost containment pressure in European and
U.S. markets, and payers have implemented measures that can
lead to restrictions on access and lower the prices paid for our
products. We expect these efforts to grow and expand over time.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Risk and Opportunity Report
Group Management Report
In the area of Proprietary Development for tafasitamab, we face
an intense competitive environment with currently used thera-
pies as well as not yet approved therapeutic alternatives in clin-
ical research, which we are addressing through an effective
sales and growth strategy.
Lastly, MorphoSys AG has implemented a business continuity
plan to prevent the collapse of critical business processes to the
greatest extent possible and to enable the resumption of critical
business processes in the event of a natural disaster or public
health emergency, such as the novel coronavirus, or other seri-
ous events. However, depending on the severity of the situation,
it may be difficult or, in certain cases, impossible for us to con-
tinue our business for an extended period of time. Our contin-
gency plans for disaster recovery and business continuity may
prove inadequate in the event of a serious disaster or similar
event, and we may incur substantial costs that could have a
material adverse effect on our business.
Organizational Risk
Organizational risks arise, for example, when further building
up the marketing structure and incurring the related costs
through our fully owned subsidiary in the U.S., MorphoSys US
Inc. Based on the development and strong growth of MorphoSys
US Inc., a joint interdisciplinary and global U.S. launch team
has been formed in order to accompany the market launch of
tafasitamab in the U.S.
And finally, organizational risk can also arise from missing or
delayed information within the organization on patent issues.
Compliance
In addition to the risk assessment process at Group level, addi-
tional risk assessments are carried out in areas of significance
for MorphoSys Group. In the area of quality management,
GxP*-relevant risks are identified and monitored. In the Health-
care Compliance area, the focus is on anti-bribery and anti-cor-
ruption as well as on key regulations accompanying commer-
cialization activities in the United States, such as Anti-Kickback
Statute, False Claim Act, Open Payments Act, Food Drug and
Cosmetic Act and others.
97
GxP-Relevant Risk
GxP-relevant risk can arise, for example, from several business
units when quality standards are not met. To counter this risk
we are committed to ensuring that our business operations
meet the highest quality standards, as set out in the “Separate
Non-Financial Group Report.”*
Specific risk can arise, for example, when the internal quality
management system does not meet the legal requirements or
when there is no internal system for detecting quality problems.
If the internal controls are not able to detect violations of Good
Manufacturing Practice (GMP*), Good Clinical Practice (GCP*),
Good Laboratory Practice (GLP*), Good Distribution Practice
(GDP*) or Good Pharmacovigilance Practice (GVP*), 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 recurring audits by an
internal, independent quality assurance department.
*see glossary – page 216
Compliance Risk
A compliance risk is that the Company fails to fully understand
the operational challenges and, as a result, does not establish
a compliance management program (CMP) in accordance with
regulatory requirements and industry standards. To address
this risk, we have implemented a risk-based compliance man-
agement program that adheres to all of the latest trends and
applicable requirements, including the Code of Conduct, Global
Anti-Bribery Policy, Global Policy on Interactions with Health-
care Professionals, Healthcare Organizations, Patients and
Patient Organizations, Global Policy on Fair Market Value,
Global Policy on Transparency and Disclosure of Transfers of
Value to Healthcare Professionals, Healthcare Organizations,
Patients and Patient Organizations and corresponding U.S and
German policies.
Moreover, Global and U.S. Compliance Committees are meeting
on a quarterly basis and make informed decisions on further
CMP development. Set of trainings targeted at specific groups of
employees as well as covering all associates are being provided
on a regular basis. For instance, there is a field force guide devel-
oped to help the sales team translate the policies into their every-
day work. Robust onboarding trainings are being provided to
newcomers in both, Germany and U.S.
* This information is not part of the management report that is subject to audit.
Financial Statements Group Management Report
Risk and Opportunity Report
98
A yearly Compliance Risk Assessment is being conducted gath-
ering feedback from more than 60 leaders, to rank the risks
and mitigate them. Our monitoring activities feed our training
and communication priorities. In the 2020 reporting year, we
implemented an anti-bribery due diligence process for relevant
third parties for the first time, piloting it at MorphoSys AG and
expanding to MorphoSys U.S. Inc. All of the above would not be
possible without a clear “tone from the top”: our Executive Com-
mittee members highlight the importance of compliance at var-
ious occasions, including during Compliance Week, a very en-
gaging event, that we held in 2020 for the first time.
The Management Board’s Evaluation of the
Group’s Overall Risk Situation
Our Management Board considers our overall risk as manage-
able and trusts in the effectiveness of the risk management sys-
tem to keep up with changes in the environment and the needs
of the ongoing business. It is the Management Board’s view that
the Group’s continued existence is not jeopardized. This assess-
ment applies to the Group as a whole, as well as to each Group
company. The Board’s conclusion is based on the following con-
siderations:
• The Group’s exceptionally high liquidity base
• The Management Board’s conviction that the Group is well-
positioned to cope with any adverse events* that may occur
• The Group’s comprehensive portfolio of preclinical and clinical
programs in partnerships with a number of large pharmaceu-
tical companies and a strong base of technologies to expand
its proprietary portfolio
*see glossary – page 216
Despite these factors, it is impossible to influence, control or
rule out risk in its entirety.
Opportunities
The most sophisticated antibody discovery and protein engi-
neering technologies, excellent know-how and a broad portfolio
of validated clinical programs have made us one of the world’s
most important biotechnology companies in the field of thera-
peutic antibodies. Monoclonal antibodies are one of today’s most
successful and best-selling therapies in cancer and in the treat-
ment of immune diseases. Similar growth potential is predicted
for bi- and multispecific antibodies as well as for antibody con-
jugates. Due to the synergies between our established antibody
identification technologies (HuCAL, Ylanthia, Slonomics) and the
combination with our innovative bi- and multispecific antibody
approaches and formats (OkapY and CyCAT platforms), we see a
tremendous opportunity to bring highly innovative and differ-
entiated therapies into MorphoSys’ clinical portfolio and further
expand our market position, particularly in this area.
Opportunity Management System
The opportunity management system is an important compo-
nent of our corporate management and is used to identify op-
portunities as early as possible and generate added value for
the Company.
Opportunity management is based on the following pillars:
• a routine discussion forum involving the Executive Committee
and selected senior managers;
• our business development and licensing activities;
• preclinical and clinical “search and evaluation” groups con-
sisting of scientists and business development representatives
driving our pipeline complementation strategy; and
• an internal suggestion scheme and accompanying incentive
system for new scientific ideas.
Committees discuss specific opportunities and decide what ac-
tion should be taken to exploit these opportunities. The meetings
and their outcomes are recorded in detail, and any subsequent
action is reviewed and monitored. Our business development
team and our scientists participate in numerous conferences,
identifying different opportunities that can open up new possi-
bilities and contribute to our growth. The opportunities identi-
fied are presented in committees convened for this purpose and
assessed in an evaluation process. Using an established opportu-
nity evaluation process ensures a qualitative and reproducible
assessment of opportunities.
Our key opportunities are described in Table 11* (qualitative
evaluation).
*cross-reference to page 101
General Statement on Opportunities
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
process of disease and paves the way for new therapeutic ap-
proaches. Innovative therapies, such as fully human antibodies,
have reached market maturity in recent years and have led to
the development of commercially successful medical products.
Therapeutic compounds based on proteins – also referred to as
“biologics” – are less subject to generic competition than chem-
ically produced molecules because the production of biological
compounds is far more complex. The sharp rise in both the de-
mand for antibodies and the interest in this class of drug candi-
dates can be seen by the acquisitions and significant licensing
agreements made over the past two to three years.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Risk and Opportunity Report
Group Management Report
99
already been granted, Tremfya is currently being tested in
clinical trials in a number of other indications: Crohn’s disease
(phase 2/3 and phase 3 studies), ulcerative colitis (phase 2 and
phase 2b/3 studies), pityriasis rubra pilaris and hidradenitis
suppurativa (both phase 2 studies), and familial adenomatous
polyposis (phase 1b study).
Technology Development
We continue to invest in new and existing technologies to main-
tain our technological leadership. An example of this is our li-
censing agreement with Cherry Biolabs, which grants us the
right to use the innovative, multispecific Hemibody technology
within the scope of our CyCAT dual targeting platform.
These types of technological advances could help us to increase
not only the speed but also the success rate of our partnered
and proprietary drug development programs. New technology
modules could also open up new disease areas where antibody-
based treatments are currently underrepresented by allowing
the generation of antibodies against novel classes of targets as
well as approaches that enable completely novel mechanisms of
action.
Technology development is carried out by a team of scientists
who focus on further developing our technologies. In addition
to our internal technology development activities, we draw on
external resources to further boost our technology.
Acquisition Opportunities
We have demonstrated our ability in the past to acquire com-
pounds, technologies and companies in order to accelerate our
growth. Promising candidates are screened systematically and
evaluated by various professional panels from a variety of per-
spectives, including scientific-clinical, commercial, financial
and regulatory perspectives. Candidates are also evaluated in
terms of their strategic synergy. If an active ingredient, tech-
nology or company meets the internal selection criteria, it is
submitted for evaluation to the Executive Committee, com-
prising the Management Board and selected senior managers,
at regular intervals. The evaluations are stored in databases so
that the information can be managed consistently and made
instantly available.
Market Opportunities
We believe that our technologies offer a decisive advantage in
the development and optimization of bi- and multispecific anti-
body candidates, which can lead to higher success rates and
shorter development times in the drug discovery process.
Based on this and thanks to our long-standing expertise in
technology and product development, as well as in the clinical
development and commercialization of differentiated therapeutic
antibodies, we foresee significant growth opportunities in the
years ahead.
Therapeutic Antibodies –
Proprietary Development
It is reasonable to assume that the pharmaceutical industry will
continue and even increase the level of in-licensing of new drugs
to refill its pipelines and replace key products and blockbusters
that have lost patent protection. Our most advanced compounds
tafasitamab, felzartamab (MOR202) and otilimab, place us in a
good position to capitalize on the needs of pharmaceutical com-
panies, as demonstrated by our partnerships with GSK (otilimab)
and I-Mab (felzartamab (MOR202) and MOR210).
We are enhancing our proprietary portfolio on an ongoing basis
and will continue to expand our proprietary portfolio by adding
clinical trials with our key drug candidates, for example, by
investigating new disease areas. We intend to augment our
portfolio with additional programs and, in doing so, take advan-
tage of existing and future opportunities for co-development or
partnerships. We will also continue to seek new opportunities
to in-license interesting drug candidates.
Therapeutic Antibodies –
Partnered Discovery
By developing drugs with a number of partners, we have been
able to spread the inherent risks of drug development over a
broader spectrum. With over 100 individual therapeutic anti-
bodies currently in partnered development programs, the op-
portunities for us to participating financially in the commer-
cialization of drugs are increasingly higher. As the first drug
generated on the basis of MorphoSys’ proprietary antibody
technology, Tremfya received marketing approval from the U.S.
Food and Drug Administration (FDA) in 2017 for the treatment
of psoriasis. Tremfya is currently approved in 76 countries for
the treatment of adults with moderate to severe plaque psoriasis
who are eligible for systemic therapy or phototherapy, and in
Brazil, Canada, Ecuador, Japan, Taiwan, the U.S. and the EU for
the treatment of adult patients with active psoriatic arthritis. In
Japan, Tremfya is also approved for the treatment of pustular
psoriasis and erythrodermic psoriasis, as well as palmoplantar
pustulosis. In addition to the indications for which approval has
Financial Statements Group Management Report
Risk and Opportunity Report
100
Financial Opportunities
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.
Table 09
Summary of MorphoSys’ Key Short- and Medium-Term Risks
Proprietary Development segment
Research-related risk
Patent-related risk
Cross-segment
Foreign currency risk
Risk related to strategic partnerships and revenue streams
Personnel-related risk
Compliance-related risk
Financial-market-related risk
Proprietary Development segment
Risks associated with commercial targets and supply sources
Risks related to regulatory, compliance and approval processes
Research-related risk
Cross-segment
Risk of elevated development costs
Risks related to strategic partnerships and revenue streams
Compliance-related risk
Risk category
1-year assessment
Strategic
External
Financial
Financial
Organizational
Compliance
Financial
••
•
••
••
••
•
•
Moderate
Low
Moderate
Moderate
Moderate
Low
Low
Risk category
3-year assessment
External, operational
Strategic, compliance
Strategic
Financial
Financial
Compliance
••
••
•
••••
••
•
Moderate
Moderate
Low
High
Moderate
Low
Legend
•
••
•••
••••
Low risk:
Moderate risk:
Medium risk:
High risk:
* Score: probability of occurrence x impact
low probability of occurrence, low impact (Score* 0 to 25)
medium probability of occurrence, moderate impact (Score* 26 to 50)
medium probability of occurrence, moderate to strong impact (Score* 51 to 75)
high probability of occurrence, very strong impact (Score* 76 to 100)
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020
Risk and Opportunity Report
Group Management Report
101
Table 10
Summary of MorphoSys’ Key Long-Term Risks1
Segment
Risk
Proprietary Development
Inability to maximize the potential of Monjuvi
Proprietary Development
Failure of proprietary felzartamab (MOR202) clinical development
Partnered Discovery
Inability to expand pipeline with major in-licensing or M&A
Cross-segment
Inability to be strategically positioned as perceived by the market
Proprietary Development
Failure of discovery projects
1 Long-term risks are weighted equally.
Table 11
Summary of MorphoSys’ Key Opportunities1
Segment
Opportunity
Proprietary Development
Maximize our commercial product development
Proprietary Development
(tafasitamab as frontline treatment in DLBCL, felzartamab (MOR202) in autoimmune diseases)
Potential new clinical development of our proprietary programs
Partnered Discovery
Successful in-licensing and/or acquisition
Proprietary Development
Leverage research organization to expand pipeline
Partnered Discovery
Further milestones and potential royalties from partnered programs
1 Long-term risks are weighted equally.
Financial Statements Group Management Report
Subsequent Events
102
Subsequent Events
A detailed description of the subsequent events can be found in
the Notes to the Consolidated Financial Statements (Note 9.5*).
*cross-reference to page 206
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
103
Statement on Corporate
Governance, Group Statement
on Corporate Governance and
Report on Corporate Governance
The Statement on Corporate Governance and the Group State-
ment on Corporate Governance, as well as the Report on Corpo-
rate Governance, are available on our website under Media and
Investors – Corporate Governance.
Statement on Corporate Gover-
nance pursuant to Section 289f
HGB and Group Statement on
Corporate Governance pursuant
to Section 315d HGB for the 2020
Financial Year
In the Statement on Corporate Governance under Section 289f
of the German Commercial Code (HGB) and the Group State-
ment on Corporate Governance pursuant to Section 315d, the
Management Board and the Supervisory Board present infor-
mation on the most essential components of our corporate gov-
ernance. The components include the annual Declaration of
Conformity pursuant to Section 161 of the German Stock Corpo-
ration Act (AktG), the relevant information on corporate gover-
nance practices and other aspects of corporate governance that
include, above all, a description of the working practices of the
Management Board and Supervisory Board.
Declaration of Conformity of the Manage-
ment Board and Supervisory Board of
MorphoSys AG with regard to the German
Corporate Governance Code (“Code”)
The Management Board and the Supervisory Board of
MorphoSys AG declare pursuant to Section 161 of the German
Stock Corporation Act:
1. From November 29, 2019, the date of its most recent Decla-
ration of Conformity, MorphoSys AG has complied – with the
exception described below – with the recommendations of
the “Government Commission on the German Corporate
Governance Code” in the Code version dated February 7,
2017 (“GCGC 2017”):
The amount of compensation of the Management Board
members does not provide for a cap, neither overall nor for
individual compensation components (see item 4.2.3 para. 2
sentence 6 of the GCGC 2017). Against the background of
already existing means of the Supervisory Board to cap vari-
able compensation components of the Management Board
members as well as the annual allocation of such variable
components, the Supervisory Board considers an additional
cap relating to the overall and individual compensation com-
ponents as unnecessary.
2. Further, MorphoSys AG has complied – with the exceptions
described below – with the recommendations of the “Govern-
ment Commission on the German Corporate Governance
Code” in the Code version dated December 16, 2019 (“GCGC
2020”) from the date of the announcement of the GCGC 2020
in the German Federal Gazette on March 20, 2020:
• MorphoSys AG does not comply with the recommendation
C.4 of the GCGC 2020, according to which a Supervisory
Board member, who is not a member of any Management
Board of a listed company, shall not accept more than five
Supervisory Board mandates at non-group listed companies
or comparable functions (in a listed or non-listed company),
with an appointment as chair of the Supervisory Board
being counted twice. The member of the Supervisory Board
George Golumbeski, Ph.D., currently holds in aggregate
seven comparable functions in pharmaceutical and bio-
technological companies in Ireland and the United States of
America. Golumbeski’s positions have at no time in the
past affected the fulfilment of his duties as a member of the
Supervisory Board of MorphoSys AG. MorphoSys AG con-
tinuously ensures that Dr. Golumbeski’s positions will not
distract his focus on MorphoSys AG’s business and that Mr.
Golumbeski has sufficient time to perform his duties as a
member of the Supervisory Board of MorphoSys AG with
due regularity and care.
• MorphoSys AG does not comply with the recommendation
C.5 of the GCGC 2020, according to which members of the
Management Board of a listed company shall not accept the
chairmanship of a Supervisory Board in a non-group listed
company. The Chief Executive Officer (CEO) of MorphoSys AG,
Jean-Paul Kress, M.D., holds a position as chairman of the
Financial Statements
Group Management Report
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
104
Board of Directors of a French biopharmaceutical company,
which he had already accepted prior to his appointment as
a member of the Management Board of MorphoSys AG and
which has at no time in the past affected the fulfilment of
his duties as CEO of MorphoSys AG. MorphoSys AG contin-
uously ensures that Kress’, M.D., position as chairman of
the Board of Directors of such company will not distract his
focus on MorphoSys AG’s business and that Kress, M.D., has
sufficient time to perform his duties as CEO of MorphoSys AG
with due regularity and care.
• Section G.I. of the GCGC 2020 contains new recommenda-
tions with regard to the remuneration of the members of the
Management Board. In accordance with the rationale of the
GCGC 2020 and the transitional provisions of the German
Stock Corporation Act regarding the amendments under the
Act Implementing the Second Shareholder Rights Directive
(ARUG II), with which the new recommendations of the
GCGC 2020 are interlinked, the new recommendations of
the GCGC 2020 have not been taken into account in current
Management Board service agreements. The Management
Board and the Supervisory Board of MorphoSys AG will
propose to the Annual General Meeting 2021 a remunera-
tion system for the members of the Management Board of
MorphoSys AG, which complies with the new recommenda-
tions of the GCGC 2020, and which will apply to all service
agreements with members of the Management Board of
MorphoSys AG to be concluded or extended after the An-
nual General Meeting 2021.
3. MorphoSys AG will continue to comply – with the exceptions
described above under item 2 – with the recommendations of
the GCGC 2020.
Planegg, this November 29, 2020
MorphoSys AG
For the
Management Board:
For the
Supervisory Board:
Dr. Jean-Paul Kress
Chief Executive Officer
Dr. Marc Cluzel
Chairman of the Supervisory Board
Relevant Information on Corporate
Governance Practices
We ensure compliance with the laws and rules of conduct
through the Group-wide enforcement of the Code of Conduct,
the Compliance Management Handbook and other internal
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 our employees and executives, particularly in
business, legal and ethical situations of conflict. The Code of
Conduct reinforces our transparent and sound management
principles and fosters the trust placed in us by the public,
business partners, employees and the financial markets. Com-
pliance with the Code of Conduct is carefully monitored. The
Group-wide implementation of the Code is overseen by the
Global Compliance Committee. The Code of Conduct itself is
routinely reviewed and updated, provided to all new employees
and can be downloaded in German or English from our website
under the section Media and Investors – Corporate Governance.
The Compliance Handbook describes our compliance manage-
ment program (CMP) and is intended to ensure compliance
with all legal regulations and prescribe high ethical standards
that apply to both the management and all employees. The
Management Board has overall responsibility for the CMP and
is required to report regularly to the Audit Committee and the
Supervisory Board. In carrying out its compliance responsibil-
ity, the Management Board has assigned the relevant tasks to
various functions at MorphoSys.
The Global Compliance Committee consists of three members
of the Management Board (Chief Executive Officer, Chief Re-
search and Development Officer and Chief Operating Officer)
and senior representatives from various departments. The Global
Compliance Committee, which meets quarterly, supports the
Head of Global Compliance in implementing and monitoring
the CMP. The Global Compliance Committee is specifically re-
sponsible for the identification and discussion of all compli-
ance-relevant issues and thus makes it possible for the Head of
Global Compliance and the other members of the Global Com-
pliance Committee to periodically verify our compliance status
and, if necessary, update the CMP.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
105
• Malte Peters, M.D., Chief Research and Development Officer,
responsible for Research, Preclinical Development, Clinical
Development, Clinical Operations, Biostatistics & Data Man-
agement, Drug Safety & Pharmacovigilance, Regulatory Af-
fairs, Medical Affairs, and Global Program Teams.
• Roland Wandeler, Ph.D., Chief Operating Officer (as of May 5,
2020), responsible globally for U.S. operations, Strategic Mar-
keting & Market Access, and Forecasts & Insights.
Supervisory Board
In accordance with the Articles of Association, our Supervisory
Board consisted of seven members until the 2020 Annual Gen-
eral Meeting, which was held on May 27, 2020. Following the
resignation of Supervisory Board member Frank Morich, M.D.,
from his position as a member of the Company’s Supervisory
Board effective April 11, 2020, a resolution was passed at the
2020 Annual General Meeting to reduce the number of Super-
visory Board members to six. As a result, the MorphoSys Su-
pervisory Board now consists of six members, who supervise
and advise the Management Board. Also at the 2020 Annual
General Meeting, Ms. Wendy Johnson, George Golumbeski,
Ph.D., and Mr. Michael Brosnan were re-elected as members of
the Supervisory Board.
The current Supervisory Board consists of professionally qual-
ified members who represent our shareholders. The Chair of the
Supervisory Board, Marc Cluzel, M.D., Ph.D., 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 per the
definition in the German Corporate Governance Code (“Code”)
and NASDAQ Listing Rules and have many years of experience
in the biotechnology and pharmaceutical industries. The Chair
of the Supervisory Board is not a former member of our Man-
agement Board. The detailed composition of the Supervisory
Board, including its members and committees, is listed in the
tables below.
The Head of Global Compliance monitors our existing CMP and
updates it in accordance with the decisions of the Management
Board and Global Compliance Committee. Compliance colleagues
are the first point of contact for all employees regarding all
compliance matters.
In 2020, MorphoSys completed the implementation phase of the
compliance management program at its wholly owned U.S. sub-
sidiary MorphoSys US Inc. State-of-the-art governance was fully
implemented, which includes a U.S. compliance committee, as
well as the corresponding policies and processes.
For more information on our compliance management program,
please see the Report on Corporate Governance.
Composition of the Management Board and
Supervisory Board
Management Board
The Management Board of MorphoSys AG consists of a Chief
Executive Officer and three further members. Jens Holstein re-
signed effective November 13, 2020. By resolution of the Super-
visory Board on January 18, 2021, Sung Lee was appointed
member of the Management Board and Chief Financial Officer,
effective February 2, 2021. The schedule of responsibilities cur-
rently defines the various areas of responsibility as follows:
• Jean-Paul Kress, M.D., Chief Executive Officer, responsible for
the areas of Strategy & Planning, Business Development &
Alliance Management, Human Resources, Legal, Compliance
& Intellectual Property, Corporate Communications, Techni-
cal Operations, Information Technology & Facilities, Quality
Assurance & Internal Audit, as well as for coordinating the
individual areas of responsibility for each Management Board
member and representing the Management Board vis-à-vis
the Supervisory Board and the public.
• Jens Holstein, Chief Financial Officer (until November 13,
2020), responsible for the areas of Accounting & Taxes, Global
Controlling & Internal Controls, Corporate Development &
M&A, Information Technology, Facilities, Central Purchasing
& Logistics, Investor Relations, Environmental Social Gover-
nance (ESG), and Lanthio Pharma.
• Sung Lee, Chief Financial Officer (as of February 2, 2021),
responsible for Accounting & Taxes, Global Controlling &
Internal Controls, Corporate Development & M&A, Central
Purchasing & Logistics, Investor Relations, and Environmental
Social Governance (ESG).
• Markus Enzelberger, Ph.D., Chief Scientific Officer (until Feb-
ruary 29, 2020), responsible for Development Partnerships &
Technology Development, Protein Chemistry, Alliance Man-
agement, Intellectual Property, and Lanthio Pharma.
Financial Statements Group Management Report
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
106
Table 12
Composition of the Supervisory Board until Termination of the 2020 Annual General Meeting
Name
Position
Initial
Appoint-
ment
End of
Term
Audit
Committee
Remuneration
and Nomination
Committee
Science and
Technology
Committee
Marc Cluzel, M.D., Ph.D.
Chairman
2012
2021
Frank Morich, M.D.
Deputy Chairman
2015
2020
Krisja Vermeylen
Member
2017
2021
Michael Brosnan
Member
2018
2020
George Golumbeski, Ph.D.
Member
2018
2020
Wendy Johnson
Member
2015
2020
Sharon Curran
Member
2019
2021
Independent financial expert
Chairperson
Member
Table 13
Composition of the Supervisory Board since Termination of the 2020 Annual General Meeting
Name
Position
Initial
Appoint-
ment
End of
Term
Audit
Committee
Remuneration
and Nomination
Committee
Science and
Technology
Committee
Marc Cluzel, M.D., Ph.D.
Chairman
2012
2021
George Golumbeski, Ph.D. Deputy Chairman
2018
2023
Krisja Vermeylen
Member
2017
2021
Michael Brosnan
Member
2018
2023
Wendy Johnson
Member
2015
2022
Sharon Curran
Member
2019
2021
Independent financial expert
Chairperson
Member
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
Working Practices of the Management Board,
Supervisory Board and Executive Committee
To ensure good corporate governance, a guiding principle of the
cooperation between our Management Board and our Supervi-
sory Board is the open, comprehensive and regular communi-
cation of information. The dual board system prescribed by the
German Stock Corporation Act clearly differentiates between the
Company’s management and its supervision. The responsibility
of both Boards is clearly stipulated by the legislator and the
Boards’ bylaws and Articles of Association. The boards work
closely together to make decisions and take actions for the Com-
pany’s benefit. Their stated objective is to sustainably increase
the Company’s value.
Management Board members have their own separate areas of
responsibility, as defined in the schedule of responsibilities,
and regularly report to the other Management Board members.
Cooperation among Management Board members is governed
by the bylaws. The Supervisory Board approves both the sched-
ule of responsibilities and the bylaws.
In the 2020 financial year, the Company established the Execu-
tive Committee. Under the leadership of the Chief Executive
Officer, the Executive Committee is responsible for the develop-
ment of the strategy, the operational management of the Com-
pany and the achievement of its targets and results. The Exec-
utive Committee prepares the decisions for the Management
Board’s resolutions and adopts resolutions jointly with the
Management Board, provided this is not the sole responsibility
of the Management Board by law or by resolution of the Super-
visory Board. The Executive Committee consists of the members
of the Management Board and senior executives from the Com-
pany’s core areas such as Business Development & Licensing
and Alliance Management, Technical Operations, Information
Technology & Facilities, Human Resources, Legal, and Compli-
ance & Intellectual Property. In addition to the members of the
Management Board, the current members of the Executive Com-
mittee are Barbara Krebs-Pohl, Ph.D. (Senior VP, Head of Global
BD&L and Alliance Management), Daniel Palmacci (Senior VP,
Global Head of Technical Operations), Maria Castresana (Senior
VP, Global Head of Human Resources) and Charlotte Lohmann
(Senior VP, General Counsel, Legal, Compliance & IP).
Executive Committee meetings are generally held at least once
every two weeks and when necessary in the interest of the
Company. Management Board meetings are generally held at
least once per month or when necessary in the interest of the
Company. During these meetings, resolutions are passed con-
cerning dealings and transactions that, under the bylaws, re-
quire the approval of the entire Management Board. At least
half of the Management Board’s members must be present to
pass a resolution. Management Board resolutions are passed by
a simple majority and, in the event of a tied vote, the Chief Exec-
utive Officer’s vote decides. For material events, each Manage-
ment Board or Supervisory Board member can call an extraor-
107
dinary 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). A written protocol is completed for each meeting of the
full Management Board and submitted for approval to the full
Management Board, as well as for the signature of the Chief
Executive Officer, at the following meeting.
The Management Board promptly and comprehensively informs
the Supervisory Board in writing and at Supervisory Board
meetings about planning, business development, the Group’s
position, risk management and other compliance issues. Ex-
traordinary meetings of the Supervisory Board are also called
for material events. The Management Board involves the Super-
visory Board in the strategy, planning and all fundamental
Company issues. The Management Board’s bylaws specify that
material business transactions require the approval of the Su-
pervisory Board. Detailed information on the cooperation of the
Management Board and Supervisory Board and important items
of discussion during the 2020 financial year can be found in the
Report of the Supervisory Board.
The Supervisory Board holds a minimum of two meetings during
each calendar half-year. The Supervisory Board has supple-
mented the Articles of Association with rules of procedure that
apply to its duties. In accordance with these rules, the Chairper-
son of the Supervisory Board coordinates the activities of the
Supervisory Board, chairs the Supervisory Board meetings and
represents the interests of the Supervisory Board externally.
The Supervisory Board typically passes its resolutions in meet-
ings, but resolutions may also be passed outside of meetings in
writing (also by e-mail), by telephone or video conference.
The Supervisory Board has a quorum when at least two-thirds
of its members participate in the vote. Resolutions of the Super-
visory Board are generally passed with a simple majority. In the
event of a tied vote, the Chairperson of the Supervisory Board’s
vote decides.
Protocols are completed for Supervisory Board meetings, and
resolutions passed outside of meetings are also documented. A
copy of the Supervisory Board’s protocol is made available to all
Supervisory Board members. In accordance with the recom-
mendation in D.13 of the Code, the Supervisory Board assesses
at regular intervals, how effective the Supervisory Board in its
entirety and its committees perform their tasks. The members
of the Management Board also take part in this review. The
most recent review was carried out by the Supervisory Board in
December 2020 and was based on a questionnaire completed
by the members of both the Supervisory and Management
Boards. The results were then discussed and evaluated at a sub-
sequent Supervisory Board meeting.
Financial Statements Group Management Report
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
108
Composition and Working Practices of the
Management Board and Supervisory Board
Committees
The Management Board has not formed any committees.
The Supervisory Board has three permanent committees: the
Audit Committee, the Remuneration and Nomination Commit-
tee, and the Science and Technology Committee. The members
of the three committees formed by the Supervisory Board are
professionally qualified.
Table 14
Participation of Supervisory Board Members
Supervisory Board Meetings
By
phone
By
phone On-site
Video
con-
ference
Video
con-
ference
Video
con-
ference
Video
con-
ference
Video
con-
ference
Video
con-
ference
Video
con-
ference
Video
con-
ference
Name
01/10/
2020
01/20/
2020
03/11/
2020
05/26/
2020
05/27/
2020
08/04/
2020
09/24/
2020
10/07/
2020
10/13/
2020
11/09/
2020
11/10/
2020
Marc Cluzel,
M.D., Ph.D.
Frank
Morich, M.D.*
Wendy
Johnson
Krisja
Vermeylen
George
Golumbeski,
Ph.D.
Michael
Brosnan
Sharon
Curran
Meetings of the Audit Committee
Name
Krisja Vermeylen
Michael Brosnan
Sharon Curran
–
–
–
–
–
–
–
–
On-site
Video
conference
Video
conference
Video
conference
Video
conference
03/10/2020 05/04/2020 08/04/2020
10/01/2020
11/06/2020
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
109
Meetings of the Remuneration and Nomination Committee
By phone
By phone
By phone
Video
conference
Video
conference
Video
conference
Video
conference
Name
01/10/2020
02/11/2020 03/04/2020 05/18/2020 09/10/2020
10/28/2020
12/10/2020
Marc Cluzel, M.D., Ph.D.
Krisja Vermeylen
Frank Morich, M.D.*
Wendy Johnson
–
–
–
–
–
–
–
Meetings of the Science and Technology Committee
On-site
Video
conference
Video
conference
Video
conference
Video
conference
Video
conference
Video
conference
Name
03/10/2020 05/25/2020 08/03/2020
08/31/2020 09/24/2020
10/21/2020
11/06/2020
Wendy Johnson
Frank Morich, M.D.*
George Golumbeski, Ph.D.
* Resigned as of April 11, 2020.
–
–
–
–
–
–
attended in person
participated by phone
participation via video
Audit Committee
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 functions,
such as risk management, compliance and internal auditing.
The Audit Committee submits a recommendation to the Super-
visory Board for the election at the Annual General Meeting of
an independent auditor. The members of the Audit Committee
are Michael Brosnan (Chair), Sharon Curran and Krisja Ver-
meylen. Currently, Michael Brosnan meets the prerequisite of
an independent financial expert.
Remuneration and Nomination Committee
The Remuneration and Nomination Committee is responsible
for the preparation and the annual review of the Management
Board’s remuneration system prior to its final approval. When
necessary, the Committee searches for suitable candidates to
appoint to the Management Board and Supervisory Board and
submits appointment proposals to the Supervisory Board. The
Committee also prepares the service agreements with Manage-
ment Board members. The members of the Remuneration and
Nomination Committee until the resignation of Frank Morich,
M.D., with effect from April 11, 2020 were Krisja Vermeylen
(Chair), Marc Cluzel, M.D., Ph.D. and Frank Morich, M.D. By
resolution of the Supervisory Board on April 14, 2020, Wendy
Johnson was appointed as member of the Remuneration and
Nomination Committee. Following this appointment, the Remu-
neration and Nomination Committee has consisted of Krisja
Vermeylen (Chair), Marc Cluzel, M.D., Ph.D. and Wendy Johnson.
Financial Statements
Group Management Report
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
110
Science and Technology Committee
The Science and Technology Committee advises the Supervisory
Board on matters concerning proprietary drug and technology
development and prepares the relevant Supervisory Board res-
olutions. The members of the Science and Technology Commit-
tee until the resignation of Frank Morich, M.D., with effect from
April 11, 2020, were George Golumbeski, Ph.D. (Chair), Frank
Morich, M.D. and Wendy Johnson. Following the resignation,
the Science and Technology Committee has consisted of George
Golumbeski, Ph.D. (Chair) and Wendy Johnson.
Ad Hoc Deal Committee
In addition to the three existing committees, an Ad Hoc Deal
Committee was set up in October 2019 to act as an additional
body for the tafasitamab partnership talks, advise on agree-
ment terms, ensure an efficient negotiation process, and facili-
tate the Supervisory Board’s involvement. The Ad Hoc Deal
Committee was initially dissolved in January 2020 upon the
signing of the global collaboration and licensing agreement
with Incyte for tafasitamab. The members of the Ad Hoc Deal
Committee were George Golumbeski, Ph.D. and Wendy John-
son. The Ad Hoc Deal Committee, which continues to consist of
George Golumbeski, Ph.D. and Wendy Johnson, will continually
be convened if required to evaluate potential in-licensing,
merger and acquisition opportunities for the intended comple-
mentation of the Company’s portfolio.
Pursuant to C.14 of the Code, the curriculum vitae of the mem-
bers of the Supervisory Board are published on our website
under Company – Management – Supervisory Board.
Report on Corporate Governance
At MorphoSys, responsible, sustainable and value-oriented cor-
porate governance is a high priority. Good corporate governance
is an essential aspect of our corporate management and forms
the framework for the Group’s management and supervision,
which includes the Group’s organization, commercial principles
and tools for its guidance and control.
The Code provides a standard for the transparent monitoring
and management of companies that strongly emphasizes share-
holder interests. The German Federal Ministry of Justice origi-
nally published the Code in 2002. On December 16, 2019, the
Government Commission on the German Corporate Gover-
nance Code adopted a new version of the Code, which entered
into force upon its publication in the German Federal Gazette
on March 20, 2020. The Code contains recommendations and
suggestions with regard to the management and supervision of
German companies listed on a stock exchange. It is based on
domestic and internationally recognized standards for good
and responsible corporate governance. The Code aims to make
the German system of corporate governance transparent for
investors. It contains recommendations and suggestions on
corporate governance with regard to shareholders and the An-
nual General Meeting, the Management Board and Supervisory
Board, transparency, accounting and valuation principles, and
auditing.
There is no obligation to comply with the recommendations and
suggestions of the Code. The German Stock Corporation Act
only requires the management boards and supervisory boards
of listed German companies to publish a declaration each year,
(i) either confirming that the company has complied with the
recommendations of the Code or (ii) listing the recommendations
with which the company has not complied and the reasons for
the deviation from the recommendations of the Code. In addi-
tion, a listed company must also state in its annual declaration
whether it intends to comply with the recommendations or
must list the recommendations with which it does not intend
to comply with in the future. These declarations must be pub-
lished permanently on the company’s website. If the company
changes its position on certain recommendations between two
annual declarations, it must disclose this fact and state the rea-
sons for the deviation from the recommendations. If suggestions
from the Code are not complied with, this does not have to be
disclosed.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
111
Competency Profile, Diversity Concept and
Composition Targets
The Company’s Supervisory Board has updated its competency
profile and composition targets based on the new Code recom-
mendations and has prepared a diversity concept in accordance
with Section 289f (2) no. 6 of the German Commercial Code. Ac-
cording to this concept, the Supervisory Board of MorphoSys AG
shall be composed in such a way that the Supervisory Board in
its entirety possesses the knowledge, skills and professional
experience necessary to perform its duties properly and ensure
that it appropriately supervises and advises the MorphoSys AG
Management Board while taking diversity into account. When
electing Supervisory Board members, the candidates who are
proposed to the Annual General Meeting fulfill the overall com-
petence profile based on their professional competence, experi-
ence, integrity, commitment, independence and character. Pro-
posals to the Annual General Meeting also take the objectives
for the composition of the Supervisory Board into consideration.
Competency Profile
The members of the Supervisory Board as a whole shall have
the professional competence and experience to fulfill the tasks of
the Supervisory Board of MorphoSys AG as an internationally
active biopharmaceutical company.
The Supervisory Board considers the following skills and ex-
pertise to be crucial for the composition of the Supervisory Board
of MorphoSys AG:
• Members should have a general knowledge of the industry in
which the Company operates in order to make sufficient and
substantive contributions at Supervisory Board meetings
• At least one member must have experience in drug develop-
ment
• At least one member must have experience in commercial-
ization
• At least one member must have expertise in the fields of
accounting or auditing (Section 100 (5) AktG)
• At least one member must have experience with personnel
issues concerning Management Board matters
Many of the corporate governance principles contained in the
Code have been practiced at MorphoSys for many years. Our
corporate governance principles are detailed in the Statement
on Corporate Governance under Sections 289f and 315d HGB.
The statement also contains the annual Declaration of Confor-
mity, relevant information on corporate governance practices
and a description of the Management Board and Supervisory
Board’s working practices. Additional information can be found
in this Report on Corporate Governance.
Communication with the Capital Markets
A key principle of corporate communication at MorphoSys is to
simultaneously and fully inform institutional investors, private
shareholders, financial analysts, employees and all other stake-
holders 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. The Company is firmly committed to follow-
ing a fair information policy.
Regular meetings with analysts and investors in the context of
roadshows and individual meetings play a central role in inves-
tor relations at MorphoSys. Conference calls accompany the pub-
lications of quarterly results and give analysts and investors an
immediate opportunity to ask questions about the Company’s
development. Presentations from conferences and similar events
are made available to those interested on the MorphoSys website,
as are visual and audio recordings of other important events.
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.
In setting up the sales organization and marketing of Monjuvi
in the U.S., MorphoSys is aiming to accommodate the specific
information needs and habits of U.S. users. With its website
morphosys-us.com, MorphoSys is endeavoring to establish it-
self with physicians and patients in the U.S. as an important
player in the hematology-oncology market.
Financial Statements Group Management Report
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
112
Diversity Concept for the Supervisory Board of
Morphosys AG
The Supervisory Board will endeavor to ensure an appropriate
level of diversity with respect to age, gender, internationality
and professional background, as well as regarding professional
competence, experience and personality, in order to achieve a
diverse composition of the Supervisory Board and enable it, in
its entirety, to base its decisions on different cultural and pro-
fessional perspectives and a broad range of experience.
The Supervisory Board specifically considers the following
criteria:
• At least two members of the Supervisory Board shall have ex-
tensive international experience or an international background
• At least one member of the Supervisory Board shall be under
the age of 60 at the time of the member’s appointment
• At least two members of the Supervisory Board shall have
different professional backgrounds and experience
With respect to women’s representation on the Supervisory
Board, the Supervisory Board has set targets as well as dead-
lines for their achievement in accordance with Section 111 (5)
AktG, to which reference is made.
Other Targets in the Composition of the
Supervisory Board
Age Limit
At the time of their appointment by the Annual General Meeting,
Supervisory Board members should not be more than 70 years
of age. The Supervisory Board may, however, decide to make an
exception in specific cases.
Duration of Appointment
The uninterrupted length of the term of office of a Supervisory
Board member shall generally not exceed 12 years. However,
the Supervisory Board may resolve an exception to this rule in
certain cases.
Independence
The Supervisory Board of MorphoSys AG considers the mini-
mum of four independent members to be appropriate in view of
the shareholder structure. According to the Code, a Supervisory
Board member is considered to be independent of MorphoSys AG,
its Management Board and any controlling shareholders when
he or she has no personal or business relationship with the
Company, the Management Board or a controlling shareholder.
The Supervisory Board’s assessment of the independence of
Supervisory Board members is based on the recommendations
of the Code, among other factors. Consequently, a Supervisory
Board member is not generally viewed as independent if the
Board member, or a close member of his or her family:
• was a member of the Management Board of MorphoSys AG in
the two years preceding appointment to the Supervisory
Board of MorphoSys AG;
• has or has had a material business relationship (directly or
indirectly) with MorphoSys AG or a Group company of
MorphoSys AG in the year preceding appointment;
• is a close family member of a Management Board member; or
• has been a member of the Supervisory Board for more than
12 years.
Significant and lasting conflicts of interest should be avoided,
particularly those resulting from functions carried out for ma-
jor competitors. It must be taken into account, however, that
certain conflicts of interest cannot generally be ruled out. Pos-
sible conflicts of interest must be disclosed to the Chairperson
of the Supervisory Board and eliminated by taking the appro-
priate measures. This could lead to the termination of the Su-
pervisory Board mandate of the member concerned if the con-
flict of interest is not merely temporary.
Availability
All members of the Supervisory Board must ensure that they
have sufficient time available to properly perform their Super-
visory Board duties at MorphoSys AG. Therefore, as a rule, it
should be ensured that:
• the Supervisory Board member is able to personally attend at
least four ordinary Supervisory Board meetings per year, for
which a reasonable amount of preparation time is required in
each case; in the event of exceptional circumstances to be
determined by the Supervisory Board Chairperson, the partic-
ipation of one or more Supervisory Board members in ordinary
Supervisory Board meetings by other means (such as video
conference) shall also be sufficient;
• the Supervisory Board member is able to attend extraordinary
meetings of the Supervisory Board, if necessary, to deal with
specific issues;
• the Supervisory Board member is able to attend the Annual
General Meeting;
• the Supervisory Board member has sufficient time to review
the annual and consolidated financial statements; and
• the Supervisory Board member allocates additional time to
prepare for and attend committee meetings, in accordance
with his or her membership in one or more of the Supervisory
Board’s current three permanent committees.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
113
Diversity Concept for the Management Board
of MorphoSys AG
Pursuant to Section 289f (2) No. 6 of the German Commercial
Code, the Supervisory Board has determined the following di-
versity concept for the composition of the Management Board of
MorphoSys AG.
The aim of the diversity concept for the Management Board is to
use the aspect of diversity in a targeted manner for the further
success of the Company. The Supervisory Board believes that
diversity in the sense of different perspectives, competencies
and backgrounds of experience is an important prerequisite for
competitiveness and sustainable corporate success.
Together with the Management Board, the Supervisory Board
ensures long-term succession planning for the Management
Board. In the search for candidates for the position of a member
of the Management Board of MorphoSys AG, the decisive selec-
tion criteria include professional qualifications for the position
to be taken over, leadership qualities, past performance, and
acquired skills and knowledge of the business of MorphoSys AG.
In determining the composition of the Management Board, the
Supervisory Board also particularly takes the following aspects
into account:
• The members of the Management Board shall, in their entirety,
possess the knowledge, skills and professional experience
required to perform their duties.
• Where possible, the members of the Management Board
should have different levels of educational and professional
experience.
• The members of the Management Board shall, in their entirety,
be familiar with the market environment, the individual busi-
ness areas and the market segment in which MorphoSys AG
operates.
• The members of the Management Board shall, in their en-
tirety, have relevant experience in the management of listed
companies.
• The members of the Management Board shall have a balanced
age structure.
• With regard to the proportion of women on the Management
Board, the Supervisory Board has set targets, as well as dead-
lines for their achievement, in accordance with Section 111
(5) AktG, to which reference is made.
The above criteria were taken into account in the appointment
of the Management Board members.
Current Composition of the Supervisory Board
The Supervisory Board of MorphoSys AG is composed in accor-
dance with the above objectives. It is composed of an appropriate
number of independent members with an international back-
ground. As the Supervisory Board as a whole currently has six
members, of which three are women, an appropriate level of
female participation has been achieved.
Target for Women’s Participation
In the Supervisory Board
The Supervisory Board of MorphoSys AG consists of six mem-
bers, three of whom are women, representing a proportion of
50 %. The Supervisory Board of MorphoSys AG has set the target
for the proportion of women on the Supervisory Board at 33.33 %,
meaning at least two out of six members shall be women. This
target figure shall apply until June 30, 2025.
In the Management Board
The Management Board of MorphoSys AG consists of four mem-
bers, all of whom are men. As a result, the current proportion of
women on the Company’s Management Board is 0 %. The Super-
visory Board has set the target for the proportion of women on
the Company’s Management Board at 0 %. This target figure
shall apply until June 30, 2023.
In the First and Second Management Level below the
Management Board
1. Target for the first management level below the Management
Board
In 2020, the Management Board confirmed its resolution for a
target of 30 % of women in the first management level below the
Management Board as of July 2017 and intends to maintain a
minimum percentage of 30 % women in the first management
level below the Management Board until June 30, 2025. As of
the date of the resolution on the target, the first management
level below the Management Board of MorphoSys AG (depart-
ment heads reporting directly to the Management Board) con-
sisted of 21 members, of which 9 are women, corresponding to
a proportion of women of 42.86 %.
2. Target for the second management level below the Manage-
ment Board
In 2020, the Management Board confirmed its resolution for a
target of 30 % women in the second management level below the
Management Board as of July 2017 and intends to maintain a
minimum percentage of 30 % women in the second management
level below the Management Board until June 30, 2025. As of the
date of the resolution on the target, the second management level
below the Management Board of MorphoSys AG (department
heads reporting directly to the first management level below
the Management Board) consisted of 53 members, 22 of whom
are women, corresponding to a proportion of women of 41.51 %.
Financial Statements Group Management Report
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
114
Other Targets in the Composition of the
Management Board
Age Limit
At the time of their appointment, Management Board members
should not be more than 67 years of age. The Supervisory Board
may, however, decide to make an exception in specific cases.
The age limit of 67 is currently complied with.
Remuneration Report
The Remuneration Report presents the principles, structure and
amount of Management Board and Supervisory Board remuner-
ation. The report complies with the legal provisions and gives
consideration to the recommendations of the Code.
Management Board Remuneration
The Management Board’s remuneration system provides an
incentive for performance-oriented and sustainable corporate
management. The aggregate remuneration of Management
Board members consists of different components, including
fixed components, an annual performance-based cash bonus
(Short-Term Incentive – STI), a variable remuneration compo-
nent with long-term incentives (Long-Term Incentive – LTI) and
other remuneration components. The variable remuneration
component with long-term incentives consists of stock options,
performance share units and performance shares issued under
stock option plans, a performance share unit program and
performance share plans (as defined below) in 2020 and prior
years. In prior years, members of the Management Board were
also granted convertible bonds under a convertible bond pro-
gram in 2013. In addition to the components mentioned, Man-
agement Board members also receive fringe benefits in the
form of non-cash benefits, mainly comprised of the use of a
company car and the payment of insurance premiums.
All remuneration packages are reviewed annually for their
scope and appropriateness by the Remuneration and Nomina-
tion Committee and compared to the results of an annual Man-
agement Board remuneration analysis. The amount of remuner-
ation paid to Management Board members highly depends on
their individual areas of responsibility, the Company’s economic
situation and success and its business prospects versus its com-
petition. All decisions concerning adjustments to remuneration
packages are made by the entire Supervisory Board. The total
remuneration package and the Management Board’s index-linked
pension scheme were comprehensively reviewed in 2020 and
adjusted by the Supervisory Board.
Overview
The benefits granted to the members of the Management Board
in the 2020 financial year (taking into account the departure of
Markus Enzelberger, Ph.D. as Chief Scientific Officer effective
February 29, 2020, and Jens Holstein as Chief Financial Officer
effective November 13, 2020, as well as the new appointment
to the Management Board of Roland Wandeler, Ph.D., effective
May 5, 2020) totaled € 11,532,252 (2019: € 11,308,876). Of this
total remuneration granted for 2020, € 8,007,458 related to cash
remuneration and € 3,524,794, or 31 %, related to personnel ex-
penses from share-based variable remuneration with long-term
incentive (performance share units and stock options).
The total amount of benefits paid to the Management Board in
the 2020 financial year was € 10,894,756 (2019: € 14,128,615).
Next to cash remuneration of € 6,994,435 (2019: € 4,104,582)
paid in the financial year, the total amount consisted mainly of
the value relevant under German tax law of € 3,900,321 (2019:
€ 1,941,794) of the transfer of treasury shares from a perfor-
mance-based share plan (as defined below). No convertible bonds
were exercised by the Management Board in 2020, therefore
the 2020 total did not include any cash inflows from the exercise
of convertible bonds (2019: €8,082,239).
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
115
As of April 1, 2020, 13,677 treasury shares from the 2016 Per-
formance Share Plan for the Management Board vested as a
result of the expiration of the vesting period for this LTI program.
The beneficiaries had the option to call these shares within a
six-month period ending October 20, 2020. All transactions by
members of the Management Board in connection with the
trading of MorphoSys shares were reported as required by law
and published in the Report on Corporate Governance and on
the Company’s website.
The following tables are based on the model tables of the Code
in its previous version of February 7, 2017, and present, in detail,
the remuneration granted and paid to the individual members
of the Management Board in financial years 2020 and 2019.
Financial Statements
Group Management Report
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
116
Table 15
Compensation of the Management Board in 2020 and 2019
Benefits Granted to the Management Board
in €
Fixed Compensation
Fringe Benefits1
Total Fixed Compensation
One-Year Variable Compensation2
One-Time Bonus3
Multi-Year Variable Compensation:
2019 Long-Term Incentive Program4 (Vesting Period 4 Years)
2019 Stock Option Plan4 (Vesting Period 4 Years)
2020 Stock Option Plan4 (Vesting Period 4 Years)
2020 Performance Share Unit Program4 (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 Bonus3
Multi-Year Variable Compensation:
2019 Long-Term Incentive Program4 (Vesting Period 4 Years)
2019 Stock Option Plan4 (Vesting Period 4 Years)
2020 Stock Option Plan4 (Vesting Period 4 Years)
2020 Performance Share Unit Program4 (Vesting Period 4 Years)
Total Variable Compensation
Service Cost
Total Compensation
Jean-Paul Kress, M.D.
Chief Executive Officer
2019
2020
2020
(Mini-
mum)
2020
(Maxi-
mum)
233,333
723,333
723,333
723,333
93,551
216,281
216,281
216,281
326,884
939,614
939,614
939,614
Malte Peters, M.D.
Chief Research and
Development Officer
Roland Wandeler, Ph.D.
Chief Operating Officer
Appointment: May 5, 2020
2019
2020
2019
2020
2020
2020
(Mini-
mum)
(Maxi-
mum)
2020
2020
(Mini-
mum)
(Maxi-
mum)
413,712
480,544
480,544
480,544
312,993
312,993
312,993
32,892
31,453
31,453
31,453
487,025
487,025
487,025
446,604
511,997
511,997
511,997
800,018
800,018
800,018
196,000
995,307
1,000,000
0
2,000,013
0
0
0
0
951,600
477,695
3,196,013
2,424,602
0
0
0
0
0
0
0
1,157,333
347,518
578,575
672,761
384,681
571,671
0
0
0
1,903,200
955,390
4,015,923
44,965
120,311
120,311
120,311
77,787
85,027
85,027
85,027
2,776
2,776
2,776
3,567,862
3,484,527
1,059,925
5,075,848
1,813,188
1,835,440
597,024
2,589,467
1,963,292
802,794
2,926,099
Jens Holstein 5
Chief Financial Officer
Resignation: November 13, 2020
2019
2020
2020
(Mini-
mum)
2020
(Maxi-
mum)
418,324
408,947
408,947
408,947
44,090
2,485,734
2,485,734
2,485,734
462,414
2,894,681
2,894,681
2,894,681
351,392
519,783
500,000
220,645
220,634
0
0
0
0
0
439,338
220,503
1,292,671
1,179,624
0
0
0
0
0
0
0
659,345
0
0
0
878,676
441,006
1,979,027
114,224
107,038
107,038
107,038
5,902
5,902
5,902
107,263
414,044
321,054
321,054
321,054
1,869,309
4,181,343
3,001,719
4,980,746
1,461,772
67,650
67,650
67,650
2,596,745
11,308,876
11,532,252
5,529,112
15,639,810
0
0
439,338
220,503
1,288,797
1,238,416
878,676
441,006
1,992,443
775,817
1,160,498
1,551,634
2,123,305
500,000
220,645
220,634
334,152
135,848
470,000
280,688
200,000
220,645
220,634
0
0
921,967
69,805
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
–
–
–
–
–
–
–
–
–
–
–
–
336,791
336,772
0
0
0
1,002,422
0
0
0
0
0
0
0
0
0
0
56,784
4,964
61,748
56,784
4,964
61,748
56,784
372,154
4,964
1,114,906
61,748
1,487,060
328,859
0
0
0
0
–
–
–
–
–
–
–
–
–
–
–
–
–
0
0
0
0
0
0
0
–
–
–
–
–
–
–
–
–
–
–
–
–
0
0
0
0
–
–
–
–
–
–
–
–
–
–
–
–
–
Markus Enzelberger, Ph.D. 5
Chief Scientific Officer
Simon Moroney, Ph.D. 5
Chief Executive Officer
Resignation: February 29, 2020
Resignation: August 31, 2019
Total
2019
2020
2019
2020
2019
2020
2020
2020
(Mini-
mum)
(Maxi-
mum)
2020
2020
(Mini-
mum)
(Maxi-
mum)
2020
2020
(Mini-
mum)
(Maxi-
mum)
1,771,675
1,982,601
1,982,601
1,982,601
1,421,287
3,225,457
3,225,457
3,225,457
3,192,962
5,208,058
5,208,058
5,208,058
1,504,457
2,478,346
3,061,110
2,200,000
998,726
2,998,687
0
0
0
0
0
0
0
1,830,276
1,694,518
7,701,870
6,003,140
0
0
0
0
0
0
0
0
0
0
0
0
3,660,552
3,389,036
10,110,698
1 In 2020, fringe benefits for Jens Holstein, Markus Enzelberger, Ph.D., and, in 2019, for Simon Moroney, Ph.D., include benefits granted in connection with their termination of employment
in the amount of € 2,443,409, € 144,234 and € 1,086,602 respectively. In 2020, the fringe benefits also include the signing bonus granted to Roland Wandeler, Ph.D., in the amount of USD
500,000 (about € 457.652).
2 The one-year bonus awarded for fiscal 2020 represents the bonus accrual for fiscal 2020, which was paid in February 2021. The bonus granted for the 2019 financial year was paid out in
February 2020.
3 The one-time bonus award granted in 2019 was paid in February 2020 in the form of a cash payment.
4 Share-based payment plans that are issued annually. The fair value was determined in accordance with the regulations of IFRS 2 “Share-based Payment”.
5 Markus Enzelberger, Ph.D., and Jens Holstein left the Company effective February 29, 2020, and December 31, 2020 respectively. The amounts shown for Jens Holstein were determined
as of November 13, 2020, as the date of resignation of his mandate as a member of the Management Board. Simon Moroney stepped down as a member of the Management Board and
Chairman of the Management Board with effect from the end of 31 August 2019. The Supervisory Board has resolved that, due to the many years of service to the company, the long-
term share-based remuneration components granted (stock options and performance shares) should not only vest pro rata temporis, but – subject to the fulfillment of all other plan
conditions – in full.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
117
Jean-Paul Kress, M.D.
Chief Executive Officer
2019
2020
2020
2020
(Mini-
mum)
(Maxi-
mum)
233,333
723,333
723,333
723,333
93,551
216,281
216,281
216,281
326,884
939,614
939,614
939,614
196,000
995,307
1,157,333
1,000,000
2,000,013
0
0
0
0
0
951,600
477,695
3,196,013
2,424,602
1,903,200
955,390
4,015,923
Jens Holstein 5
Chief Financial Officer
Resignation: November 13, 2020
2019
2020
2020
2020
(Mini-
mum)
(Maxi-
mum)
418,324
408,947
408,947
408,947
44,090
2,485,734
2,485,734
2,485,734
462,414
2,894,681
2,894,681
2,894,681
351,392
519,783
659,345
500,000
220,645
220,634
0
0
0
0
0
439,338
220,503
1,292,671
1,179,624
878,676
441,006
1,979,027
114,224
107,038
107,038
107,038
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Malte Peters, M.D.
Chief Research and
Development Officer
Roland Wandeler, Ph.D.
Chief Operating Officer
Appointment: May 5, 2020
2019
2020
2020
(Mini-
mum)
2020
(Maxi-
mum)
2019
2020
2020
(Mini-
mum)
2020
(Maxi-
mum)
413,712
480,544
480,544
480,544
32,892
31,453
31,453
31,453
446,604
511,997
511,997
511,997
347,518
578,575
500,000
220,645
220,634
0
0
0
0
0
439,338
220,503
1,288,797
1,238,416
0
0
0
0
0
0
0
672,761
0
0
0
878,676
441,006
1,992,443
44,965
120,311
120,311
120,311
77,787
85,027
85,027
85,027
3,567,862
3,484,527
1,059,925
5,075,848
1,813,188
1,835,440
597,024
2,589,467
–
–
–
–
–
–
–
–
–
–
–
–
312,993
312,993
312,993
487,025
487,025
487,025
800,018
800,018
800,018
384,681
0
0
0
0
775,817
1,160,498
0
0
0
0
0
0
0
571,671
0
0
0
0
1,551,634
2,123,305
2,776
2,776
2,776
1,963,292
802,794
2,926,099
Markus Enzelberger, Ph.D. 5
Chief Scientific Officer
Resignation: February 29, 2020
Simon Moroney, Ph.D. 5
Chief Executive Officer
Resignation: August 31, 2019
Total
2019
2020
2020
(Mini-
mum)
2020
(Maxi-
mum)
2019
2020
2020
(Mini-
mum)
2020
(Maxi-
mum)
2019
2020
2020
(Mini-
mum)
2020
(Maxi-
mum)
334,152
135,848
470,000
280,688
200,000
220,645
220,634
0
0
921,967
69,805
56,784
4,964
61,748
56,784
4,964
61,748
56,784
372,154
4,964
1,114,906
61,748
1,487,060
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
328,859
0
336,791
336,772
0
0
1,002,422
5,902
5,902
5,902
107,263
1,869,309
4,181,343
3,001,719
4,980,746
1,461,772
67,650
67,650
67,650
2,596,745
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,771,675
1,982,601
1,982,601
1,982,601
1,421,287
3,225,457
3,225,457
3,225,457
3,192,962
5,208,058
5,208,058
5,208,058
1,504,457
2,478,346
2,200,000
0
998,726
2,998,687
0
0
0
0
0
0
1,830,276
1,694,518
7,701,870
6,003,140
0
0
0
0
0
0
0
0
3,061,110
0
0
0
0
3,660,552
3,389,036
10,110,698
414,044
321,054
321,054
321,054
11,308,876
11,532,252
5,529,112
15,639,810
1 In 2020, fringe benefits for Jens Holstein, Markus Enzelberger, Ph.D., and, in 2019, for Simon Moroney, Ph.D., include benefits granted in connection with their termination of employment
in the amount of € 2,443,409, € 144,234 and € 1,086,602 respectively. In 2020, the fringe benefits also include the signing bonus granted to Roland Wandeler, Ph.D., in the amount of USD
2 The one-year bonus awarded for fiscal 2020 represents the bonus accrual for fiscal 2020, which was paid in February 2021. The bonus granted for the 2019 financial year was paid out in
3 The one-time bonus award granted in 2019 was paid in February 2020 in the form of a cash payment.
4 Share-based payment plans that are issued annually. The fair value was determined in accordance with the regulations of IFRS 2 “Share-based Payment”.
5 Markus Enzelberger, Ph.D., and Jens Holstein left the Company effective February 29, 2020, and December 31, 2020 respectively. The amounts shown for Jens Holstein were determined
as of November 13, 2020, as the date of resignation of his mandate as a member of the Management Board. Simon Moroney stepped down as a member of the Management Board and
Chairman of the Management Board with effect from the end of 31 August 2019. The Supervisory Board has resolved that, due to the many years of service to the company, the long-
term share-based remuneration components granted (stock options and performance shares) should not only vest pro rata temporis, but – subject to the fulfillment of all other plan
conditions – in full.
Table 15
Compensation of the Management Board in 2020 and 2019
Benefits Granted to the Management Board
in €
Fixed Compensation
Fringe Benefits1
Total Fixed Compensation
One-Year Variable Compensation2
One-Time Bonus3
Multi-Year Variable Compensation:
2019 Long-Term Incentive Program4 (Vesting Period 4 Years)
2019 Stock Option Plan4 (Vesting Period 4 Years)
2020 Stock Option Plan4 (Vesting Period 4 Years)
2020 Performance Share Unit Program4 (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 Bonus3
Multi-Year Variable Compensation:
Total Variable Compensation
Service Cost
Total Compensation
500,000 (about € 457.652).
February 2020.
2019 Long-Term Incentive Program4 (Vesting Period 4 Years)
2019 Stock Option Plan4 (Vesting Period 4 Years)
2020 Stock Option Plan4 (Vesting Period 4 Years)
2020 Performance Share Unit Program4 (Vesting Period 4 Years)
Financial Statements
Group Management Report
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
118
Payments during the Financial Year
Jean-Paul Kress, M.D.
Chief Executive Officer
Malte Peters, M.D.
Chief Research and
Development Officer
Roland Wandeler, Ph.D.
Chief Operating Officer
Appointment: May 5, 2020
Jens Holstein 5
Markus Enzelberger, Ph.D.,5,6
Simon Moroney, Ph.D.,5,6
Chief Financial Officer
Chief Scientific Officer
Chief Executive Officer
Resignation:
November 13, 2020
Resignation:
February 29, 2020
Resignation:
August 31, 2019
Total
in €
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
Fixed Compensation
Fringe Benefits1
Total Fixed Compensation
One-Year Variable Compensation
One-Time Bonus in Shares2
Multi-Year Variable Compensation:
2013 Convertible Bonds Program3
(Vesting Period 4 Years)
2015 Long-Term Incentive Program3
(Vesting Period 4 Years)
2016 Long-Term Incentive Program3
(Vesting Period 4 Years)
Other4
Total Variable Compensation
233,333
93,551
326,884
0
0
0
0
0
0
0
Service Cost
Total Compensation
44,965
371,849
723,333
216,281
939,614
196,000
1,000,000
413,712
32,892
446,604
334,152
480,544
31,453
511,997
347,518
500,000
0
0
0
0
0
0
0
0
0
0
0
0
1,196,000
120,311
2,255,925
334,152
77,787
858,543
847,518
85,027
1,444,542
–
–
–
–
–
–
–
–
–
–
–
–
–
312,993
399,474
712,467
7,838
0
0
0
0
0
7,838
2,776
723,081
418,324
44,090
462,414
337,877
2,016,750
724,223
0
0
3,078,850
114,224
408,947
170,734
579,681
351,392
500,000
0
0
0
1,408,731
2,260,123
107,038
334,152
31,365
365,517
269,892
0
0
0
182,047
451,939
69,805
887,261
56,784
110,107
166,891
288,688
200,000
0
0
0
281,450
762,138
5,902
934,931
372,154
319,701
691,855
455,343
6,065,489
1,035,524
0
0
379,295
379,295
0
0
0
0
0
0
1,771,675
521,599
2,293,274
1,397,264
8,082,239
1,941,794
0
0
0
0
1,982,601
1,307,344
3,289,945
1,183,436
2,200,000
0
0
0
0
2,210,140
3,900,321
7,556,356
2,210,140
11,421,297
7,283,757
107,263
414,044
321,054
3,655,488
2,946,842
8,355,474
2,589,435
14,128,615
10,894,756
1 In 2020, the fringe benefits for Jens Holstein, Markus Enzelberger, Ph.D., and, in 2019, for Simon Moroney, Ph.D., include benefits granted on the occasion of termination of employment
in the amount of € 128,409, € 105,144 and € 379,295 respectively. In 2020, the first installment of the signing bonus for Roland Wandeler, Ph.D., was paid in the amount of USD 400,000
(about € 366.100). This is included in the fringe benefits. The second installment will be paid in May 2021.
2 The one-year variable remuneration here shows the bonus paid out in the respective financial year for the previous financial year.
3 The time and value of the inflow are deemed to be the relevant time and value under German tax law. This table therefore shows the monetary benefit from the difference between
the conversion price and the stock market price at the time of exercise of convertible bonds or from the share price at the time of transfer of treasury shares from a performance
share plan in the respective financial year.
4 There were no remuneration reclaims against the Management Board in either 2020 or 2019.
5 Markus Enzelberger, Ph.D., and Jens Holstein left the Company effective February 29, 2020, and December 31, 2020, respectively. The amounts shown for Jens Holstein were determined
as of November 13, 2020, as the date of resignation of his mandate as a member of the Management Board. Simon Moroney, Ph.D., stepped down as a member of the Management
Board and Chairman of the Management Board with effect from the end of August 31, 2019. The Supervisory Board has resolved that, due to the many years of service to the company,
the long-term share-based remuneration components granted (stock options and performance shares) should not only vest pro rata temporis, but –subject to the fulfillment of all
other plan conditions – in full.
6 In 2020, the inflows for Simon Moroney, Ph.D., and Markus Enzelberger, Ph.D., include inflows from the transfer of treasury shares from a performance share plan following his resignation
from the Management Board. The 2019 figures for Dr. Simon Moroney include inflows from the exercise of convertible bonds and the transfer of treasury shares from a performance
share plan following his retirement from the position of Chief Executive Officer. These were granted in prior years as part of the Management Board service.
Fixed Remuneration and Fringe Benefits
The non-performance-related remuneration of the Management
Board comprises fixed remuneration and additional fringe
benefits, which mainly include the use of company cars as well
as subsidies or reimbursement of costs for health, social and
occupational disability insurance. The Chief Executive Officer,
Jean-Paul Kress, M.D., receives an ongoing expense allowance
for tax advice and dual residences. The new Chief Operating Of-
ficer, Roland Wandeler, Ph.D., (joined on May 5, 2020), received
a signing bonus of $500,000, payable in two installments (2020:
$400,000 and 2021: $100,000), as well as reimbursement of
relocation expenses in connection with the conclusion of his
employment contract. In addition, he receives an ongoing ex-
pense allowance for tax advice. The Chief Financial Officer Jens
Holstein received an expense allowance for dual residences as
well as for tax advice. In addition, Jens Holstein receives a
severance payment of €2,300,000, which will be paid out in
2021. Markus Enzelberger, Ph.D., received a severance pay-
ment amounting to 50 % of his fixed remuneration and bonus for
the previous financial year until the regular expiry of his ser-
vice contract.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
119
Payments during the Financial Year
Jean-Paul Kress, M.D.
Chief Executive Officer
Malte Peters, M.D.
Chief Research and
Roland Wandeler, Ph.D.
Chief Operating Officer
Development Officer
Appointment: May 5, 2020
Jens Holstein 5
Chief Financial Officer
Resignation:
November 13, 2020
Markus Enzelberger, Ph.D.,5,6
Chief Scientific Officer
Resignation:
February 29, 2020
Simon Moroney, Ph.D.,5,6
Chief Executive Officer
Resignation:
August 31, 2019
Total
in €
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
Fixed Compensation
Fringe Benefits1
Total Fixed Compensation
One-Year Variable Compensation
One-Time Bonus in Shares2
Multi-Year Variable Compensation:
2013 Convertible Bonds Program3
(Vesting Period 4 Years)
2015 Long-Term Incentive Program3
(Vesting Period 4 Years)
2016 Long-Term Incentive Program3
(Vesting Period 4 Years)
Other4
Total Variable Compensation
Service Cost
Total Compensation
233,333
93,551
326,884
723,333
216,281
939,614
196,000
1,000,000
413,712
32,892
446,604
334,152
480,544
31,453
511,997
347,518
500,000
0
0
0
0
0
0
0
0
0
0
0
0
44,965
371,849
1,196,000
120,311
2,255,925
334,152
77,787
858,543
847,518
85,027
1,444,542
0
0
0
0
0
0
0
–
–
–
–
–
–
–
–
–
–
–
–
–
312,993
399,474
712,467
7,838
0
0
0
0
0
7,838
2,776
723,081
418,324
44,090
462,414
337,877
2,016,750
724,223
0
0
3,078,850
114,224
408,947
170,734
579,681
351,392
500,000
0
0
1,408,731
0
2,260,123
107,038
3,655,488
2,946,842
334,152
31,365
365,517
269,892
0
182,047
0
0
451,939
69,805
887,261
56,784
110,107
166,891
288,688
200,000
372,154
319,701
691,855
455,343
0
0
6,065,489
1,035,524
0
379,295
379,295
0
0
0
1,771,675
521,599
2,293,274
1,397,264
0
0
8,082,239
1,941,794
1,982,601
1,307,344
3,289,945
1,183,436
2,200,000
0
0
0
281,450
0
762,138
5,902
934,931
0
0
2,210,140
0
0
0
3,900,321
0
7,556,356
2,210,140
11,421,297
7,283,757
107,263
0
414,044
321,054
8,355,474
2,589,435
14,128,615
10,894,756
1 In 2020, the fringe benefits for Jens Holstein, Markus Enzelberger, Ph.D., and, in 2019, for Simon Moroney, Ph.D., include benefits granted on the occasion of termination of employment
5 Markus Enzelberger, Ph.D., and Jens Holstein left the Company effective February 29, 2020, and December 31, 2020, respectively. The amounts shown for Jens Holstein were determined
in the amount of € 128,409, € 105,144 and € 379,295 respectively. In 2020, the first installment of the signing bonus for Roland Wandeler, Ph.D., was paid in the amount of USD 400,000
(about € 366.100). This is included in the fringe benefits. The second installment will be paid in May 2021.
2 The one-year variable remuneration here shows the bonus paid out in the respective financial year for the previous financial year.
3 The time and value of the inflow are deemed to be the relevant time and value under German tax law. This table therefore shows the monetary benefit from the difference between
the conversion price and the stock market price at the time of exercise of convertible bonds or from the share price at the time of transfer of treasury shares from a performance
share plan in the respective financial year.
4 There were no remuneration reclaims against the Management Board in either 2020 or 2019.
as of November 13, 2020, as the date of resignation of his mandate as a member of the Management Board. Simon Moroney, Ph.D., stepped down as a member of the Management
Board and Chairman of the Management Board with effect from the end of August 31, 2019. The Supervisory Board has resolved that, due to the many years of service to the company,
the long-term share-based remuneration components granted (stock options and performance shares) should not only vest pro rata temporis, but –subject to the fulfillment of all
other plan conditions – in full.
6 In 2020, the inflows for Simon Moroney, Ph.D., and Markus Enzelberger, Ph.D., include inflows from the transfer of treasury shares from a performance share plan following his resignation
from the Management Board. The 2019 figures for Dr. Simon Moroney include inflows from the exercise of convertible bonds and the transfer of treasury shares from a performance
share plan following his retirement from the position of Chief Executive Officer. These were granted in prior years as part of the Management Board service.
Pension Expenses
The Company also made payments to members of the Manage-
ment Board, with the exception of Roland Wandeler, Ph.D., in an
amount equal to the maximum of 10 % of the member’s fixed
annual salary and, in some cases, plus any payable taxes, which
is intended to be used for the members’ individual retirement
plans. Additionally, all Management Board members, with the
exception of Roland Wandeler, Ph.D., participate in a pension
plan in the form of a provident fund, which was introduced in
cooperation with Allianz Pensions-Management e.V. The pension
obligations of the provident fund are met by Allianz Pensions-
Management e.V. and not considered a pension commitment.
Roland Wandeler, Ph.D., who resides in the U.S., participates in
the MorphoSys US Inc.’s retirement plan, managed through
Fidelity Investments. He receives a quarterly company contri-
bution into his retirement account aligned to the practices for
US participants. Furthermore, Roland Wandeler, Ph.D., receives
a deferred compensation payment into a plan managed by
Principal in the US, in the amount of the difference between the
Company’s contributions to Allianz Pensions-Management e.V.
and the contributions paid into the U.S. retirement plan for
Roland Wandeler, Ph.D.
Financial Statements
Group Management Report
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
120
Performance-Based Remuneration
(Short-Term Incentive – STI)
As performance-based remuneration, each member of the
Management Board receives an annual bonus payment, which
can amount to up to 80 % of the gross base salary for the Chief
Executive Officer and up to 70 % of the gross base salary for all
other Management Board members when the targets are fully
achieved. These bonus payments are dependent upon the
achievement of corporate targets set by the Supervisory Board
at the beginning of each financial year. Typically, the targets
are based on, among other things, business performance and
the progress of the partnered and proprietary pipelines. At
the beginning of the year, the Supervisory Board assesses the
degree of achievement of the Company’s targets for the previ-
ous year and determines the bonus accordingly. The bonus is
subject to a cap of 160 % of the gross base salary for the CEO and
140 % of the gross base salary for all other Management Board
members. If targets are not achieved, the performance-based
remuneration can be reduced to zero. The bonus for the 2020
financial year will be paid in February 2021.
In February 2020, the members of the Management Board (at
that time, Jean-Paul Kress, M.D., Jens Holstein, Malte Peters,
M.D., and Markus Enzelberger, Ph.D.) also received a special
bonus. Jean-Paul Kress, M.D., received a special bonus of
€ 1,000,000.00, Jens Holstein and Malte Peters, M.D., received
a special bonus of € 500,000.00 each, and Markus Enzelberger,
Ph.D. received a special bonus of € 200,000.00.
Long-Term Incentive Remuneration
(Long-Term Incentive – LTI)
In 2011, MorphoSys introduced a long-term incentive program
(“Performance Share Plan”) for the Management Board and
members of the Senior Management Group. This Performance
Share Plan is based on the allocation of performance shares and
linked to the achievement of certain predefined performance
targets over a four-year period. The award of the performance
shares is carried out by the transfer of Company treasury
shares.
The Supervisory Board decides each year on the number of
performance shares to be granted to the Management Board.
The most recent decision granting the Management Board (at
that time, consisting of Simon Moroney, Ph.D., Jens Holstein,
Malte Peters, M.D., and Markus Enzelberger, Ph.D.) shares under
the Performance Share Plan was in the 2019 reporting year. In
2020, no further shares were granted under the Performance
Share Plan.
In 2017, based on a resolution of the Annual General Meeting
on June 2, 2016 (TOP 9), MorphoSys introduced a stock option
plan as another instrument to provide long-term incentive re-
muneration. As of April 1, 2020, the Management Board (at that
time, consisting of Jean-Paul Kress, M.D., Jens Holstein and
Malte Peters, M.D.) were granted a total of 47,913 stock options.
Within the scope of this plan, each member of the Management
Board received a certain number of stock options, entitling the
Management Board members to subscribe to up to two MorphoSys
shares each. For further details, please refer to Note [8.1*] in the
Notes to the Consolidated Financial Statements.
*cross-reference to page 189
In accordance with the resolution of the Annual General Meet-
ing on June 2, 2016 (Agenda Item 9), the stock option plan’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 bench-
mark index consists of equal parts of the NASDAQ Biotechnology
Index and the TecDAX. 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 percentages 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.
For the performance target of absolute price performance, a
comparison is made between the average stock price of
MorphoSys shares for the preceding 30 trading days before the
beginning and end of each year in the four-year period. If the
MorphoSys share price increases, the degree of target achieve-
ment can reach up to 200 % calculated on a straight-line basis for
that particular year. Any further positive share price develop-
ment 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’ share price measured by the average
of the closing prices for the preceding 30 trading days before
the beginning and end of each year in the four-year period is
compared with the development of the benchmark index, mea-
sured by the average of the closing prices of the respective
benchmark index during the last 30 trading days before the
beginning and end of each year in the four-year period. Within
the benchmark index, the NASDAQ Biotech Index and the Tec-
DAX are each weighted at 50 %. The percentage price develop-
ments of each index for the respective annual period are added
and divided by two. If MorphoSys shares outperform the bench-
mark index, the degree of target achievement calculated on a
straight-line basis for the relevant period can reach up to 200 %.
Any further positive share price development of MorphoSys
shares versus the benchmark index will not lead to any further
increase in the performance target (cap).
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
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 number
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 corresponds
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 Company
shares from Conditional Capital 2016-III and the administration
of the stock option plan. For more information, please refer to
the corresponding resolution of the Annual General Meeting on
June 2, 2016 (Agenda Item 9).
The Annual General Meeting of May 27, 2020 also created a new
Conditional Capital 2020-I under Agenda Item 11 and renewed
the authorization to issue stock options on the basis of a stock
option plan with essentially the same conditions that served as
the basis for the resolution of the Annual General Meeting of
June 2, 2016. Under this authorization, amongst others, up to
657,307 stock options may be granted to members of the Com-
pany’s Management Board. MorphoSys did not make use of this
authorization in 2020.
In 2020, MorphoSys also introduced a performance share unit
program (“Performance Share Unit Program”) as an additional
instrument of long-term incentive remuneration. As of April 1,
2020, the Management Board (at that time, consisting of Jean-
Paul Kress, M.D., Jens Holstein and Malte Peters, M.D.) was
granted a total of 12,320 Performance Share Units. The new
Management Board member, Roland Wandeler, Ph.D., who
joined the Board on May 5, 2020, was granted as one-time
sign-on package performance share units worth $ 1,000,000
(approx. € 0.9 million) on June 1, 2020, for a total of 8,361 per-
formance share units. For further details, please refer to Note
[8.3.6] in the Notes to the Consolidated Financial Statements.
The performance targets for the Performance Share Unit Pro-
gram are the absolute performance of the MorphoSys share
price and the relative performance of the MorphoSys share
price compared to a benchmark index; the benchmark index
consists of the NASDAQ Biotechnology Index and the TecDAX
in equal parts. Each performance target has a weighting of 50 %
for the overall target achievement level.
121
To determine the degree of target achievement for each perfor-
mance target, the four-year vesting period (until the first per-
formance share units 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 achievement for each of the two performance targets
are then added together and divided by two; the result being
the overall level of target achievement.
For the performance target of absolute price performance, a com-
parison is made between the average stock price of MorphoSys
shares for the preceding 30 trading days before the beginning
and end of each year in the four-year period. If the MorphoSys
share price increases, the degree of target achievement can
reach up to 200 % calculated on a straight-line basis for that
particular year. Any further positive share price development
of MorphoSys shares does not lead to any further increase in
the performance target (cap).
For the performance target of relative price performance, the
development of MorphoSys’ share price measured by the aver-
age of the closing prices for the preceding 30 trading days be-
fore the beginning and end of each year in the four-year period
is compared with the development of the benchmark index,
measured by the average of the closing prices of the respective
benchmark index during the last 30 trading days before the
beginning and end of each year in the four-year period. Within
the benchmark index, the NASDAQ Biotech Index and the Tec-
DAX are each weighted at 50 % so that the percentage price devel-
opments of each index for the respective annual period are added
and divided by two. If MorphoSys shares outperform the bench-
mark index, the degree of target achievement calculated on a
straight-line basis for the relevant period can reach up to 200 %.
Any further positive share price development of MorphoSys
shares versus the benchmark index does not lead to any further
increase in the performance target (cap).
Performance share units are only exercisable when the four-
year vesting period has expired, and the respective minimum
target achievement level for a performance target has been ex-
ceeded. The final number of exercisable performance share
units is determined by multiplying the number of originally
granted performance share units (“grant”) by the total target
achievement level and rounding up to the next whole number.
Each performance share unit entitles the beneficiaries to a cash
payment claim against the Company in the amount of the aver-
age closing price of the MorphoSys share during the last 30
trading days prior to the expiration of the vesting period. The
beneficiaries’ payment claim is limited to a total of 250 % of the
original amount granted.
Financial Statements Group Management Report
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
122
The plan conditions contain further details for the granting and
settlement of performance share units and for the implementa-
tion of the Performance Share Unit Program.
Miscellaneous
No loans or similar benefits were granted during the reporting
year to any member of the Management Board. The members
of the Management Board also did not receive any benefits
from third parties during the reporting year that were either
promised or granted based on their position as members of the
Management Board.
Payments upon Termination of Management
Contracts/Change Of Control
In the event of the premature termination of a Management
Board member’s service contract, payments rendered by the
Company to the member of the Management Board, including
fringe benefits, shall not exceed the value of two years’ com-
pensation (severance cap), and shall not compensate more than
the remaining term of the service contract. If the service con-
tract is terminated for good cause for which the Management
Board member is responsible, the member will not be entitled
to any payments. The severance cap should be calculated on the
basis of the total remuneration for the previous full financial
year and, if applicable, as well as on the expected total remu-
neration for the current financial year.
the Management Board may terminate their service contracts
for cause and demand payment of the fixed salary and annual
bonus still outstanding up to the end of the service contract, but
at least 200 % of the annual gross fixed salary and annual bonus.
Furthermore, in such a case, all stock options, performance
share units and performance shares granted vest immediately
and may be exercised after the statutory vesting periods or
blackout periods have expired. The following cases are consid-
ered to be changes of control: (i) MorphoSys transfers all or
substantially all of its corporate assets to a non-affiliated com-
pany, (ii) MorphoSys merges with a non-affiliated company, (iii)
MorphoSys AG as a controlled company becomes a party to an
agreement pursuant to Section 291 of the German Stock Corpo-
ration Act (AktG) or MorphoSys is integrated in accordance
with Section 319 of the German Stock Corporation Act (AktG),
or (iv) a shareholder or third party directly or indirectly holds
30 % or more of the voting rights of MorphoSys, or at least 30 %
of the voting rights are attributed to the shareholder or third
party.
Non-compete clauses have also been agreed with the members of
the Management Board for the period following their departure.
In return, MorphoSys AG is required to make compensation
payments for six months after termination of the service con-
tract. The compensation payment amounts to 100 % of the fixed
salary for the duration of the non-compete clause.
If the service contract of a member of the Management Board
ends by death, his or her spouse or life partner is entitled to the
fixed monthly salary for the month of death and the following
12 months. In the event of a change of control, the members of
The following overview summarizes the various components of
Executive Board compensation on an individualized basis for
each Executive Board member:
Table 16
Components of Executive Board Compensation in 2020 and 2019
Performance-unrelated
Performance-related
Long-term incentive
remuneration
remuneration
compensation
Total
2019
2020
2019
2020
2019
2020
2019
2020
Jean-Paul Kress, M.D.
Malte Peters, M.D.
Roland Wandeler, Ph.D.
371,849
524,391
0
597,024
802,794
847,518
0
Jens Holstein1
576,638
3,001,719
851,392
Markus
1,059,925
1,196,000
995,307
2,000,013
1,429,295
3,567,862
3,484,527
578,575
384,681
519,783
441,279
0
659,841
775,817
1,813,188
1,835,440
0
1,963,292
441,279
659,841
1,869,309
4,181,343
Enzelberger, Ph.D.1
539,805
67,650
Simon Moroney, Ph.D.1
1,594,323
0
480,688
328,859
0
0
441,279
673,563
0
0
1,461,772
2,596,745
67,650
0
Total Compensation
3,607,006
5,529,112
3,704,457
2,478,346
3,997,413
3,524,794
11,308,876
11,532,252
1 Jens Holstein will receive a severance payment of € 2,300,000, which will be paid in 2021, as well as an expense allowance for tax advice. Markus Enzelberger, Ph.D. received a severance
payment amounting to 50 % of his fixed remuneration and his bonus payment for the previous financial year until the regular expiry of his service contract. Due to their long years
of commitment to the Company, the Supervisory Board decided that for both, the long-term incentive plans would not forfeit on a pro-rate basis despite their termination of the
employment before the end of the respective four-year vesting periods. Because of this modification of terms and conditions, the respective personnel expense from share-based
compensation for the outstanding vesting periods was allocated to the remaining period of performance. For Jens Holstein, € 487,327 were recognized earlier than anticipated in 2020,
whereas for Markus Enzelberger, Ph.D. € 122,683 were booked earlier in the years 2019 and 2020. In 2020, performance-unrelated compensation includes benefits of € 128,409 for Jens
Holstein and € 105,144 for Markus Enzelberger, Ph.D., and in 2019, benefits of € 379,295 for Simon Moroney, Ph.D., which were granted on the occasion of termination of employment.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
123
for each Supervisory Board meeting they attend. For Committee
work, the Chair of the Audit Committee receives € 18,000.00,
the chairs of all other committees each receive € 12,000.00, and
the remaining Committee members each receive € 6,000.00.
Committee members also receive € 1,200.00 for each Committee
meeting attended. If (i) a Supervisory Board member domiciled
outside Europe attends a Supervisory Board and/or Committee
meeting, in person in Europe or (ii) a Supervisory Board member
domiciled inside Europe attends a Supervisory Board and/or
Committee meeting in person in the U.S., the Supervisory
Board member shall be paid a lump-sum expense allowance of
€ 2,000.00 (plus any value-added tax) for the additional travel
time involved in addition to the attendance fees and reimburse-
ment of expenses.
Supervisory Board members are also reimbursed for travel ex-
penses and value-added taxes (VAT) on their remuneration.
In addition, the members of the Supervisory Board are included
in a Directors and Officers liability insurance (D&O Insurance)
maintained by the Company at an appropriate level in the inter-
ests of the Company. The premiums are paid by the Company.
An appropriate deductible has been agreed for the D&O Insur-
ance of the members of the Supervisory Board.
In the 2020 financial year, Supervisory Board members received
a total of € 634,752 (2019: € 633,597), excluding the reimburse-
ment of travel expenses. This amount consists of fixed remuner-
ation and attendance fees for participating in Supervisory Board
and committee meetings.
We did not grant any loans to Supervisory Board members.
Change in the Composition of the Management
Board
In the 2020 reporting year, the following changes occurred in
the composition of the Management Board: Markus Enzelberg-
er’s, Ph.D., resignation as Chief Scientific Officer and member of
the Management Board announced in November 2019, became
effective as of February 29, 2020. By resolution of the Supervi-
sory Board on March 30, 2020, Roland Wandeler, Ph.D., was
appointed as a new member of the Management Board for a
term of three years from May 5, 2020 to April 30, 2023. Jens
Holstein left as Chief Financial Officer and member of the Man-
agement Board with effect of as of December 31, 2020.
Vote on the Remuneration System for the
Management Board (“Say On Pay”)
The current remuneration system for the members of the Man-
agement Board is unchanged from the remuneration system
approved by the Annual General Meeting on May 19, 2011, with
a majority of over 91 %.
On January 1, 2020, the Act for the Implementation of the Sec-
ond Shareholders’ Rights Directive (ARUG II) came into force.
According to the new regulations, the shareholders must resolve
on a remuneration system for the Management Board to be sub-
mitted by the Supervisory Board for the first time prior to the
end of the first Annual General Meeting in 2021. MorphoSys has
therefore deliberately refrained from submitting a Management
Board remuneration system to be put up for vote at its Annual
General Meeting in 2020. The Supervisory Board has drafted a
remuneration system for the Management Board and will pres-
ent it to the Annual General Meeting 2021 for resolution.
Supervisory Board Remuneration
The remuneration of the members of the Supervisory Board is
governed by our Articles of Association and a corresponding
resolution of the Annual General Meeting on Supervisory Board
remuneration. At the 2020 Annual General Meeting, a resolu-
tion was passed to increase the annual remuneration of the
Chairperson of the Audit Committee and to grant a lump-sum
expense allowance per meeting for Supervisory Board mem-
bers who are domiciled within Europe and physically attend a
Supervisory Board and/or Committee meetings in the U.S. In
the 2020 financial year, Supervisory Board members received
fixed remuneration in addition to attendance fees and expense
allowances for attending Supervisory Board and Committee
meetings. Supervisory Board members each receive annual
remuneration in the form of a lump-sum payment for their
membership on the Supervisory Board (€ 98,210.00 for the
Chairperson, € 58,926.00 for the Deputy Chairperson and
€ 39,284.00 for the other members of the Supervisory Board).
The Chairperson receives € 4,000.00 for each Supervisory
Board meeting he chairs; the other members receive € 2,000.00
Financial Statements Group Management Report
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
124
The table below presents the Supervisory Board’s remuneration
in more detail.
Table 17
Compensation of the Supervisory Board in 2020 and 2019
in €
2020
2019
2020
2019
2020
2019
Fixed Compensation
Attendance Fees1
Total Compensation
Marc Cluzel, M.D., Ph.D.
Michael Brosnan
Sharon Curran
George Golumbeski, Ph.D.,
Wendy Johnson
Krisja Vermeylen
Frank Morich, M.D.2
Total
104,210
104,210
57,284
45,284
65,345
49,579
57,284
19,766
51,284
27,791
51,284
47,618
57,284
70,926
56,400
28,400
30,000
30,800
39,200
38,400
12,800
44,400
34,000
11,600
31,600
35,600
32,400
33,600
160,610
85,684
75,284
96,145
88,779
95,684
32,566
398,752
410,397
236,000
223,200
634,752
148,610
85,284
39,391
82,884
83,218
89,684
104,526
633,597
1 The lump-sum expense allowance includes expense allowance for attendance at Supervisory Board and committee meetings.
2 Frank Morich, M.D., resigned as a member of the Supervisory Board with effect from April 11, 2020.
Shareholdings of Management Board and
Supervisory Board Members
The members of the Management Board and the Supervisory
Board hold less than 1 % of the shares issued by the Company.
All shares, performance shares, performance share units, stock
options and convertible bonds held by each member of the Man-
agement Board and the Supervisory Board are listed below.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
125
Table 18
Directors’ Holdings
Shares
Management Board
Jean-Paul Kress, M.D.
Malte Peters, M.D.
Roland Wandeler, Ph.D.1
Jens Holstein 2
Markus Enzelberger, Ph.D.3
Total
Supervisory Board
Marc Cluzel, M.D., Ph.D.
Michael Brosnan
Sharon Curran
George Golumbeski, Ph.D.
Wendy Johnson
Krisja Vermeylen
Frank Morich, M.D.4
Total
Stock Options
Management Board
Jean-Paul Kress, M.D.
Malte Peters, M.D.
Roland Wandeler, Ph.D.1
Jens Holstein2
Markus Enzelberger, Ph.D.3
Total
Performance Shares
Management Board
Jean-Paul Kress, M.D.1
Malte Peters, M.D.
Roland Wandeler, Ph.D.
Jens Holstein2
Markus Enzelberger, Ph.D.3
Total
01/01/2020
Additions
Sales
12/31/2020
0
3,313
–
19,517
1,676
24,506
750
0
0
0
500
350
1,000
2,600
0
0
0
13,677
0
13,677
0
0
0
0
0
0
0
0
0
0
0
9,000
0
9,000
0
0
0
0
0
0
0
0
0
3,313
0
–
–
3,313
750
0
0
0
500
350
–
1,600
01/01/2020
Additions
Forfeitures
Exercises
12/31/2020
57,078
21,609
–
21,609
18,678
118,974
24,911
11,501
0
11,501
0
47,913
0
0
0
0
0
0
0
0
0
0
0
0
81,989
33,110
0
–
–
115,099
01/01/2020
Additions
Adjustment
due to
performance
criteria5
Forfeitures
Allocations6
12/31/2020
0
7,197
–
12,693
7,259
27,149
0
0
0
0
0
0
0
1,850
0
10,031
0
11,881
0
0
0
0
0
0
0
0
0
13,677
0
13,677
0
9,047
0
–
–
9,047
1 Roland Wandeler, Ph.D., became a member of the Management Board of MorphoSys AG
4 Frank Morich, M.D., resigned as a member of the Supervisory Board with effect from April
with effect as of May 5, 2020.
2 Jens Holstein resigned as a member of the Management Board with effect from the end
of November 13, 2020. Changes in the number of shares after his departure from the
Management Board are not presented.
3 Markus Enzelberger, Ph.D., resigned as a member of the Management Board with effect
from the end of February 29, 2020. Changes in the number of shares after his departure
from the Management Board are not presented.
11, 2020. Changes in the number of shares after his departure from the Management
Board are not presented.
5 Adjustment based on defined performance criteria. For performance criteria that have
not yet been met, a target achievement of 100% is assumed.
6 Allocations are made as soon as the transfer of performance shares within the six-month
exercise period after the end of the four-year waiting period has expired.
Financial Statements
Group Management Report
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
126
The members of our Supervisory Board do not hold stock op-
tions, performance share units, convertible bonds or perfor-
mance shares.
in accordance with the requirements set forth in the relevant
legal provisions (Article 19 [1a] of the Market Abuse Regulation
(MAR)).
Managers’ Transactions
The members of the Management Board and the Supervisory
Board of MorphoSys AG, as well as persons closely associated
with them, are required to disclose trading in MorphoSys shares
During the reporting year, MorphoSys received notifications
pursuant to Article 19 (1a) MAR, which are shown in the table
below.
Table 19
Managers Transactions 2020
Party Sub-
ject to the
Notification
Require-
ment
Date of
Transaction
in 2019
Function
Type of Transaction
Aggregated
Share Price
Aggregated
Volume
Place of
Transaction
Chief
Financial
Disposal of shares (performance shares)
from the expiring long-term incentive
(LTI) program 2016 as part of his remuner-
ation as member of the Management
Board; Mr. Holstein received a total of
Jens Holstein
Officer
05/10/2020
13,677 shares under this program
99.04 €
445.676,26 €
Xetra
Chief
Financial
Disposal of shares (performance shares)
from the expiring long-term incentive
(LTI) program 2016 as part of his remuner-
ation as member of the Management
Board; Mr. Holstein received a total of
Jens Holstein
Officer
02/10/2020
13,677 shares under this program
97.99 €
440.952,04 €
Xetra
Chief
Financial
Allocation of 13,677 shares as part his re-
muneration as member of the Manage-
ment Board (Long-Term Incentive Pro-
Not
Not
Outside a
Jens Holstein
Officer
21/04/2020
gram 2016) (issuer’s own shares)
numerable
numerable
trading venue
Jean-Paul
Kress, M.D.
Chief
Executive
Officer
Chief
Financial
Acceptance of 24,911 stock options to
subscribe for up to two shares each within
the compensation as a Management
21/04/2020
2020)
numerable
numerable
trading venue
Board Member (Stock Option Program
Not
Not
Outside a
Acceptance of 11,501 stock options to
subscribe for up to two shares each within
the compensation as a Management
Board Member (Stock Option Program
Not
Not
Outside a
Jens Holstein
Officer
21/04/2020
2020)
numerable
numerable
trading venue
Chief
Research &
Acceptance of 11,501 stock options to
subscribe for up to two shares each within
the compensation as a Management
Malte Peters,
Development
Board Member (Stock Option Program
Not
Not
Outside a
M.D.
Officer
21/04/2020
2020)
numerable
numerable
trading venue
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
Avoiding Conflicts of Interest
The members of the Management Board and the Supervisory
Board are obligated to refrain from actions that could lead to
conflicts of interest with their responsibilities at MorphoSys AG.
Such transactions or secondary activities of the Management
Board must be disclosed to the Supervisory Board without delay
and require the Supervisory Board’s approval. The Supervisory
Board in turn must inform the Annual General Meeting of any
conflicts of interest that arise and disclose how they were dealt
with. No conflict of interest arose in the Supervisory Board in
the 2020 financial year.
Share Repurchases
By resolution of the Annual General Meeting on May 23, 2014,
MorphoSys was authorized, in accordance with Section 71 (1)
no. 8 of the German Stock Corporation Act (AktG), to repur-
chase treasury shares in an amount of up to 10 % of the existing
share capital up to and including April 30, 2019. Following the
authorization’s expiry, no new authorization was proposed to the
2020 Annual General Meeting; therefore, no such authorization
currently exists.
Information Technology
The strategic alignment of our IT infrastructure and processes
coupled with our fundamental business continuity measures
made it possible to transition to remote working due to COVID 19
without any problems or restrictions to our business activities.
Our commercial supply chain for Monjuvi was implemented in
the first half of 2019 using SAP Business ByDesign and other
systems. The development of our sales platform was completed
in a short amount of time and with great success to coincide
with the market launch of Monjuvi. We also launched and suc-
cessfully completed various digital projects to introduce not
only new business processes but also digitize existing business
processes even more. Various components of the digital work-
place were also optimized to further enhance remote working
capabilities going forward and ensure they remain an integral
part of our modern working environment.
With the shift to remote working, IT security and compliance
became even more important areas of information technology
in the reporting year. For this reason and in an effort to opti-
mize our cyber defense measures, we consolidated several of
our platforms within the area of IT security.
Our internal Computer Emergency Response Team (CERT) has
not detected any serious security incidents during the report-
ing year.
127
We also had our technical security controls reviewed for vulner-
abilities by external security experts and our employees were
trained to gain an awareness of their shared responsibility and
essential contribution to IT security in our Company.
Information on the Internal Control and Risk
Management System with Regard to the Ac-
counting Process under Section 289 (4) and
Section 315 (4) HGB
In the 2020 financial year, we completed a routine update of the
documentation for our existing internal control and risk man-
agement system, which helps us maintain adequate internal
control over financial reporting and ensures the availability of
key controls to report financial figures as precisely and accu-
rately as possible. We also expanded this system based on the
SOX regulations (Sarbanes-Oxley Act of 2002, Section 404).
COSO (Committee of Sponsoring Organizations of the Treadway
Commission) defines the corresponding COSO framework (“In-
ternal Control – Integrated Framework”). We use this frame-
work, which is the most commonly used framework for the in-
ternal 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 fi-
nancial statements were prepared in accordance with the appli-
cable IFRS standards endorsed by the European Union (EU) for
external purposes.
The consolidated financial statements are subjected to numerous
preparation, review and control processes so that they can be
reported promptly to the market and to shareholders. To accom-
plish this, our executives have a coordinated plan for which all
internal and external resources are made available. We also use
a strict principle of double-checking to ensure the accuracy of
the key financial ratios reported and the underlying execution
of all accounting processes. Numerous rules and guidelines are
also followed to ensure the strict separation of the planning,
posting and execution of financial transactions. This functional
separation of processes is ensured by all of our operating IT
systems we use through an appropriate assignment of rights.
External service providers regularly review the implementation
of and compliance with these guidelines and the efficiency of the
accounting processes.
Financial Statements Group Management Report
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
128
Predicting future events is not the task of our internal control
and risk management system. Our risk management system
does, however, ensure that business risks are detected and
assessed 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 the Company.
The Management Board ensures that risks are always dealt with
responsibly and keeps the Supervisory Board informed of all
existing risks and their development. Detailed information on
our risks and opportunities can be found in the section “Risk
and Opportunity Report.”
Accounting and External Audit
We prepare our annual 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 in compliance with the recommendations of the Interna-
tional Financial Reporting Standards Interpretations Commit-
tee (IFRS IC). We have applied all standards and interpretations
that were in force on December 31, 2020 and adopted by the EU
into European law. As of December 31, 2020, there were no
standards or interpretations with an impact on our consoli-
dated financial statements as of December 31, 2020 and 2019
that had entered into force but had not yet been adopted into
European law. Therefore, our consolidated financial statements
comply with both the IFRS published by the International Ac-
counting Standards Board (IASB) and the IFRS adopted by the
EU. In addition, our consolidated financial statements take into
account the supplementary provisions of German commercial
law that are to be applied in accordance with Section 315e (1) of
the German Commercial Code (HGB).
For the election of our auditor, the Audit Committee of the Super-
visory Board submits a nomination proposal to the Supervisory
Board. At the 2020 Annual General Meeting, Pricewaterhouse-
Coopers GmbH Wirtschaftsprüfungsgesellschaft was appointed
as auditor for the 2020 financial year. As proof of its indepen-
dence, the auditor submitted an Independence Declaration to
the Supervisory Board. The lead auditor of these consolidated
financial statements was Holger Lutz, who has audited the con-
solidated financial statements since 2019.
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 2020 financial year can be found in Note 7.1*.
*cross-reference to page 186
* This information is not part of the management report that is subject to audit.
Compliance Management Program
The “Separate Non-Financial Group Report”* sets out the basic
mechanisms of our compliance management program (CMP).
The report is available on our website https://csr.morphosys.
com/2020.
The identification and assessment of compliance risks are an
important part of the CMP and are incorporated into the pro-
gram’s overall strategic development. Our main compliance-rel-
evant risk areas are evaluated using a systematic approach and
taking into account our current business strategy and priorities.
During the reporting year, we carried out an annual compliance
risk assessment that included anti-bribery and other relevant
risk areas. Risk mitigation measures were initiated for the ar-
eas of action identified. Within the scope of the CMP, employ-
ees are given the opportunity to report suspected breaches of
law within the MorphoSys Group in a protected manner through
the MorphoSys Integrity Line reporting system. In addition to
an annual compliance risk analysis, we have developed other
appropriate guidelines and have monitored compliance. In or-
der to prevent compliance breaches, employees were routinely
trained in topics relevant for compliance. For the first time, an
e-learning on the Code of Conduct has been successfully com-
pleted by a vast majority of the workforce.
In November 2020, MorphoSys launched a compliance campaign
involving its entire workforce under the motto “Integrity in All
We Do.” The tone from the top was further developed with the
messages from the Chief Executive Officer, the Chief Research
and Development Officer, the Chief Operating Officer and other
leaders.
Compliance-related discussions and analyses at all levels of the
Company lead to a continuous improvement in managing and
mitigating risk at MorphoSys.
In conjunction with the EU General Data Protection Regulation
(Regulation [EU] 2016/679 – “GDPR”), which entered into force
on May 25, 2018, we have implemented various procedures
since 2018 to ensure compliance with the GDPR.
›› see figure 10 – Compliance Management Program (CMP) (page 129)
Internal Audit Department
Our Internal Audit department is an essential element of the
Corporate Governance structure. The department assists us
in accomplishing our objectives by prescribing a systematic
approach to evaluating and improving the effectiveness of our
risk management, internal control and other corporate gover-
nance processes. The accounting and consulting firms KPMG
and Protiviti were appointed in 2020 as co-sourcing partners
for the internal auditing process.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
129
Figure 10
Compliance Management Program (CMP)
Credo
Code of
Conduct
Chairperson of the
Audit Committee
reports, if
required, to
Head of
Global
Compliance
reports to
Chief Executive
Offi cer
reports to
General Counsel,
Member of the
Executive Committee
leading the global CMP and managing the interfaces
between diff erent compliance streams
Compliance Risk
Management
Review and
Approval of Key
Initiatives
Transparency
&
Disclosure
Monitoring &
Continuous
Improvement
Anti-Bribery due
Diligence
of Third Parties
Compliance
Management
Program
Compliance
Committees
Compliance
Documents
Trainings &
Awareness
Integrity Line
Financial Statements Group Management Report
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
130
The Internal Audit department executes a risk-based audit plan
that includes the requirements and recommendations of the
Management Board, as well as those of the Supervisory Board’s
Audit Committee. The Internal Audit department is also re-
sponsible for performing management testing in accordance
with the requirements of the U.S. Sarbanes-Oxley Act, Section
404 (SOX). This procedure involves independently testing the
appropriateness and effectiveness of internal controls in the
business processes relevant to financial reporting.
Our Internal Audit department informs the relevant members
of the Executive Committee about the outcome of each internal
audit. The Head of Internal Audit reports to the Audit Commit-
tee of the Supervisory Board on the results of the internal au-
dits and SOX management testing twice a year or immediately
if necessary.
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.
Shareholdings in Common Stock Exceeding
10 % of Voting Rights
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 with Special Rights Conferring Powers
of Control
Shares with special rights conferring powers of control do not
exist.
Three audits were carried out in the year 2020. Some areas for
action were identified resulting in the adoption of correspond-
ing corrective plans of action. The internal audit plan for 2021
envisages three audits.
Control over Voting Rights with Regard to
Employee Ownership of Capital
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.
Disclosures under Section 289a (1),
Section 315a (1) HGB and Explana-
tory Report of the Management
Board under Section 176 (1) Sen-
tence 1 AktG
Composition Of Common Stock
On December 31, 2020, the Company’s common stock amounted
to € 32,890,046.00 and was divided into 32,890,046 no-par-
value bearer shares. With the exception of the 131,414 treasury
shares held by the Company, these bearer shares possess vot-
ing rights, whereby each share grants one vote at the Annual
General Meeting. The Company’s share capital recorded in the
commercial register as of December 31, 2020, amounted to
€ 32,865,399.00 and was divided into 32,865,399 no-par-value
bearer shares. This amount of share capital does not yet reflect
the increase in share capital or the number of shares resulting
from the exercise of 24,647 conversion rights from convertible
bonds in 2020. On January 18, 2021, the Supervisory Board of
the Company resolved to amend the wording of the Articles of
Association to reflect the higher share capital of € 32,890,046.00,
which was registered with the commercial register on Febru-
ary 4, 2021.
Restrictions Affecting Voting Rights and the
Transfer of Shares
Our Management Board is not aware of any restrictions that
may affect voting rights or the transfer of shares, or any restric-
tions that may emerge from agreements between shareholders.
Appointment and Dismissal of Management
Board Members and Amendments to the
Articles of Association
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 Executive
Officer and three other members. Management Board members
may be appointed for a maximum term of five years. Reappoint-
ments or extensions in the term of office are allowed for a max-
imum 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 as
defined under Section 84 (3) AktG. If a required member of the
Management Board is absent, one will be appointed 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 rep-
resented. 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 resolved
by the Supervisory Board in accordance with Section 179 (1)
sentence 2 AktG in conjunction with Section 12 (3) of the Arti-
cles of Association.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
Power of the Management Board to Issue
Shares
The Management Board’s power to issue shares is granted un-
der Section 5 (5) through (6i) of the Company’s Articles of Asso-
ciation and the statutory provisions. The Supervisory Board is
authorized to amend the wording of the Articles of Association
in accordance with the scope of the capital increase from condi-
tional or authorized capital.
1. Authorized Capital
In the case of an authorized capital increase, the Manage-
ment Board is authorized, with the Supervisory Board’s con-
sent, to determine the further details of the capital increase
and its implementation.
a) Pursuant to Section 5 (5) of the Articles of Association, the
Management Board is authorized with the Supervisory
Board’s consent to increase the Company’s share capital
against contribution in cash and/or contribution in kind
on one or several occasions by up to € 11,768,314.00 by
issuing up to 11,768,314 new, no-par-value bearer shares
until and including the date of April 30, 2023 (Authorized
Capital 2018-I).
When executing capital increases, shareholders are prin-
cipally entitled to subscription rights. The shares may also
be subscribed to by one or several credit institutions with
the obligation to offer the shares to shareholders for sub-
scription. With the Supervisory Board’s consent, the Man-
agement Board is, however, authorized to exclude share-
holders’ subscription rights.
aa) in the case of a capital increase against contribution
in cash, to the extent necessary to avoid fractional
shares; or
bb) in the case of a capital increase against contribution in
kind; or
cc) in the case of a capital increase against contribution in
cash to the extent the new shares shall be placed on a
foreign stock exchange in the context of a new listing.
The total number of shares to be issued via a capital in-
crease against contribution in cash and/or in kind, exclud-
ing subscription rights and based on the authorizations
mentioned above, shall not exceed 20 % of the share capi-
tal, when calculated based on the authorizations’ effective
date or exercise, whichever amount is lower. The 20 % limit
mentioned above shall take into account (i) treasury shares
sold with the exclusion of subscription rights after the ef-
fective date of these authorizations (unless they service
the entitlements of members of the Management Board
and/or employees under employee participation programs),
(ii) shares that are issued excluding subscription rights
during the effective period of these authorizations from
other authorized capital existing on the effective date of
these authorizations, and (iii) shares to be issued during
the effective period of these authorizations to service
131
bonds with conversion or warrant rights, whose authoriza-
tion basis exists on the effective date of these authoriza-
tions, to the extent the bonds with conversion or warrant
rights were issued with the exclusion of the subscription
rights of the shareholders (unless they service the entitle-
ments of members of the Management Board and/or em-
ployees under employee participation programs).
b) Pursuant to Section 5 (6) of the Articles of Association, the
Management Board is authorized with the Supervisory
Board’s consent to increase the Company’s share capital
against contribution in cash on one or several occasions by
a total of up to € 3,286,539.00 by issuing up to 3,286,539
new no-par-value bearer shares until and including May
26, 2025 (Authorized Capital 2020-I).
Shareholders are principally entitled to subscription rights.
The shares may also be subscribed to by one or several
credit institutions with the obligation to offer the shares to
shareholders for subscription. The Management Board is,
however, authorized to exclude shareholder subscription
rights with the Supervisory Board’s consent in the follow-
ing cases:
aa) to the extent such exclusion is necessary to avoid frac-
tional 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 increases
against contribution in cash, excluding subscription rights
and based on the authorizations mentioned above shall not
exceed 10 % of the share capital when calculated based on
the authorizations’ effective date or exercise, whichever
amount is lower. The aforementioned 10 % limit shall in-
clude (i) treasury shares sold with exclusion of subscrip-
tion rights after the effective date of these authorizations
(unless they service the entitlements of members of exec-
utive management bodies and/or employees of the Com-
pany and its affiliated companies under employee partici-
pation programs), (ii) shares to be issued with the exclusion
of subscription rights during the effective period of these
authorizations from other authorized capital existing on the
effective date of these authorizations (unless they service
the entitlements of members of executive management
bodies and/or employees of the Company and its affiliated
companies under employee participation programs), as
well as (iii) shares to be issued during the effectiveness of
these authorizations to service bonds with conversion or
warrant rights, whose authorization basis exists on the
Financial Statements
Group Management Report
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
132
effective date of these authorizations, to the extent the
bonds with conversion or warrant rights were issued with
the exclusion of shareholders’ subscription rights (unless
they service the entitlements of members of executive
management bodies and/or employees of the Company
and its affiliated companies under employee participation
programs).
c) Pursuant to Article 5 (6h) of the Articles of Association,
the Management Board is authorized with the consent of
the Supervisory Board to increase the Company’s share
capital on one or several occasions by a total of up to
€ 159,197.00 by issuing up to 159,197 new no-par-value
bearer shares against cash contributions and/or contribu-
tions in kind until and including April 30, 2024 (Autho-
rized Capital 2019-I). The subscription rights of sharehold-
ers are excluded. The Authorized Capital 2019-I serves the
purpose of delivering shares of the Company against the
contribution of payment claims resulting from Restricted
Stock Units (RSUs) in order to fulfill RSUs that were
granted in accordance with the terms and conditions of
the Company’s Restricted Stock Unit Program (RSUP) ex-
clusively to senior managers and employees (including
directors and officers) of MorphoSys US Inc. The issue
price of the new shares must amount to at least € 1.00 and
may be paid either by way of a cash contribution and/or
contribution in kind, including in particular the contribu-
tion of claims against the Company under the RSUP. The
Management Board is authorized with the consent of the
Supervisory Board to determine the further details of the
capital increase and its implementation; this also includes
determining the profit entitlement of the new shares,
which, in deviation from Section 60 (2) of the German
Stock Corporation Act (AktG), may also participate in the
profit of an already completed fiscal year.
2. Conditional Capital
a) Pursuant to Section 5 (6b) of the Articles of Association,
the Company’s share capital is conditionally increased by
up to € 5,307,536.00 through the issue of up to 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 accor-
dance with the resolution above. The conditional capital
increase will only be carried out to the extent that the hold-
ers 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 beginning 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.
On October 13, 2020, the Management Board, with the Su-
pervisory Board’s consent, resolved to issue convertible
bonds in an amount totaling up to € 325,000,000.00, ma-
turing in October 2025. The convertible bonds may be con-
verted into up to approximately 2.65 million new and/or
existing shares. The issue of the convertible bonds is based
on Conditional Capital 2016-I. The subscription rights of
the Company’s shareholders were excluded.
b) Pursuant to Section 5 (6e) of the Articles of Association,
the Company’s share capital is increased conditionally by
up to € 13,415.00 through the issue of up to 13,415 new
no-par-value bearer shares of the Company (Conditional
Capital 2008-III). The conditional capital increase will
only be executed to the extent that holders of convertible
bonds, which have been issued, exercise their conversion
rights for conversion 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 by the Annual General Meeting on the
appropriation of profits at the time of their issue. The Man-
agement Board shall be authorized, with the consent of the
Supervisory Board, to establish additional details regard-
ing the conditional capital increase and its execution.
c) Pursuant to Section 5 (6g) of the Articles of Association, the
share capital is increased conditionally by up to € 995,162.00
through the issue of up to 995,162 new no-par-value bearer
shares of the Company (Conditional Capital 2016-III). The
conditional capital serves to meet the obligations of sub-
scription rights that have been issued and exercised based
on the authorization resolved by the Annual General Meet-
ing of June 2, 2016 under Agenda Item 9 letter a). The condi-
tional capital increase will only be executed to the extent
that holders of subscription 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
price in accordance with Agenda Item 9 letter a) subpara-
graph (8) of the Annual General Meeting’s resolution dated
June 2, 2016; Section 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 profits at
the time of the shares’ issue. The Management Board, and
the Supervisory Board where members of the Manage-
ment Board are concerned, is authorized to determine the
additional detail of the conditional capital increase and its
execution.
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020
Statement on Corporate Governance, Group Statement on Corporate Governance and Report on Corporate Governance
Group Management Report
133
Furthermore, in case of a termination due to a change of control,
all granted stock options, performance shares and other compa-
rable direct or indirect interests in MorphoSys with compensa-
tion character will vest immediately and may be exercised after
the statutory vesting periods and blackout periods have expired.
Following a change of control, some members of the Senior
Management Group may terminate their employment contracts
and demand a severance payment in the amount of one annual
gross fixed salary and the full contractual bonus for the calen-
dar year in which the termination is effected. A target achieve-
ment rate of 100 % is applied. In such a case, all stock options
and performance shares granted will vest immediately and may
be exercised after the statutory vesting periods and blackout
periods have expired. The following cases are considered as a
change of control: (i) MorphoSys transfers all or substantially all
of its corporate assets to a non-affiliated company, (ii) MorphoSys
merges with a non-affiliated company, (iii) MorphoSys AG as a
controlled company becomes a party to an agreement pursuant
to Section 291 of the German Stock Corporation Act (AktG) or
MorphoSys is integrated in accordance with Section 319 of the
German Stock Corporation Act (AktG), or (iv) a shareholder or
third party directly or indirectly holds 30 % or more of the voting
rights of MorphoSys, or at least 30 % of the voting rights are
attributed to the shareholder or third party.
d) Pursuant to Section 5 (6i) of the Articles of Association,
the Company’s share capital is increased conditionally by
up to € 1,314,615.00 by issuing up to 1,314,615 new no-par
value bearer shares (Conditional Capital 2020-I). The con-
ditional capital serves to fulfill subscription rights that
were issued and exercised on the basis of the authorization
resolved by the Annual General Meeting on May 27, 2020,
under Agenda Item 11, letter a). The conditional capital in-
crease will only be implemented to the extent that holders
of subscription rights exercise their subscription rights to
subscribe to shares of the Company. The shares will be
issued at the exercise price determined in accordance
with the resolution of the Annual General Meeting of May
27, 2020, under Agenda Item 11, letter a) subparagraph (8)
as the issue price; Section9 (1) AktG remains unaffected.
The new shares are entitled to dividends for the first time
for the financial year for which, at the time of their issue, no
resolution by the Annual General Meeting on the appro-
priation of the accumulated profit has yet been passed.
The Management Board, or, insofar as members of the
Management Board are affected, the Supervisory Board
are authorized to determine the further details of the con-
ditional capital increase and its implementation.
Power of Management Board to Repurchase
Shares
The authorization granted by the Company’s Annual General
Meeting on May 23, 2014 expired on April 30, 2019. As a result,
the Management Board is not currently authorized to repurchase
the Company’s shares.
Material Agreements Made by the Company
that Fall under the Condition of a Change of
Control after a Takeover Bid
A change of control as a result of a takeover bid could have an
impact on our convertible bond issued in October 2020, the un-
derlying contract of which contains customary change-of-con-
trol clauses. According to these clauses, bondholders can de-
mand early repayment of the outstanding amounts in the event
of a change of control.
The Company has not entered into any further material agree-
ments that are subject to a change of control following a take-
over bid.
Compensation Agreements Concluded by the
Company with Management Board Members
and Employees in the Event of a Takeover Bid
In accordance with the service contracts in force during the
reporting period, the members of the Management Board may
terminate their service contracts following a change of control
and demand the fixed salary and annual bonus still outstanding
until the end of the regular term of the service contract, but at
least 200 % of the annual gross fixed salary and annual bonus.
Financial Statements Financial Statements
134
Contents
03
Financial
Statements
See our latest reports online You can also find our Group’s current annual and non-financial reports in both English and German online. Simply go to our website. We look forward to your visit. Annual Report https://reports.morphosys.com/2020Non-Financial Report https://csr.morphosys.com/2020Annual Report2020Non-Financial Report2020 s
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a
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a
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F
i
136
137
138
140
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)
142
Consolidated Statement of Cash Flows (IFRS)
Notes
144
144
167
170
172
178
186
189
General Information
Summary of Significant Accounting Policies
Segment Reporting
Collaboration and License Agreement with Incyte
Notes to the Profit or Loss Statement
Notes to the Balance Sheet Assets
Notes to the Balance Sheet Equity and Liabilities
Remuneration System for the Management Board
and Employees of the Group
203
Additional Notes
Financial Statements
136
Consolidated Statement of Profit 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
Income from Reversals of Impairment Losses / (Impairment Losses)
on Financial Assets
Income Tax Benefit
Consolidated Net Profit / (Loss)
Earnings per Share, Basic and Diluted
Earnings per Share, Basic
Earnings per Share, diluted
Shares Used in Computing Earnings per Share, Basic and Diluted
Shares Used in Computing Earnings per Share, Basic
Shares Used in Computing Earnings per Share, Diluted
Note
2020
2019
2018
2.7.1, 5.1
327,698,465
71,755,303
76,442,505
2.7.2, 5.2.1
(9,174,146)
(12,085,198)
(1,796,629)
2.7.2, 5.2.2
(141,426,832)
(108,431,600)
(106,397,017)
2.7.2, 5.2.3
(107,742,684)
(22,671,481)
(6,382,510)
2.7.2, 5.2.4
(51,403,257)
(36,664,666)
(21,927,731)
2.7.3, 5.3
2.7.4, 5.3
2.7.5, 5.3
2.7.5, 5.3
(309,746,919)
(179,852,945)
(136,503,887)
14,584,829
(5,175,177)
804,739
(626,678)
1,644,632
(689,343)
27,361,198
(107,919,581)
(59,106,093)
92,047,221
2,799,473
(96,214,409)
(2,272,369)
417,886
(753,588)
2.3.1
(702,000)
872,000
(1,035,000)
2.7.6, 5.4
75,398,566
3,506,419
4,304,674
97,890,576
(103,014,058)
(56,172,121)
2.7.7, 5.5
2.7.7, 5.5
2.7.7, 5.5
2.7.7, 5.5
2.7.7, 5.5
2.7.7, 5.5
–
3.01
2.97
–
(3.26)
(1.79)
–
–
–
–
31,611,155
31,338,948
32,525,644
33,167,852
–
–
–
–
The Notes are an integral part of these consolidated financial statements.
Consolidated Statement of Comprehensive Income (IFRS)
Financial Statements
137
Consolidated Statement of
Comprehensive Income (IFRS)
in €
2020
2019
2018
Consolidated Net Profit / (Loss)
Items that will not be reclassified to Profit or Loss
97,890,576
(103,014,058)
(56,172,121)
Change in Fair Value of Shares through Other Comprehensive Income
1,260,132
(1,160,160)
(127,458)
Items that may be reclassified to Profit or Loss
Foreign Currency Translation Differences from Consolidation
Other Comprehensive Income
Total Comprehensive Income
2,247,005
75,332
3,507,137
(1,084,828)
(83,432)
(210,890)
101,397,713
(104,098,886)
(56,383,011)
The Notes are an integral part of these consolidated financial statements.
Financial Statements
138
Consolidated Balance Sheet (IFRS)
Consolidated Balance Sheet
(IFRS)
in €
Assets
Current Assets
Cash and Cash Equivalents
Financial Assets at Fair Value through Profit or Loss
Other Financial Assets at Amortized Cost
Accounts Receivable
Financial Assets from Collaborations
Income Tax Receivables
Other Receivables
Inventories, Net
Prepaid Expenses and Other Current Assets
Total Current Assets
Non-current Assets
Property, Plant and Equipment, Net
Right-of-Use Assets, Net
Patents, Net
Licenses, Net
Licenses for Marketed Products
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
Note
12/31/2020
12/31/2019
2.8.1, 6.1
2.8.1, 6.2
2.8.1, 6.2
2.8.2, 6.3
2.8.3, 4
2.8.2, 6.6
2.8.2, 6.4
2.8.4, 6.5
2.8.5, 6.6
2.8.6, 6.7
2.8.7, 6.8
2.8.8, 6.9
2.8.8, 6.9
2.8.8, 6.9
2.8.8, 6.9
2.8.8, 6.9
2.8.8, 6.9
2.8.1, 6.2
2.8.9, 6.10
109,794,680
287,937,972
649,713,342
83,354,276
42,870,499
401,826
2,159,475
9,962,657
20,621,493
44,314,050
20,454,949
207,735,195
15,081,702
0
145,817
1,613,254
288,212
14,059,627
1,206,816,220
303,692,806
6,323,753
44,417,767
1,937,856
11,835,619
55,485,886
4,652,838
43,160,253
2,981,282
2,350,002
0
0
35,683,709
115,788
1,619,233
196,587,542
0
107,137
3,676,233
84,922,176
14,076,836
0
Deferred Tax Asset
2.9.8, 5.4, 6.11
132,806,097
Prepaid Expenses and Other Assets, Net of Current Portion
2.8.10, 6.12
1,567,259
1,136,030
Total Non-current Assets
Total Assets
452,696,800
192,746,496
1,659,513,020
496,439,302
The Notes are an integral part of these consolidated financial statements.
Consolidated Balance Sheet (IFRS)
Financial Statements
139
in €
Note
12/31/2020
12/31/2019
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts Payable and Accruals
Current Portion of Lease Liabilities
Tax Liabilities
Other Provisions
Current Portion of Contract Liability
Current Portion of Convertible Bond
Current Portion of Financial Liabilities from Collaborations
Convertible Bonds due to Related Parties
Total Current Liabilities
Non-current Liabilities
Lease Liabilities, Net of Current Portion
Other Provisions, Net of Current Portion
Contract Liability, Net of Current Portion
Deferred Tax Liability
Convertible Bond, Net of Current Portion
Financial Liabilities from Collaborations, Net of Current Portion
Total Non-current Liabilities
Total Liabilities
Stockholders’ Equity
Common Stock
Ordinary Shares Issued (32,890,046 and 31,957,958 for 2020 and 2019, respectively)
Ordinary Shares Outstanding (32,758,632 and 31,732,158 for 2020 and 2019, respectively)
Treasury Stock (131,414 and 225,800 shares for 2020 and 2019, respectively), at Cost
Additional Paid-in Capital
Other Comprehensive Income Reserve
Accumulated Deficit
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
The Notes are an integral part of these consolidated financial statements.
2.9.2, 7.1
2.8.6, 6.7
2.9.3, 7.2
2.9.2, 7.2
2.9.4, 7.3
2.9.6, 7.5
2.9.9, 4
2.9.7
2.8.6, 6.7
2.9.2, 7.2
2.9.5, 7.3
2.9.8, 5.4, 7.4
2.9.6, 7.5
2.9.9, 4
128,554,203
57,041,902
3,055,608
65,727,675
0
2,543,903
422,945
154,895
0
2,515,097
94,732
323,000
1,570,801
0
0
12,324
200,459,229
61,557,856
41,963,794
40,041,581
1,527,756
71,829
5,057,465
272,759,970
516,350,960
23,166
114,927
0
0
0
837,731,774
40,179,674
1,038,191,003
101,737,530
2.9.10, 7.6.1
32,890,046
31,957,958
2.9.10, 7.6.4
2.9.10, 7.6.5
2.9.10, 7.6.6
(4,868,744)
(8,357,250)
748,978,506
628,176,568
2,211,419
(1,295,718)
2.9.10, 7.6.7
(157,889,210)
(255,779,786)
621,322,017
394,701,772
1,659,513,020
496,439,302
Financial Statements
Consolidated Statement of Changes in Stockholders’ Equity (IFRS)
140
Consolidated Statement of Changes
in Stockholders’ Equity (IFRS)
Balance as of January 1, 2018
Capital Increase, Net of Issuance Cost of € 15,038,362
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 Programs
Transfer of Treasury Stock to Members of the Management Board
Reserves:
Change in Fair Value of Shares through Other Comprehensive Income
Foreign Currency Translation Differences from Consolidation
Consolidated Net Loss
Total Comprehensive Income
Balance as of December 31, 2018
Balance as of January 1, 2019
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 Programs
Transfer of Treasury Stock to Related Parties
Reserves:
Change in Fair Value of Shares through Other Comprehensive Income
Foreign Currency Translation Differences from Consolidation
Consolidated Net Loss
Total Comprehensive Income
Balance as of December 31, 2019
Balance as of January 1, 2020
Capital Increase, Net of Issuance Cost of € 100,370
Equity Component of the Convertible Bond
Compensation Related to the Grant of Stock Options and Performance Shares
Exercise of Convertible Bonds Issued
Transfer of Treasury Stock for Long-Term Incentive Programs
Reserves:
Change in Fair Value of Shares through Other Comprehensive Income
Foreign Currency Translation Differences from Consolidation
Consolidated Net Profit
Total Comprehensive Income
Balance as of December 31, 2020
The Notes are an integral part of these consolidated financial statements.
8.1, 8.3
8.3.1
4, 7.6.1
2.9.7, 7.5, 7.6.5
8.1, 8.3
8.2
7.6.4, 8.3.2
6.10, 7.6.6
7.6.6
7.6.7
Common Stock
Shares
€
29,420,785
2,386,250
29,420,785
2,386,250
0
32,537
0
32,537
0
0
0
0
0
0
0
0
0
0
0
0
31,839,572
31,839,572
0
118,386
31,839,572
31,839,572
0
118,386
0
0
0
0
0
0
0
0
0
0
0
0
31,957,958
31,957,958
907,441
0
0
31,957,958
31,957,958
907,441
0
0
24,647
24,647
0
0
0
0
0
0
0
0
0
0
32,890,046
32,890,046
131,414
(4,868,744)
748,978,506
(157,889,210)
621,322,017
Treasury Stock
Additional
prehensive In-
Accumulated
Stockholders’
Other Com-
Shares
€
€
€
Paid-in Capital
come Reserve
Deficit
€
319,678
(11,826,981)
438,557,856
(96,593,607)
359,558,053
(17,219)
(21,423)
636,414
791,794
281,036
281,036
(10,398,773)
619,908,453
(10,398,773)
619,908,453
(52,328)
(2,908)
1,934,043
107,480
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
176,189,256
5,584,969
1,004,580
(636,414)
(791,794)
6,654,470
3,655,168
(1,934,043)
(107,480)
628,176,568
628,176,568
79,590,657
36,483,050
7,455,761
760,976
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
(94,386)
3,488,506
(3,488,506)
(56,172,121)
(56,172,121)
(56,172,121)
(56,383,011)
(152,765,728)
488,372,634
(152,765,728)
488,372,634
Total
Equity
€
178,575,506
5,584,969
1,037,117
(127,458)
(83,432)
0
0
0
0
6,654,470
3,773,554
(1,160,160)
75,332
394,701,772
394,701,772
80,498,098
36,483,050
7,455,761
785,623
0
1,260,132
2,247,005
97,890,576
101,397,713
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)
(210,890)
(1,160,160)
75,332
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,260,132
2,247,005
3,507,137
2,211,419
97,890,576
97,890,576
225,800
225,800
(8,357,250)
(8,357,250)
(1,295,718))
(255,779,786)
(1,295,718
(255,779,786)
(103,014,058)
(103,014,058)
(1,084,828)
(103,014,058)
(104,098,886)
Consolidated Statement of Changes
in Stockholders’ Equity (IFRS)
Balance as of January 1, 2018
Capital Increase, Net of Issuance Cost of € 15,038,362
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 Programs
Transfer of Treasury Stock to Members of the Management Board
Reserves:
Change in Fair Value of Shares through Other Comprehensive Income
Foreign Currency Translation Differences from Consolidation
Consolidated Net Loss
Total Comprehensive Income
Balance as of December 31, 2018
Balance as of January 1, 2019
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 Programs
Transfer of Treasury Stock to Related Parties
Reserves:
Change in Fair Value of Shares through Other Comprehensive Income
Foreign Currency Translation Differences from Consolidation
Consolidated Net Loss
Total Comprehensive Income
Balance as of December 31, 2019
Balance as of January 1, 2020
Capital Increase, Net of Issuance Cost of € 100,370
Equity Component of the Convertible Bond
Compensation Related to the Grant of Stock Options and Performance Shares
Exercise of Convertible Bonds Issued
Transfer of Treasury Stock for Long-Term Incentive Programs
Reserves:
Change in Fair Value of Shares through Other Comprehensive Income
Foreign Currency Translation Differences from Consolidation
Consolidated Net Profit
Total Comprehensive Income
Balance as of December 31, 2020
4, 7.6.1
2.9.7, 7.5, 7.6.5
8.1, 8.3
8.2
7.6.4, 8.3.2
6.10, 7.6.6
7.6.6
7.6.7
The Notes are an integral part of these consolidated financial statements.
Common Stock
Shares
€
29,420,785
2,386,250
29,420,785
2,386,250
32,537
32,537
31,839,572
31,839,572
31,839,572
31,839,572
118,386
118,386
8.1, 8.3
8.3.1
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
Consolidated Statement of Changes in Stockholders’ Equity (IFRS)
Financial Statements
141
Treasury Stock
Shares
Additional
Paid-in Capital
€
€
Other Com-
prehensive In-
come Reserve
€
Accumulated
Deficit
€
Total
Stockholders’
Equity
€
319,678
(11,826,981)
438,557,856
0
0
0
0
0
0
(17,219)
(21,423)
636,414
791,794
(10,398,773)
619,908,453
(10,398,773)
619,908,453
0
0
0
0
281,036
281,036
0
0
(52,328)
(2,908)
0
0
0
0
0
0
0
0
0
0
1,934,043
107,480
0
0
0
0
176,189,256
5,584,969
1,004,580
(636,414)
(791,794)
0
0
0
0
6,654,470
3,655,168
(1,934,043)
(107,480)
0
0
0
0
628,176,568
628,176,568
79,590,657
36,483,050
7,455,761
760,976
31,957,958
31,957,958
907,441
31,957,958
31,957,958
907,441
24,647
24,647
225,800
225,800
(8,357,250)
(8,357,250)
0
0
0
0
0
0
0
0
32,890,046
32,890,046
131,414
(4,868,744)
748,978,506
(94,386)
3,488,506
(3,488,506)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(127,458)
(83,432)
(96,593,607)
359,558,053
0
0
0
0
0
0
0
178,575,506
5,584,969
1,037,117
0
0
(127,458)
(83,432)
0
(56,172,121)
(56,172,121)
(210,890)
(210,890)
(210,890)
(56,172,121)
(56,383,011)
(152,765,728)
488,372,634
(152,765,728)
488,372,634
0
0
0
0
(1,160,160)
75,332
0
0
0
0
0
0
6,654,470
3,773,554
0
0
(1,160,160)
75,332
0
(103,014,058)
(103,014,058)
(1,084,828)
(103,014,058)
(104,098,886)
(1,295,718))
(255,779,786)
(1,295,718
(255,779,786)
0
0
0
0
0
1,260,132
2,247,005
0
3,507,137
2,211,419
0
0
0
0
0
0
0
97,890,576
97,890,576
394,701,772
394,701,772
80,498,098
36,483,050
7,455,761
785,623
0
1,260,132
2,247,005
97,890,576
101,397,713
(157,889,210)
621,322,017
Financial Statements
142
Consolidated Statement of Cash Flows (IFRS)
Consolidated Statement of
Cash Flows (IFRS)
in €
Note
2020
2019
2018
Operating Activities:
Consolidated Net Profit / (Loss)
Adjustments to Reconcile Consolidated Net Profit / (Loss) to
Net Cash Provided by / (Used in) Operating Activities:
97,890,576
(103,014,058)
(56,172,121)
Impairments of Assets
6.7, 6.9
16,480,272
2,317,489
24,033,479
Depreciation and Amortization of Tangible and Intangible Assets
and of Right-of-Use Assets
6.7, 6.8, 6.9
8,329,559
6,245,162
3,750,259
Net (Gain) / Loss of Financial Assets at Fair Value through
Profit or Loss
Net (Gain) / Loss of Financial Assets at Amortized Cost
(Income) from Reversals of Impairments / Impairments on
Financial Assets
Net (Gain) / Loss on Derivative Financial Instruments
Non Cash Effective Net Change in Financial Assets / Liabilities
from Collaborations
Non Cash Effective Change of Financial Liabilities at
Amortized Cost
(Income) from Reversals of Impairments on Inventories
Gain from Deconsolidation of Subsidiaries
Net (Gain) / Loss on Sale of Property, Plant and Equipment
Non-cash Income from Recognition of previously unrecognized
Intangible Assets
Recognition of Contract Liability
Share-based Payment
Income Tax Benefit
Changes in Operating Assets and Liabilities:
Accounts Receivable
Inventories, Prepaid Expenses and Other Assets, Tax Receivables
6.2
6.2
2.3.1
6.4
4
7.5
6.5
5.3
6.9
7.3
13,401,584
8,378,845
702,000
4,252,171
(36,551,618)
2,453,561
(13,270,968)
(379,173)
0
0
(12,500,264)
5.2.5, 8
8,955,307
(75,398,566)
5.4
6.3
(752,257)
705,952
(872,000)
(1,261,618)
0
0
0
0
79,330
0
1,035,000
121,717
0
0
0
0
(21,408)
(24,093)
0
(5,335,977)
6,654,470
(3,506,419)
(350,000)
(1,993,763)
5,584,969
(4,304,674)
(69,619,751)
2,667,232
(6,610,625)
and Other Receivables
6.4. 6.5, 6.6
(8,485,396)
(4,422,409)
545,816
Accounts Payable and Accruals, Lease Liabilities, Tax Liabilities
and Other Provisions
Other Liabilities
Contract Liability
Income Taxes Paid
7.1, 7.2
77,505,284
7.3
0
13,430,268
(303,974)
13,202,429
316,288
6,069,450
(62,560)
1,890,046
(2,718,825)
2,386,009
(33,837)
Net Cash Provided by / (Used in) Operating Activities
35,269,717
(81,070,234)
(32,781,313)
The Notes are an integral part of these consolidated financial statements.
Consolidated Statement of Cash Flows (IFRS)
Financial Statements
143
in €
Investing Activities:
Note
2020
2019
2018
Cash Payments to Acquire Financial Assets at Fair Value through
Profit or Loss
(495,970,604)
(28,305,339)
(84,511,324)
Cash Receipts from Sales of Financial Assets at Fair Value through
Profit or Loss
214,209,301
53,159,814
126,388,925
Cash Payments to Acquire Other Financial Assets at
Amortized Cost
Cash Receipts from Sales of Other Financial Assets at
Amortized Cost
Cash Receipts from (+) / Cash Payments for (–) Derivative
Financial Instruments
Cash Payments to Acquire Property, Plant and Equipment
Cash Receipts from Sales of Property, Plant and Equipment
Cash Payments to Acquire Intangible Assets
Cash Payments for Acquisitions of Shares at Fair Value through
Other Comprehensive Income
Cash Receipts from Sales of Shares at Fair Value through Other
Comprehensive Income
Cash Receipts from Sales of Subsidiaries
Interest Received
(1,249,729,925)
(246,461,961)
(366,810,000)
686,568,082
318,720,000
149,980,211
(3,855,905)
(4,455,323)
0
(44,881,207)
931,595
(488,201)
(3,103,330)
(1,820,749)
20,469
(562,314)
28,444
(644,575)
0
(15,004,996)
(9,458)
14,804,287
2,477,760
1,210,668
0
0
0
0
90,156
136,124
6.4
6.7
6.9
6.10
6.10
Net Cash Provided by / (Used in) Investing Activities
(879,622,866)
79,484,094
(177,750,603)
Financing Activities:
Cash Proceeds from Issuing Shares
Cash Payments for Costs from Issuing Shares
Cash Proceeds in Connection with Convertible Bonds Granted
to Related Parties
Cash Receipts from Financing from Collaborations
Cash Proceeds from Issuing Convertible Bonds
Cash Payments for Principal Elements of Lease Payments
Interest Paid
Net Cash Provided by / (Used in) Financing Activities
Effect of Exchange Rate Differences on Cash
Increase / (Decrease) in Cash and Cash Equivalents
Disposal of Cash and Cash Equivalents due to Deconsolidation
of Subsidiaries
Cash and Cash Equivalents at the Beginning of the Period
Cash and Cash Equivalents at the End of the Period
4, 7.6.1, 7.6.5
80,598,468
7.6.5
(100,370)
0
0
193,613,868
(15,038,362)
8.2
4
7.5
6.5
6.8
773,300
3,714,361
1,020,849
510,186,974
319,946,211
(2,786,972)
(1,431,487)
907,186,124
3,397,655
66,230,630
(750,000)
44,314,050
109,794,680
0
0
(2,349,801)
(1,011,321)
353,239
87,115
0
0
0
(134,269)
179,462,086
(59,463)
(1,145,786)
(31,129,293)
0
45,459,836
44,314,050
0
76,589,129
45,459,836
The Notes are an integral part of these consolidated financial statements.
Notes
The consolidated financial statements as of the reporting dates of De-
cember 31, 2020 and 2019, as well as the periods from January 1 through
December 31 for the years 2020, 2019 and 2018, comprise MorphoSys AG
and its subsidiaries (collectively, the “MorphoSys Group” or the “Group”).
MorphoSys AG prepares the consolidated financial statements for the
largest and the smallest consolidated 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 un-
derlying 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.
All figures in this report were rounded to the nearest euro, thousand
euros or million euros.
There was no material impact on the business, estimates and assump-
tions made or the recoverability of assets as a result of COVID-19.
Due to the market approval of Monjuvi, the corresponding amount re-
ported under the balance sheet item “In-process research and develop-
ment programs” was reclassified to the balance sheet item “License
fees for marketed products” in the financial year 2020.
In the consolidated statement of cash flows, cash inflows and outflows for
derivative financial instruments were reclassified from operating activ-
ities to investing activities due to incorrect classification. In order to
provide comparable information for the previous year, the prior-year
figures were adjusted accordingly. In financial year 2019, these were
cash receipts of € 0.9 million and in 2018 cash payments of € 0.5 million.
Unless stated otherwise, the accounting policies set out below were
applied consistently to all periods presented in these consolidated fi-
nancial statements.
Financial Statements
144
Notes
1 General Information
Business Activities and the Company
MorphoSys AG (“the Company” or “MorphoSys”) is a commercial-stage
biopharmaceutical company dedicated to the discovery, development
and commercialization of therapeutic antibodies for patients suffering
from cancer and autoimmune diseases. The Company has a propri-
etary portfolio of compounds and a 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 corpora-
tion. In March 1999, the Company completed its initial public offering
on Germany’s “Neuer Markt”: the segment of the Deutsche Börse desig-
nated, at that time, 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 MorphoSys AG
consolidated and separate financial statements can be viewed at this
address. The Company is registered in the Commercial Register B of
the District Court of Munich under the number HRB 121023.
2
Summary of Significant Accounting
Policies
Basis of and Changes in Accounting Standards
2.1
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 Report-
ing Standards Interpretations Committee (IFRS IC). We have applied
all standards and interpretations that were in force as of December 31,
2020 and adopted by the European Union (EU). As of December 31,
2020, there were no standards or interpretations that affected our con-
solidated financial statements for the years ended December 31, 2020,
2019 and 2018 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). In accor-
dance with the regulations of the United States Securities and Exchange
Commission, the statement of profit or loss is presented for a compara-
tive period of three years. This extends beyond the comparative period
of two years in accordance with the requirements of IFRS as adopted
by the EU.
Financial Statements
145
Mandatory
Application for
financial years
starting on
Adopted by
the European
Union
Possible
Impact on
MorphoSys
01/01/2020
01/01/2020
01/01/2020
01/01/2020
01/01/2020
yes
yes
yes
yes
yes
none
none
none
yes
none
Notes
2.1.2 Changes in Accounting Policies and Disclosures
The accounting principles applied generally correspond to the policies
used in the prior year.
New or Revised Standards and Interpretations Adopted for the First
Time in the Financial Year
Standard / Interpretation
IFRS 3 (A)
Business Combinations
IFRS 9, IAS 39 and IFRS 7 (A)
Interest Rate Benchmark Reform
IFRS 16 (A)
Covid 19-Related Rent Concessions
IAS 1 and IAS 8 (A)
Definition of Material
Amendments to References to the Conceptual Framework in
IFRS Standards
(A) Amendments
The effects of the amendments to IAS 1 and IAS 8 on the consolidated
financial statements are not considered material and are therefore not
individually explained.
New or Revised Standards and Interpretations Not Yet Mandatorily
Applicable
The following new or revised standards that were not yet mandatory in
the reporting period or have not yet been adopted by the European
Union, have not been applied prematurely. The effects on the consoli-
dated financial statements of standards marked with “yes” are consid-
ered probable and are currently being examined by the Group. Only
significant effects are described in more detail. The effects on the con-
solidated financial statements of the extensions to IAS 1 and IAS 8 are
not considered material and, therefore, not explained separately. Stan-
dards with the comment “none” are not expected to have a material
impact on the consolidated financial statements.
Standard / Interpretation
IFRS 3 (A)
IFRS 4 (A)
IFRS 9, IAS 39, IFRS 7,
Reference to the Conceptual Framework
Extension of the Temporary Exemption from Applying IFRS 9
IFRS 4 and IFRS 16 (A)
Interest Rate Benchmark Reform — Phase 2
IFRS 17 and IFRS 17 (A)
Insurance Contracts and Amendments to IFRS 17
IAS 1 (A)
IAS 1 (A)
IAS 8 (A)
IAS 16 (A)
IAS 37 (A)
(A) Amendments
Classification of Liabilities as Current or Non-current
Disclosure of Accounting policies
Definition of Accounting Estimates
Property, Plant and Equipment — Proceeds before Intended Use
Amended by Onerous Contracts — Cost of Fulfilling a Contract
Annual Improvements to International Financial Reporting
Standards, 2018 – 2020
Mandatory
Application for
financial years
starting on
Adopted by
the European
Union
Possible
Impact on
MorphoSys
01/01/2022
01/01/2021
01/01/2021
01/01/2023
01/01/2023
01/01/2023
01/01/2023
01/01/2022
01/01/2022
01/01/2022
no
no
yes
no
no
no
no
no
no
no
none
none
none
none
yes
yes
yes
none
none
none
Financial Statements
146
2.2 Consolidation Principles
2.2.1 Consolidated Companies and Scope of Consolidation
MorphoSys AG, as the ultimate parent company, is located in Planegg,
near Munich. MorphoSys AG has one wholly owned subsidiary,
MorphoSys US Inc. in Boston, Massachusetts, USA (collectively referred
to as the “MorphoSys Group” or the “Group”).
Effective November 16, 2020, the 100 % direct investment in Lanthio
Pharma B.V. (Groningen, the Netherlands) and the 100 % indirect in-
vestment via Lanthio Pharma B.V. in LanthioPep B.V. (Groningen, the
Netherlands) were sold. The two companies were no longer included in
MorphoSys AG’s scope of consolidation as of this date.
The consolidated financial statements as of December 31, 2020, were
prepared by the Management Board on March 11, 2021, by resolution
of the Management Board, authorized for issue, and forwarded to the
Supervisory Board for review and approval. The members of the Group’s
Management Board are Jean-Paul Kress, M.D., as Chief Executive Officer
(Chair of the Management Board), Sung Lee as Chief Financial Officer,
Malte Peters, M.D., as Chief Research and Development Officer and
Roland Wandeler, Ph.D., as Chief Operating Officer.
Markus Enzelberger, Ph.D., stepped down as a member of the Manage-
ment Board with effect from the end of February 29, 2020.
Jens Holstein stepped down as a member of the Management Board
with effect from the end of November 13, 2020. Sung Lee assumed the
position as Chief Financial Officer on February 2, 2021.
2.2.2 Consolidation Methods
The following Group subsidiary was included in the scope of consolida-
tion, as shown in the table below.
Company
MorphoSys US Inc., Boston,
Massachusetts, USA
Purchase of
Shares /
Establishment
Included in
Basis of
Consolidation
since
July 2018
07/02/2018
This subsidiary is fully consolidated as it is a direct wholly owned sub-
sidiary. MorphoSys controls the subsidiary due to its full power over the
investee. Additionally, MorphoSys is subject to risk exposure and has
rights to variable returns from its involvement with the investee.
MorphoSys also has unlimited capacity to exert power over the investee
to influence its returns.
The Group does not have any entities consolidated as joint ventures
using the equity method, nor does it exercise a controlling influence.
Notes
The assets and liabilities of the fully consolidated international entity
are recognized using Group-wide uniform accounting and valuation
methods. The consolidation methods applied have not changed from
the previous year.
Upon consolidation, the carrying amounts of the parent company’s in-
vestments in each subsidiary are offset against the parent’s share in the
equity of each subsidiary. Inter-company assets and liabilities, income
and expenses, and profits or losses arising from transactions between
Group companies are eliminated in full. The arm’s length principle was
applied to all contracts and transactions between Group companies.
2.2.3 Principles of Foreign Currency Translation
The Group’s consolidated financial statements are presented in euros,
which is also the parent company’s functional currency. For each entity,
the Group determines the functional currency. The items included in the
financial statements of each entity are measured using that functional
currency.
Transactions and Balances
Transactions in foreign currencies are initially recorded by the Group’s
entities at their respective functional currency spot rates at the date the
transaction first qualifies for recognition. Monetary assets and liabilities
denominated in foreign currencies are translated at the functional cur-
rency spot rates of exchange at the reporting date. Differences arising
on settlement or translation of monetary items relating to operating
business are recognized in other income or expenses. For monetary
items relating to investing and financing activities, differences are rec-
ognized in finance income or finance expenses.
Non-monetary items that are measured in terms of historical cost in a
foreign currency are translated using the exchange rates at the dates
of the initial transactions.
Group Companies
On consolidation, the assets and liabilities of foreign operations are
translated into euros at the rate of exchange prevailing at the reporting
date and their statements of profit or loss are translated at exchange
rates prevailing at the dates of the transactions. The exchange differ-
ences arising on translation for consolidation are recognized in “other
comprehensive income reserve” (equity).
2.3 Financial Instruments and Financial Risk
Management
2.3.1 Credit Risk and Liquidity 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 and US dollars. Financial assets at fair value,
with changes recognized in profit or loss and other financial assets at
amortized cost are high quality assets. Cash and cash equivalents, fi-
nancial assets at fair value, with changes recognized in profit or loss,
and other financial assets at amortized cost are generally held at numer-
ous reputable financial institutions in Europe and the United States.
With respect to its positions, the Group continuously monitors the finan-
cial institutions that are its counterparties to the financial instruments,
as well as their creditworthiness, and does not anticipate any risk of
non-performance.
Notes
The changes in impairment losses for credit risks (see Note 2.4*) rec-
ognized in the statement of profit or loss for the financial years 2020,
2019 and 2018 under the item impairment losses on financial assets
were determined based on the rationale that negative values represent
additions and positive values represent reversals of risk provisions.
There were no impairments in the 2020 financial year. The increase in
this allowance compared to January 1, 2020 was primarily the result of
the increase of financial assets at amortized cost for which impairment
losses are determined.
*cross-reference to page 154
Financial Statements
147
in 000’ €
Stage 1
Stage 2
Stage 3
Stage 2
Stage 3
General Impairment Model
Simplified
Impairment Model
Balance as of January 1, 2019
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, 2019
Balance as of January 1, 2020
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
(665)
445
0
(79)
0
(299)
(299)
299
(1,001)
0
0
Balance as of December 31, 2020
(1,001)
(506)
427
0
79
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(90)
90
(80)
0
0
(80)
(80)
80
(424)
0
0
(424)
0
0
0
0
0
0
0
0
0
0
0
0
Total
(1,261)
962
(80)
0
0
(379)
(379)
379
(1,425)
0
0
(1,425)
Financial Statements
148
The Group recognizes impairment losses for default risks for financial
assets as follows:
Notes
Balance Sheet Item as of
December 31, 2020
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
Impairment
Rate
Cash and Cash Equivalents
Other Financial Assets at
Amortized Cost
low
low
Expected
Twelve-Month
Loss
109,797
(2)
109,795
0.0 %
Expected
Twelve-Month
Loss
847,300
(999)
846,301
Lifetime Expected
Accounts Receivable
low
Credit Losses
83,778
(424)
83,354
Balance Sheet Item as of
December 31, 2019
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
Impairment
Rate
Cash and Cash Equivalents
Other Financial Assets at
Amortized Cost
low
low
Expected
Twelve-Month
Loss
44,314
0
44,314
0.0 %
Expected
Twelve-Month
Loss
293,958
(299)
293,659
Lifetime Expected
Accounts Receivable
low
Credit Losses
15,162
(80)
15,082
0.1 %
0.5 %
0.1 %
0.5 %
The Group is also exposed to credit risk from debt instruments that are
measured at fair value in profit or loss. This includes the items “Finan-
cial Assets at Fair Value through Profit or Loss” and “Financial Assets
from Collaborations”. As of December 31, 2020, the maximum credit
risk corresponded to the carrying amounts of these items amounting
to € 330.8 million (December 31, 2019: € 20.5 million).
One of the Group’s policies requires that all customers who wish to
transact business on credit undergo a credit assessment based on exter-
nal ratings. Nevertheless, the Group’s revenue and accounts receivable
are still subject to credit risk from customer concentration. The Group’s
single most significant customer accounted for € 50.1 million of ac-
counts receivables as of December 31, 2020 (December 31, 2019:
€ 8.0 million), or 60 % of the Group’s total accounts receivable at the end
of 2020. The Group’s top three customers individually accounted for
78 %, 14 % and 1 % of the total revenue in 2020.
As of December 31, 2019, 53 % of the Group’s accounts receivable balance
related to a single customer; of the total revenue in 2019, three custom-
ers individually accounted for 45 %, 31 % and 13 %.
On December 31, 2018, one customer had accounted for 33 % of the
Group’s accounts receivable, and the top three customers in 2018 indi-
vidually accounted for 65 %, 25 % and 5 % of the Group’s revenue.
The table below shows the accounts receivables by region as of the
reporting date.
in €
12/31/2020
12/31/2019
Europe and Asia
USA and Canada
Other
Impairment
Total
4,451,611
79,326,304
0
6,984,944
8,176,758
0
(423,639)
(80,000)
83,354,276
15,081,702
On December 31, 2020 and December 31, 2019, the Group’s exposure to
credit risk from derivative financial instruments was assessed as low.
The maximum credit risk (equal to the carrying amount) for rent depos-
its and other deposits on the reporting date amounted to € 1.4 million
(December 31, 2019: € 1.0 million).
Notes
The following table shows the contractual cash flows of financial liabil-
ities as of the reporting date.
Financial Statements
149
in €; due in
Trade Accounts Payable
Convertible Bonds
Financial Liabilities from Collaborations
in €; due in
12/31/2020
Less than
One Year
12/31/2020
Between One
and Five Years
12/31/2020
More than
Five Years
47,558,635
2,031,250
161,250
0
333,125,000
180,346,823
0
0
529,337,547
12/31/2020
Total
47,558,635
335,156,250
709,845,620
12/31/2019
Less than
One Year
12/31/2019
Between One
and Five Years
12/31/2019
More than
Five Years
12/31/2019
Total
Trade Accounts Payable
Convertible Bonds due to Related Parties
10,655,014
12,324
0
0
0
0
10,655,014
12,324
Financial assets and financial liabilities were not netted as of Decem-
ber 31, 2020. Currently, there is no legal right to offset amounts recog-
nized, to settle on a net basis, or to realize an asset and settle a liability
simultaneously. There were no financial instruments pledged as collat-
eral as of December 31, 2020.
2.3.2 Market 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.
Currency Risk
The consolidated financial statements are prepared in euros. Both rev-
enues and expenses of the Group are incurred in euros and US dollars.
Throughout the year, the Group monitors the necessity to hedge for-
eign exchange rates to minimize currency risk and addresses this risk
by using derivative financial instruments.
In accordance with the Group’s hedging policy, highly probable cash
flows and definite 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 derivatives with a positive fair value, unrealized gains are re-
corded in other receivables and for derivatives with a negative fair
value, unrealized losses are recorded in other liabilities.
As of December 31, 2020, there was no unsettled foreign exchange for-
ward agreement (December 31, 2019: one unsettled foreign exchange
forward agreement; December 31, 2018: nine unsettled foreign ex-
change forward agreements). The unrealized gross gains in prior
years from foreign exchange forward agreements were recorded in the
finance result in the respective years (December 31, 2019: € 0.4 mil-
lion; December 31, 2018: € 0.1 million).
Financial Statements
150
The Group’s exposure to foreign currency risk based on the carrying
amounts of the items is shown in the table below.
Notes
as of December 31, 2020; in €
US$
Other
Cash and Cash Equivalents
Financial Assets at Fair Value through Profit or Loss
Other Financial Assets at Amortized Cost
Accounts Receivable
Financial Assets from Collaborations
Restricted Cash (included in Other Assets, Net of Current Portion)
Accounts Payable and Accruals
Financial Liabilities from Collaborations
Total
76,581,756
115,134,211
57,326,015
28,455,909
42,870,499
712,891
(51,436,436)
(516,505,855)
(246,861,010)
0
0
0
0
0
0
(52,305)
0
(52,305)
as of December 31, 2019; in €
US$
Other
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 Assets, Net of Current Portion)
Accounts Payable and Accruals
Gesamt
Different foreign exchange rates and their impact on assets and liabil-
ities were simulated in a sensitivity analysis to determine the effects
on profit or loss. A 10 % increase in the euro versus the US dollar as of
December 31, 2020, would have reduced the consolidated net profit by
€ 82.9 million. A 10 % decline in the euro versus the US dollar would
have increased the consolidated net profit by € 96.2 million.
A 10 % increase in the euro versus the US dollar as of December 31,
2019, would have increased the consolidated net loss by € 6.7 million.
A 10 % decline in the euro versus the US dollar would have reduced the
consolidated net loss by € 7.9 million.
A 10 % increase in the euro versus the US dollar as of December 31,
2018, would have increased the consolidated net loss by € 1.4 million.
A 10 % decline in the euro versus the US dollar would have reduced the
consolidated net loss by € 1.7 million.
Interest Rate Risk
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 and the ability to plan future cash flows.
Interest rate risks are limited because all securities can be liquidated
within a maximum of two years and due to the partially fixed interest
rates during the term in order to ensure that planning is possible. In
addition, changes in interest rates may affect the fair value of financial
assets from collaborations.
17,913,455
16,221,808
41,756,008
978,368
289,537
(4,910,130)
72,249,046
0
0
0
0
0
(5,662)
(5,662)
Different interest rates and their effect on existing investments with
variable interest rates and on financial assets from collaborations were
simulated in a sensitivity analysis in order to determine the effect on
profit or loss. An increase of the variable interest rate by 0.5 % would
have increased the consolidated net profit by € 1.2 million as of Decem-
ber 31, 2020 (December 31, 2019: reduction of consolidated net loss by
€ 0.3 million; December 31, 2018: reduction of consolidated net loss by
€ 0.4 million). A decrease of the variable interest rate by 0.5 % would
have decreased the consolidated net profit by € 1.4 million as of Decem-
ber 31, 2020 (December 31, 2019: increase of consolidated net loss by
€ 0.3 million; December 31, 2018: increase consolidated net loss by
€ 0.1 million).
The Group is not subject to significant interest rate risks from the lia-
bilities currently reported on the balance sheet.
2.3.3 Fair Value Hierarchy and Measurement Methods
The fair value is the price that would be achieved for the sale of an asset
in an arm’s length transaction between independent market partici-
pants or the price to be paid for the transfer of a liability (disposal or
exit price). Measurement 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.
Notes
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 liabilities
is permitted but not required if those prices best reflect the fair value
in the respective circumstances. For simplification, mean rates are also
permitted. This 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.
Hierarchy Level 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
Note 6.2*).
*cross-reference to page 179
Hierarchy Levels 2 and 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.
Financial Statements
151
Hierarchy Level 2 contains foreign exchange forward agreements to
hedge exchange rate fluctuations, term deposits and the convertible
bonds. Future cash flows for these foreign exchange forward agree-
ments 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 expected cash flows at market interest rates. The fair
value of the convertible bonds was determined by calculating the pres-
ent value of all cash flows associated with the liability using the appli-
cable reference interest rate with an adjustment to reflect MorphoSys’s
credit risk premium.
Hierarchy Level 3 financial assets comprise investments at fair value,
with changes recognized directly in equity, as well as financial assets
and financial liabilities from collaborations. The underlying valuations
are generally carried out by employees in the finance department who
report directly to the Chief Financial Officer. The valuation process and
results are reviewed and discussed among the persons involved on a
regular basis. To determine the fair value of financial assets from col-
laborations, expected cash inflows from Incyte’s planned losses result-
ing from the co-promotion activities of Monjuvi in the USA are dis-
counted using market interest rates of financial instruments with
comparable currencies and maturities, taking into account Incyte’s
credit risk. In order to determine the fair value of the financial liabili-
ties from collaborations for disclosure purposes (these are accounted
for at amortized cost using the effective interest method as described
in Note 4*), expected cash outflows from the planned profits to Incyte
resulting from the co-promotion activities of Monjuvi in the USA are
discounted using market interest rates of financial instruments with
comparable currencies and maturities, taking into account the credit
risk of MorphoSys. The cash inflows and outflows represent estimates of
future revenues and costs from the co-promotion activities of Monjuvi
in the USA and are subject to significant discretion. These estimates are
based on assumptions that are jointly arrived at and approved of twice
each year by the responsible departments at MorphoSys and Incyte.
Financial assets and financial liabilities from collaborations are fur-
thermore subject to significant uncertainties from currency exchange
rate developments.
*cross-reference to page 170
Hierarchy Level 3 financial assets are presented in Notes 4* and 6.10*
of the notes to the consolidated financial statements. Hierarchy Level 3
financial liabilities are presented in Note 4*.
*cross-reference to page 170 and page 185
Reclassifications between the hierarchy levels are generally taken into
account as of the reporting dates; however, no transfers were made
between the fair value hierarchy levels in 2020 or 2019.
Financial Statements
152
The table below shows the fair values of financial assets and liabilities
and the carrying amounts presented in the consolidated balance sheet.
Notes
December 31, 2020; in 000’ €
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
Cash and Cash Equivalents
Financial Assets at Fair Value through Profit or Loss
Other Financial Assets at Amortized Cost
Accounts Receivable
Financial Assets from Collaborations
Other Receivables
Current Financial Assets
Other Financial Assets at Amortized Cost, Net of Current Portion
Prepaid Expenses and Other Assets, Net of Current Portion
thereof Non-Financial Assets
thereof Restricted Cash
Non-current Financial Assets
Total
Accounts Payable and Accruals
Current Portion of Lease Liabilities
Current Portion of Convertible Bond
Current Portion of Financial Liabilities from Collaborations
Current Financial Liabilities
Lease Liabilities, Net of Current Portion
Convertible Bond, Net of Current Portion
Financial Liabilities from Collaborations, Net of Current Portion
Non-current Financial Liabilities
Total
6.1
6.2
6.2
6.3
4
6.2
6.12
7.1
6.8
7.5
6.8
7.5
4
*
1
*
*
3
*
2
n/a
2
*
n/a
2
n/a
2
3
0
0
0
0
0
0
0
0
183
0
183
183
0
(3,056)
0
0
(3,056)
(41,964)
0
0
(41,964)
(45,020)
109,795
0
649,713
83,354
0
2,159
845,021
196,588
0
1,384
197,972
1,042,993
0
0
0
0
0
0
0
0
0
0
* Declaration waived in line with IFRS 7.29 (a). For these instruments the carrying amount is a reasonable approximation of fair value.
** Declaration waived in line with IFRS 7.29 (d) as disclosure is not required for lease liabilities.
287,938
42,870
330,808
330,808
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
(128,554)
(423)
(155)
(129,132)
(272,760)
(516,351)
(789,111)
(918,243)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
109,795
287,938
649,713
83,354
42,870
2,159
1,175,829
196,588
1,567
183
1,384
198,155
1,373,985
(128,554)
(3,056)
(423)
(155)
(132,188)
(41,964)
(272,760)
(516,351)
(831,075)
(963,263)
287,938
42,870
197,749
n/a
1,384
*
*
*
*
**
*
*
*
**
(334,124)
(617,178)
December 31, 2020; in 000’ €
Note Hierarchy Level
Category
Cost
Cash and Cash Equivalents
Financial Assets at Fair Value through Profit or Loss
Other Financial Assets at Amortized Cost
Accounts Receivable
Financial Assets from Collaborations
Other Receivables
Current Financial Assets
Other Financial Assets at Amortized Cost, Net of Current Portion
Prepaid Expenses and Other Assets, Net of Current Portion
thereof Non-Financial Assets
thereof Restricted Cash
Non-current Financial Assets
Total
Accounts Payable and Accruals
Current Portion of Lease Liabilities
Current Portion of Convertible Bond
Current Financial Liabilities
Lease Liabilities, Net of Current Portion
Convertible Bond, Net of Current Portion
Non-current Financial Liabilities
Total
Current Portion of Financial Liabilities from Collaborations
Financial Liabilities from Collaborations, Net of Current Portion
Not classified
into a
Financial Assets
Measurement
at Amortized
0
0
0
0
0
0
0
0
0
0
0
0
0
183
0
183
183
(3,056)
(41,964)
(41,964)
(45,020)
109,795
649,713
83,354
0
0
2,159
845,021
196,588
0
1,384
197,972
1,042,993
0
0
0
0
0
0
0
0
0
0
*
1
*
*
3
*
2
2
*
2
2
3
n/a
n/a
n/a
(3,056)
6.1
6.2
6.2
6.3
4
6.2
6.12
7.1
6.8
7.5
6.8
7.5
4
* Declaration waived in line with IFRS 7.29 (a). For these instruments the carrying amount is a reasonable approximation of fair value.
** Declaration waived in line with IFRS 7.29 (d) as disclosure is not required for lease liabilities.
Notes
Financial Statements
153
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
0
287,938
0
0
42,870
0
330,808
0
0
0
0
330,808
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
(128,554)
0
(423)
(155)
(129,132)
0
(272,760)
(516,351)
(789,111)
(918,243)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
109,795
287,938
649,713
83,354
42,870
2,159
1,175,829
196,588
1,567
183
1,384
198,155
1,373,985
(128,554)
(3,056)
(423)
(155)
(132,188)
(41,964)
(272,760)
(516,351)
(831,075)
(963,263)
*
287,938
*
*
42,870
*
197,749
n/a
1,384
*
**
*
*
**
(334,124)
(617,178)
Financial Statements
154
December 31, 2019; in 000’ €
Note Hierarchy Level
Notes
Not classified
into a
Measurement
Category
Financial Assets
at Amortized
Cost
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 Financial Assets
Other Financial Assets at Amortized Cost, Net of Current Portion
Shares at Fair Value through Other Comprehensive Income
thereof Shares at Level 1
thereof Shares at Level 3
Prepaid Expenses and Other Assets, Net of Current Portion
thereof Non-Financial Assets
thereof Restricted Cash
Non-current Financial Assets
Total
Accounts Payable and Accruals
Current Portion of Lease Liabilities
Convertible Bonds - Liability Component
Current Financial Liabilities
Lease Liabilities, Net of Current Portion
Non-current Financial Liabilities
Total
6.1
6.2
6.2
6.3
6.4
6.2
6.9
6.10
7.1
6.7
6.7
*
1
*
*
*
2
2
1
3
n/a
2
*
n/a
2
n/a
0
0
0
0
0
0
0
0
0
0
147
0
147
147
0
(2,515)
0
(2,515)
(40,042)
(40,042)
(42,557)
44,314
0
207,735
15,082
1,217
0
268,348
84,922
0
0
0
989
85,911
354,259
0
0
0
0
0
0
0
* Declaration waived in line with IFRS 7.29 (a). For these instruments the carrying amount is a reasonable approximation of fair value.
** Declaration waived in line with IFRS 7.29 (d) as disclosure is not required for lease liabilities.
Impairment
2.4
2.4.1 Financial Instruments According to General
Expected Credit Loss Model
The Group assesses on a forward-looking basis the expected credit
losses associated with its debt instruments carried at amortized cost
(term deposits with fixed and variable interest rates and bonds). The
impairment method applied depends on whether there has been a sig-
nificant 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). Where the expected lifetime of an asset is less than twelve
months, expected losses are measured at its expected lifetime. Expected
credit losses are based on the contractual cash flows multiplied by the
premium of a credit default swap according to the expected maturity of
the contracting party (Level 1). In case the credit risk of a financial in-
strument has increased significantly since initial recognition, the Group
measures impairment for that financial 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 when the
premium on a counterparty credit default swap has increased by 100
basis points since the initial recognition of the instrument (Level 2). If
there is an objective indication of impairment, the interest received
must also be adjusted so that the interest as of this date is accrued
based on 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 there is objective evidence of
this. This is usually assumed to be the case when financial instruments
are more than two years overdue. Impairment of financial instruments
is recognized under impairment losses on financial assets.
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
20,455
396
20,851
20,851
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
13,690
387
14,077
14,077
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(57,042)
(57,042)
(12)
0
(12)
(57,054)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
44,314
20,455
207,735
15,082
1,613
1,217
396
289,199
84,922
14,077
13,690
387
1,136
147
989
100,135
389,334
(57,042)
(2,515)
(12)
(59,569)
(40,042)
(40,042)
(99,611)
20,455
*
*
*
*
396
84,922
13,690
387
n/a
989
*
**
(12)
**
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 Financial Assets
thereof Shares at Level 1
thereof Shares at Level 3
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 Financial Assets
Total
Accounts Payable and Accruals
Current Portion of Lease Liabilities
Convertible Bonds - Liability Component
Current Financial Liabilities
Lease Liabilities, Net of Current Portion
Non-current Financial Liabilities
Total
6.1
6.2
6.2
6.3
6.4
6.2
6.9
6.10
7.1
6.7
6.7
*
1
*
*
*
2
2
1
3
2
*
2
n/a
n/a
n/a
0
0
0
0
0
0
0
0
0
0
147
0
147
147
0
0
(2,515)
(2,515)
(40,042)
(40,042)
(42,557)
Cost
44,314
0
207,735
15,082
1,217
0
268,348
84,922
989
85,911
354,259
0
0
0
0
0
0
0
0
0
0
* Declaration waived in line with IFRS 7.29 (a). For these instruments the carrying amount is a reasonable approximation of fair value.
** Declaration waived in line with IFRS 7.29 (d) as disclosure is not required for lease liabilities.
December 31, 2019; in 000’ €
Note Hierarchy Level
Category
Not classified
into a
Financial Assets
Measurement
at Amortized
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
Financial Statements
155
0
20,455
0
0
0
396
20,851
0
0
0
0
0
0
20,851
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
13,690
387
0
0
14,077
14,077
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(57,042)
0
(12)
(57,042)
0
(12)
(57,054)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
44,314
20,455
207,735
15,082
1,613
1,217
396
289,199
84,922
14,077
13,690
387
1,136
147
989
100,135
389,334
(57,042)
(2,515)
(12)
(59,569)
(40,042)
(40,042)
(99,611)
*
20,455
*
*
*
396
84,922
13,690
387
n/a
989
*
**
(12)
**
2.4.2 Financial Instruments According to Simplified
Expected Credit Loss Model
In the case of accounts receivable, the Group applies the simplified
approach, which requires expected lifetime losses to be recognized
from the initial recognition of the receivables (Level 2). In the event of
objective indications of an impairment of accounts receivable, the ex-
pected loss must be calculated as the difference between the gross
carrying amount and the present value of the expected cash flows dis-
counted 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 with similar
credit risk profiles. The impairment 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 recognized under other expenses. This is usually assumed to be
the case when accounts receivable are more than two years overdue. If,
in subsequent periods, amounts are received that were previously im-
paired, these amounts are recognized in other income.
Financial Statements
156
2.4.3 Non-Financial Assets
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 the inventory’s
net realizable value are 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 determined on an interim basis, if required. Impairment
is recognized 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 the cost 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 impairment
as part of the impairment testing of the CGU that was allocated the
corporate asset.
Impairment losses are recognized in profit or loss. Goodwill impairment
cannot be reversed. For all other assets, the 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.
Notes
2.5 Additional Information
2.5.1 Key Estimates and Assumptions
Estimates and assumptions are continually evaluated and based on
historical experience and other factors, including the expectation 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 carrying
amounts of assets and liabilities in the next financial year are ad-
dressed below.
Revenues
Revenues from product sales, license fees, milestones, royalties and
contracts with multiple performance obligations are subject to as-
sumptions regarding variable consideration components, probabilities
of occurrence and individual selling prices within the scope of the ac-
counting and measurement principles explained in Note 2.7.1*. Accru-
als in connection with revenues products sales are also affected by
estimates and assumptions.
*cross-reference to page 158
Financial Assets
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 select-
ing the inputs to calculate the impairment based on past experience,
current market conditions and forward-looking estimates at the end of
each reporting period.
Financial Assets and Liabilities from Collaborations
For details on estimates and assumptions in connection with financial
assets and liabilities from collaborations refer to note 4*.
*cross-reference to page 170
Leases
In determining the lease term, all facts and circumstances are consid-
ered that create an economic incentive to exercise an extension option.
Extension options are only included in the lease term if the lease is
reasonably certain to be extended.
In-Process R&D Programs and Goodwill
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 Note 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 subjected to a
sensitivity analysis. These calculations require the use of estimates
(see Note 6.9*).
*cross-reference to page 156 and page 183
Notes
Financial Statements
157
Convertible Bond
The convertible bond is to be separated in a liability and an equity
component. The amount allocated to the equity component was calcu-
lated by using a Black-Scholes valuation model. A Monte-Carlo simu-
lation was used in order to determine the liability component. It was
assessed that all cash flows associated with the liability component
should be discounted by using a yield curve subject to default risk. All
parameters necessary for the valuation are market observable, except
for the risk premium included in MorphoSys’ default risk. The risk pre-
mium (assumed to be constant over the term) was calibrated in the
manner that the value of the convertible bond in the model corresponds
to the nominal value of the bond in the amount of € 325.0 million.
Income Taxes
Income taxes comprise taxes levied in the individual countries on tax-
able profit and changes in deferred taxes. The income taxes reported
are recognized on the basis of the statutory regulations in force or en-
acted as of the reporting date in the amount in which they are expected
to be paid or refunded. Deferred taxes are recognized for tax-deduct-
ible or temporary taxable differences between the carrying amounts of
assets and liabilities in the IFRS balance sheet and the tax base, as
well as for tax effects arising from consolidation measures and tax re-
duction claims arising from loss carryforwards that are likely to be
realized in subsequent years. Goodwill is excluded.
The assessment of the recoverability of deferred tax assets considers
the currently achieved total results of a legal entity as well as the ex-
pected future taxable results, derived from the corporate planning.
The recognition of deferred tax assets on tax loss carryforwards re-
quires management to make estimates and judgments about the amount
of future taxable profit available against which the tax loss carryfor-
wards can be utilized. Deferred tax assets on loss carryforwards are
only recognized to the extent that sufficient taxable income is expected
in the future.
Uncertain tax positions are analyzed on an ongoing basis and, if taxes
are sufficiently probable, risk provisions are recognized in an appro-
priate amount in each case. Uncertainties arise, among other things,
from matters that are being discussed in ongoing tax audits but have not
yet resulted in final findings or are under discussion due to disputed
legal situations or new case law.
As the estimates can change over time, for example, as a result of find-
ings in the course of the tax audit or current case law, there will also be
a corresponding effect on the amount of the required assessment of the
risk provision. The amount of the expected tax liability or tax receiv-
able reflects the amount representing the best estimate or the expected
value, taking into account any existing tax uncertainties.
2.5.2 Capital Management
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, 2020, the equity ratio
was 37.4 % (December 31, 2019: 79.5 %; see also the following over-
view). The equity ratio decreased mainly due to the initial recognition
of the financial liabilities from collaborations from the collaboration
and license agreement with Incyte as well as the convertible bond.
in 000’ €
12/31/2020
12/31/2019
Stockholders’ Equity
In % of Total Capital
Total Liabilities
In % of Total Capital
Total Capital
621,322
37.4 %
1,038,191
62.6 %
1,659,513
394,702
79.5 %
101,738
20.5 %
496,439
The Management Board and employees can participate in the Group’s
performance through long-term, performance-related remuneration
components. These components consist of convertible bonds issued in
2013 and stock option plans (SOP) granted to the Management Board
and certain employees of MorphoSys AG in 2017, 2018, 2019 and 2020,
in accordance with the bonus system approved by the Annual General
Meeting. In addition, MorphoSys established a Long-Term Incentive
Plan (LTI Plan) in 2016, 2017, 2018 and 2019, as well as a performance
share unit program (PSU program) in 2020 for the Management Board
and certain employees of MorphoSys AG. In 2019 and 2020, MorphoSys
established long-term incentive programs (Long-Term Incentive Plan
– LTI Plan and Restricted Stock Unit Plan – RSU Plan) for certain em-
ployees of MorphoSys US Inc. In 2020, MorphoSys also established a
long-term cash incentive plan (CLTI plan) for certain employees of
MorphoSys US Inc. These LTI Plans are based on the performance-re-
lated issuance of shares (“performance shares” and shares still to be
created from authorized capital under the RSU plans), which are finally
allocated upon achievement of specific predefined performance criteria
and after the expiration of the vesting period (see Notes 8.3* and 8.6*).
The PSU program and CLTI plan are settled in cash upon achievement
of certain predefined performance criteria and the expiration of the
vesting period.
*cross-reference to page 192 and page 197
There are no liabilities to banks. During the financial year, the Group
made changes to its capital management by reflecting the financial li-
abilities from collaborations from the collaboration and license agree-
ment with Incyte as well as from the issuance of the convertible bond.
For the assessment of the impairment of deferred tax assets, the plan-
ning assumptions are influenced by key estimates and mainly include
the Company’s profit forecasts for the period up to 2039.
Following overview contains the presentation and development of net
liabilities. “Other Changes” include non-cash movements, including
accrued interest expense, which are presented in operating activities
in the cash flow statement.
45,460
79,837
0
87
(81,070)
44,314
44,314
26,813
3,398
0
0
35,270
109,795
44,581
(24,854)
0
(24)
752
20,455
20,455
281,761
(877)
0
0
(13,402)
287,938
0
0
0
0
0
0
0
0
0
32,413
(5,549)
16,007
42,870
Total
49,258
58,263
(4,122)
63
(81,250)
22,212
22,212
(517,640)
(5,286)
63,350
49,217
(5,958)
(394,105)
Financial Statements
158
Notes
in 000’ €
Lease Liabilities
Financial
Liabilities from
Collaborations
Convertible
Bonds
Sub-Total
Cash and Cash
Fair Value through
Financial Assets at
Financial
Assets from
Equivalents
Profit or Loss
Collaborations
Balance as of January 1, 2019
Cash Flows
New Leases
Exchange differences
Other Changes
Balance as of December 31, 2019
Balance as of January 1, 2020
Cash Flows
New Leases
Exchange differences
Changes recognized in Equity
Other Changes
Balance as of December 31, 2020
(40,783)
3,280
(4,122)
0
(932)
(42,557)
(42,557)
3,918
(5,286)
0
0
(1,094)
(45,019)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(542,599)
(319,946)
0
66,379
0
(40,285)
(516,506)
0
0
49,217
(2,454)
(273,183)
(40,783)
3,280
(4,122)
0
(932)
(42,557)
(42,557)
(858,627)
(5,286)
66,379
49,217
(43,833)
(834,708)
2.6 Use of Interest Rates for Measurement
The Group uses maturity-specific and credit risk adjusted interest
rates to measure fair value. When calculating share-based payments,
MorphoSys uses the interest rate on four-year German government
bonds on the date the share-based payment was granted.
2.7 Accounting Policies Applied to Line Items of
the Statement of Profit or Loss
2.7.1 Revenues and Revenue Recognition
Recognizing revenue from contracts with customers requires the fol-
lowing 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 revenue from product sales, li-
cense fees, milestone payments, service fees, and royalties.
Revenues from Product Sales
Revenues from the sale of MorphoSys products are recognized at the
transaction price at the time the customer obtains control of the product
(defined as the point at which the customer receives the product). As a
result, revenues are recognized based on a specific point in time. The
transaction price represents the consideration expected by MorphoSys
in exchange for the product and takes into account variable components.
The variable consideration is only included in the transaction price if it
is highly probable that there will not be a subsequent material adjust-
ment to the transaction price.
The most common elements of variable consideration related to product
sales at MorphoSys are listed below and are determined according to
the expected value approach.
• Rebates and discounts agreed with government agencies, buying
groups, specialty distributors and specialty pharmacies are accrued
and deducted from revenues at the time the related revenues are
recognized. They are calculated based on actual discounts and re-
bates granted, specific regulatory requirements, specific terms in
individual agreements, product pricing and/or the anticipated sales
channel mix. Because the Company recognizes revenue upon trans-
fer of control of the product to specialty distributors and specialty
pharmacies, and not upon transfer to the end-user (patient), for cer-
tain rebates the Company is required to estimate of the mix of prod-
uct sales between its sales channels in determining the amount of
rebate that will ultimately be paid.
• Discounts offered to customers are intended to encourage prompt
payment and are deferred and recognized as revenue deductions at
the time the related revenues are recognized.
• Accruals for product returns are recognized as revenue deductions
at the time the corresponding revenues are recognized.
Variable consideration is deducted from trade receivables, in case
these are directly paid to the direct customer. In case payments are to
be made to another party, these are presented as accruals. Accruals for
revenue deductions are adjusted to the actual amounts when rebates
and discounts and cash discounts are realized. The accruals represent
estimates of the related obligations, meaning that management’s judg-
ment is required in estimating the impact of these revenue deductions.
Notes
Financial Statements
159
in 000’ €
Lease Liabilities
Financial
Liabilities from
Collaborations
Convertible
Bonds
Sub-Total
Cash and Cash
Equivalents
Financial Assets at
Fair Value through
Profit or Loss
Financial
Assets from
Collaborations
Balance as of January 1, 2019
Cash Flows
New Leases
Exchange differences
Other Changes
Balance as of December 31, 2019
Balance as of January 1, 2020
Cash Flows
New Leases
Exchange differences
Changes recognized in Equity
Other Changes
Balance as of December 31, 2020
(40,783)
3,280
(4,122)
0
(932)
(42,557)
(42,557)
3,918
(5,286)
0
0
(1,094)
(45,019)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(40,783)
3,280
(4,122)
0
(932)
(42,557)
(42,557)
(858,627)
(5,286)
66,379
49,217
(43,833)
(834,708)
(542,599)
(319,946)
66,379
(40,285)
(516,506)
49,217
(2,454)
(273,183)
45,460
79,837
0
87
(81,070)
44,314
44,314
26,813
0
3,398
0
35,270
109,795
44,581
(24,854)
0
(24)
752
20,455
20,455
281,761
0
(877)
0
(13,402)
287,938
0
0
0
0
0
0
0
32,413
0
(5,549)
0
16,007
42,870
Total
49,258
58,263
(4,122)
63
(81,250)
22,212
22,212
(517,640)
(5,286)
63,350
49,217
(5,958)
(394,105)
2.6 Use of Interest Rates for Measurement
The Group uses maturity-specific and credit risk adjusted interest
rates to measure fair value. When calculating share-based payments,
MorphoSys uses the interest rate on four-year German government
bonds on the date the share-based payment was granted.
2.7 Accounting Policies Applied to Line Items of
the Statement of Profit or Loss
2.7.1 Revenues and Revenue Recognition
Recognizing revenue from contracts with customers requires the fol-
lowing 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 revenue from product sales, li-
cense fees, milestone payments, service fees, and royalties.
Revenues from Product Sales
Revenues from the sale of MorphoSys products are recognized at the
transaction price at the time the customer obtains control of the product
(defined as the point at which the customer receives the product). As a
result, revenues are recognized based on a specific point in time. The
transaction price represents the consideration expected by MorphoSys
in exchange for the product and takes into account variable components.
The variable consideration is only included in the transaction price if it
is highly probable that there will not be a subsequent material adjust-
ment to the transaction price.
License Fees and Milestone Payments
The Group recognizes revenues from license fees for intellectual prop-
erty (IP) both at a point in time and over a period of time. The Group
must make an assessment as to whether such a license represents a
right-to-use the IP (at a point in time) or a right to access the IP (over
time). Revenue for a right-to-use license is recognized by the Group
when the licensee can use and benefit from the IP after the license term
begins, e.g., the Group has no further obligations in the context of the
out-licensing of a drug candidate or technology. A license is considered
a right to access the intellectual property when the Group undertakes
activities during the license term that significantly affect the IP, 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. Revenues from the right to access the IP are
recognized on a straight-line basis over the license term.
Milestone payments for research and development are contingent upon
the occurrence of a future event and represent variable consideration.
The Group’s management estimates at the contract’s inception that the
most likely amount for milestone payments is zero. The most likely
amount method of estimation is considered the most predictive for the
outcome since the outcome is binary; for example, achieving a specific
success in clinical development (or not). The Group includes milestone
payments in the total transaction price only to the extent that it is
highly probable that a significant reversal of accumulated revenue will
not occur when the uncertainty associated with the variable consider-
ation is subsequently resolved.
Sales-based milestone payments included in contracts for IP licenses are
considered by the Group to be sales-based license fees because they
are solely determined by the sales of an approved drug. Accordingly,
such milestones are recognized as revenue once the sales of such
drugs occur or at a later point if the performance obligation has not
been fulfilled.
Service Fees
Service fees for the assignment of personnel to research and develop-
ment collaborations are recognized as revenues in the period the ser-
vices were provided. If a Group company acts as an agent, revenues are
recognized on a net basis.
Royalties
Revenue recognition for royalties (income based on a percentage of
sales of a marketed product) is based on the same revenue recognition
principles that apply to sales-based milestones, as described above.
Agreements with Multiple Performance Obligations
A Group company may enter into agreements with multiple perfor-
mance obligations that include both licenses and services. In such
cases, an assessment must be made as to whether the license is dis-
tinct from the services (or other performance obligations) provided
under the same agreement. The transaction price is allocated to sepa-
rate performance obligations based on the relative stand-alone selling
price of the performance obligations in the agreement. The Group com-
pany estimates stand-alone selling prices for goods and services not
sold separately on the basis of comparable transactions with other
customers. The residual approach is the method used to estimate a
stand-alone selling price when the selling price for a good or service is
highly variable or uncertain.
Principle-Agent Relationships
In agreements involving two or more independent parties who con-
tribute to the provision of a specific good or service to a customer, the
Group company assesses whether it has promised to provide the spe-
cific good or service itself (the company acting as a principal) or to ar-
range for this specific good or service to be provided by another party
(the company acting as an agent). Depending on the result of this as-
sessment, the Group company recognizes revenues on a gross (princi-
pal) 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
Financial Statements
160
specified good or service before it is transferred to the customer. Indi-
cators 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; obtaining the legal
title to a good or service only momentarily before it is transferred to
the customer does not necessarily indicate that a Group company is a
principal. Generally, an assessment as to whether a Group company is
acting as a principal or an agent in a transaction requires a consider-
able degree of judgment.
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 because the contract
parties share equally in the risk of co-developing a drug and in the
future profits from the marketing of the approved drug.
2.7.2 Operating Expenses
Operating expenses are allocated to the functional costs on the basis of
cost centers or percentage allocation keys.
Cost of Sales
The cost of sales includes the acquisition and production cost of inven-
tories recognized as an expense, personnel expenses, inventory write-
downs, reversals of inventory write-downs, operating costs, impair-
ments and scheduled depreciation and other expenses for intangible
assets as well as costs for external services. Cost of sales are recog-
nized as an expense as incurred.
Research and Development Expenses
Research costs are expensed in the period in which they occur. Devel-
opment costs are generally expensed as incurred. Development costs
are recognized as an intangible asset when the criteria such as the
probability of expected future economic benefits, as well as the reli-
ability of cost measurement, are met.
This line item contains personnel expenses, consumable supplies,
other operating expenses, impairment charges, impairment reversals,
amortization and other costs related to intangible assets (additional
information can be found in Note 6.9*), costs for external services, in-
frastructure costs and depreciation.
*cross-reference to page 183
Selling Expenses
The line item includes personnel costs, consumable supplies, operating
costs, amortization of intangible assets (software; additional information
can be found in Note 6.9*), costs for external services, infrastructure
costs and depreciation. This item also includes all expenses for services
provided by Incyte in connection with the joint US sales activities.
*cross-reference to page 183
Notes
General and Administrative Expenses
The line item includes personnel costs, consumable supplies, operating
costs, amortization of intangible assets (software; additional information
can be found in Note 6.9*), costs for external services, infrastructure
costs and depreciation.
*cross-reference to page 183
Personnel Expenses from Stock Options
The Group spreads the 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 that triggered the grant-
ing of the share-based payments. Personnel expense is recognized in
the respective functional area to which the beneficiary is allocated.
Share-based compensation is considered when the Group acquires
goods or services in exchange for shares or stock options (“settlement
in equity instruments”) or other assets that represent the value of a
specific number of shares or stock options (“cash settlement”). Addi-
tional information can be found in Notes 8.1* through 8.7*.
*cross-reference to page 189 and page 199
Operating Lease Payments
Through December 31, 2018, payments made within the scope of oper-
ating leases were recognized in profit or loss on a straight-line basis
over the term of the lease according to IAS 17. According to SIC 15, all
incentive agreements within the scope 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.
The Group’s lease agreements were classified exclusively as operating
leases through December 31, 2018. The Group did not engage in any
finance lease arrangements.
2.7.3 Other Income
The line item “other income” consists primarily of foreign currency
gains from operating activities.
Non-repayable grants received from government agencies to fund
specific 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,
government agencies generally have the right to audit the use of the
funds granted to the Group. The government grants are generally cost
subsidies, and their recognition through profit or loss is limited to the
corresponding costs.
No payments were granted in financial years 2020, 2019 or 2018 that
are required to be classified as investment subsidies.
2.7.4 Other Expenses
The line item “other expenses” consists mainly of currency losses from
the operating business.
Notes
Financial Statements
161
2.7.5 Finance Income and Finance Expenses
Gains and losses on hedges of foreign exchange rate fluctuations,
changes in fair value and interest effects from the application of the
effective interest method to financial assets and liabilities are recog-
nized in finance income and finance expenses.
The accounting policies resulting from the collaboration and license
agreement with Incyte are presented in Note 4*.
*cross-reference to page 170
Income Tax Expenses/Benefits
2.7.6
Current income taxes are calculated based on the respective local tax-
able income and local tax rules for the period. In addition, current in-
come taxes presented for the period include adjustments for uncertain
tax payments or tax refunds for periods not yet finally assessed, ex-
cluding interest expenses and penalties on the underpayment of taxes.
In the event that amounts included in the tax returns are considered
unlikely to be accepted by the tax authorities (uncertain tax positions),
a provision for income taxes is recognized. Tax refund claims from
uncertain tax positions are recognized when it is probable that they
can be realized. Current taxes reflect the expected tax liability on the
taxable income for the year, based on the enacted or r substantially
enacted tax rates, as well as adjustments to the tax liability for previ-
ous years.
Deferred tax assets or liabilities are calculated for temporary differ-
ences between the tax bases and the financial statement carrying
amounts, including differences from consolidation, unused tax loss
carryforwards, and unused tax credits. Measurement is based on en-
acted or substantively enacted tax rates and tax rules.
Deferred tax assets are offset against deferred tax liabilities when the
taxes are levied by the same taxation authority, and the entity has a
legally enforceable right to offset current tax assets against current
tax liabilities according to their maturity.
Assessments as to the recoverability of deferred tax assets require the
use of judgment regarding assumptions related to estimated future
taxable profits. This includes the amounts of taxable future profits, the
periods in which those profits are expected to occur, and the availability
of tax planning opportunities. The Group record a deferred tax asset
only when it is probable that a corresponding amount of taxable profit
will be available against which the deductible temporary differences
relating to the same taxation authority and the same taxable entity can
be utilized.
The analysis and forecasting required in this process are performed
for individual jurisdictions by qualified local tax and financial profes-
sionals. Given the potential significance surrounding the underlying
estimates and assumptions, group-wide policies and procedures have
been designed to ensure consistency and reliability around the recover-
ability assessment process. Forecast operating results are based upon
approved business plans, which are themselves subject to a well-defined
process of control. As a matter of policy, especially strong evidence sup-
porting the recognition of deferred tax assets is required if an entity
has suffered a loss in either the current or the preceding period.
Changes in deferred tax assets and liabilities are generally recognized
through profit and loss in the consolidated statement of profit or loss,
except for changes recognized directly in equity. 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 expected to be realized.
2.7.7 Earnings per Share
The Group reports basic and diluted earnings per share. Basic earnings
per share are computed by dividing the net profit or loss attributable to
parent company shareholders by the weighted-average number of ordi-
nary shares outstanding for the reporting period. Diluted earnings per
share are 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 resulting from stock options granted to the
Management Board and employees and convertible bonds.
In 2019 and 2018, diluted earnings per share equaled basic earnings
per share. The effect of 57,035 potentially dilutive shares in 2019 and
120,214 dilutive shares in 2018 resulting from stock options and con-
vertible bonds granted to the Management Board and certain employ-
ees of the Company has been excluded from the diluted earnings per
share as it would result in a decline in the loss per share and should,
therefore, not be treated as dilutive.
The 67,964 stock options and 58,811 restricted stock units still un-
vested as of December 31, 2020 and the 515,433 shares from the con-
vertible bond are included in the calculation of potentially dilutive
shares as they are dilutive for the 2020 financial year.
2.8 Accounting Policies Applied to Balance Sheet
Assets
2.8.1 Liquidity
Liquidity is defined as the sum of the balance sheet positions “Cash
and Cash Equivalents”, “Financial Assets at Fair Value through Profit
or Loss” and “Other Financial Assets at Amortized Cost”.
Classification
The Group classifies its financial assets (debt instruments) in the mea-
surement categories of those subsequently measured at fair value (ei-
ther through other comprehensive income or profit or loss) and those
measured at amortized cost.
The Group defines all cash held at banks and on hand, as well as all
short-term deposits with a maturity of three months or less as of the
purchase date, as cash and cash equivalents. The Group invests the
majority of its cash and cash equivalents at several major financial in-
stitutions including, Commerzbank, UniCredit, BayernLB, LBBW, BNP
Paribas, Deutsche Bank, Sparkasse, Banque Européenne du Crédit Mu-
tuel, Credit Suisse, UBS and Bank of America Merrill Lynch.
Guarantees granted for rent deposits and obligations from convertible
bonds issued to employees are recorded as restricted cash under
“Other Assets” because they are not available for use in the Group’s
operations.
Financial Statements
162
Recognition and Derecognition
The Group recognizes a financial asset at the point in time when it be-
comes the contractual party of the financial asset. Financial assets 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.
Measurement
Upon initial recognition, the Group measures a financial asset at fair
value and — when the financial asset is not subsequently measured at
fair value in profit or loss — plus transaction costs directly attributable
to the acquisition of that asset. Transaction costs of financial assets
measured at fair value through profit or loss are recognized as ex-
penses 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 described below.
Assets that are held in order to collect the contractual cash flows and
for which these cash flows represent interest and principal payments
only are measured at amortized cost. Interest income from these finan-
cial assets is recognized in finance income using the effective interest
method. Negative interests are recognized in Finance Expense. Gains
and losses upon 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 principal and in-
terest payments only are measured at fair value through other compre-
hensive income. Changes in the carrying amounts are recognized in
other comprehensive income, with the exception of impairment losses,
income from impairment reversals, interest income and foreign cur-
rency gains and losses, which are recognized in profit or loss. Upon the
derecognition of the financial asset, the cumulative gain or loss previ-
ously 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 and losses on
debt instruments that are subsequently measured at fair value through
profit or loss are recognized in the finance result in the period in which
they occur.
The Group reclassifies debts instruments only in case when there is a
change in the business model for managing such assets.
Notes
Derivatives
The Group uses derivatives to hedge cash flows associated to foreign
exchange risks. The use of derivatives is subject to a Group policy ap-
proved 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 measured at fair
value at the end of each reporting period. The derivatives are presented
as other receivables or other provision, depending on their nature.
Changes in the fair value of a derivative instrument that is not accounted
for as a hedging relationship are recognized directly in profit or loss in
the finance result.
MorphoSys has not applied hedge accounting in the financial years
2020, 2019 and 2018.
2.8.2 Accounts Receivable, Income Tax Receivables and
Other Receivables
Accounts receivable are measured at amortized cost less any impair-
ment using the simplified impairment model (see Notes 2.3.1*, 2.4.2*
and 6.3*).
*cross-reference to page 146, page 155 and page 180
Income tax receivables mainly include receivables due from tax au-
thorities in the context of capital gain taxes withheld to the nominal
value without discount.
Other non-derivative financial instruments are measured at amortized
cost using the effective interest method.
2.8.3 Financial Assets from Collaborations
The accounting policies applied to financial assets from collaborations
are presented in Notes 2.3.3* and 4*.
*cross-reference to page 150 and page 170
2.8.4 Inventories
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 purchase costs, including those incurred
in bringing the inventories into operating condition, and take purchase
price reductions into account, such as bonuses and discounts. Manu-
facturing costs comprise all directly attributable costs as well as reason-
ably allocated overhead. Net realizable value is the estimated selling
price less the estimated expenses necessary for completion and sale.
Inventories are divided into the categories of raw materials and sup-
plies as well as finished goods.
The impairment to a net realizable value of zero on the antibody material
(tafasitamab) derived from fermenter runs, recognized in cost of sales
as well as research and development expenses in prior periods, was
reversed due to the market approval of Monjuvi. This was now usable
for commercialization and therefore represents inventory. Following
its market approval, tafasitamab used for commercialization purposes
is presented as inventory, which is measured at its cost of production
and recognized in cost of sales upon its sale.
Notes
Inventory of tafasitamab used for clinical trials or research activities
are presented as other current assets and once it is used costs are
recognized in the income statement under research and development
expenses when consumed.
2.8.5 Prepaid Expenses and Other Current Assets
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 lab-
oratory services not yet performed. Other current assets primarily
consist of receivables from tax authorities from input tax surpluses,
combination compounds as well as receivables from upfront pay-
ments. This item is recognized at nominal value or acquisition cost
less impairments.
2.8.6 Property, Plant and Equipment
Property, plant and equipment are recorded at historical cost less accu-
mulated depreciation (see Note 6.7*) and any impairment losses (see
Note 2.4.3*). Historical cost includes expenditures directly related to
the purchase at the time of the acquisition. Replacement purchases,
building alterations and improvements are capitalized, whereas repair
and maintenance expenses are recognized as expenses as they are
incurred. Property, plant and equipment are 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 shorter
of either the asset’s estimated useful life or the remaining term of the
lease.
*cross-reference to page 156 and page 181
Asset Class
Office Equipment
Laboratory Equipment
Low-value Office and Laboratory
Equipment
Computer Hardware
Permanent Improvements to
Property/Buildings
Useful Life
Depreciation
Rates
8 years
4 years
Immediately
3 years
10 years
13 %
25 %
100 %
33 %
10 %
The residual values and useful lives of assets are reviewed at the end
of each reporting period and adjusted when necessary.
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’s operating business
is funded with equity.
Financial Statements
163
2.8.7 Leases
As of January 1, 2019, the Group applies the IFRS 16 standard on leases.
For lessees, a uniform approach is applied to the recognition of leases,
according to which assets for the right-of-use assets of the leased assets
and liabilities for the payment obligations entered into are required to
be recognized in the balance sheet for all leases. At the time a leased
asset becomes available for the Group’s use, a right-of-use asset and
corresponding lease liability are recognized in the balance sheet.
Right-of-use assets are measured at cost, which is calculated as the
lease liability plus lease payments made at or before the date on which
the asset is made available for use, less lease incentives received and
additional initial direct costs and dismantling obligations. Subsequent
measurement of right-of-use assets is at amortized cost. The right-of-
use assets are amortized on a straight-line basis over the shorter of
either the useful life or the term of the lease agreement.
The lease liability is the present value of the fixed and variable lease
payments that are paid during the term of the lease less any lease in-
centives receivable. The discounting is carried out based on the implied
interest rate underlying the lease contract if the rate can be determined.
If not, discounting is carried out based on the lessee’s incremental bor-
rowing rate, i.e., the interest rate a lessee would need to pay to borrow
over a similar term, and with a similar security, the funds necessary to
obtain an asset of similar value and condition to the right-of-use asset
in a similar economic environment.
In subsequent measurement, the carrying amount of the lease liability
is increased to reflect the interest expense on the lease liability and
reduced to reflect the lease payments made. Each lease installment is
separated into a repayment portion and a financing expense portion.
Finance expenses are recognized in profit or loss over the term of the
lease.
The Group is exposed to potential future increases in variable lease
payments based on an index or rate, which are not included in the lease
liability until they take effect. When adjustments to lease payments
based on an index or rate take effect, the lease liability is reassessed
and adjusted against the right-of-use asset.
As of January 1, 2019, the rental expenses recognized in the statement of
profit or loss up to and including the 2018 financial year were replaced
by depreciation and amortization of assets and interest expenses from
the compounding of lease liabilities. This means that the related costs
are recorded in various items of the statement of profit or loss and differ
in their total amount compared to the application of IAS 17. As a result of
the interest expenses recorded under finance expenses in the statement
of profit or loss, there was a material effect on Group EBIT in the 2019
financial year compared with the application of IAS 17 in financial year
2018. In accordance with IAS 17, interest expenses were part of rental
expenses and were recorded under operating expenses in the statement
of profit or loss.
Financial Statements
164
Notes
The payments for the redemption of lease liabilities and the payments
attributable to the interest portion of the lease liabilities are allocated
to cash flow from financing activities.
a license are amortized over the term of each annual agreement. Subli-
cense 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.
For low-value leases and short-term leases (terms of less than twelve
months), mainly technical equipment, use is made of the simplified
application. Accordingly, no right-of-use assets or lease liabilities are
recognized; instead, the lease payments are recognized as an expense
over the term of the lease.
Impairment losses are recognized in accordance with the principles
described in Note 2.4.3*.
*cross-reference to page 156
2.8.8 Intangible Assets
Purchased intangible assets are capitalized at acquisition cost and ex-
clusively amortized on a straight-line basis over their useful lives. In-
ternally generated intangible assets are recognized to the degree the
corresponding recognition criteria are met.
Development costs are capitalized as intangible assets when the corre-
sponding capitalization criteria have been met, namely, clear specifica-
tion of the product or procedure, technical feasibility, intention of com-
pletion, use, commercialization, coverage of development costs through
future free cash flows, reliable determination of these free cash flows
and availability of sufficient resources for completion of development
and sale. Amortization of intangible assets is recorded in cost of goods
sold or research and development expenses.
Expenses to be classified as research expenses are allocated to re-
search and development expenses.
Subsequent expenditures for capitalized intangible assets are capital-
ized only when they substantially increase the future economic benefit
of the specific asset to which they relate. All other expenditures are
expensed as incurred.
Patents
Patents obtained by the Group are recorded at acquisition cost less accu-
mulated amortization (see below) and any impairment (see Note 2.4.3*).
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 iden-
tified in the purchase price allocation for the acquisition of Sloning
BioTechnology GmbH was recorded at the fair value at the time of ac-
quisition, less accumulated amortization (useful life of 10 years).
*cross-reference to page 156
Licenses
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 (8 to 13 years). The amortization period and method
are reviewed at the end of each financial year. Annual fees to maintain
Licenses For Marketed Products
Due to the market approval of Monjuvi, the amount recognized in the
balance sheet item “In-process R&D programs” as of December 31, 2019,
has been reclassified to the balance sheet item “Licenses for marketed
products.” The prepaid license fees and milestone payments that are
subsequently paid after the milestones have been reached are amortized
over the estimated useful life of the acquired license. The duration and
method of amortization are reviewed at the end of each financial year.
In the case of triggering events, the asset is tested for any impairment.
Because the Group applies the cost accumulation approach, milestones
in the near future are not taken into account.
In-Process R&D Programs
This line item previously contained capitalized 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 included
compounds and antibody programs resulting from acquisitions. As of
December 31, 2020, no assets were recognized in this balance sheet
item due to the launch of Monjuvi and the divestment of the Lanthio
entities’ in-process R&D programs.
Software
Software is recorded at acquisition cost less accumulated amortization
(see below) and any impairment (see Note 2.4.3*). Amortization is rec-
ognized 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.
*cross-reference to page 156
Goodwill
Goodwill is recognized for expected synergies from business combina-
tions and the skills of the acquired workforce. Goodwill is tested annu-
ally for impairment (see Note 6.9*).
*cross-reference to page 183
Intangible Asset Class
Useful Life
Amortization
Rates
Patents
10 years
10 %
Licenses and Licenses for
Marketed Products
8 – 24 years
13 % – 4 %
In-process R&D Programs
Software
Goodwill
Not yet amor-
tized, Impair-
ment Only
3 – 5 years
Impairment
Only
–
33 % – 20 %
–
Financial Statements
165
2.9.2 Accounts Payable, Accruals and other Provisions
Accounts payable and accruals are initially recognized at fair value and
subsequently at amortized cost using the effective interest method.
Non-financial liabilities with a term of more than one year are dis-
counted to their net present value. Liabilities that are uncertain in
their timing or amount are recorded as accruals.
Accruals are recognized for obligations to third parties arising from
past events. Furthermore, accruals are only recognized for legal or fac-
tual obligations to third parties if the event’s occurrence is more likely
than not. Accruals are recognized in the amount required to settle the
respective obligation and discounted to the reporting date when the
interest effect is material. The amount required to meet the obligation
also includes expected price and cost increases. The interest portion of
the addition to accruals is recorded in the finance result. The measure-
ment of accruals is based on past experience and considers the circum-
stances in existence on the reporting date.
The Group has entered into various research and development contracts
with research institutions and other companies. These agreements are
generally cancelable, and related costs are recorded as research and
development expenses as incurred. The Group recognizes accruals for
estimated ongoing research costs that have been incurred. When eval-
uating the appropriateness of the deferred expenses, the Group ana-
lyzes the progress of the studies, including the phase and completion
of events, invoices received and contractually agreed costs. Significant
judgments and estimates are made in determining the deferred bal-
ances at the end of any reporting period. Actual results may differ from
the Group’s estimates. The Group’s historical accrual estimates have
not been materially different from the actual costs.
Other provisions mainly include cash-settled share-based payments.
2.9.3 Tax Liabilities
Tax liabilities are recognized and measured at their nominal value. Tax
liabilities contain obligations from current taxes, excluding deferred
taxes. Liabilities for trade taxes, corporate taxes and similar taxes on
income are determined based on the taxable income of the consolidated
entities less any prepayments made.
2.9.4 Current Portion of Contract Liabilities
Upfront payments from customers for services to be rendered by the
Group and revenue that must be recognized over a period of time are
deferred and measured at the nominal amount of cash received. The
corresponding rendering of services and revenue recognition is ex-
pected to occur within a twelve-month period following the reporting
date.
Notes
2.8.9 Sharesat Fair Value, with Changes Recognized in
Other Comprehensive Income
The investments in adivo GmbH and Vivoryon Therapeutics AG are
accounted for as equity financial instruments at fair value. Changes in
fair value are recognized in other comprehensive income. This was ir-
revocably determined when the investments were first recognized.
These investments are strategic financial investments, and the Group
considers this classification to be more meaningful. If one of the invest-
ment is derecognized, no subsequent reclassification of gains or losses
to profit or loss will occur. Dividends from these investments are recog-
nized in profit or loss when there is a justified right to receive payment.
2.8.10 Prepaid Expenses and Other Assets, net of Current
Portion
The non-current portion of expenses incurred prior to the reporting
date but recognized in subsequent financial years is recorded in pre-
paid expenses. This line item contains maintenance contracts and sub-
licenses.
This line item also includes other non-current assets recognized at fair
value. Other non-current assets consist mainly of restricted cash, such
as rent deposits.
2.9 Accounting Policies Applied to Equity and
Liability Items of the Balance Sheet
2.9.1 Financial Liabilites
Initial Recognition and Measurement
Financial liabilities are recognized when the group entity becomes a
party to the financial instrument that establishes the financial liability.
Financial instruments are initially recognized on the settlement date
in the case of regular way purchases or sales, and derivative financial
instruments are initially recognized on the trade date.
Financial liabilities are measured at fair value on initial recognition.
Direct attributable transaction costs are deducted from the fair value if
they are attributable to financial liabilities measured at amortized
cost. Transaction costs are recognized directly in profit or loss if they
are related to the issue of financial liabilities measured at fair value.
Subsequent Measurement
For purposes of subsequent measurement, financial liabilities are clas-
sified in two categories:
• Financial liabilities at fair value through profit or loss
• Financial liabilities at amortized cost
Subsequent measurement of financial liabilities at fair value through
profit or loss is at fair value. Gains or losses from changes in fair value
are recognized in profit or loss in the financial result.
After initial recognition of financial liabilities at amortized cost, these
financial liabilities are measured at amortized cost using the effective
interest method. Gains and losses are recognized in profit or loss in the
financial result using the effective interest method.
Derecognition
A financial liability is derecognized when the obligation under the lia-
bility is discharged or cancelled or expires.
Financial Statements
166
Notes
2.9.5 Contract Liabilities, net of Current Portion
This line item includes the non-current portion of deferred customer
upfront payments and revenue that must be recognized over a period
of time. Contractual liabilities are measured at the nominal amount of
cash received.
Deferred tax assets are offset against deferred tax liabilities when the
taxes are levied by the same taxation authority and their maturity and
the entity has a legally enforceable right to offset current tax assets
against current tax liabilities. Deferred tax assets and liabilities may
not be discounted.
2.9.6 Convertible Bonds
The components of the convertible bonds issued by MorphoSys are rec-
ognized separately as a financial liability and as an equity instrument
according to the economic substance of the contractual arrangement.
As of the date of issuance, the fair value of the liability component was
determined using the market interest rate applicable to comparable
non-convertible instruments. This amount was recognized as a financial
liability at amortized cost using the effective interest method until set-
tlement on conversion or maturity of the instrument. The conversion
option classified as equity was determined as the difference between
the total value of the convertible bond and the fair value of the liability
component. The resulting amount, net of income tax effects, is recog-
nized in the capital reserve as part of equity and is not adjusted in
subsequent periods. No gain or loss arises from the exercise or expira-
tion of the conversion option. Transaction costs associated with the
instrument are allocated between the two components based on the
allocation of proceeds. The transaction costs attributable to the bor-
rowed capital were deducted from carrying amount of the liability com-
ponent and are amortized over the term of the convertible bond using
the effective interest method.
Interest calculated pro rata and payable within the next 12 months is
shown as current.
2.9.7 Convertible Bonds due to Related Parties
The Group has issued convertible bonds to the Group’s Management
Board and employees. The equity component of a convertible bond must
be recorded separately under 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 effect of the equity component on profit or loss is recognized
in personnel expenses from stock options, whereas the effect on profit
or loss from the liability component is recognized as interest expense.
The exercise period of the conversion rights expired on March 31, 2020.
2.9.8 Deferred Taxes
Deferred tax assets and liabilities are calculated using the liability
method, which is commonly used internationally. Under this method,
taxes expected to be paid or recovered in subsequent financial years
are based on the applicable tax rate at the time of recognition.
Deferred tax assets and liabilities are recorded separately in the bal-
ance sheet and take into account the future tax effect resulting from
temporary differences between carrying amounts in the balance sheet
for assets and liabilities and tax loss carryforwards.
Deferred tax assets on loss carryforwards and temporary differences
are recognized and measured on the basis of projected future taxable
income. They are only recognized if sufficient taxable income is avail-
able in the future to utilize the deferred tax assets.
In assessing the recoverability of deferred tax assets, only the effects
on earnings of the reversal of temporary differences arising from de-
ferred tax liabilities, the planned results from operating activities, and
possible tax strategies are taken into account. The planned results are
based on internal forecasts of the future earnings situation of the re-
spective Group company for the assessment of recoverability in the case
of loss carryforwards and the long-term planning of the respective
company for the assessment of recoverability in the case of temporary
differences. If there are doubts about the realizability of the loss carry-
forwards, no corresponding deferred tax assets are recognized in indi-
vidual cases, or deferred tax assets already recognized are impaired.
The tax deferrals recognized are subject to ongoing reviews of the un-
derlying assumptions. Changes in assumptions or circumstances may
necessitate adjustments, which may result in additional tax deferrals
or their reversal. Deferred tax assets and liabilities are offset if they
relate to the same tax authority, and the right to offset current tax assets
and liabilities is legally enforceable. Deferred tax assets and liabilities
are recognized on an undiscounted basis. If the items underlying the
temporary differences, or tax expenses and income respectively, are
recognized directly in equity, this also applies to the current taxes or
deferred tax assets and liabilities attributable thereto.
2.9.9 Financial Liabilities from Collaborations
The accounting policies applied to financial liabilities from collabora-
tions are presented in Note 2.3.3* and Note 4*.
*cross-reference to page 150 and page 170
2.9.10 Stockholders’ Equity
Common Stock
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.
Treasury Stock
Repurchases of the Company’s own shares at prices quoted on an ex-
change or at market value are recorded in this line item as a deduction
from common stock.
Notes
Financial Statements
167
When common stock recorded as stockholders’ equity is repurchased,
the amount of consideration paid, including directly attributable costs,
is recognized as a deduction from stockholders’ equity net of taxes and
classified as treasury shares. When treasury shares are subsequently
sold or reissued, the proceeds are recognized as an increase in stock-
holders’ 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 in-
centive plans (in this case: performance shares) is reflected in this line
item based on the set number of shares to be allocated after the expira-
tion of the four-year vesting period (quantity structure) and multiplied
by the weighted-average purchase price of the treasury shares (value
structure). The adjustment is carried out directly in equity through a
reduction in the line item “treasury stock,” which is a deduction from
common stock, while simultaneously reducing additional paid-in capi-
tal. Further information can be found in Notes 8.3.1* and 8.3.2*.
*cross-reference to page 192 and page 193
Additional Paid-In Capital
Additional paid-in capital mainly consists of personnel expenses re-
sulting from the grant of stock options, convertible bonds and perfor-
mance shares, the conversion option of convertible bonds classified as
equity, as well as the proceeds from newly created shares in excess of
their nominal value.
Other Comprehensive Income Reserve
The line item “other comprehensive income reserve” includes changes
in the fair value of equity instruments that are recognized in other
comprehensive income and currency exchange differences that are not
recognized in profit or loss.
Accumulated Income/Deficit
The “accumulated income/deficit” line item consists of the Group’s ac-
cumulated consolidated net profits/losses. A separate measurement of
this item is not made.
The Management Board evaluates a segment’s economic success using
selected key figures so that all relevant income and expenses are in-
cluded. EBIT, which the Company defines as earnings before finance
income, finance expenses, income from impairment reversals/ex-
penses from impairment losses on financial assets and income taxes,
is the key benchmark for measuring and evaluating the operating re-
sults. Refer to the table in Note 3.3* for a reconciliation of EBIT to net
income as well as to the table in Note 5.3* for a breakdown of finance
income and expenses. Other key internal reporting figures include rev-
enues, operating expenses, segment results and the liquidity position.
*cross-reference to page 168 and page 174
Starting in first quarter of 2021, MorphoSys will no longer present the
previous segment information for the Proprietary Development and
Partnered Discovery segment to the Company’s chief operating-decision
maker, the Management Board. Internal reporting will only focus on
the Groups key value drivers, which are product sales, further market
approvals of tafasitamab and royalties. The previous segment report-
ing will be made for external reporting purposes for the last time as of
December 31, 2020. The future reporting will only include the consoli-
dated statement of profit or loss and there will no longer be any segment
reporting.
Proprietary Development
3.1
The Proprietary Development segment comprises all activities related
to the proprietary development of therapeutic antibodies. Currently,
this segment’s activities comprise a total of eleven antibody programs,
with tafasitamab representing the Company’s most advanced propri-
etary clinical program. Also included are the antibody felzartamab
(MOR202), which was partially out-licensed to I-Mab and the proprietary
program otilimab, which was out-licensed to GlaxoSmithKline (GSK) in
2013. The partially or completely out-licensed programs have been
part of the Proprietary Development segment since the beginning of
their development and will therefore continue to be reported in this
segment. MorphoSys is also pursuing other early-stage proprietary
development and co-development programs. One other program is in
preclinical development and a further six programs are in drug discov-
ery. The Proprietary Development segment also manages the develop-
ment of proprietary technologies
3
Segment Reporting
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
discrete financial information is available.
3.2 Partnered Discovery
MorphoSys’s technology for generating therapeutics is based on human
antibodies. The Group markets this technology commercially through
its partnerships with numerous pharmaceutical and biotechnology
companies. The Partnered Discovery segment encompasses all operat-
ing activities relating to these commercial agreements.
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.
Financial Statements
168
3.3 Cross-Segment Information
The information on segment assets is based on the assets’ respective
locations.
Notes
For the Twelve-month Period
Ended December 31 (in 000’ €)
External Revenues
Operating Expenses
Segment Result
Other Income
Other Expenses
Segment EBIT
Finance Income
Finance Expenses
Income from Reversals of Impairment Losses /
(Impairment Losses) on Financial Assets
Earnings before Taxes
Income Tax Benefit / (Expenses)
Consolidated Net Profit / (Loss)
Current Assets
Non-current Assets
Total Segment Assets
Current Liabilities
Non-current Liabilities
Stockholders’ Equity
Total Segment Liabilities and Equity
Capital Expenditure
Depreciation and Amortization
Proprietary Development
Partnered Discovery
Unallocated
Group
2020
2019
2018
2020
2019
2018
2020
2019
2018
2020
2019
2018
278,630
(265,159)
13,471
9,386
0
22,857
81,995
(45,443)
138,515
103,747
242,262
102,177
544,761
0
646,938
48,260
3,201
34,286
(143,459)
(109,173)
125
(19)
53,610
(107,019)
(53,409)
159
0
49,068
(11,643)
37,425
0
0
37,469
(10,671)
26,798
0
0
22,832
(9,516)
13,316
0
0
(109,067)
(53,250)
37,425
26,798
13,316
(25,651)
(19,172)
(107,920)
(59,106)
0
0
0
0
0
0
0
0
0
0
12,155
72,928
85,083
36,176
27,775
0
63,951
2,830
1,718
15,842
42,041
57,883
32,167
3,291
0
35,458
1,319
1,903
13,965
7,166
21,131
7,363
4,517
0
11,880
429
1,104
11,078
11,851
22,929
2,877
5,771
0
8,648
625
1,385
7,114
6,288
13,402
1,471
158
0
1,629
879
1,429
0
(32,945)
(32,945)
5,199
(5,175)
(32,921)
10,052
(50,771)
1,054,336
341,784
1,396,120
90,919
288,454
621,322
1,000,695
526
425
(25,723)
(25,723)
680
(608)
0
0
0
280,460
107,967
388,427
22,505
6,633
394,702
423,840
207
355
(19,969)
(19,969)
1,486
(689)
0
0
0
365,949
101,530
467,479
12,285
1,019
488,373
501,677
268
418
327,698
(309,747)
17,951
14,585
(5,175)
27,361
92,047
(96,214)
(702)
22,492
75,399
97,891
1,206,816
452,697
1,659,513
200,459
837,732
621,322
1,659,513
49,215
4,730
71,755
(179,853)
(108,098)
805
(627)
2,799
(2,272)
872
(106,521)
3,506
(103,015)
303,693
192,746
496,439
61,558
40,179
394,702
496,439
3,662
3,458
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
538,764
2,466
3,750
The segment result is defined as the segment’s revenue, less the seg-
ment’s operating expenses. The unallocated operating expenses of
€ 32.9 million (2019: € 25.7 million; 2018: € 20.0 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, except for the effects from the collaboration and li-
cense agreement with Incyte, are also not allocated to the segments as
they are managed on a Group basis. Unallocated segment assets and
liabilities have the same background as unallocated operating expenses.
In the 2020 financial year, impairments totaling € 13.9 million were
recognized in the Proprietary Development segment and € 2.1 million
in the Partnered Discovery segment on property, plant and equipment
as well as intangible assets (2019: impairments of € 1.6 million in the
Proprietary Development segment; 2018: impairments of € 19.2 million
in the Proprietary Development segment).
In 2019, the largest customer for the Group accounted for revenues of
€ 32.3 million, the second-largest for € 22.0 million, and the third-larg-
est for € 9.4 million. The largest customer was allocated to the Part-
nered Discovery segment and the second-largest and third-largest
customers to the Proprietary Development segment.
In 2018, € 49.5 million of the Group’s total revenues came from the
largest customer, € 19.0 million from the second-largest customer, and
€ 3.9 million from the third-largest customer. The largest and third-larg-
est customers were allocated to the Proprietary Development segment
and the second-largest customer to the Partnered Discovery segment.
The following overview shows the Group’s regional distribution of
revenue:
The Group’s key customers are allocated to both the Proprietary Devel-
opment and the Partnered Discovery segments. As of December 31,
2020, the single most important customer represented accounts receiv-
able with a carrying amount of € 50.1 million (December 31, 2019:
€ 8.0 million). The largest customer for the Group accounted for revenues
in 2020 of € 255.8 million, the second-largest for € 44.7 million, and the
third-largest for € 4.1 million. The largest and third-largest customer
in 2020 were allocated to the Proprietary Development segment and
the second-largest customer to the Partnered Discovery segment.
in 000’ €
Germany
Europe and
Asia
USA and
Canada
Total
2020
0
2019
145
2018
309
8,640
39,322
56,784
319,058
327,698
32,288
71,755
19,350
76,443
3.3 Cross-Segment Information
The information on segment assets is based on the assets’ respective
locations.
For the Twelve-month Period
Ended December 31 (in 000’ €)
External Revenues
Operating Expenses
Segment Result
Other Income
Other Expenses
Segment EBIT
Finance Income
Finance Expenses
Income from Reversals of Impairment Losses /
(Impairment Losses) on Financial Assets
Earnings before Taxes
Income Tax Benefit / (Expenses)
Consolidated Net Profit / (Loss)
Current Assets
Non-current Assets
Total Segment Assets
Current Liabilities
Non-current Liabilities
Stockholders’ Equity
Total Segment Liabilities and Equity
Capital Expenditure
Depreciation and Amortization
(109,067)
(53,250)
37,425
26,798
13,316
278,630
(265,159)
13,471
9,386
0
22,857
81,995
(45,443)
138,515
103,747
242,262
102,177
544,761
0
646,938
48,260
3,201
34,286
(143,459)
(109,173)
125
(19)
0
0
12,155
72,928
85,083
36,176
27,775
0
63,951
2,830
1,718
53,610
(107,019)
(53,409)
159
0
0
0
15,842
42,041
57,883
32,167
3,291
0
35,458
1,319
1,903
49,068
(11,643)
37,425
0
0
0
0
13,965
7,166
21,131
7,363
4,517
0
11,880
429
1,104
37,469
(10,671)
26,798
0
0
0
0
11,078
11,851
22,929
2,877
5,771
0
8,648
625
1,385
22,832
(9,516)
13,316
0
0
0
0
7,114
6,288
13,402
1,471
158
0
1,629
879
1,429
The segment result is defined as the segment’s revenue, less the seg-
ment’s operating expenses. The unallocated operating expenses of
€ 32.9 million (2019: € 25.7 million; 2018: € 20.0 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, except for the effects from the collaboration and li-
cense agreement with Incyte, are also not allocated to the segments as
they are managed on a Group basis. Unallocated segment assets and
liabilities have the same background as unallocated operating expenses.
In the 2020 financial year, impairments totaling € 13.9 million were
recognized in the Proprietary Development segment and € 2.1 million
in the Partnered Discovery segment on property, plant and equipment
as well as intangible assets (2019: impairments of € 1.6 million in the
Proprietary Development segment; 2018: impairments of € 19.2 million
in the Proprietary Development segment).
The Group’s key customers are allocated to both the Proprietary Devel-
opment and the Partnered Discovery segments. As of December 31,
2020, the single most important customer represented accounts receiv-
able with a carrying amount of € 50.1 million (December 31, 2019:
€ 8.0 million). The largest customer for the Group accounted for revenues
in 2020 of € 255.8 million, the second-largest for € 44.7 million, and the
third-largest for € 4.1 million. The largest and third-largest customer
in 2020 were allocated to the Proprietary Development segment and
the second-largest customer to the Partnered Discovery segment.
Notes
Financial Statements
169
Proprietary Development
Partnered Discovery
Unallocated
Group
2020
2019
2018
2020
2019
2018
2020
2019
2018
2020
2019
2018
0
(32,945)
(32,945)
5,199
(5,175)
(32,921)
10,052
(50,771)
1,054,336
341,784
1,396,120
90,919
288,454
621,322
1,000,695
526
425
0
(25,723)
(25,723)
680
(608)
0
(19,969)
(19,969)
1,486
(689)
(25,651)
(19,172)
0
0
0
0
280,460
107,967
388,427
22,505
6,633
394,702
423,840
207
355
365,949
101,530
467,479
12,285
1,019
488,373
501,677
268
418
327,698
(309,747)
17,951
14,585
(5,175)
27,361
92,047
(96,214)
(702)
22,492
75,399
97,891
1,206,816
452,697
1,659,513
200,459
837,732
621,322
1,659,513
49,215
4,730
71,755
(179,853)
(108,098)
805
(627)
76,442
(136,504)
(60,062)
1,645
(689)
(107,920)
(59,106)
2,799
(2,272)
872
(106,521)
3,506
(103,015)
303,693
192,746
496,439
61,558
40,179
394,702
496,439
3,662
3,458
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
The following overview shows the timing of the satisfaction of perfor-
mance obligations:
in 000’ €
2020
2019
2018
2020
2019
2018
Proprietary Development
Partnered Discovery
At a Point in Time thereof performance obligations fulfilled in previous periods:
in Proprietary Development € 0.8 million in 2020, € 29.1 million in 2019 and € 0
in 2018 and in Partnered Discovery € 46.2 million in 2020, € 32.9 million in 2019
and € 19.0 million in 2019
278,630
34,286
53,610
48,808
36,984
0
0
0
260
485
278,630
34,286
53,610
49,068
37,469
22,832
22,268
564
Over Time
Total
A total of € 311.6 million (December 31, 2019: € 175.8 million) of the
Group’s non-current assets, excluding deferred tax assets, are located
in Germany and € 8.3 million in the USA (December 31, 2019: € 4.4 mil-
lion). In the Netherlands, there were no non-current assets as of De-
cember 31, 2020 due the sale of the Lanthio entities (December 31,
2019: € 12.5 million). Of the Group’s investments, € 47.6 million (De-
cember 31, 2019: € 2.3 million) were made in Germany, € 1.6 million
(December 31, 2019: € 1.3 million) in the USA and less than € 0.1 mil-
lion (December 31, 2019: less than € 0.1 million) in the Netherlands. In
accordance with internal definitions, investments solely include addi-
tions to property, plant and equipment and intangible assets not related
to leases and business combinations.
Financial Statements
170
4 Collaboration and License
Agreement with Incyte
On January 13, 2020, MorphoSys AG and Incyte Corporation an-
nounced that both companies had signed a collaboration and license
agreement for the further global development and commercialization of
MorphoSys’s proprietary anti-CD19 antibody tafasitamab. The agree-
ment became effective on March 3, 2020 following the receipt of anti-
trust clearance. Under the terms of the agreement, MorphoSys re-
ceived an upfront payment of US$ 750.0 million (€ 691.7 million). In
addition, Incyte invested US$ 150.0 million (€ 130.9 million) in new
ADSs of MorphoSys. MorphoSys increased its common stock by issuing
907,441 new ordinary shares from Authorized Capital 2017-I, excluding
the preemptive rights of existing shareholders, to facilitate Incyte’s
purchase of 3,629,764 ADSs. Each ADS represents one-quarter of one
MorphoSys ordinary share. The new ordinary shares underlying the
ADSs represented 2.84 % of the registered common stock of MorphoSys
prior to the capital increase. Incyte purchased the 3,629,764 new ADSs
at a price of US$ 41.32 (approximately € 36.27) per ADS. This price
represented a premium of 20 % on the volume-weighted average price
of the ADSs 30 days prior to the signing of the collaboration and license
agreement. Subject to limited exceptions, Incyte has agreed not to sell
or otherwise transfer any of the new ADSs (representing 2.76 % of
MorphoSys’s registered common stock following the capital increase)
for a period of 18 months.
Depending on the achievement of certain developmental, regulatory,
and commercial milestones, MorphoSys is eligible to receive milestone
payments amounting to up to US$ 1.1 billion (approximately € 973.0 mil-
lion). MorphoSys will also receive tiered royalties in a mid-teen to
mid-twenties percentage of net sales of Monjuvi outside the US. In
the US, MorphoSys and Incyte will co-commercialize Monjuvi, with
MorphoSys being responsible for the commercial relationship with the
end customer, which also comprises the deliveries of the drug and the
collection of the related cash inflows. The revenues from product sales
of Monjuvi will, therefore, be recognized by MorphoSys, as it is the
principal of the transaction. Incyte and MorphoSys are jointly respon-
sible for the commercialization activities in the US and will equally
share any profits and losses (50/50 basis). Outside the US, Incyte will
receive exclusive commercialization rights, determine the commer-
cialization strategy and be responsible for the commercial relationship
with the end customer, including the deliveries of the drug and the
collection of the related cash inflows. Therefore, Incyte will recognize
all revenues generated from sales of tafasitamab outside the US and
will pay royalties to MorphoSys on these sales.
MorphoSys received a total of US$ 900.0 million (€ 822.6 million) from
Incyte upon signing the agreement. At the time of its initial recogni-
tion, a current financial asset in the amount of US$ 48.9 million
(€ 45.1 million) and a non-current financial liability in the amount of
US$ 588.3 million (€ 542.6 million) were recognized and recorded in
the balance sheet items “Financial assets from collaborations” and “Fi-
nancial liabilities from collaborations”. The financial asset represents
MorphoSys’s current reimbursement claim against Incyte from the
Notes
expected future losses associated with the US commercialization ac-
tivities (as Incyte has agreed to compensate MorphoSys for 50 % of said
losses) measured at fair value. The non-current financial liability, mea-
sured initially at fair value, represents Incyte’s prepaid entitlement to
future profit sharing on sales of Monjuvi in the US (as MorphoSys will
share 50 % of these profits with Incyte). Incyte has already acquired this
right with the payments made in March 2020; therefore, a liability had
to be recognized at that time. The basis for the initial valuation at fair
value is the corporate planning and its shared profits and losses thereof
in connection with the commercialization activities of MorphoSys and
Incyte in the United States for the years ahead. As part of Incyte’s
participation in the equity of MorphoSys AG through a capital increase,
the equivalent of US$1.0 million (€ 0.9 million; equivalent to the nom-
inal value of € 1 per ordinary share) was recognized in common stock
and US$ 90.7 million (€ 79.7 million) in additional paid-in capital in
the amount of the fair value of the investment. The remainder of
US$ 268.9 million (€ 236.1 million) was recognized as revenues accord-
ing to IFRS 15, as this is the amount recognized as consideration for the
marketing license for tafasitamab outside the US. Due to the different
timing of revenue recognition and receipt of payment from Incyte, for-
eign currency gains of € 8.4 million were recognized.
The financial asset is subsequently measured at fair value through
profit or loss and the financial liability at amortized cost using the ef-
fective interest method. Any resulting effective interest is recognized
in the finance result. The basis for the valuation at fair value is the
corporate planning and its shared profits and losses thereof in connec-
tion with the commercialization activities of MorphoSys and Incyte in
the US for the years ahead. Cash flows from the profits and losses shared
equally between the two parties are generally recognized directly
against the financial asset or financial liability. Differences between
the planned and actual cash flows from the financial asset or financial
liability are recorded in the finance result. Effects resulting from
changes in planning estimates regarding the expected net cash flows
from financial assets and financial liabilities are also recognized in the
finance result. The initial interest rate continues to be applied for the
subsequent measurement of the financial liability, whereas the current
yield curve is used for the financial assets. Foreign currency translation
effects from the financial asset or financial liability are also recognized
in the finance result.
The planning assumptions are influenced by significant estimates and
mainly comprise revenues and costs for the production and sale of
Monjuvi in the US, the discount rate and the expected term of cash
flows. Revenues are affected by variable influencing factors such as
patient numbers and the number of doses of Monjuvi administered, as
well as the price that can be obtained in the market. Costs include the
manufacturing costs for these doses of Monjuvi and other cost compo-
nents for e.g. sale, transport, insurance and packaging. For more infor-
mation on the discount rate, see section 2.3.3* of these notes. The term
is the estimated time period over which Monjuvi will generate benefits
in the approved indication and therefore the expected term of product
sales in the US.
*cross-reference to page 150
Notes
Financial Statements
171
As of December 31, 2020, US$ 633.8 million (€ 516.5 million) was recog-
nized as a current and non-current financial liability and US$ 52.6 mil-
lion (€ 42.9 million) as a financial asset as a result of the collaboration
with Incyte.
MorphoSys and Incyte will also share the development costs for the
jointly initiated worldwide and US-specific clinical trials at a ratio of
55 % (Incyte) to 45 % (MorphoSys). This 45 % share of development costs
borne by MorphoSys is included in research and development costs.
Should MorphoSys provide services in excess of this 45 % share,
MorphoSys will be entitled to a compensation claim against Incyte,
which will qualify as revenue in accordance with IFRS 15. Related ex-
penses for the provision of the service are recognized as cost of sales.
Conversely, MorphoSys has to bear additional research and develop-
ment expenses if Incyte performs more than 55 % of the total clinical
trial services. In addition, Incyte will assume 100 % of future develop-
ment costs for clinical trials in countries outside the United States,
which are conducted in Incyte’s own responisbility. Incyte has the op-
tion to obtain development services from MorphoSys for this purpose.
If this option is exercised, the related income will be recognized as
revenue.
The financial assets from collaborations measured according to Level 3
changed in 2020 as follows:
in 000’ €
Opening Balance
Additions
Cash Receipts
Through Other Comprehensive Income
Through Profit or Loss (in Finance Result)
Closing Balance
2020
0
45,090
(12,677)
10,458
42,870
If the expected sales revenues and cost components had changed by
1 %, the fair value of the financial asset from collaborations would have
been in a range of € 42.1 million to € 43.7 million (acquisition date:
€ 43.7 million to € 46.5 million).
The estimates underlying the financial liabilities from collaboration
are subject to a sensitivity analysis below. This would have resulted in
the following effects on the fair value of the financial liabilities from
collaborations upon initial recognition. In each case, one planning as-
sumption is changed and all other estimates are kept constant.
in million €
+ 1 %
(1 %)
Change in Price obtained in the Market
(revenue related)
Change in Patient Numbers and Number
of Doses administered (revenue related)
Change in Manufacturing Costs and
other Cost Components (cost related)
Change in Patient Numbers and Number
of Doses administered (cost related)
Discount Rate
13.8
12.7
(7.2)
(1.2)
(43.1)
(13.8)
(12.6)
7.2
1.2
47.7
The effects included in the previous table would have correspondingly
affected the revenue recognized as residual value for the marketing
license for tafasitamab outside the US at the acquisition date. An in-
crease in financial liabilities from collaborations would have led to lower
and a decrease to higher sales revenues.
As of December 31, 2020, percentage changes in significant estimates
would have impacted the financial liabilities from collaborations as fol-
lows.
0
in million €
+ 1 %
(1 %)
Change in Price obtained in the Market
(revenue related)
Change in Patient Numbers and Number
of Doses administered (revenue related)
Change in Manufacturing Costs and
other Cost Components (cost related)
Change in Patient Numbers and Number
of Doses administered (cost related)
11.2
10.1
(6.2)
(1.1)
(11.2)
(10.1)
6.2
1.1
Financial Statements
172
5 Notes to the Profit or Loss
Statement
5.1
Revenues
Notes
Proprietary Development
Partnered Discovery
in 000’ €
2020
2019
Product Sales, Net
License Fees
Milestone Payments
Service Fees
Royalties
Total
22,983
236,051
847
18,749
0
278,630
0
0
29,100
5,186
0
34,286
2018
0
50,596
0
3,014
0
53,610
2020
0
43
3,978
2,580
42,467
49,068
2019
0
265
1,370
4,046
31,788
37,469
2018
0
618
3,917
2,919
15,379
22,833
Substantially all service fee revenues relate to revenues on a gross
basis (principal).
Of the total revenues generated in 2020, a total of € 47.1 million were
recognized from performance obligations that were fulfilled in previ-
ous periods and related to milestone payments and royalties (2019:
€ 62.0 million; 2019: € 19.0 million).
5.2 Operating Expenses
5.2.1 Cost of Sales
Cost of sales consisted of the following:
in 000’ €
2020
2019
2018
Expensed Acquisition or Production Cost of Inventories
Personnel Expenses
Impairment (+) and Reversals of Impairment (-) on Inventories
Other Operating Expenses
Impairment, Amortization and Other Costs of Intangible Assets
External Services
Depreciation and Other Costs for Infrastructure
Total
For the explanation of the income in the line “impairment and reversals
of impairment on inventories”, see Note 6.5* of these notes.
*cross-reference to page 180
5.2.2 Research and Development Expenses
Research and development expenses consisted of the following:
in 000’ €
Personnel Expenses
Impairment (+) and Reversals of Impairment (-) on Inventories
Consumable Supplies
Other Operating Expenses
Impairment, Amortization and Other Costs of Intangible Assets
External Services
Depreciation and Other Costs for Infrastructure
Total
5,564
11,054
(9,933)
12
2,251
128
98
9,174
2020
35,495
(3,338)
3,239
2,498
20,201
74,663
8,669
141,427
0
3,233
8,685
18
0
49
100
0
1,797
0
0
0
0
0
12,085
1,797
2019
30,131
0
2,874
3,142
5,631
60,710
5,944
2018
25,288
0
2,310
2,761
22,760
47,889
5,389
108,432
106,397
Notes
For the explanation of the income in the line “impairment and rever-
sals of impairment on inventories”, see Note 6.5* of these notes.
*cross-reference to page 180
In 2020, a total of € 16.0 million in impairment losses was recognized as
expenses for intangible assets, which related to the MOR107 in-process
R&D program, licenses and patents as well as to goodwill.
5.2.3 Selling Expenses
Selling expenses consisted of the following:
in 000’ €
Personnel Expenses
Consumable Supplies
Other Operating Expenses
Amortization of Intangible Assets
External Services
Depreciation and Other Costs for Infrastructure
Total
5.2.4 General and Administrative Expenses
General and administrative expenses consisted of the following:
in 000’ €
Personnel Expenses
Consumable Supplies
Other Operating Expenses
Amortization of Intangible Assets
External Services
Depreciation and Other Costs for Infrastructure
Total
5.2.5 Personnel Expenses
Personnel expenses consisted of the following:
in 000’ €
Wages and Salaries
Social Security Contributions
Share-based Payment Expense
Temporary Staff (External)
Other
Total
In the years 2020, 2019 and 2018, other personnel expenses consisted
mainly of costs for personnel support and personnel development.
The cost of defined contribution plans amounted to € 0.8 million in 2020
(2019: € 0.7 million; 2018: € 0.7 million).
Financial Statements
173
2019
6,967
14
1,158
11
14,150
371
22,671
2019
23,382
389
1,875
39
9,241
1,739
2018
2,536
3
538
25
2,953
328
6,383
2018
15,016
15
1,012
97
4,475
1,313
36,665
21,928
2019
43,476
5,686
6,654
2,633
5,264
63,713
2018
30,349
4,341
5,585
1,241
3,121
44,637
2020
52,959
125
3,360
8
50,591
700
107,743
2020
32,352
565
1,250
55
13,097
4,084
51,403
2020
99,438
8,043
8,955
5,760
9,664
131,860
Financial Statements
174
The following number of employees as of December 31 of a given year
were employed in the various functions and allocated to the segments
as follows:
Notes
2020
2019
2018
Research and Development
Selling
General and Administrative
Total
Proprietary Development
Partnered Discovery
Unallocated
Total
The average number of employees for the 2020 financial year was 564
(2019: 374; 2018: 327).
5.3 Other Income and Expenses, Finance Income
and Finance Expenses
The other income and other expenses are shown in the following
overview.
in 000’ €
Gain from Deconsolidation of Lanthio Entities
Gain on Foreign Exchange from Operating Activities
Grant Income
Gain from recognition of previously unrecognized intangible assets
Income from Other Items
Other Income
Loss on Foreign Exchange from Operating Activities
Expenses from Other Items
Other Expenses
The finance income and finance expenses are shown in the following
overview.
in 000’ €
Foreign Currency Gains from Financial Liabilities from Collaborations
Gain from Changes of Estimates in Financial Assets from Collaborations
Gain from Foreign Currency Hedging
Gain on Financial Assets at Fair Value through Profit or Loss
Interest Income on Other Financial Assets at Amortized Cost
Finance Income
Foreign Currency Losses from Financial Assets from Collaborations
Effective Interest Expenses from Financial Liabilities from Collaborations
Losses from Changes of Estimates in Financial Liabilities from Collaborations
Losses from Foreign Currency Hedging
Loss on Financial Assets at Fair Value through Profit or Loss
Interest Expenses for Other Financial Assets at Amortized Cost
Interest Expenses on Lease Liabilities
Interest Expenses for Financial Liabilites at Amortized Cost
Bank Fees
Finance Expenses
351
142
122
615
423
59
133
615
2020
379
13,656
61
0
489
14,585
(4,581)
(594)
(5,175)
2020
66,379
15,616
698
8,121
1,233
92,047
(5,549)
(15,329)
(24,565)
(4,950)
(32,138)
(9,391)
(1,174)
(2,454)
(664)
300
40
86
426
249
61
116
426
246
21
62
329
209
49
71
329
2019
2018
0
233
98
0
474
805
(413)
(214)
(627)
0
677
153
350
465
1,645
(457)
(232)
(689)
2019
2018
0
0
1,476
1,101
223
2,799
0
0
0
(214)
(299)
(796)
(932)
0
(31)
0
0
322
5
91
418
0
0
0
(444)
(85)
(53)
0
(126)
(46)
(754)
(96,215)
(2,273)
Financial Statements
175
2020
(18,202)
(8,860)
1,260
24,031
(1,771)
2019
2,063
299
(1,160)
0
1,202
2018
(202)
(978)
(127)
(126)
(1,433)
Notes
The following net gains or losses resulted from financial instruments
in the financial year:
in 000’ €
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
Total
Net gains or losses mainly comprised gains and losses from hedging
exchange rate fluctuations, interest income and expenses, as well as
valuation effects from changes in fair value. The category financial lia-
bilities at amortized cost also includes gains and losses from changes
in planning estimates from financial liabilities from collaborations.
Income Tax Expenses and Benefits
5.4
MorphoSys AG is subject to corporate taxes, the solidarity surcharge
and trade taxes. The Company’s corporate income tax rate in the report-
ing year remained unchanged (15.0 %), as did the solidarity surcharge
(5.5 %) and the effective trade tax rate (10.85 %), resulting in a combined
effective tax rate of 26.68 %.
MorphoSys US Inc. is subject to Federal Corporate Income Tax of 21.0 %
and a blended State Income Tax of combined and effective 4.11 %, re-
sulting in a total effective income tax rate of 25.11 %.
in 000’ €
Current Tax Benefit / (Expense) (Thereof Regarding Prior Years: k€ 66; 2019: € 0; 2018: k€ 1)
Deferred Tax Benefit / (Expenses)
Total Income Tax Benefit / (Expenses)
2020
(67,073)
142,472
75,399
2019
(1)
3,507
3,506
2018
1
4,304
4,305
The Group recorded total income tax benefits of € 75.4 million in 2020,
which was mainly driven by the different accounting treatment of the
collaboration and license agreement for tax purposes, since the result-
ing financial liability could not be recorded for tax purposes. This in-
cluded current tax expenses of € 67.1 and deferred tax expenses from
temporary differences of € 10.6 million. These were more than offset by
deferred tax benefits from temporary differences of € 153.1 million.
From the initial valuation of the convertible bond, € 12.8 million was
recorded through equity and the share of deferred taxes to be recog-
nized in profit or loss was recorded as current tax expense at
€ 1.3 million.
Financial Statements
176
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 2020 finan-
cial year (2019: 26.675 %; 2018: 26.675 %) was applied to profit before
taxes to calculate the statutory income tax expense. This rate consisted
of a corporate income tax of 15.0 %, a solidarity surcharge of 5.5 % on
the corporate tax, and an average trade tax of 10.85 % applicable to the
Group.
Notes
in 000’ €
2020
2019
2018
Earnings Before Income Taxes
Expected Tax Rate
Expected Income Tax
Tax Effects Resulting from:
Premium from Capital Increase by Incyte
Share-based Payment
Permanent Differences
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
Recognition of Deferred Tax Assets on Prior Year Temporary Differences
Effect from Utilization of Loss Carryforwards for which no Deferred Tax Assets were recognized
Tax Rate Differences to Local Tax Rates
Effect of Tax Rate Changes
Prior Year Taxes
Other Effects
Actual Income Tax
Effective Tax Rate
22,492
26,675 %
(6,000)
14,182
(1,823)
4,991
(9,718)
0
0
0
6,548
66,472
140
0
0
607
75,399
335.2 %
(106,520)
26,675 %
28,414
0
(387)
(101)
(151)
(310)
0
(60,477)
26,675 %
16,132
0
(363)
0
(126)
3,716
(349)
(24,285)
(14,497)
0
0
(1,461)
1,789
0
(2)
3,506
(3.3) %
0
0
(268)
0
1
59
4,305
(7.1) %
As of December 31, 2020, the tax loss carryforwards in MorphoSys AG
were fully utilized on the basis of the net income generated and the
profit to be taken into account for tax purposes pursuant to Section 5
paragraph 2a of the German Income Tax Act. Tax loss carryforwards
from previous years at MorphoSys US Inc. were capitalized as start-up
losses for taxation purposes and are treated accordingly as temporary
differences. The respective deferred tax asset of € 6.0 million was cap-
italized, because realization is likely based on the positive current
planning and the implemented transferprice method. On November 16,
2020, the 100 % direct investment in Lanthio Pharma B.V. and the 100 %
indirect investment in LantioPep B.V. were sold. As a result, the previ-
ous loss carryforwards are to be eliminated.
Deferred taxes on temporary differences are capitalized in full due to
the long-term positive business development and the associated posi-
tive earnings forecasts of MorphoSys AG and MorphoSys US Inc. The
forecast period is up to 2039 and in line with the accrual period of the
financial liability from collaborations, and the respective analysis is
based on long-term corporate planning and supports the assessment
as strong evidence that the deferred tax assets will be realized.
Notes
in 000’ €
Tax Losses from Prior Years
Tax Losses from Current Year
Reclassification to Temporary Differences
Expiry / Deconsolidation
Utilization of Tax Losses
Total Tax Losses as of December 31, 2020
Deferred tax assets and deferred tax liabilities consisted of the following:
in 000’s €, as of December 31
Collaborations
Convertible Bonds
Leases
Intangible Assets
Inventories
Receivables and Other Assets
Property, Plant and Equipment
Other Provisions
Other Liabilities
Tax Losses
Offsetting
Total
€ 3.2 million of deferred tax assets were regarded as current and
€ 129.6 million as non-current (reversal or offset after more than 12
months). Deferred tax liabilities are of current nature, income tax
receivables and income tax payables are both fully of current nature.
in 000’s €, as of December 31
Collaborations
Convertible Bonds
Leases
Intangible Assets
Inventories
Receivables and Other Assets
Property, Plant and Equipment
Other Provisions
Other Liabilities
Tax Losses
Foreign Currency Translation Differences
Total
As of December 31, 2020, there were no temporary differences in con-
nection with investments in subsidiaries (as of December 31, 2019 the
respective outside basis differences for which no deferred tax liability
was recognized amounted to € 0.6 million).
Financial Statements
177
Unlimited Carry Forward
Limited Carry Forward
of Tax Losses
of Tax Losses
295,417
0
(27,453)
(18,772)
(249,193)
0
20,435
0
0
(20,435)
0
0
Deferred
Tax Asset
2020
Deferred
Tax Asset
2019
Deferred
Tax Liability
2020
Deferred
Tax Liability
2019
137,778
113
824
8,753
1,328
1,099
0
2,581
0
0
(19,670)
132,806
0
0
1
8,138
0
0
0
0
0
3,843
(11,982)
0
5,475
13,653
787
517
0
211
381
2,723
980
0
(19,670)
5,057
0
0
448
1,351
0
55
0
9,778
350
0
(11,982)
0
Changes in Deferred Taxes in 2020
Recognized in Profit or Loss
Income / (Expense)
Recognized in Equity
132,303
(806)
484
1,449
1,328
943
(381)
9,636
(630)
(3,843)
642
141,125
0
(12,734)
0
0
0
0
0
0
0
0
0
(12,734)
Financial Statements
178
5.5 Earnings per Share
Earnings per share are calculated by dividing the 2020 consolidated
net profit of € 97,890,576 (2019: consolidated net loss of € 103,014,058;
2018: consolidated net loss of € 56,172,121) by the weighted-average
number of ordinary shares outstanding during the respective year
(2020: 32,525,644; 2019: 31,611,155; 2018: 31,338,948).
The table below shows the calculation of the weighted-average number
of ordinary shares.
Notes
The following table shows the reconciliation of basic earnings per
share to diluted earnings per share (in €, except for disclosures in
shares).
2020
97,890,576
654,487
98,545,063
32,525,644
642,208
33,167,852
3.01
2.97
Numerator (in €)
Consolidated Net Profit – used in calculating Basic
Earnings per Share
Interest in connection with Dilutive Shares
2020
2019
Profit used in calculating Diluted Earnings per Share
Denominator (in Shares)
Shares Issued on January 1
31,957,958
31,839,572
Weighted average Ordinary Shares Used in Calculating
Effect of Treasury Shares Held
on January 1
(225,800)
(281,036)
Dilutive Shares
Basic Earnings per Share
Effect of Share Issuance
725,953
0
Weighted average Ordinary Shares and potential
Ordinary Shares Used in Calculating Diluted Earnings
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
3,291
247
per Share
Earnings per Share (in €)
0
17,516
230
208
Basic
Diluted
12,561
10,500
22,106
5,789
183
707
631
296
588
1,533
In 2019 and 2018, diluted earnings per share equaled basic earnings
per share. The effect of 115,684 potentially dilutive shares in 2019 and
52,930 dilutive shares in 2018 resulting from stock options granted to
the Management Board and certain employees of the Company was
excluded from the diluted earnings per share as it would result in a
decline in the loss per share and should, therefore, not be treated as
dilutive.
Effect of Transfer of Treasury Stock /
Shares Issued in September
5,829
25,122
6 Notes to the Balance Sheet Assets
4,709
331
6.1 Cashand Cash Equivalents
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
Weighted-average Number of Shares
0
0
of Common Stock
32,525,644
31,611,155
Cash and Cash Equivalents
73
Bank Balances and Cash in Hand
Impairment
109,797
(2)
109,795
44,314
0
44,314
7,702
in 000’ €
12/31/2020
12/31/2019
Diluted earnings per share is calculated by taking into account the
potential increase in the Group’s ordinary shares as the result of
granted stock options, restricted stock units and convertible bonds.
The presentation of the development of the expected twelve-month loss
for cash and cash equivalents can be found in Note 2.3.1*.
*cross-reference to page 146
Notes
6.2 Financial Assets at Fair Value, with Changes
Recognized in Profit or Loss and Other Finan-
cial Assets at Amortized Costs
The financial assets at fair value, with changes recognized in profit or
loss, are shown in the following overview.
Financial Statements
179
in 000’ €
December 31, 2020
Money Market Funds
Total
December 31, 2019
Money Market Funds
Total
Gross Unrealized
Maturity
Cost
Gains
Losses
daily
288,050
293
(405)
daily
20,330
125
0
Market
Value
287,938
287,938
20,455
20,455
Realized and unrealized gains and losses on money market funds held
or sold were recognized in the finance result in profit or loss. The valu-
ation of financial assets resulted in a net loss of € 6.1 million in 2020
(2019: net gain of € 0.4 million; 2018: net loss of less than € 0.1 million).
The other financial assets at amortized cost are shown in the following
overview.
in 000’ €
December 31, 2020
Maturity
Cost
Unrealized
Interest Gain
(+) / Loss (-)
Impairment
Carrying
amount
Term Deposits, Current Portion
4 – 12 Months
649,745
Bonds
Total
December 31, 2019
More than
12 Months
197,827
Term Deposits, Current Portion
4 – 12 Months
207,846
Commercial Papers
Term Deposits, Net of Current Portion
Total
More than
12 Months
More than
12 Months
10,000
75,000
380
(652)
90
1
18
(412)
(587)
649,713
196,588
846,301
(201)
207,735
0
(97)
10,001
74,921
292,657
As of December 31, 2020, these assets mainly consisted of term depos-
its with fixed or variable interest rates, as well as corporate bonds with
fixed interest.
Interest expense from financial assets classified as “at amortized cost”
amounted to € 0.5 million in 2020 (2019: € 0.1 million interest income;
2018: € 0.1 million interest income) and was recognized in the finance
result.
Financial Statements
180
Notes
The risk associated with these financial instruments results primarily
from bank credit risks. The presentation of the development of the ex-
pected twelve-month loss and the lifetime expected credit loss for term
deposits and corporate bonds can be found in Note 2.3.1*.
Inventories
6.5
Inventories amounted to € 10.0 million as of December 31, 2020 (De-
cember 31, 2019: € 0.3 million) and consisted of raw materials and
supplies (€ 5.3 million) and finished goods (€ 4.7 million).
*cross-reference to page 146
Further information on the accounting for financial assets is provided
in Note 2.8.1*.
*cross-reference to page 161
6.3 Accounts Receivable
All accounts receivable are non-interest-bearing and generally have
payment terms of between 30 and 180 days. As of December 31, 2020,
accounts receivable mainly included royalty payments not yet received
and receivables from the collaboration and license agreement with
Incyte. As of December 31, 2019, accounts receivable mainly consisted
of royalty payments not yet received and unbilled services associated
with the transfer of projects to customers.
The presentation of the development of the risk provisions in the 2020
and 2019 financial years for accounts receivable using the simplified
impairment model can be found in Note 2.3.1*.
*cross-reference to page 146
6.4 Other Receivables
Other receivables as of December 31, 2020, mainly consisted of receiv-
ables from creditors with debit accounts in the amount of € 1.2 million
(December 31, 2019: € 0.3 million). As of December 31, 2019, other re-
ceivables mainly consisted of receivables from unrealized gross gains
on foreign exchange forward agreements in the amount of € 0.4 million.
The foreign exchange forward agreements were classified as financial
assets at fair value through profit or loss.
As of December 31, 2020 and December 31, 2019, there were no impair-
ments recognized on other receivables.
The impairment to a net realizable value of zero on the antibody material
(tafasitamab) derived from fermenter runs, which was recognized in
cost of sales and research and development expenses in prior periods,
was reversed due to the market approval of Monjuvi. At the time of the
reversal tafasitamab was allocated only under inventories. The reversal
resulted in a net gain of € 13.3 million, which was fully attributable to
financial year 2019. The reversal of the impairment loss was recog-
nized in cost of sales of € 9.9 million and in research and development
expenses of € 3.3 million. There were no impairment losses to be rec-
ognized in 2020 and 2019.
6.6
Income Tax Receivables, Prepaid Expenses and
Other Current Assets
As of December 31, 2020, income tax receivables amounted to € 0.4 mil-
lion (December 31, 2019: € 0.1 million) and consisted of receivables
from capital gain taxes withheld.
Prepaid expenses and other current assets are shown in the following
table.
in 000’ €
12/31/2020
12/31/2019
Combination Drugs
10,003
Receivables due from Tax
Authorities from Input Tax Surplus
3,920
Upfront Fees for External
Laboratory Services
Upfront Fees for Sublicenses
Other Prepayments
Total
1,210
777
4,711
20,621
4,790
3,502
745
466
4,557
14,060
An impairment of € 0.5 million was recognized on combination drugs
in 2020 (December 31, 2019: € 0.7 million).
Notes
6.7 Property, Plant and Equipment
in 000’ €
Cost
January 1, 2020
Additions
Disposals
Exchange differences
December 31, 2020
Accumulated Depreciation and Impairment
January 1, 2020
Depreciation Charge for the Year
Disposals
Exchange differences
December 31, 2020
Carrying Amount
January 1, 2020
December 31, 2020
Cost
January 1, 2019
Additions
Disposals
December 31, 2019
Accumulated Depreciation and Impairment
January 1, 2019
Depreciation Charge for the Year
Impairment
Disposals
December 31, 2019
Carrying Amount
January 1, 2019
December 31, 2019
Financial Statements
181
Office and
Laboratory
Equipment
Furniture and
Fixtures
18,386
2,662
(1,006)
(1)
20,041
15,654
2,101
(921)
0
16,834
2,732
3,207
17,658
1,647
(919)
18,386
14,758
1,805
10
(919)
15,654
2,900
2,732
2,390
1,672
(8)
(112)
3,942
469
363
(2)
(5)
825
1,921
3,117
939
1,452
(1)
2,390
308
161
0
0
469
631
1,921
Total
20,776
4,334
(1,014)
(113)
23,983
16,123
2,464
(923)
(5)
17,659
4,653
6,324
18,597
3,099
(920)
20,776
15,066
1,966
10
(919)
16,123
3,531
4,653
No borrowing costs were capitalized during the reporting period, and
there were neither restrictions on the retention of title nor property,
plant and equipment pledged as security for liabilities. There were no
material contractual commitments for the purchase of property, plant
and equipment as of the reporting date.
The disposals in the 2020 financial year included € 0.4 million in ac-
quisition costs and € 0.3 million in accumulated depreciation and
impairment from the sales of the Lanthio entities.
Depreciation is contained in the following line items of profit or loss.
in 000’ €
2020
2019
2018
Research and Development
Research and Development (Impairment)
Selling
General and Administrative
Total
1,663
0
132
692
2,487
1,478
10
92
396
1,976
1,398
0
87
327
1,812
Financial Statements
182
6.8 Leases
The development of the right-of-use assets and lease liabilities is
shown below.
Notes
Right-of-Use Assets
Lease
Liabilities
in 000’ €
Balance as of January 1, 2019
Additions
Depreciation of Right-of-Use Assets
Interest Expenses on Lease Liabilities
Lease Payments
Stand am 31. Dezember 2019
Balance as of January 1, 2020
Additions
Depreciation of Right-of-Use Assets
Interest Expenses on Lease Liabilities
Lease Payments
Disposals
Balance as of December 31, 2020
Building
Cars
Technical
Equipment
42,094
3,009
(2,517)
0
0
42,586
42,586
4,660
(3,218)
0
0
(78)
43,950
244
138
(144)
0
0
238
238
196
(162)
0
0
0
272
168
312
(144)
0
0
336
336
12
(152)
0
0
0
196
Lease agreements had the following effects on the statement of profit
or loss.
in 000’ €
Depreciation of Right-of-Use Assets
Interest Expenses on Lease Liabilities
Expenses for Short Term Leases
Expenses for Leases of Low Value Assets and Short-Term Leases
Total
Depreciation of right-of-use assets is contained in the following line
items of profit or loss.
in 000’ €
Cost of Sales
Research and Development
Selling
General and Administrative
Total
Total
42,506
3,459
(2,805)
0
0
43,160
43,160
4,868
(3,532)
0
0
(78)
44,418
2020
(3,586)
(1,173)
0
(81)
40,783
4,122
0
932
(3,280)
42,557
42,557
5,286
0
1,173
(3,918)
(79)
45,019
2019
(2,805)
(932)
0
(41)
(4,840)
(3,778)
2020
98
1,991
145
1,352
3,586
2019
100
1,985
123
597
2,805
The maturity analysis of the lease liabilities as of December 31, 2020 is
as follows.
December 31, 2020; in 000’ €
Contractual Maturities of Financial Liabilities
Up to
One Year
Between
One and
Five Years
More than
Five Years
Total
Contractual
Cash Flows
Carrying
Amount
Liabilities
Lease Liabilities
4,150
16,025
32,913
53,088
45,019
Financial Statements
183
Notes
The rental conditions for leases are negotiated individually and include
different terms. Leases are generally concluded for fixed periods but
may include extension options. Such contractual conditions offer the
Group the greatest possible operational flexibility. In determining the
term of the lease, all facts and circumstances are taken into account
that provide an economic incentive to exercise extension options. If
extension options are exercised with sufficient certainty, they are
taken into account when determining the term of the contract. The
leases contain fixed and variable lease payments linked to an index.
The Group entered into an additional lease for office space in Boston in
January 2020. The minimum lease term of six and a half years results in
a contractually agreed cash outflow of US$ 5.6 million (€ 5.0 million).
6.9
Intangible Assets
in 000’ €
Patents
Licenses
Licenses for
Marketed
Products
In-process
R&D
Programs
Software
Goodwill
Total
Cost
January 1, 2020
Additions
Disposals
Reclassification
December 31, 2020
Accumulated Amortization
and Impairment
January 1, 2020
Amortization Charge
for the Year
Impairment
Disposals
Reclassification
December 31, 2020
Carrying Amount
January 1, 2020
December 31, 2020
Cost
January 1, 2019
Additions
December 31, 2019
Accumulated Amortization
and Impairment
January 1, 2019
Amortization Charge
for the Year
Impairment
December 31, 2019
Carrying Amount
January 1, 2019
December 31, 2019
18,034
290
(110)
0
18,214
23,896
12,000
(500)
0
35,396
15,053
21,546
990
233
0
0
206
2,000
(192)
0
16,276
23,560
2,981
1,938
17,585
449
18,034
2,350
11,836
23,896
0
23,896
13,646
21,369
1,209
198
15,053
3,939
2,981
72
105
21,546
2,527
2,350
0
0
0
56,449
56,449
0
963
0
0
0
963
0
55,486
0
0
0
0
0
0
0
0
0
52,159
32,501
(28,211)
(56,449)
0
5,758
90
(1)
0
5,847
11,041
0
(3,689)
0
7,352
110,888
44,881
(32,511)
0
123,258
16,475
5,651
7,365
66,090
0
11,736
(28,211)
0
0
35,684
0
52,159
0
52,159
81
0
(1)
0
5,731
107
116
5,644
114
5,758
0
2,057
(3,689)
0
5,733
3,676
1,619
11,041
0
11,041
2,240
16,026
(32,093)
0
52,263
44,798
70,995
110,325
563
110,888
15,140
5,440
7,365
62,960
0
1,335
16,475
37,019
35,684
211
0
5,651
204
107
0
0
1,492
1,638
7,365
66,090
3,676
3,676
47,365
44,798
Financial Statements
184
Notes
As of December 31, 2020, Goodwill was subject to an impairment test.
This test indicated a need for impairment.
There were no material contractual commitments for the purchase of
intangible assets as of the reporting date.
The disposals in the 2020 financial year included € 32.5 million in ac-
quisition costs and € 32.1 million in accumulated amortization and
impairment from the deconsolidation of the Lanthio entities. This in-
cluded costs and accumulated amortization and impairment for in-pro-
cess R&D programs in the amount of € 28.2 million and for goodwill in
the amount of € 3.7 million.
Amortization was included in the following line items of profit or loss.
in 000’ €
2020
2019
2018
Cost of Sales
Research and
Development
Research and
Development
(Impairment)
Selling
General and
Administrative
Total
963
0
0
1,258
1,444
1,822
16,026
1,639
19,189
5
17
11
37
25
91
18,269
3,131
21,127
Licenses for Marketed Products
Due to the market launch of Monjuvi, the amount reported for this pur-
pose under the line item “In-process R&D programs” was reclassified
to the line item “Licenses for marketed products”.
Tafasitamab
Until market approval on July 31, 2020, the compound tafasitamab was
measured as an intangible asset with an indefinite useful life (no fore-
seeable limit to the period in which the compound is expected to gener-
ate cash flows) and subjected to an impairment test. Due to the market
approval of Monjuvi, the compound is from now on classified as an in-
tangible asset with a finite useful life and amortized as of that date.
The Group amortizes the intangible asset on a straight-line basis over
the estimated useful life of the acquired license until 2044 and recog-
nizes the amortization in cost of sales. The duration and method of
amortization are reviewed at the end of each financial year. In the
event of triggering events, the asset is tested for impairment, if any. As
of December 31, 2020, no indications of impairment were identified.
In-Process R&D Programs
Until the market approval of Monjuvi, this balance sheet item included
capitalized payments from in-licensing as well as milestone payments
made for this compound at later dates. In 2020, further milestone pay-
ments of € 32.5 million were capitalized for a total amount of € 56.4 mil-
lion. Due to the market approval, this amount was reclassified to the
balance sheet item “Licenses for marketed products.”
Lanthio Group
As of June 30, 2020, an intangible asset (MOR107) from the acquisition
of the Lanthio group that is not yet ready for use was subject to an
event-driven impairment test. As the program is not expected to be
advanced towards clinical development, a full impairment loss of
€ 11.7 million was recognized
Effective November 16, 2020, the 100 % direct interest in Lanthio
Pharma B.V. (Groningen, the Netherlands) and the 100 % indirect inter-
est via Lanthio Pharma B.V. in LanthioPep B.V. (Groningen, the Nether-
lands) were divested.
Goodwill
The annual goodwill impairment test was performed on September 30,
2020.
Slonomics Technology
As of September 30, 2020, goodwill of € 3.7 million from the 2010 ac-
quisition of Sloning BioTechnology GmbH was subject to an impair-
ment test. The recoverable amount of the cash-generating unit Slonom-
ics technology, which is part of the Partnered Discovery segment, was
determined on the basis of value-in-use calculations. The calculation
showed that the value-in-use was lower than the carrying amount of
the cash-generating unit, and a € 2.1 million impairment was recog-
nized as a result. The cash flow forecasts took into account future free
cash flows from the contribution of the Slonomics technology to part-
nered programs. The cash flow forecasts are based on a period of ten
years because the Management Board believes that commercialization
through licensing agreements, milestone payments, and royalties is
only feasible by means of medium- to long-term contracts. For this rea-
son, a planning horizon of ten years is considered appropriate for the
value-in-use calculation. The lower year-on-year cash flow forecasts
are predominantly based on the assumption that the advantage of in-
corporating the Slonomics technology into partnered programs can no
longer be extended for more advanced partnered programs. The values
of the underlying assumptions were determined using both internal
(past experience) and external sources of information (market infor-
mation). Based on the updated ten-year cash flow forecast, the value-in-
use was determined as follows: A beta factor of 0.9 (2019: 1.2), WACC
before taxes of 8.5 % (2019: 9.4 %) and a perpetual growth rate of 1 %
(2019: 1 %). A detailed sensitivity analysis was performed for the
growth rate and the discount rate for calculating value-in-use. The sen-
sitivity analysis took into account the change in one assumption, with
the remaining assumptions remaining unchanged from the original
calculation. A change in the pre-tax WACC of +/–1.0 % would cause a
€ 0.2 million lower or € 0.3 million higher impairment of goodwill. A
sensitivity analysis for changes in the cash flows has not been per-
formed since the cash flows have 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 any additional
need for impairment. The values ascribed to the assumptions corre-
spond to the Management Board’s forecasts for future development and
are based on internal planning scenarios as well as external sources of
information
No indication of further impairment was identified as of December 31,
2020.
Notes
6.10 Investments at fair Value, with Changes
Recognized in Other Comprehensive Income
This item concerns an investment in adivo GmbH, Martinsried,
Germany.
MorphoSys has held an investment in adivo GmbH since July 2019. As
of December 31, 2020, the fair value of the investment in adivo GmbH
was measured at € 0 (December 31, 2019: € 0.4 million). The decrease
of € 0.4 million was recognized directly in equity.
Financial Statements
185
Currency
Stake in %
Equity in
Domestic
Currency
(in €)
Loss for the
Year in
Domestic
Currency
(in €)
adivo GmbH, Martinsried, Germany
€
17.2
(346,691)
(467,272)
No observable market data is available for the determination of the fair
value of the investment in adivo GmbH. This corresponds to hierarchy
level 3 for the fair value. The change in the investment in adivo GmbH
is shown below.
6.12 Prepaid Expenses and other Assets, Net of
Current Portion
This balance sheet item includes the non-current portion of prepaid
expenses and other assets.
The Group has classified certain items within other assets as “restricted
cash” that is not available for operational purposes (see Note 2.8.1*). As
of December 31, 2020, the Group had non-current restricted cash of
€ 1.2 million for rental deposits issued (December 31, 2019: € 0.8 mil-
lion). As of December 31, 2020, € 0.2 million were deposited as collateral
by MorphoSys US Inc. (December 31, 2019: € 0.2 million).
*cross-reference to page 161
This line item consisted of the following:
in 000’ €
12/31/2020
12/31/2019
Prepaid Expenses, Net of Current
Portion
Other Current Assets
Total
183
1,384
1,567
134
1,002
1,136
in 000’ €
2020
2019
Opening Balance
Additions
Disposals
Through Other Comprehensive
Income
Through Profit or Loss
Closing Balance
387
0
0
(387)
0
0
232
0
0
155
0
387
MorphoSys has held an investment in Vivoryon Therapeutics AG since
July 2019. During the 2020 financial year, all shares in this investment
were sold in several steps for strategic reasons. The gain on the disposal
amounted to € 0.3 million and was recognized in equity. This corre-
sponds to a fair value before sale of € 15.3 million. As of December 31,
2019, the fair value of the investment was measured at € 13.7 million.
In the 2020 and 2019 financial years, no dividends from the investments
were recognized in profit or loss, and there were no reclassifications of
gains or losses made within equity.
6.11 Deferred Tax Assets
The Group recognized deferred tax assets of € 132.8 million in the
2020 financial year that were mainly related to the collaboration and
license agreement with Incyte because the financial liability resulting
from this collaboration cannot be recognized in the tax accounts. As of
December 31, 2019, no deferred tax assets had to be recognized due to
the Company’s history of losses.
Notes
At the Company’s Annual General Meeting in May 2020, Pricewater-
houseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC GmbH),
Munich, was appointed as the auditor. The Supervisory Board engaged
PwC GmbH to audit the financial statements.
In the 2020 financial year, PwC GmbH received total fees from
MorphoSys of € 1,632,883, including fees for audit services of
€ 1,561,233, fees of € 70,000 for other assurance services in connec-
tion with the non-financial group report and fees of € 1,650 for other
services. PwC GmbH did not provide tax advisory services in 2020.
Tax Liabilities and other Provisions
7.2
As of December 31, 2020, the Group recorded tax liabilities and other
provisions of € 67.5 million (2019: € 0.4 million).
Tax liabilities included primarily expenses for income taxes. Other
provisions included mainly expenses for share-based payments when
these are settled by other assets equivalent to the value of a certain
number of shares or stock options (“cash settlement”), as well as per-
sonnel recruitment measures.
Financial Statements
186
7 Notes to the Balance Sheet Equity
and Liabilities
Accounts Payable and Accruals
7.1
Accounts payable and licenses payable were non-interest-bearing and,
under normal circumstances, have payment terms of no more than
30 days.
Accounts payable and accruals are listed in the following table:
in 000’ €
12/31/2020
12/31/2019
Trade Accounts Payable
Licenses Payable
Accruals
Other Liabilities
Total
47,559
259
79,200
1,536
128,554
10,655
357
44,971
1,059
57,042
Accruals are shown in the following overview:
in 000’ €
12/31/2020
12/31/2019
Accruals for External Laboratory
Services
43,500
24,383
Accrued Personnel Expenses
from Payments to Employees
and Management
Accruals for Outstanding Invoices
Accruals for Revenue Deductions
from Product Sales
Accruals for Legal Fees
Accruals for Audit Fees and other
related Costs
Accruals for License Payments
Total
17,320
15,236
943
472
683
1,046
79,200
13,975
5,639
0
272
663
39
44,971
Notes
The table below shows the development of tax liabilities and current
and non-current other provisions in the 2020 financial year.
Financial Statements
187
in 000’ €
Tax Liabilities
Other Provisions
Total
01/01/2020
Additions
Utilized
Released
12/31/2020
95
346
441
65,633
1,505
67,138
0
323
323
0
0
0
65,728
1,528
67,256
7.3 Contract Liabilities
Contract liabilities related to transaction prices paid by customers that
were allocated to unfulfilled performance obligations as of December 31,
2020. It is expected that the realization of current contract liabilities
will be in the 2021 financial year and non-current contract liabilities
mainly in the 2022 financial year. The changes in this item are shown
in the table below.
the share on XETRA between issue and pricing). The convertible bonds
are traded on the Open Market Segment (Freiverkehr) of the Frankfurt
Stock Exchange.
The convertible bonds are convertible between November 26, 2020 and
the fortieth trading day prior to maturity. As of the maturity date,
MorphoSys has the right to either pay the full amount in cash or to
settle a certain amount through the delivery of shares.
in 000’ €
Opening Balance
Prepayments Received in the
Financial Year
Revenues Recognized in the
Reporting Period that was included
in the Contract Liability at the
2020
1,686
2019
952
13,430
6,070
MorphoSys is entitled to redeem the convertible bonds at any time the
market price of MorphoSys shares reaches at least 130 % of the then
applicable conversion price over a period of twenty trading days or when
only 20 % or less of the original total nominal amount of the convertible
bond is still outstanding. Repayment is then made in the amount of the
nominal value plus accrued interest.
Beginning of the Period
(1,571)
(794)
Revenues Recognized for Received
Prepayments and Services
Performed in the Financial Year
(10,929)
Closing Balance
thereof short-term
thereof long-term
2,616
2,544
72
(4,542)
1,686
1,571
115
7.4 Deferred Tax Liabilities
The Group recognized deferred tax liabilities of € 14.1 million in the
2020 financial year in connection with the issuance of convertible
bonds. As of December 31, 2020, deferred tax liabilities of € 5.1 million
were recognized after offsetting.
There are no uncertain tax positions requiring disclosure under
IFRIC 23.
7.5 Convertible Bonds
By resolution of the Annual General Meeting on June 2, 2016, Condi-
tional Capital 2016-I of up to € 500.0 million has been created until
April 2021, authorizing the issuance of a total of 5,307,536 new no-par-
value bearer shares.
The holders of the convertible bonds have a conditional call right
should an investor directly or indirectly acquire at least 30 % of the
voting rights in MorphoSys (representing a change of control). In the
event of such a change of control, each convertible bondholder has the
right to call the bonds that have not yet been converted or redeemed.
Repayment is then made in the amount of the nominal value plus ac-
crued interest.
MorphoSys raised gross proceeds of € 325.0 million through the issu-
ance of the convertible bonds. Issuance costs of € 5.1 million were in-
curred in the transaction. The net issue proceeds are to be used for
general corporate activities, including proprietary development, in-li-
censing and/or M&A transactions.
The conversion right securitized in the convertible bond represents an
equity instrument and was recognized in equity for an amount of
€ 49.2 million net of issuance costs attributable to the equity compo-
nent. The equity component is not adjusted over time, and the liability
component is classified as a financial liability at amortized cost. As of
the date of initial recognition, the liability component amounted to
€ 270.7 million after the deduction of issuance costs. The difference
between this amount and the nominal value of € 325.0 million is recog-
nized as an interest expense over the term of the financial liability
using the effective interest method.
Making partial use of the conditional capital, MorphoSys AG placed
non-subordinated, unsecured convertible bonds on October 16, 2020
for a nominal amount of € 325.0 million, equal to 3,250 bonds with a
nominal amount of € 100,000 each, and maturing on October 16, 2025.
The convertible bonds are initially convertible into approximately
2,475,436 new or existing bearer ordinary shares MorphoSys.
The early termination rights from MorphoSys (issuer call and clean-up
call) and the put option of the convertible bondholders in the case of
change of control all represent embedded derivatives that, however,
have not been separated in accordance with IFRS 9, as they are consid-
ered to be closely related to the base contract. Accordingly, these com-
ponents are included in the financial liability.
The convertible bonds were issued at 100 % of their nominal amount
and carry a coupon of 0.625 % p.a. payable semi-annually. The conver-
sion price is € 131.29, corresponding to a conversion premium of 40 %
to the reference price of € 93.7766 (volume-weighted average price of
Financial Statements
188
Stockholders’ Equity
7.6
7.6.1 Common Stock
As of December 31, 2020, the Company’s common stock, including
treasury shares, amounted to € 32,890,046 and 32,890,046 shares,
representing an increase of € 932,088 and 932,088 shares compared to
€ 31,957,958 and 31,957,958 shares as of December 31, 2019. Each
share of common stock grants one vote. The common stock increased
due to Incyte’s purchase of 3,692,764 ADSs, or 907,441 shares, created
from a capital increase from Authorized Capital 2017-I, as well as from
the exercise of 24,647 convertible bonds granted to employees amount-
ing to € 24,647, or 24,647 shares. The weighted-average exercise price
of the exercised convertible bonds amounted to € 31.88.
7.6.2 Authorized Capital
In comparison to December 31, 2019, the number of authorized ordi-
nary shares increased from 14,843,488 to 15,214,050. The number was
reduced by the capital increase of € 907,441 from the Authorized Capital
2017-I carried out in April 2020 under the collaboration and license
agreement with Incyte. At the Annual General Meeting on May 27,
2020, Authorized Capital 2020-I in the amount of € 3,286,539 was
newly created, and the remaining Authorized Capital 2017-I in the
amount of € 2,008,536 was canceled. Under Authorized Capital 2020-I,
the Management Board is authorized, with the consent of the Supervi-
sory Board, to increase the Company’s share capital on one or more
occasions on or before the end of May 26, 2025 against cash contribu-
tions by a total of up to € 3,286,539 by issuing up to 3,286,539 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 specific total amount referred to as authorized
capital (Genehmigtes Kapital), which is a concept under German law
that enables the company to issue shares without going through the
process of obtaining an additional shareholders’ resolution. The aggre-
gate nominal amount of the authorized capital created by the share-
holders may not exceed half of the share capital existing at the time of
registration of the authorized capital in the commercial register.
7.6.3 Conditional Capital
In comparison to December 31, 2019, the number of ordinary shares of
conditional capital increased from 6,340,760 to 7,630,728. At the An-
nual General Meeting on May 27, 2020, Conditional Capital 2020-I in
the amount of € 1,314,615 was newly created. The exercise of 24,647
conversion rights in 2020 had an offsetting effect. The reduction from
the exercise of the 24,647 conversion rights was entered into the com-
mercial register in February 2021.
Although shareholders may resolve to amend or create conditional cap-
ital (Bedingtes Kapital), 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 em-
ployees and members of the Management Board of the Company or of
an affiliated company by way of consent or authorizing resolution. Ac-
cording to German law, the aggregate nominal amount of the condi-
tional capital created at the shareholders’ meeting may not exceed half
of the share capital existing at the time of the shareholders’ meeting
adopting such resolution. The aggregate nominal amount of the condi-
tional capital created for the purpose of granting subscription rights to
employees and members of the management of our Company or of an
affiliated company may not exceed 10 % of the share capital existing at
the time of the shareholders’ meeting adopting such resolution.
Notes
7.6.4 Treasury Stock
In the years 2020 and 2019, the Group did not repurchase any of its
own shares. The composition and development of this line item are
listed in the table below.
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
Transfer in 2019
As of 12/31/2019
Transfer in 2020
As of 12/31/2020
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
(55,236)
225,800
(94,386)
131,414
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
(2,041,523)
8,357,250
(3,488,506)
4,868,744
On December 31, 2020, the Company held 131,414 treasury shares
with a value of € 4,868,744 — a decrease of € 3,488,506 compared to
December 31, 2019 (225,800 shares, € 8,357,250). The reason for this
decrease was the transfer of 91,037 treasury shares amounting to
€ 3,364,727 to the Management Board and selected employees of the
Company (beneficiaries) from the 2016 Long-Term Incentive Plan (LTI
Plan). The vesting period for this LTI Plan expired on April 1, 2020 and
offered beneficiaries a six-month period until October 20, 2020 to re-
ceive a total of 91,037 shares. In addition, 3,349 treasury shares for an
amount of € 123,779 from the 2019 Long-Term Incentive Plan were
transferred to certain employees of MorphoSys US Inc.
Consequently, the number of MorphoSys shares owned by the Com-
pany as of December 31, 2020, was 131,414 (December 31, 2019:
225,800). The repurchased shares may be used for all of the purposes
named in the authorization granted by the Annual General Meeting on
May 23, 2014, particularly for existing and future employee stock
option programs and/or to finance acquisitions. The shares may also
be redeemed.
7.6.5 Additional Paid-In Capital
As of December 31, 2020, the capital reserve amounted to € 748,978,506
(December 31, 2019: € 628,176,568). The increase by a total of
€ 120,801,938 resulted mainly from the capital increase with Incyte in
the amount of € 79,590,657 after deducting transaction costs of
€ 100,370 and from the convertible bond option of € 49,994,274 classi-
fied as equity and deducting deferred taxes directly recognized in eq-
uity of € 12,733,806 as well as transaction costs of € 777,418. Further-
more, the additional paid-in capital increased due to the addition of
Notes
Financial Statements
189
personnel expenses from share-based payments in the amount of
€ 7,455,761 and the exercise of convertible bonds in the amount of
€ 760,976. This was offset by the decrease from reclassifications of
treasury shares in connection with the allocation of shares from the
MorphoSys AG 2016 Performance Share Plan in the amount of
€ 3,364,727 and from the MorphoSys US Inc. 2019 LTI Plan in the
amount of € 123,779.
7.6.6 Other Comprehensive Income Reserve
On December 31, 2020, this reserve included changes in the fair value
of equity instruments of € 1,260,132 (December 31, 2019: € 1,160,160)
recognized directly in equity, as well as currency translation differ-
ences from consolidation of € 2,247,005 (December 31, 2019: of € 75,332).
The currency translation differences from consolidation included ex-
change rate differences from the revaluation of the financial statements
of Group companies prepared in foreign currencies and differences
between the exchange rates used in the balance sheet and income
statement.
7.6.7 Accumulated Deficit
The consolidated net profit for the year of € 97,890,576 is reported under
“accumulated deficit.” As a result, the accumulated deficit decreased
from € 255,779,786 in 2019 to € 157,889,210 in 2020.
8 Remuneration System for the
Management Board and Employees
of the Group
A change in the organizational structure of MorphoSys took effect as of
July 1, 2020. This change had an impact on the definition of related
parties who hold a key position in MorphoSys AG as the parent com-
pany of the Group. In addition to the members of the Management
Board and the Supervisory Board, all persons on the management level
below who have direct or indirect authority and responsibility for plan-
ning, directing, or supervising the activities of the Company are also
considered to be key management personnel. From the Group’s per-
spective, key management personnel are those persons who direct and
control a significant part of the Group’s activities. Starting in 2020, in
addition to the Management Board and the Supervisory Board, the
other members of the Executive Committee that was newly formed in
2020 are considered key management personnel from the perspective of
MorphoSys AG and are therefore relevant for the disclosures. Prior-year
figures do not need to be adjusted and are therefore not comparable to
the figures for 2020.
Stock Option Plans
8.1
8.1.1 2017 Stock Option Plan
On April 1, 2017, MorphoSys established a stock option plan (SOP) for
the Management Board and selected employees of the Company (bene-
ficiaries). 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 period/performance period is four years. Each
stock option grants up to two subscription rights to shares in the Com-
pany. 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 crite-
ria of the absolute and relative MorphoSys share price performance
compared to the Nasdaq Biotech Index and the TecDAX Index. The pro-
gram’s performance criteria can be met annually up to a maximum of
200 %. If the share price development falls short of the program’s per-
formance 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 period,
which is March 31, 2024.
In the event of a departure from the Company, the beneficiaries gen-
erally retain the stock options that have vested by the time of their
departure.
In the event of a termination of a beneficiary for reasons of conduct or
a revocation of the appointment of a member of the Management Board
for reasons constituting good cause within the meaning of Section 626
(2) of the German Civil Code (BGB), all unexercised stock options forfeit
without 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.
In 2020, personnel expenses from stock options under the Group’s
2017 SOP amounted to € 62,780 based on the fair value on the grant
date (2019: € 252,393; 2018: € 436,154).
8.1.2 2018 Stock Option Plan
On April 1, 2018, MorphoSys established a stock option plan (SOP) for
the Management Board and selected Company employees (beneficia-
ries). The program is considered 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 in the Company. The
subscription rights vest each year by 25 % within the four-year vesting
period, provided that the performance criteria specified for the respec-
tive period have been 100 % fulfilled. The number of subscription rights
vested per year is calculated based on the key performance criteria of
the absolute and relative MorphoSys share price performance compared
to the Nasdaq Biotech Index and the TecDAX Index. The program’s per-
formance criteria can be met annually up to a maximum of 200 %. If the
share price development falls short of the program’s performance pa-
rameters, 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
using either newly created shares from Conditional Capital 2016-III or
by issuing treasury shares, or in cash should the exercise from Condi-
tional 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.
Financial Statements
190
Notes
In the event of a departure from the Company, the beneficiaries gen-
erally retain the stock options that have vested by the time of their
departure.
In the event of a departure from the Company, the beneficiaries gener-
ally retain the stock options that have vested by the time of their
departure.
In the event of a termination of a beneficiary for reasons of conduct or
a revocation of the appointment of a member of the Management Board
for reasons constituting good cause within the meaning of Section 626
(2) of the German Civil Code (BGB), all unexercised stock options forfeit
without entitlement to compensation.
In the event of a termination of a beneficiary for reasons of conduct or
a revocation of the appointment of a member of the Management Board
for reasons constituting good cause within the meaning of Section 626
(2) of the German Civil Code (BGB), all unexercised stock options forfeit
without entitlement to compensation.
If an accumulated period of absence of more than 90 days occurs
during the four-year vesting period/performance period, 1/48 of the
stock options granted are forfeited for each up to 30 days of absence. A
period of absence is defined as absence due to illness, continued pay-
ment of remuneration in the event of illness or a suspended service or
employment relationship without continued payment of remuneration.
If an accumulated period of absence of more than 90 days occurs
during the four-year vesting period/performance period, 1/48 of the
stock options granted are forfeited for each up to 30 days of absence. A
period of absence is defined as absence due to illness, continued pay-
ment of remuneration in the event of illness or a suspended service or
employment relationship without continued payment of remuneration.
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.
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.
In 2020, personnel expenses from stock options under the Group’s
2018 SOP amounted to € 251,855 based on the fair value on the grant
date (2019: € 704,954; 2018: € 925,635).
On October 1, 2019, MorphoSys established a further stock option plan
(SOP plan) for one member of the Management Board. The terms and
conditions were identical to those of the April 1, 2019 program, and the
exercise price was € 106.16.
8.1.3 2019 Stock Option Plan
On April 1, 2019, MorphoSys established a stock option plan (SOP) for
the Management Board and selected employees of the Company (bene-
ficiaries). The program is considered an equity-settled share-based
payment and is accounted for accordingly. The grant date was April 1,
2019, and the vesting period/performance period is four years. Each
stock option grants up to two subscription rights to shares in the Com-
pany. 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 sub-
scription rights vested per year is calculated based on the key perfor-
mance criteria of the absolute and relative MorphoSys share price per-
formance compared to the Nasdaq Biotech 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
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 € 87.86.
MorphoSys reserves the right to settle the exercise of stock options
using either newly created shares from Conditional Capital 2016-III,
issuing 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, 2026.
In 2020, personnel expenses from stock options under the Group’s
2019 SOP amounted to € 1,570,241 based on the fair value on the grant
date (2019: € 1,718,087).
8.1.4 2020 Stock Option Plan
On April 1, 2020, MorphoSys established a stock option plan (SOP) for
the Management Board and selected employees of the Company (bene-
ficiaries). The program is considered an equity-settled share-based
payment and is accounted for accordingly. The grant date was April 21,
2020, and the vesting period/performance period is four years. Each
stock option grants up to two subscription rights to shares in the Com-
pany. 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 sub-
scription rights vested per year is calculated based on the key perfor-
mance criteria of the absolute and relative MorphoSys share price per-
formance compared to the Nasdaq Biotech 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
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 € 93.66.
Financial Statements
191
Notes
MorphoSys reserves the right to settle the exercise of stock options
using either newly created shares from Conditional Capital 2016-III,
through the issue 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, 2027.
In the event of a departure from the Company, the beneficiaries gener-
ally retain the stock options that have vested by the time of their
departure.
In the event of a termination of a beneficiary for reasons of conduct or
a revocation of the appointment of a member of the Management Board
for reasons constituting good cause within the meaning of Section 626
(2) of the German Civil Code (BGB), all unexercised stock options forfeit
without entitlement to compensation.
If an accumulated period of absence of more than 90 days occurs
during the four-year vesting period/performance period, 1/48 of the
stock options granted are forfeited for each up to 30 days of absence. A
period of absence is defined as absence due to illness, continued pay-
ment of remuneration in the event of illness or a suspended service or
employment relationship without continued payment of remuneration.
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, 2020, a total of 108,215 stock options had been granted to
beneficiaries, of which 36,412 had been granted to the Management
Board (further details can be found in the “Stock Options” table in Note
8.8* “Related Parties”), 10,466 to the further members of the Executive
Committee and 61,337 to selected Company employees who do not
belong to the Executive Committee. For the calculation of personnel
expenses resulting from share-based payment under the 2020 Stock
Option Plan, the assumption is that ten beneficiaries would leave the
Company during the four-year period.
*cross-reference to page 199
In 2020, personnel expenses from stock options under the Group’s
2020 SOP amounted to € 1,990,326 based on the fair value on the grant
date.
The table below shows the development of the stock options plans in
the financial year 2020.
April 2017
Stock Option
Plan
April 2018
Stock Option
Plan
April 2019
Stock Option
Plan
October 2019
Stock Option
Plan
April 2020
Stock Option
Plan
Outstanding on January 1, 2020
72,759
65,335
76,021
57,078
Granted
Exercised
Forfeited
Expired
Outstanding on December 31, 2020
Weighted-average Price (€)
0
0
(109)
0
72,650
55.52
0
0
(1,080)
0
64,255
81.04
0
0
(2,838)
0
73,183
87.86
0
0
0
0
57,078
106.16
0
108,215
0
(1,173)
0
107,042
93.66
Financial Statements
192
The fair value of the stock options from the 2017, 2018, 2019 and 2020
stock option plans was determined using a Monte Carlo simulation.
The expected volatility is based on the development of the share vola-
tility of the last four years. Furthermore, the calculation of fair value
equally considered the performance criteria of the absolute and rela-
tive performance of MorphoSys shares compared to the development of
the Nasdaq Biotech Index and the TecDAX Index. The parameters and
fair value of each program are listed in the table below.
Notes
April 2017
Stock Option
Plan
April 2018
Stock Option
Plan
April 2019
Stock Option
Plan
October 2019
Stock Option
Plan
April 2020
Stock Option
Plan
Share Price on Grant Date in €
Exercise 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 %
Fair Value on Grant Date in €
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
85.00
87.86
37.76
18.61
26.46
4.0
n/a
98.10
106.16
38.02
18.17
24.82
4.0
n/a
94.90
93.66
39.86
25.32
20.48
4.0
n/a
between
between
between
between
between
0.03 and 0.23
0.02 and 0.15
0.02 and 0.13
0.0 and 0.02
(0.55) and (0.83)
21.41
30.43
31.81
35.04
38.20
8.2 2013 Convertible Bond Program
On April 1, 2013, MorphoSys AG granted the Management Board and
certain employees of the 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 received the right to convert the bonds into Company
shares. Each convertible bond can be exchanged for one of the Compa-
ny’s no-par-value bearer shares equal to the proportional amount of
common stock, which is € 1. Exercise of the convertible bonds was
subject to several conditions, such as the achievement of performance
targets, the expiration of vesting periods, the exercisability of the con-
version 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 table below shows the development of the convertible bond pro-
grams in the financial year 2020.
Outstanding on January 1, 2020
Granted
Exercised
Forfeited
Expired
Outstanding on December 31, 2020
Convertible
Bonds
24,647
0
(24,647)
0
0
0
In the period from the grant date until March 31, 2020, one beneficiary
had left MorphoSys, resulting in the forfeiture of 13,414 convertible
bonds. Prior to March 31, 2020, all remaining convertible bonds had
been exercised.
8.3 Long-Term Incentive Programs
8.3.1 2015 Long-Term Incentive Plan
On April 1, 2015, MorphoSys established a Long-Term Incentive Plan
(LTI Plan) for the Management Board and certain employees of the
Company (beneficiaries). The vesting period for this LTI Plan expired on
April 1, 2019. The program is considered an equity-settled share-based
payment and is accounted for accordingly. The LTI Plan is a perfor-
mance-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 performance criteria are based on a mathe-
matical comparison of the absolute and relative performance of the
MorphoSys share price against the Nasdaq Biotech Index and the Tec-
DAX Index. Achievement of these criteria was set at 100 % for one year,
94 % for one year and 200 % each for two years. In addition, the Super-
visory Board set a “company factor” as 1, which determines the num-
ber of performance shares to be issued. Based on these conditions and
the set factor, 52,328 performance shares of MorphoSys AG were trans-
ferred to the beneficiaries after the four-year vesting period during the
period ending December 31, 2019. In August 2019, the original six-
month transfer period for the performance shares was extended from
October 14, 2019 to December 31, 2019 and had no impact on the fair
value of the performance shares or the period over which the compen-
sation expense was recognized. The Management Board received 19,815
performance shares, and the Senior Management Group received
18,798 performance shares. A total of 13,715 performance shares were
granted to former members of the Management Board and the Senior
Management Group who have since left the Company.
Notes
Financial Statements
193
In 2020, personnel expenses resulting from performance shares under
the Group’s 2015 LTI Plan amounted to € 0 based on the fair value on
the grant date (2019: € 6,714; 2018: € 109,511).
At the end of the four-year waiting period, there is a six-month exercise
period during which the Company can transfer the performance shares
to the beneficiaries. The beneficiaries are free to choose the award date
within this exercise period.
8.3.2 2016 Long-Term Incentive Plan
On April 1, 2016, MorphoSys established a Long-Term Incentive Plan
(LTI Plan) for the Management Board and certain employees of the
Company (beneficiaries). The vesting period for this LTI Plan expired
on April 1, 2020. The program is considered an equity-settled share-
based payment and is accounted for accordingly. The LTI Plan is a per-
formance-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 performance criteria were based on a mathe-
matical comparison of the absolute and relative performance of the
MorphoSys share price against the Nasdaq Biotech Index and the Tec-
DAX Index. Achievement of these criteria was set at 94 % for one year
and 200 % each for three years. In addition, the Supervisory Board set
a “company factor” as 1, which determines the number of performance
shares to be issued. Based on these conditions and the set factor,
91,037 performance shares of MorphoSys AG were transferred to the
beneficiaries after the four-year vesting period in the period ending
October 20, 2020. The Management Board received 13,677 performance
shares (for further information, see the tables entitled “Shares” and
“Performance Shares” in Note 8.8* “Related Parties”), and the mem-
bers of the Executive Committee received 8,754 performance shares. A
total of 68,606 performance shares were granted to current and former
employees of the Company.
*cross-reference to page 199
In 2020, personnel expenses resulting from performance shares under
the Group’s 2016 LTI Plan amounted to € 4,921 based on the fair value
on the grant date (2019: € 141,473; 2018: € 330,727).
8.3.3 2017 Long-Term Incentive Plan
On April 1, 2017, MorphoSys established another Long-Term Incentive
Plan (LTI Plan) for the Management Board and selected employees of
the Company (beneficiaries). This plan is considered a share-based
payment program with settlement in equity instruments and is ac-
counted 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 predefined 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 the key performance cri-
teria of the absolute and relative MorphoSys share price performance
compared to the Nasdaq Biotech Index and the TecDAX Index. The per-
formance 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 payout 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 Supervi-
sory 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 Company’s
general development. The right to receive a specific allocation of per-
formance shares under the LTI Plan, however, occurs only at the end of
the four-year vesting/performance period.
If the number of repurchased shares is not sufficient for servicing the
LTI Plan, MorphoSys reserves the right to pay a specific 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.
In the event of a departure from the Company, the beneficiaries are
generally entitled to the performance shares that have vested up to the
date of their departure on a pro rata basis.
In the event of a termination of a beneficiary for reasons of conduct or
a revocation of the appointment of a member of the Management Board
for reasons constituting good cause within the meaning of Section 626
(2) of the German Civil Code (BGB), all performance shares forfeit with-
out entitlement to compensation.
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 specific allocation of performance shares under the LTI Plan
occurs only at the end of the four-year vesting period.
In 2020, personnel expenses resulting from performance shares under
the Group’s 2017 LTI Plan amounted to € 80,383 based on the fair value
on the grant date (2019: € 323,165; 2018: € 558,446).
8.3.4 2018 Long-Term Incentive Plan
On April 1, 2018, MorphoSys established another Long-Term Incentive
Plan (LTI Plan) for the Management Board and selected employees of
the Company (beneficiaries). This plan is considered a share-based
payment program with settlement in equity instruments and is ac-
counted 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 predefined performance criteria for the respective
period are 100 % 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 the key performance cri-
teria of the absolute and relative MorphoSys share price performance
compared to the Nasdaq Biotech Index and the TecDAX Index. The per-
formance 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 payout 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 Supervi-
sory 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 specific allocation
of performance shares under the LTI Plan, however, occurs only at the
end of the four-year vesting/performance period.
Notes
and up to 200 % for the entire four-year period. If the specified perfor-
mance criteria are met by less than 0 % in one year, no shares will be
earned for that year (entitlement). In any case, the maximum payout 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 ex-
ample, if the level of payment is regarded as unreasonable in view of
the general development of the Company. The right to receive a specific
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 vesting period, there is a six-month exercise period
during which the Company can transfer the performance shares to the
beneficiaries.
If the number of repurchased shares is not sufficient for servicing the
LTI Plan, MorphoSys reserves the right to pay a specific 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.
In the event of a departure from the Company, the beneficiaries are
generally entitled to the performance shares that have vested up to the
date of their departure on a pro rata basis.
In the event of a termination of a beneficiary for reasons of conduct or
a revocation of the appointment of a member of the Management Board
for reasons constituting good cause within the meaning of Section 626
(2) of the German Civil Code (BGB), all performance shares forfeit with-
out entitlement to compensation.
If an accumulated period of absence of more than 90 days occurs during
the four-year vesting period/performance period, the beneficiary is en-
titled to performance shares on a pro rata basis. A period of absence is
defined as absence due to illness, continued payment of remuneration in
the event of illness or a suspended service or employment relationship
without continued payment of remuneration.
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 specific allocation of performance shares under the LTI Plan
occurs only at the end of the four-year vesting period.
In 2020, personnel expenses resulting from performance shares under
the Group’s 2019 LTI Plan amounted to € 682,162 based on the fair
value on the grant date (2019: € 1,294,974).
Financial Statements
194
At the end of the four-year waiting period, there is a six-month exercise
period during which the Company can transfer the performance
shares to the beneficiaries. The beneficiaries are free to choose the
award 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 specific 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.
In the event of a departure from the Company, the beneficiaries are
generally entitled to the performance shares that have vested up to the
date of their departure on a pro rata basis.
In the event of a termination of a beneficiary for reasons of conduct or
a revocation of the appointment of a member of the Management Board
for reasons constituting good cause within the meaning of Section 626
(2) of the German Civil Code (BGB), all performance shares forfeit with-
out entitlement to compensation.
If an accumulated period of absence of more than 90 days occurs
during the four-year vesting period/performance period, the benefi-
ciary is entitled to performance shares on a pro rata basis. A period of
absence is defined as absence due to illness, continued payment of
remuneration in the event of illness or a suspended service or employ-
ment relationship without continued payment of remuneration.
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 specific allocation of performance shares under the LTI Plan
occurs only at the end of the four-year vesting period.
In 2020, personnel expenses resulting from performance shares under
the Group’s 2018 LTI Plan amounted to € 257,494 based on the fair
value on the grant date (2019: € 720,764; 2018: € 946,346).
8.3.5 2019 Long-Term Incentive Plan
On April 1, 2019, MorphoSys established another Long-Term Incentive
Plan (LTI Plan) for the Management Board and selected employees of
the Company (beneficiaries). This plan is considered a share-based
payment program with settlement in equity instruments and is ac-
counted 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, 2019, and the vesting/performance period
is four years. If the predefined performance criteria for the respective
period are 100 % 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 the key performance cri-
teria of the absolute and relative MorphoSys share price performance
compared to the Nasdaq Biotech Index and the TecDAX Index. The
performance criteria can be met annually up to a maximum of 300 %
Notes
The table below shows the development of the LTI plans in the financial
year 2020.
Financial Statements
195
Outstanding on January 1, 2020
Granted
Adjustment due to Performance Criteria
Exercised
Forfeited
Expired
Outstanding on December 31, 2020
Weighted-average Exercise Price (€)
The fair value of the performance shares from the Long-Term Incentive
Plans from 2017 through 2019 has been 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 calcula-
tion of fair value equally considered the performance criteria of the
absolute and relative performance of MorphoSys shares compared to
the development of the Nasdaq Biotech Index and the TecDAX Index.
The parameters and the fair value of each program are listed in the
table below.
Share Price on Grant Date in €
Exercise 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 %
Fair Value on Grant Date in €
April 2016
Long-Term
Incentive
Program
April 2017
Long-Term
Incentive
Program
April 2018
Long-Term
Incentive
Program
April 2019
Long-Term
Incentive
Program
56,002
0
35,035
(91,037)
0
0
0
n/a
29,838
19,654
22,626
0
0
0
0
0
29,838
n/a
0
0
0
(283)
0
19,371
n/a
0
0
0
(843)
0
21,783
n/a
April 2017
Long-Term
Incentive
Program
April 2018
Long-Term
Incentive
Program
April 2019
Long-Term
Incentive
Program
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
85.00
n/a
37.76
18.61
26.46
4.0
n/a
between
between
between
0.03 and 0.23
0.02 and 0.15
0.02 and 0.13
70.52
103.58
106.85
Financial Statements
196
8.3.6 2020 Performance Share Unit Program
On April 1, 2020, MorphoSys established a performance share unit pro-
gram (PSU program) for the Management Board and certain employees
of the Company (beneficiaries). The program is considered a cash-set-
tled, share-based payment and is accounted for accordingly. The PSU
program is a performance-based program and is paid out in cash sub-
ject to the fulfillment of predefined performance criteria. The grant
date was April 21, 2020; the vesting period/performance period is four
years. If the predefined performance criteria for the respective period
are fully met, 25 % of the performance share units become vested in
each year of the four-year vesting period. The number of performance
share units vested per year is calculated on the basis of the perfor-
mance criteria of the absolute and relative development of the MorphoSys
share price compared to the development of the Nasdaq Biotech Index
and the TecDAX Index. The performance criteria can be met each year
up to a maximum of 200 %. If the defined performance criteria are met
by less than 0 % in any one year, no performance share units will be
earned for that year. However, the right to receive a certain cash settle-
ment from the PSU program does not arise until the end of the four-
year vesting period/performance period. After the end of the four-year
vesting period, there is a six-month period during which the perfor-
mance shares can be transferred from the Company to the beneficiaries.
MorphoSys reserves the right to settle the PSU program at the end of
the vesting period in MorphoSys AG’s own ordinary shares equal to
the amount of the performance share units earned. The currently
available treasury stock is not sufficient to settle the vested awards.
MorphoSys therefore accounts for the plan only as a cash-settled
share-based payment.
In the event of a departure from the Company, the beneficiaries gener-
ally retain the performance share units that have vested by the time of
their departure.
In the event of a termination of a beneficiary for reasons of conduct or
a revocation of the appointment of a member of the Management Board
for reasons constituting good cause within the meaning of Section 626
(2) of the German Civil Code (BGB), all performance share units forfeit
without entitlement to compensation.
If an accumulated period of absence of more than 12 months occurs
during the four-year vesting period/performance period, 1/48 of the
performance share units are forfeited for each month of absence. A
period of absence is defined as an absence due to illness or a period
of inactive service or employment without continued payment of
remuneration.
If a change of control occurs during the four-year vesting period, all
performance share units will become fully vested. In this case, the
right to receive a specific allocation of performance share units under
the PSU program occurs only at the end of the four-year vesting period.
As of April 1, 2020, a total of 27,795 performance share units were
granted to beneficiaries, consisting of 9,363 performance share units
to the Management Board, 2,688 performance share units to other
members of the Executive Committee and 15,744 performance share
units to certain employees of the Company who are not members of the
Executive Committee. For the calculation of the personnel expenses
from share-based compensation, it was assumed for the PSU program
2020 that ten beneficiaries would leave the Company during the four-
year period.
Notes
On June 1, 2020, MorphoSys established another performance share
unit program (PSU program) for one member of the Management
Board. The terms and conditions were identical to those of the April 1,
2020 program, and a total of 8,361 performance share units were
granted.
In 2020, personnel expenses under the Group’s 2020 performance
share unit program amounted to € 1,166,194.
The table below shows the development of the performance share unit
programs in the financial year 2020.
April 2020
Performance
Share Unit
Program
June 2020
Performance
Share Unit
Program
Outstanding on January 1, 2020
Granted
Exercised
Forfeited
Expired
Outstanding on December 31, 2020
Weighted-average Price (€)
0
27,795
0
(301)
0
27,494
n/a
0
8,361
0
0
0
8,361
n/a
The fair values of the performance share units of the 2020 PSU pro-
grams are determined using a Monte Carlo simulation. The expected
volatility is based on the development of the share price volatility of the
last four years. Furthermore, the calculation of fair values equally con-
sidered the performance criteria of the absolute and relative perfor-
mance of MorphoSys shares compared to the development of the Nasdaq
Biotech Index and the TecDAX Index. The parameters and the fair
value of each program are listed in the table below.
April 2020
Performance
Share Unit
Program
June 2020
Performance
Share Unit
Program
Share Price in € on
December 31, 2020
Exercise Price in €
Expected Volatility of the
MorphoSys share in %
Expected Volatility of the Nasdaq
Biotech Index in %
Expected Volatility of the TecDAX
Index in %
Remaining Performance Term of
Program in Years
Dividend Yield in %
93.82
n/a
40.24
25.73
23.32
3.25
n/a
93.82
n/a
39.83
25.52
22.88
3.42
n/a
Risk-free Interest Rate in %
(0.68) and (0.91)
(0.71) and (0.84)
between
between
Fair Value on December 31,
2020, in €
68.46
68.23
Notes
Financial Statements
197
8.4 Morphosys US Inc. – Share Plan
On September 10, 2018, MorphoSys established a share plan for one
employee of MorphoSys US Inc. This program was considered a share-
based payment program with settlement in equity instruments (trea-
sury shares of MorphoSys AG). The grant date was September 25, 2018.
The fair value at the grant date was € 91.90 per share and the vesting
period was one year. The total number of shares granted was calcu-
lated by dividing the total plan value of US$ 370,000 by the average
XETRA share price on the Frankfurt Stock Exchange over the 30 trad-
ing days prior to the start date of the program (€ 102.95). As a result,
the share plan thus comprised a maximum of 3,104 shares. With the
end of the vesting period in 2019, all 3,104 shares were transferred to
the beneficiary.
In 2020, personnel expenses of the Group under this share plan
amounted to € 0 (2019: € 96,374; 2018:€ 188,884).
8.5 Morphosys US Inc. – 2019 Long-Term Incentive
Program
On April 1, 2019, MorphoSys AG established a Long-Term Incentive
Plan (LTI Plan) for selected employees of MorphoSys US Inc. (beneficia-
ries). 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. The plan has a term of four
years and comprises four one-year performance periods. If the pre-
defined performance criteria for the respective period are fully met,
25 % of the performance shares become vested in each year. The number
of shares vested per year is calculated based on key performance criteria
of MorphoSys US Inc. during the annual performance period. The per-
formance criteria can be met up to a maximum of 125 % per year. If less
than 0 % of the defined performance criteria are met in any one year, no
shares will be vested for that year. After the end of each one-year per-
formance period, there is a six-month period during which the perfor-
mance shares can be transferred from the Company to the beneficiaries.
If the number of repurchased shares is not sufficient for servicing the
LTI Plan, MorphoSys reserves the right to pay a specific 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 average market price of one share of the Company in the XETRA
closing auction on the Frankfurt Stock Exchange during the 30 trading
days preceding the grant of the performance shares.
In the event of a departure from the Company, the beneficiaries are
generally entitled to the performance shares that have vested up to the
date of their departure on a pro rata basis.
In the event of termination by a beneficiary for good cause, all perfor-
mance shares will be forfeited without entitlement to compensation.
After the end of the first one-year performance period, a target achieve-
ment of 100 % was determined. Taking this target achievement into
account, 3,349 performance shares of MorphoSys AG were transferred
to the beneficiaries in the period from April 1, 2020 to October 20, 2020.
The fair value of the performance shares on December 31, 2020 was
€ 93.82 per share.
In 2020, personnel expenses of the Group from performance shares
under the MorphoSys US Inc. 2019 LTI Plan amounted to € 38,888
based on the fair value on December 31, 2020. (2019: € 1,076,158).
The table below shows the development of the performance shares under
the MorphoSys US Inc. 2019 LTI Plan in the financial year 2020.
Outstanding on January 1, 2020
Granted
Exercised
Forfeited
Expired
Outstanding on December 31, 2020
Weighted-average Price (€)
MorphoSys US Inc. –
2019 Long-Term
Incentive Program
12,467
0
(3,349)
0
0
9,118
n/a
8.6 Morphosys US Inc. – Restricted Stock Unit
Plan (RSUP)
8.6.1 2019 Long-Term Incentive Program
On October 1, 2019, MorphoSys AG established a Long-Term Incentive
Plan (LTI Plan) for selected employees of MorphoSys US Inc. (beneficia-
ries). The program is considered a share-based payment program with
settlement in equity instruments and is accounted for accordingly. The
LTI Plan is a restricted stock unit plan (RSUP) and is paid out in shares of
MorphoSys AG that are to be created from authorized capital provided
predefined performance criteria have been fulfilled. The term of the
plan is three years and includes three one-year performance periods.
If the predefined performance criteria for the respective period are fully
met, 33.3 % of the performance shares become vested in each year. The
number of performance shares vested per year is calculated based on
the key performance criteria of MorphoSys US Inc. and the MorphoSys
share price performance during the annual performance period. The
performance criteria can be met up to a maximum of 125 % per year. If
less than 0 % of the defined performance criteria are met in any one
year, no shares will be vested for that year. At the end of the total three-
year performance period, the corresponding number of shares eventu-
ally vested is calculated, and the shares created from authorized capital
are transferred from the Company to the beneficiaries.
Notes
If a beneficiary loses his office or terminates his employment with
MorphoSys US Inc. prior to the end of a performance period, the bene-
ficiary will generally be entitled to all vested restricted stock units for
already completed one-year performance periods. All remaining re-
stricted stock units are forfeited without entitlement to compensation.
As of April 1, 2020, 42,307 restricted shares were granted to US bene-
ficiaries. For the calculation of the personnel expenses from share-
based compensation, it was assumed for the LTI Plan 2020 that four
beneficiaries would leave the Company during the three-year period.
The fair value of the restricted shares granted on April 1, 2020, in ac-
cordance with the grant dates or measurement dates for each of the
three performance periods were € 94.14 per share on November 30,
2020, and € 93.82 per share on December 31, 2020.
On October 1, 2020, MorphoSys established an additional Long-Term
Incentive Plan in the form of a restricted stock unit plan (RSUP) for
certain employees of MorphoSys US Inc. (beneficiaries). The terms and
conditions were identical to those of the April 1, 2020 program, with
7,678 restricted shares granted. For the calculation of the personnel
expenses from share-based compensation, it was assumed for the 2020
LTI Plan that two beneficiaries would leave the Company during the
three-year period.
The fair value of the restricted shares granted on October 1, 2020, in
accordance with the grant dates or measurement dates for each of the
three performance periods were € 94.14 per share as of November 30,
2020, and € 93.82 per share as of December 31, 2020.
In 2020, personnel expenses of the Group from the MorphoSys US Inc.
2020 RSU Plan amounted to € 1,916,267 based on the fair values.
Financial Statements
198
MorphoSys reserves the right to pay a specific amount of the LTI Plan
in cash at the end of the performance period, equal to the value of the
performance shares granted.
If a beneficiary loses his office or terminates his employment with
MorphoSys US Inc. prior to the end of a performance period, the bene-
ficiary will generally be entitled to all vested restricted stock units for
already completed one-year performance periods. All remaining re-
stricted stock units are forfeited without entitlement to compensation.
The fair values of the performance shares according to the grant dates
or measurement dates for each of the three performance periods were
€ 127.90 per share on December 13, 2019, € 94.14 per share on Novem-
ber 30, 2020, and € 93.82 per share on December 31, 2020.
In 2020, personnel expenses of the Group from the MorphoSys US Inc.
2019 RSU Plan amounted to € 600,445 based on the fair values (2019:
€ 269,415).
8.6.2 2020 Long-Term Incentive Program
On April 1, 2020, MorphoSys AG established a Long-Term Incentive
Plan (LTI Plan) for selected employees of MorphoSys US Inc. (beneficia-
ries). The program is considered a share-based payment program with
settlement in equity instruments and is accounted for accordingly. The
LTI Plan is a restricted stock unit plan (RSUP) and is paid out in shares
of MorphoSys AG that are to be created from authorized capital provided
predefined performance criteria have been fulfilled. The term of the plan
is three years and includes three one-year performance periods. If the
predefined performance criteria for the respective period are fully met,
33.3 % of the performance shares become vested in each year. The num-
ber of performance shares vested per year is calculated based on the
key performance criteria of MorphoSys US Inc. and the MorphoSys
share price performance during the annual performance period. The
performance criteria can be met up to a maximum of 125 % per year. If
less than 0 % of the defined performance criteria are met in any one
year, no shares will be vested for that year. At the end of the total three-
year performance period, the corresponding number of shares eventu-
ally vested is calculated, and the shares created from authorized capital
are transferred from the Company to the beneficiaries.
MorphoSys reserves the right to pay a specific amount of the LTI Plan
in cash at the end of the performance period, equal to the value of the
performance shares granted.
Notes
The table below shows the development of the performance shares un-
der the MorphoSys US Inc. RSU Plans in the financial year 2020.
Financial Statements
199
MorphoSys US Inc. –
October 2019
Restricted Stock
Unit Plan
MorphoSys US Inc. –
April 2020
Restricted Stock
Unit Plan
MorphoSys US Inc. –
October 2020
Restricted Stock
Unit Plan
14,990
0
0
(2,273)
0
12,717
n/a
0
42,307
0
(2,537)
0
39,770
n/a
0
7,678
0
0
0
7,678
n/a
8.8 Related Parties
Related parties that can be influenced by the Group or can have a signif-
icant 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 responsi-
ble for the planning, management and monitoring of the Group. In ad-
dition to cash compensation, the Group has granted the Management
Board performance shares. The tables below show the shares, stock
options and performance shares held by the members of the Manage-
ment Board and Supervisory Board, as well as the changes in their
ownership during the 2020 financial year.
Outstanding on January 1, 2020
Granted
Exercised
Forfeited
Expired
Outstanding on December 31, 2020
Weighted-average Price (€)
8.7 Morphosys Us Inc. – Long-Term Cash
Incentive Plan (CLTI Plan)
On April 30, 2020, MorphoSys US Inc. established a long-term cash
incentive plan (CLTI plan) for certain employees of MorphoSys US Inc.
(beneficiaries). The program is considered a cash-settled, share-based
payment and is accounted for accordingly. The CLTI plan is paid out in
cash provided predefined performance criteria have been fulfilled. The
term of the plan is three years and includes three one-year perfor-
mance periods. If the predefined performance criteria for the respec-
tive period are fully met, 33.3 % of the performance shares become
vested in each year. The amount of compensation vested per year is
calculated based on the key performance criteria of the performance of
MorphoSys US Inc. and the share price performance of MorphoSys AG
during the annual performance period. The performance criteria can be
met up to a maximum of 125 % per year. If less than 50 % of the defined
performance criteria are met in any one year, no award will be granted
for that year. At the end of the total three-year performance period, the
cash compensation earned is paid by MorphoSys US Inc.
If a beneficiary terminates his employment with MorphoSys US Inc.
prior to the end of a one-year performance period, the beneficiary shall
lose his entitlement to a cash settlement during the relevant one-year
performance period and future performance periods. Entitlements
from previously completed one-year performance periods are retained.
As of December 31, 2020, and based on 100 % target achievement, cash
settlement under the CLTI plan at the end of the three-year perfor-
mance period is expected to be € 0.8 million.
In 2020, personnel expenses of the Group from the MorphoSys US Inc.
2020 CLTI plan amounted to € 325,513. The other provision for this
program amounts to € 0.3 million as of December 31, 2020.
Financial Statements
Notes
200
Shares
Management Board
Jean-Paul Kress, M.D.
Malte Peters, M.D.
Roland Wandeler, Ph.D.1
Jens Holstein2
Markus Enzelberger, Ph.D.3
Total
Supervisory Board
Dr. Marc Cluzel
Michael Brosnan
Sharon Curran
Dr. George Golumbeski
Wendy Johnson
Krisja Vermeylen
Dr. Frank Morich4
Total
Stock Options
Management Board
Jean-Paul Kress, M.D.
Malte Peters, M.D.
Roland Wandeler, Ph.D.1
Jens Holstein2
Markus Enzelberger, Ph.D.3
Total
Performance Shares
Management Board
Jean-Paul Kress, M.D.
Malte Peters, M.D.
Roland Wandeler, Ph.D.1
Jens Holstein2
Dr. Markus Enzelberger3
Total
01/01/2020
Additions
Sales
12/31/2020
0
3,313
–
19,517
1,676
24,506
750
0
0
0
500
350
1,000
2,600
0
0
0
13,677
0
13,677
0
0
0
0
0
0
0
0
0
0
0
9,000
0
9,000
0
0
0
0
0
0
0
0
0
3,313
0
–
–
3,313
750
0
0
0
500
350
–
1,600
01/01/2020
Additions
Forfeitures
Exercises
12/31/2020
57,078
21,609
–
21,609
18,678
118,974
01/01/2020
Additions
24,911
11,501
0
11,501
0
47,913
Adjustment
due to per-
formance
criteria5
0
0
0
0
0
0
0
0
0
0
0
0
81,989
33,110
0
–
–
115,099
Forfeitures
Allocations6
12/31/2020
0
7,197
–
12,693
7,259
27,149
0
0
0
0
0
0
0
1,850
0
10,031
0
11,881
0
0
0
0
0
0
0
0
0
13,677
0
13,677
0
9,047
0
–
–
9,047
1 Roland Wandeler, Ph.D., joined the Management Board of MorphoSys AG effective May 5, 2020.
2 Jens Holstein resigned as a member of the Management Board with effect from the end of November 13, 2020. Changes in the number of shares after his departure from the
Management Board are not presented.
3 Markus Enzelberger, Ph.D., resigned as a member of the Management Board with effect from the end of February 29, 2020. Changes in the number of shares after his departure from the
Board of Management are not presented.
4 Dr. Frank Morich resigned as a member of the Supervisory Board with effect from the end of April 11, 2020. Changes in the number of shares after his departure from the Board of
Management are not presented.
5 Adjustment due to established performance criteria. For performance criteria that have not yet been met, a target achievement of 100 % is assumed.
6 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
The Supervisory Board of MorphoSys AG does not hold any stock op-
tions or performance shares.
The remuneration system for the Management Board is intended to
provide sustainable, results-oriented corporate governance. The Man-
agement Board’s total remuneration consists of several components,
including fixed compensation, an annual cash bonus that is dependent
upon the achievement of corporate targets (short-term incentives —
STI), variable compensation components with long-term incentives
(LTI) and other remuneration components. Variable remuneration com-
ponents with long-term incentive consist of long-term incentive plans
(LTI Plan) from previous years, stock option and performance share
plans from previous years, and a performance share unit program and
a stock option plan from the current year. The members of the Manage-
ment Board additionally receive fringe benefits in the form of benefits
in kind, essentially consisting of a company car and insurance premi-
ums. 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 ap-
propriateness of the remuneration packages. The amount of remunera-
tion paid to members of the Management Board is based largely on the
duties of the respective Management Board member, the financial sit-
uation and the performance and business outlook for the Company
versus its competition. All resolutions on adjustments to the overall
remuneration packages are passed by the plenum of the Supervisory
Board. The Management Board’s total remuneration package and the
index-linked pension contracts were thoroughly reviewed and then
adjusted by the Supervisory Board in 2020.
If a Management Board member’s service 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 service
contracts and receive any outstanding fixed salary and the annual bo-
nus 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, performance share units and performance
shares granted will become vested immediately and can be exercised
after the expiration of the statutory vesting periods. A change of con-
trol has occurred when (i) MorphoSys transfers assets or a substantial
portion of its assets to unaffiliated third parties, (ii) MorphoSys merges
with an unaffiliated company, (iii) an agreement pursuant to Section
291 AktG is entered into with MorphoSys as a dependent company,
MorphoSys is integrated under Section 319 AktG or (iv) a shareholder
or third party holds 30 % or more of MorphoSys’s voting rights.
For the fiscal year 2020, the members of the Executive Board were
granted a total compensation of € 11,532,252 (€ 11,308,876), consisting
of performance-unrelated remuneration of € 5,529,112 (€ 3,607,006),
performance-related remuneration of € 2,478,346 (2019: € 3,704,457)
as well as long-term incentive compensation of € 3,524,794 (€ 3,997,413)
in the form of share-based compensation. Performance-unrelated
compensation includes post-employment benefits in the amount of
€ 2,443,409 (2019: € 1,191,085) granted during the respective board
membership terms.
Financial Statements
201
As of April 1, 2020, the Executive Board was granted 9,363 Perfor-
mance Share Units at a fair value of € 74.57 and as of June 1, 2020,
8,361 Performance Share Units at a fair value of € 92.79. Additionally,
as of April 1, 2020, the Executive Board was granted 36,412 stock op-
tions at a fair value of € 36.13.
For the individualized Executive Board compensation, we refer to the
remuneration report within the Management Report.
In the years 2020 and 2019, there were no other long-term benefits in
accordance with IAS 24.17 (c) accruing to the Management Board or
Supervisory Board. No benefits upon termination of service in accor-
dance with IAS 24.17 (d) were accrued for the Supervisory Board in the
years 2020 and 2019.
The new Chief Operating Officer, Roland Wandeler, Ph.D., (since May 5,
2020), received a signing bonus of 500,000 US dollar related to the
execution of his employment agreement, payable in two installments
(2020: 400,000 US dollar (about € 366,000) and 2021: 100,000 US dol-
lar (about € 91,500)), as well as reimbursement of relocation expenses.
In addition, Roland Wandeler, Ph.D., will receive an ongoing expense
allowance for tax advice.
Jens Holstein will receive a severance payment of € 2,300,000, which
will be paid in 2021, as well as an expense allowance for tax advice.
Markus Enzelberger, Ph.D., received a severance payment amounting to
50 % of his fixed remuneration and his bonus payment for the previous
financial year until the regular expiry of his service contract. Due to
their long years of commitment to the Company, the Supervisory Board
decided that for both, the long-term incentive plans would not forfeit on
a pro-rate basis despite their termination of the employment before the
end of the respective four-year vesting periods. Because of this modifi-
cation of terms and conditions, the respective personnel expense from
share-based compensation for the outstanding vesting periods was al-
located to the remaining period of performance. For Jens Holstein,
€ 487,327 were recognized earlier than anticipated in 2020, whereas
for Markus Enzelberger, Ph.D., € 122,683 were booked earlier in the
years 2019 and 2020.
Payments to former members of the Management Board amounted to
€ 0.6 million in 2020 (2019: € 0.3 million).
The total compensation for key management personnel in 2020 and
2019 was as follows.
in 000’ €
2020
2019
Total Short-Term Employee
Benefits
Total Post-Employment Benefits
Total Termination Benefits
Total Share-Based Payment
7,261,119
424,300
2,443,409
4,125,979
5,706,334
414,044
1,191,085
3,997,413
Total Compensation
14,254,807
11,308,876
Financial Statements
202
In 2020, the total remuneration for the Supervisory Board, excluding
reimbursed travel costs, amounted to € 634,752 (2019: € 633,597).
Supervisory Board Remuneration for The Years 2020 and 2019:
Notes
Fixed Compensation
Attendance Fees1
Total Compensation
In €
2020
2019
2020
2019
2020
2019
Dr. Marc Cluzel
Michael Brosnan
Sharon Curran
Dr. George Golumbeski
Wendy Johnson
Krisja Vermeylen
Dr. Frank Morich2
Total
104,210
57,284
45,284
65,345
49,579
57,284
19,766
104,210
51,284
27,791
51,284
47,618
57,284
70,926
56,400
28,400
30,000
30,800
39,200
38,400
12,800
44,400
34,000
11,600
31,600
35,600
32,400
33,600
160,610
85,684
75,284
96,145
88,779
95,684
32,566
398,752
410,397
236,000
223,200
634,752
148,610
85,284
39,391
82,884
83,218
89,684
104,526
633,597
1 The attendance fee contains expense allowances for the attendance at the Supervisory Board and the Committee meetings.
2 Dr. Frank Morich resigned as a member of the Supervisory Board with effect from the end of April 11, 2020.
No other agreements currently exist with present or former members
of the Supervisory Board.
The change in the organizational structure of MorphoSys AG in 2020
(see Note 8*) affects the following presentation of stock options, con-
vertible bonds and performance shares held by related parties:
*cross-reference to page 189
As of December 31, 2020, the members of the Executive Committee
(excluding the Management Board) held 31,067 stock options and 7,137
performance shares granted by the Company.
In 2020, a new stock option program and new performance share pro-
gram were issued to the members of the Executive Committee (exclud-
ing the Management Board) (see Notes 8.1.4* and 8.3.6*).
*cross-reference to page 190 and page 196
On April 1, 2020, a total of 7,493 shares from the 2016 LTI Plan were
allocated to the members of the Executive Committee (excluding the
Management Board), who were given the option to receive the shares
within an eight-month period. By December 31, 2020, this option had
been exercised for a total of 7,493 shares.
On December 31, 2019, the Senior Management Group held 100,832
stock options, 11,233 convertible bonds and 63,786 performance
shares granted by the Company. On December 31, 2019, the President
of MorphoSys US Inc. held 5,065 performance shares granted to him by
the Company.
Notes
9 Additional Notes
9.1 Obligations Arising from Leases and other
Contracts
The future minimum payments under non-cancelable leases of low-
value assets and contracts for insurance and other services on Decem-
ber 31, 2020 were as follows:
Financial Statements
203
in 000’ €
Up to One Year
Between One and Five Years
More than Five Years
Total
Leases of Low-Value
Assets and Short-
Term Leases
Performance Share
Unit Program
44
0
0
44
0
1,868
0
1,868
Other
7,406
992
0
8,398
Total
7,450
2,860
0
10,310
Additionally, the future payments shown in the table below may be-
come due for outsourced studies after December 31, 2020. These
amounts could be shifted or substantially lower due to changes in the
study timeline or premature study termination.
in million €
Total 2020
Up to One Year
Between One and Five Years
More than Five Years
Total
111.7
81.6
0.0
193.3
9.2 Contingent Assets/Contingent Liabilities
Contingent liabilities are potential obligations from past events that
exist only when the occurrence of one or more uncertain future events
– beyond the Company’s control – is confirmed. Current obligations
can represent a contingent liability if it is not probable enough that an
outflow of resources justifies the recognition of a provision. Moreover,
it is not possible to make a sufficiently reliable estimate of the sum of
obligations.
The Management Board is unaware of any proceedings that may result
in a significant obligation for the Group or lead to a material adverse ef-
fect on the Group’s net assets, financial position or results of operations.
If certain milestones are achieved in the Proprietary Development
segment (for example, submitting an investigational new drug (IND)
application for specific target molecules), this may trigger milestone
payments to licensors of up to an aggregate of US$ 249.0 million (ap-
proximately € 203.0 million) related to regulatory events or the
achievement of sales targets. The next milestone payment amounting
to US$ 12.5 million (approximately € 10.2 million) could presumably
occur in the next 12 months.
Milestone payments to MorphoSys may be triggered by the achieve-
ment of specific milestones by one of our partners (submitting an in-
vestigational new drug, or IND, application for specific target mole-
cules or the transfer of technology, among others) in the Partnered
Discovery segment. As the timing and achievement of such milestones
are uncertain, further details cannot be published.
Monjuvi’s product sales trigger percentage-based royalty payments.
Obligations may arise from enforcing the Company’s patent rights ver-
sus third parties. It is also conceivable that competitors may challenge
the patents of the MorphoSys Group or that MorphoSys may come to
the conclusion that its 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 counterclaims against
MorphoSys. Currently, there are no specific indications such obligations
have arisen.
9.3 Corporate Governance
The Group has submitted the Declaration of Conformity with the recom-
mendations of the Government Commission on the German Corporate
Governance Code for the 2019 financial year under Section 161 of the
German Stock Corporation Act (AktG). This declaration was published
on the Group’s website (https://www.morphosys.com/media-and-inves-
tors/corporate-governance) on November 29, 2020 and made perma-
nently available to the public.
9.4 Research and Development Agreements
The Group has entered numerous research and development agreements
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 develop-
ments under the research and development agreements in the 2020
financial year.
Financial Statements
204
9.4.1 Proprietary Development Segment
In the Proprietary Development segment, partnerships are entered
into as part of the Group’s strategy to develop proprietary drugs in its
core areas of oncology and inflammatory diseases. Partnerships cur-
rently exist with (in alphabetical order) Galapagos, GlaxoSmithKline,
I-Mab Biopharma, Immatics Biotechnologies, Incyte, 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 de-
veloping 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 com-
mercialization. Both MorphoSys and Galapagos contributed their core
technologies and expertise to this alliance. Along with the use of its
adenovirus-based platform to explore new target molecules for the de-
velopment of antibodies, Galapagos provided access to already identified
target molecules that are associated with bone and joint diseases.
MorphoSys provided access to its antibody technologies used to generate
fully human antibodies directed against these target molecules. Under
the terms of the agreement, Galapagos and MorphoSys will share the
research and development costs. In July 2014, the collaboration ad-
vanced into the preclinical development of MOR106, an antibody from
MorphoSys’s 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. The companies
agreed that they would work together to significantly expand the exist-
ing development plan for MOR106. Novartis received all of the exclu-
sive rights to the product’s commercialization resulting from the
agreement. With the signing of the agreement, all future research,
development, manufacturing and commercialization costs for MOR106
are borne by Novartis. The companies further agreed that Novartis
would explore the potential of MOR106 in other indications beyond
atopic dermatitis. In addition to receiving financing from Novartis for
the current and future development of the MOR106 program, MorphoSys
and Galapagos jointly received a payment of € 95 million. Of this
amount, MorphoSys recognized its 50 % share of that amount –
€ 47.5 million – as revenue in 2018. MorphoSys and Galapagos will
continue to jointly receive significant milestone payments of up to ap-
proximately US$ 1 billion (approximately € 858.7 million; based on the
current euro-dollar exchange rate at the time the agreement was signed)
when specific development, regulatory, commercial and revenue mile-
stones are met. MorphoSys and Galapagos also stand to jointly receive
tiered royalties ranging from a low 10 % to a low 20 % of net sales.
According to their 2008 agreement, MorphoSys and Galapagos will
share equally in all payments (50/50). In October 2019, MorphoSys,
Galapagos and Novartis announced a stop in the clinical development
of MOR106 in atopic dermatitis. The decision was based on the results
of a benefit-based interim analysis of the IGUANA phase 2 study. Novar-
tis terminated the development and commercialization agreement in a
timely manner, and the ongoing activities related to the terminated
studies are being completed jointly by the three parties.
Notes
In June 2013, MorphoSys announced it had entered into a global agree-
ment with GlaxoSmithKline (GSK) for the development and commer-
cialization of otilimab. Otilimab is MorphoSys’s proprietary HuCAL
antibody against the GM-CSF target molecule. Under the agreement,
GSK assumes responsibility for the compound’s entire development
and commercialization. MorphoSys has already received a payment of
€ 22.5 million under this agreement and, next to tiered double-digit
royalties on net sales, is still eligible to receive additional payments
from GSK of up to € 423 million, depending on the achievement of
certain developmental stages, as well as regulatory, commercial and
revenue-related milestones. GSK is clinically investigating otilimab in
rheumatoid arthritis and, in July 2019, started a phase 3 development
program in this indication. The treatment of the first patients in this
program triggered a milestone payment of € 22.0 million to MorphoSys.
GSK has also initiated a clinical trial (OSCAR) to evaluate the efficacy
and safety of otilimab in patients with severe pulmonary COVID 19-as-
sociated disease.
In 2017, MorphoSys announced it had signed an exclusive regional
licensing agreement with I-Mab Biopharma to develop and commer-
cialize felzartamab (MOR202) in China, Taiwan, Hong Kong and Macau.
Felzartamab (MOR202) is MorphoSys’s proprietary antibody targeting
CD38. Under the terms of the agreement, I-Mab Biopharma has the
exclusive right for the later development and commercialization of fel-
zartamab (MOR202) in the agreed regions. MorphoSys received a pay-
ment of US$ 20.0 million and is also entitled to receive additional suc-
cess-based clinical and commercial milestone payments from I-Mab of
up to roughly US$ 100 million (approximately€ 84.1 million). In addi-
tion, MorphoSys will be entitled to receive double-digit, staggered royal-
ties on the net revenue of felzartamab (MOR202) in the agreed regions.
I-Mab is investigating felzartamab (MOR202/TJ202) in a phase 3 clinical
study in Mainland China to evaluate felzartamab (MOR202/TJ202) in
combination with lenalidomide plus dexamethasone in r/r multiple
myeloma. I-Mab is also evaluating felzartamab (MOR202/TJ202) as a
potential third-line therapy in r/r multiple myeloma in a phase 2 trial
that started in March 2019. Both studies are considered pivotal in the
agreed regions. In 2019, MorphoSys initiated a phase 1/2 study
(M-PLACE study) with felzartamab (MOR202) for the treatment of an-
ti-PLA2R-positive membranous nephropathy, an autoimmune disease
affecting the kidneys.
In 2018, MorphoSys announced the completion of an exclusive, strate-
gic development collaboration and regional licensing agreement with
I-Mab Biopharma for the MOR210 antibody. MOR210 is a preclinical
antibody candidate developed by MorphoSys against C5aR1 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 cancer med-
icine. MorphoSys received a payment of US$ 3.5 million and is further
eligible to receive performance-related clinical and sales-based mile-
stone payments of up to US$ 101.5 million (approximately € 89.6 mil-
lion). MorphoSys recognized the payment of US$ 3.5 million (€ 3.1 mil-
lion) 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 roy-
alties on net sales of MOR210 outside the I-Mab territory, as well as
staggered shares of proceeds from the further out-licensing of MOR210.
Notes
Financial Statements
205
In August 2015, MorphoSys announced a strategic alliance with the
German company Immatics Biotechnologies GmbH in the field of immu-
no-oncology. 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) and, in
return, Immatics receives the right to develop MorphoSys’s Ylanthia
antibodies against several TUMAPs. The companies will pay each
other milestone payments and royalties on marketed products based
on the companies’ development progress.
9.4.2 Partnered Discovery Segment
Through its commercial partnerships in the Partnered Discovery seg-
ment, MorphoSys receives various types of payments that are spread
over the duration of the agreements or recognized in full as revenue as
predefined targets and milestones are reached. These payments in-
clude 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. MorphoSys is
also entitled to development-related milestone payments and royalties
on product sales for specific antibody programs.
In January 2020, MorphoSys and Incyte announced that the companies
had signed a collaboration and license agreement for the continued
global development and commercialization of MorphoSys’s proprietary
anti-CD19 antibody tafasitamab. A detailed description of the agree-
ment can be found in Note 4*.
Prior to the 2020 financial year, active collaborations with a number of
partners had already ended. However, drug development programs ini-
tiated 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 2020 but where drug development programs were still
being pursued include (in alphabetical order): Bayer AG, Boehringer
Ingelheim, Fibron Ltd. (transfer of the contract from ProChon Biotech
Ltd.), Janssen Research and Development LLC, Novartis, OncoMed
Pharmaceuticals (fully acquired in April 2019 by Mereo BioPharma
Group), Pfizer, Roche and Sosei Heptares.
Partnerships that were still active in 2020 include (in alphabetical
order): GeneFrontier Corporation/Kaneka and LEO Pharma.
In MorphoSys’s strategic alliance with LEO Pharma, which has been in
place since 2016, the two companies are working together to discover
and develop antibody-based therapies for dermatology.
The Group’s alliance with Novartis AG for the research and develop-
ment of biopharmaceuticals came to an end in November 2017. The
collaboration began in 2004 and led to the creation of several ongoing
therapeutic antibody programs against a number of diseases. MorphoSys
receives performance-based milestones contingent upon the success-
ful clinical development and regulatory approval of several products.
In addition to these payments, MorphoSys is also entitled to royalties
on any future product sales.
*cross-reference to page 170
In May 2016, MorphoSys and the MD Anderson Cancer Center from the
University of Texas announced a long-term strategic alliance. Within
the scope of this alliance, MorphoSys is applying its Ylanthia technol-
ogy platform and, together, the companies are working to identify, val-
idate and develop novel anti-cancer antibodies through to clinical proof
of concept by researching targets in a variety of oncology indications.
MD Anderson, in cooperation with MorphoSys, will conduct early clin-
ical studies of therapeutic antibody candidates, after which MorphoSys
has the option to continue developing selected antibodies for its own
proprietary pipeline.
In June 2010, MorphoSys and the US-based biopharmaceutical company
Xencor signed an exclusive global licensing and cooperation agreement
under which MorphoSys receives exclusive global licensing rights to
tafasitamab, the antibody for the treatment of cancer and other indi-
cations. The companies jointly conducted a phase 1/2a trial in the US
in patients with chronic lymphocytic leukemia. MorphoSys is solely
responsible for the further clinical development after the successful
completion of the phase 1 clinical trial and commercialization. Upon
signing the license and cooperation agreement, Xencor received a pay-
ment of US$ 13.0 million (approximately € 10.5 million) from MorphoSys
and milestone payments totaling US$ 53.0 million (approximately
€ 43.4 million), which was then capitalized under in-process R&D pro-
grams. Xencor is entitled to development, regulatory and commercially
related milestone payments. Furthermore, Xencor is also eligible to
receive tiered royalty payments of tafasitamab in the mid single-digit
to sub-teen double-digit percentage range based upon net sales of li-
censed antibody sold by us or our licensees. Our royalty obligations
continue on a product-by-product and country-by-country basis until
the later to occur of the expiration of the last valid claim in the licensed
patent covering a licensed product in such country, or 11 years after
the first sale of a licensed product following marketing authorization in
such country.
In November 2020, MorphoSys, Incyte and Xencor announced a clini-
cal collaboration agreement to study the combination of tafasitamab,
plamotamab and lenalidomide in patients with relapsed or refractory
diffuse large b cell lymphoma (DLBCL), first-line DLBCL and relapsed or
refractory follicular lymphoma (FL). MorphoSys and Incyte will provide
tafasitamab for the studies. The studies are sponsored and funded by
Xencor and are planned to be conducted in North America, Europe and
the Asia-Pacific region.
Financial Statements
206
9.5 Subsequent Events
On January 5, 2021, MorphoSys and Incyte announced that the Swiss
Agency for Therapeutic Products (Swissmedic) has accepted the market-
ing authorization application (MAA) for tafasitamab. The MAA seeks
approval for tafasitamab, in combination with lenalidomide, followed
by tafasitamab monotherapy, for the treatment of adult patients with
relapsed or refractory diffuse large B-cell lymphoma (DLBCL), includ-
ing DLBCL arising from low grade lymphoma, who are not candidates
for autologous stem cell transplantation (ASCT). The MAA will now
enter the formal review process by Swissmedic.
On January 06, 2021, MorphoSys announced the appointment of Mr.
Sung Lee as Chief Financial Officer (CFO) of the Company, effective
February 2, 2021. Mr. Sung Lee succeeds Mr. Jens Holstein, who re-
signed from the Management Board effective November 13, 2020 and
left MorphoSys effective December 31, 2020. As a member of the Man-
agement Board of MorphoSys AG, Mr. Sung Lee will lead all corporate
finance functions of the Company and his place of employment will be
Planegg, Germany.
On January 12, 2021, MorphoSys and Incyte announced that Health
Canada has accepted the New Drug Submission (NDS) for tafasitamab.
The application seeks approval of tafasitamab in combination with
lenalidomide, followed by tafasitamab monotherapy, for the treatment
of adult patients with relapsed or refractory diffuse large B-cell lym-
phoma (DLBCL), including DLBCL arising from low grade lymphoma,
who are not eligible for, or refuse, autologous stem cell transplant
(ASCT).
On January 25, 2021, MorphoSys and I-Mab announced that the first
patient has been dosed in a phase 1 dose escalation study to evaluate
the safety, tolerability, pharmacokinetics (PK) and pharmacodynamics
(PD) of MOR210/ TJ210 monotherapy in patients with relapsed or re-
fractory advanced solid tumors in the United States.
Notes
On March 2, 2021, MorphoSys announced that its licensing partner
GSK reported preliminary results of the OSCAR (Otilimab in Severe
COVID-19 Related Disease) study using otilimab for the treatment of
severe pulmonary COVID-19 related disease. Given these data suggest
an important clinical benefit in a pre-defined sub-group of high-risk pa-
tients and the urgent public health need, GSK has amended the OSCAR
study to expand this cohort to confirm these potentially significant
findings. The dosing of the first patient in the expanded study trig-
gered milestone payments of a total of €16 million to MorphoSys.
Planegg, March 11, 2021
Jean-Paul Kress, M.D
Chief Executive Officer
Sung Lee
Chief Financial Officer
Malte Peters, M.D
Chief Research and
Development Officer
Roland Wandeler, Ph.D.
Chief Operating Officer
Responsibility Statement
Additional Information
207
Responsibility Statement
To the best of our knowledge, and in accordance with the applicable
reporting principles, the consolidated financial statements give a true
and fair view of the 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 11, 2021
Jean-Paul Kress, M.D
Chief Executive Officer
Sung Lee
Chief Financial Officer
Malte Peters, M.D
Chief Research and
Development Officer
Roland Wandeler, Ph.D.
Chief Operating Officer
Additional Information
208
Independent Auditor’s Report
Independent Auditor’s Report
The following copy of the auditor’s report also includes a “Re-
port on the audit of the electronic renderings of the financial
statements and the management report prepared for disclo-
sure purposes in accordance with § 317 Abs. 3b HGB” (“sepa-
rate report on ESEF conformity”). The subject matter (ESEF
documents) to which the separate report on ESEF conformity
relates is not attached. The audited ESEF documents can be in-
spected in or retrieved from the Federal Gazette.
Independent Auditor’s Report
To MorphoSys AG, Planegg
Report on the Audit of the Consoli-
dated Financial Statements and of
the Group Management Report
Audit Opinions
We have audited the consolidated financial statements of
MorphoSys AG, Planegg, and its subsidiaries (the Group), which
comprise the consolidated balance sheet as at December 31,
2020, and the consolidated statement of comprehensive income,
consolidated statement of profit or loss, consolidated statement of
changes in stockholders’ equity and consolidated cash flow state-
ment for the financial year from January 1 to December 31, 2020,
and notes to the consolidated financial statements, including a
summary 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, 2020. In accor-
dance with the German legal requirements, 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 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 as-
sets, liabilities, and financial position of the Group as at Decem-
ber 31, 2020, and of its financial performance for the financial
year from January 1 to December 31, 2020, 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 opportu-
nities 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 for the Audit 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”) in compliance with German
Generally Accepted Standards for Financial Statement Audits
promulgated by the Institut der Wirtschaftsprüfer [Institute of
Public Auditors in Germany] (IDW). Our responsibilities 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 Management Report”
section of our auditor’s report. We are independent of the group
entities in accordance with the requirements of European law
and German commercial and professional law, and we have ful-
filled our other German professional responsibilities in accor-
dance with these requirements. In addition, in accordance with
Article 10 (2) point (f) of the EU Audit Regulation, we declare
Independent Auditor’s Report
Additional Information
209
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 finan-
cial statements and on the group management report.
Key Audit Matters in the Audit of the Consoli-
dated Financial Statements
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 2020. These matters were addressed in the con-
text of our audit of the consolidated financial statements as a
whole, and in forming our audit opinion thereon; we do not pro-
vide a separate audit opinion on these matters.
In our view, the matters of most significance in our audit were
as follows:
1 Initial accounting treatment and valuation of the compo-
nents of the Incyte collaboration and license agreement
2 Subsequent measurement of the financial asset and the fi-
nancial liability from the Incyte collaboration and license
agreement
3 Assessment of recoverability of deferred tax assets
Our presentation of these key audit matters has been struc-
tured in each case as follows:
1 Matter and issue
2 Audit approach and findings
3 Reference to further information
Hereinafter we present the key audit matters:
1 Initial accounting treatment and valuation of the compo-
nents of the Incyte collaboration and license agreement
1 Under the collaboration and license agreement with Incyte
Corporation (hereinafter “Incyte”), the Company received a
total of € 822.6 million. At the time of its initial recognition,
a current financial asset in the amount of € 45.1 million and
a non-current financial liability in the amount of € 542.6 mil-
lion were recognized and recorded in the balance sheet
items “Financial Assets from Collaborations” and “Finan-
cial Liabilities from Collaborations”. The financial asset rep-
resents MorphoSys’s current 50 % reimbursement claim
against Incyte from the expected future losses associated
with the US commercialization activities measured at fair
value. The non-current financial liability, measured at fair
value, represents Incyte’s prepaid entitlement to future
profit sharing on sales of Monjuvi® (tafasitamab- cxix)in the
US. The basis for the initial valuation at fair value is the
corporate planning and its shared profits and losses thereof
in connection with the commercialization activities of
MorphoSys and Incyte in the United States for the years
ahead. The executive director’s significant estimations in-
clude the discount rate and other assumptions including
forecasted number of patients as well as expectations on
selling price and costs associated with the sale of Monjuvi®
(tafasitamab-cxix).In addition, as part of Incyte’s participa-
tion in the equity of MorphoSys through a capital increase,
the equivalent of € 0.9 million was recognized in common
stock and € 79.7 million in additional paid-in capital in the
amount of the fair value of the investment. The remainder of
€ 236.1 million was recognized as revenues according to
IFRS 15, as this is the amount recognized as consideration
for the marketing license for tafasitamab outside the US. As
a result of the difference in the timing of revenue recogni-
tion and the receipt of the payment from Incyte, foreign cur-
rency gains of € 8.4 million were recognized.
The initial accounting treatment and valuation of the com-
ponents of the Incyte collaboration and license agreement
depend to a large extent on the assessments and estimates
made by the executive directors with respect especially to
the future risk adjusted cash outflows and inflows in con-
nection with the sales of Monjuvi® (tafasitamab-cxix) and
the discount rate applied and other assumptions and are
therefore subject to significant judgement by the executive
directors and considerable uncertainty. Against this back-
ground, and due to the complex nature of the accounting
requirements and of the valuation, this matter was of par-
ticular significance in the context of our audit.
2 As part of our audit, we tested the effectiveness of controls
relating to the determination of the rights and obligations
and the initial assessment of the accounting treatment of
the Incyte collaboration and license agreement under the
applicable IFRS standards. Our procedures also included,
among others, agreeing that the capital increase has been
accounted for at the fair value as of the subscription date
and testing the executive directors’ process for determining
the fair values of the financial asset and the financial liabil-
ity from collaboration. As part of these procedures we tested
the completeness, accuracy and relevance of underlying data
used in the executive directors’ model for determining the
risk adjusted forecasted cash outflows and inflows, evaluated
the reasonableness of the executive directors’ significant
assumptions including the forecasted number of patients as
well as expectations on selling price and costs associated
with the sales of Monjuvi® (tafasitamab-cxix). Furthermore,
Additional Information
210
Independent Auditor’s Report
our procedures included recalculating the transaction price
relating to the marketing license for tafasitamab outside of
the United States. Professionals with specialized skill and
knowledge were used to assist in evaluating the reasonable-
ness of the assumptions used in the initial valuation of the
components, including the assessment of the risk adjusted
forecasted cash flows and the discount rate.
Overall, the valuation parameters and assumptions used by
the executive directors are in line with our expectations
and also lie within a range that we consider reasonable.
3 The Company’s disclosures on the initial accounting treat-
ment and valuation of the Incyte collaboration and license
agreement are contained in sections 2.3.3 and 4 of the Notes
to the consolidated financial statements.
2 Subsequent measurement of the financial asset and the
financial liability from the Incyte collaboration and li-
cense agreement
1 As of December 31, 2020, the Company has recorded a fi-
nancial asset of € 42.9 million and a financial liability of
€ 516.5 million related to the Incyte collaboration and license
agreement. The financial asset is measured at fair value
through profit or loss and the financial liability at amortized
cost using the effective interest method. Cash flows from
the profits and losses shared equally between MorphoSys
and Incyte are generally recognized directly against the fi-
nancial asset or financial liability. Differences between the
planned and actual cash flows from the financial asset or
financial liability are recorded in the finance result. Effects
resulting from changes in planning estimates regarding the
expected net cash flows from financial assets and financial
liabilities are also recognized in the finance result. The ini-
tial interest rate continues to be applied for the subsequent
measurement of the financial liability, whereas the current
yield curve is used for the financial assets. Foreign currency
translation effects from the financial asset or financial liabil-
ity are also recognized in the finance result. The basis for
the valuation at fair value is the corporate planning and its
shared profits and losses thereof in connection with the com-
mercialization activities of MorphoSys and Incyte in the US
for the years ahead. The executive director’s significant
estimations include forecasted number of patients as well
as expectations on selling price and costs associated with
the sale of Monjuvi® (tafasitamab-cxix).
The outcome of the subsequent measurement of the finan-
cial asset and liability is dependent to a large extent on the
assumptions made by the executive directors with respect
to the future risk adjusted cash outflows and inflows in con-
nection with the sale of Monjuvi® (tafasitamab-cxix, the
discount rate and other assumptions. Therefore, the subse-
quent measurement is subject to significant judgement by
the executive directors’ and considerable uncertainty.
Against this background and due to the complexity of the
measurement, this matter was of particular significance in
the context of our audit.
2 As part of our audit, we tested the effectiveness of controls
relating to the subsequent measurement of the financial
asset and the financial liability from the Incyte collabora-
tion and license agreement. Our procedures also included,
among others, testing the executive director’s process for
determining the fair value of the financial asset and the
subsequent measurement of the financial liability, including
evaluating the reasonableness of the executive director’s
significant assumptions of the risk adjusted cashflows,
forecasted number of patients, expectations on selling price
and costs associated with the sale of Monjuvi® (tafasit amab-
cxix)and testing the completeness, accuracy, and relevance
of underlying data used in the model. Professionals with
specialized skill and knowledge were used to assist in
evaluating the reasonableness of the assumptions including
the assessment of the risk adjusted forecasted cash flows.
Overall, the valuation parameters and assumptions used by
the executive directors are in line with our expectations
and also lie within a range that we consider reasonable.
3 The Company’s disclosures on the subsequent valuation of
the financial asset and financial liability from the Incyte
collaboration and license agreement are contained in sec-
tions 2.3.3 and 4 of the Notes to the consolidated financial
statements.
3 Assessment of recoverability of deferred tax assets
1 The Company reports a deferred tax asset amounting to
€ 132.8 million as of December 31, 2020. Deferred tax as-
sets on temporary differences are recognized and measured
on the basis of projected future taxable income. They are only
recognized if sufficient taxable income is available in the
future to utilize the deferred tax assets. Assessments as to
the recoverability of deferred tax assets require the use of
Independent Auditor’s Report
judgment regarding assumptions related to estimated fu-
ture taxable profits. This includes the amounts of taxable
future profits, the periods in which those profits are ex-
pected to occur, and the availability of tax planning oppor-
tunities. The Company records a deferred tax asset only
when it is probable that a corresponding amount of taxable
profit will be available against which the deductible tempo-
rary differences relating to the same taxation authority and
the same taxable entity can be utilized. The analysis and
forecasting required in this process are performed for indi-
vidual jurisdictions by qualified local tax and financial pro-
fessionals. Forecast operating results are based upon ap-
proved business plans.
The executive directors’ assessment of the recoverability of
deferred taxes was of particular significance in the context
of our audit, as it depends to a large extent on the executive
directors’ estimates and assumptions in determining
whether sufficient future taxable income will be generated
to support the realization of the existing deferred tax as-
sets and is therefore subject to significant judgement by the
executive directors and considerable uncertainties.
2 As part of our audit, we tested the effectiveness of controls
relating to the executive director’s assessment of the re-
coverability of deferred tax assets, including controls over
the executive director’s projections of pre-tax income. Our
procedures also included, among others, evaluating the
assumptions used by the executive directors to develop
projections of future taxable income, including the pre-tax
income, by income tax jurisdiction and testing the com-
pleteness and accuracy of the underlying data used in the
projections. In addition, we compared the projections of
future pre-tax income with other forecasted financial infor-
mation prepared by the Company.
Overall, the valuation parameters and assumptions used by
the executive directors are in line with our expectations and
also lie within a range that we consider reasonable.
3 The Company’s disclosures on the deferred tax assets are
contained in sections 2.5.1, 2.7.6 and2.9.8 and 5.4 of the
Notes to the consolidated financial statements.
Additional Information
211
Other Information
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
to the date of our auditor’s report:
• the statement on corporate governance pursuant to § 289f HGB
and § 315d HGB included in section “Statement on Corporate
Governance, Group Statement on Corporate Governance and
Report on Corporate Governance” of the group management
report
• the subsection “Corporate Governance Report” in the section
“Statement on Corporate Governance, Group Statement on
Corporate Governance and Report on Corporate Governance”
of the group management report
• the separate non-financial group report pursuant to § 315b
Abs. 3 HGB
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 state-
ments, with the group management report or our knowledge
obtained in the audit, or
• otherwise appears to be materially misstated.
Responsibilities of the Executive Directors and
the Supervisory Board for the Consolidated
Financial Statements and the Group Manage-
ment Report
The executive directors are responsible for the preparation of
the consolidated financial statements that comply, in all material
respects, with IFRSs as adopted by the EU and the additional
requirements of German commercial law pursuant to § 315e
Abs. 1 HGB and that the consolidated financial statements, in
compliance with these requirements, give a true and fair view
of the assets, liabilities, financial position, and financial perfor-
mance 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 Information
212
Independent Auditor’s Report
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 financial
statements, complies with German legal requirements, and ap-
propriately presents the opportunities and risks of future devel-
opment. In addition, the executive directors are responsible for
such arrangements and measures (systems) as they have consid-
ered 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 management 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.
Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements and of the
Group Management Report
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 re-
spects, is consistent with the consolidated financial statements
and the knowledge obtained in the audit, complies with the Ger-
man legal requirements and appropriately presents the opportu-
nities and risks of future development, as well as to issue an au-
ditor’s report that includes our audit opinions on the consolidated
financial statements and on the group management 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 Ger-
man 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
purpose 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 in-
adequate, 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
Independent Auditor’s Report
fair view of the assets, liabilities, financial position and fi-
nancial performance of the Group in compliance with IFRSs
as adopted by the EU and the additional requirements of Ger-
man 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 responsi-
ble for our audit opinions.
• 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
presented by the executive directors in the group manage-
ment report. On the basis of sufficient appropriate audit evi-
dence we evaluate, in particular, the significant assumptions
used by the executive directors as a basis for the prospective
information, and evaluate the proper derivation of the pro-
spective information from these assumptions. We do not ex-
press a separate audit opinion on the prospective information
and on the assumptions used as a basis. There is a substan-
tial unavoidable 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 gov-
ernance, 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 reg-
ulation precludes public disclosure about the matter.
Additional Information
213
Other Legal and Regulatory
Requirements
Assurance Report in Accordance with § 317
Abs. 3b HGB on the Electronic Reproduction
of the Consolidated Financial Statements
and the Group Management Report Prepared
for Publication Purposes
Reasonable Assurance Conclusion
We have performed an assurance engagement in accordance
with § 317 Abs. 3b HGB to obtain reasonable assurance about
whether the reproduction of the consolidated financial state-
ments and the group management report (hereinafter the “ESEF
documents”) contained in the attached electronic file MorphoSys_
AG_KA+KLB_ESEF-2020-12-31_en.zip and prepared for publica-
tion purposes complies in all material respects with the require-
ments of § 328 Abs. 1 HGB for the electronic reporting format
(“ESEF format”). In accordance with German legal requirements,
this assurance engagement only extends to the conversion of the
information contained in the consolidated financial statements
and the group management report into the ESEF format and
therefore relates neither to the information contained within this
reproduction nor to any other information contained in the
above-mentioned electronic file.
In our opinion, the reproduction of the consolidated financial
statements and the group management report contained in the
above-mentioned attached electronic file and prepared for publi-
cation purposes complies in all material respects with the re-
quirements of § 328 Abs. 1 HGB for the electronic reporting for-
mat. We do not express any opinion on the information contained
in this reproduction nor on any other information contained in
the above-mentioned electronic file beyond this reasonable as-
surance conclusion and our audit opinion on the accompanying
consolidated financial statements and the accompanying group
management report for the financial year from January 1, to De-
cember 31, 2020 contained in the “Report on the Audit of the
Consolidated Financial Statements and on the Group Manage-
ment Report” above.
Basis for the Reasonable Assurance Conclusion
We conducted our assurance engagement on the reproduction
of the consolidated financial statements and the group man-
agement report contained in the above-mentioned attached
electronic file in accordance with § 317 Abs. 3b HGB and the
Exposure Draft of IDW Assurance Standard: Assurance in Ac-
cordance with § 317 Abs. 3b HGB on the Electronic Reproduction
Independent Auditor’s Report
• Obtain an understanding of internal control relevant to the
assurance engagement on the ESEF documents in order to
design assurance procedures that are appropriate in the cir-
cumstances, but not for the purpose of expressing an assur-
ance conclusion on the effectiveness of these controls.
• Evaluate the technical validity of the ESEF documents, i.e.,
whether the electronic file containing the ESEF documents
meets the requirements of the Delegated Regulation (EU)
2019/815 in the version applicable as at the balance sheet
date on the technical specification for this electronic file.
• Evaluate whether the ESEF documents enables a XHTML re-
production with content equivalent to the audited consolidated
financial statements and to the audited group management
report.
• Evaluate whether the tagging of the ESEF documents with
Inline XBRL technology (iXBRL) enables an appropriate
and complete machine-readable XBRL copy of the XHTML
reproduction.
Note on Supplementary Audit
We issue this auditor’s report on the consolidated financial
statements and the group management report as well as on the
reproduction of the consolidated financial statements and the
group management report submitted for audit for the first time,
contained in the attached file MorphoSys_AG_KA+KLB_ESEF-
2020-12-31.zip and prepared for publication purposes on the
basis of our audit, duly completed as at March 11, 2021, and our
supplementary audit completed as at March 15, 2021, which re-
lated to the initial submission of the ESEF documents.
Further Information pursuant to Article 10 of
the EU Audit Regulation
We were elected as group auditor by the annual general meet-
ing on May 27, 2020. We were engaged by the supervisory
board on July 14, 2020. 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 Information
214
of Financial Statements and Management Reports Prepared for
Publication Purposes (ED IDW AsS 410) and the International
Standard on Assurance Engagements 3000 (Revised). Accord-
ingly, our responsibilities are further described below in the
“Group Auditor’s Responsibilities for the Assurance Engage-
ment on the ESEF Documents” section. Our audit firm has ap-
plied the IDW Standard on Quality Management: Requirements
for Quality Management in the Audit Firm (IDW QS 1).
Responsibilities of the Executive Directors and the
Supervisory Board for the ESEF Documents
The executive directors of the Company are responsible for the
preparation of the ESEF documents including the electronic re-
production of the consolidated financial statements and the
group management report in accordance with § 328 Abs. 1 Satz
4 Nr. 1 HGB and for the tagging of the consolidated financial
statements in accordance with § 328 Abs. 1 Satz 4 Nr. 2 HGB.
In addition, the executive directors of the Company are respon-
sible for such internal control as they have considered neces-
sary to enable the preparation of ESEF documents that are free
from material non-compliance with the requirements of § 328
Abs. 1 HGB for the electronic reporting format, whether due to
fraud or error.
The executive directors of the Company are also responsible for
the submission of the ESEF documents together with the audi-
tor’s report and the attached audited consolidated financial
statements and audited group management report as well as
other documents to be published to the operator of the German
Federal Gazette [Bundesanzeiger].
The supervisory board is responsible for overseeing the prepa-
ration of the ESEF documents as part of the financial reporting
process.
Group Auditor’s Responsibilities for the Assurance
Engagement on the ESEF Documents
Our objective is to obtain reasonable assurance about whether
the ESEF documents are free from material non-compliance
with the requirements of § 328 Abs. 1 HGB, whether due to
fraud or error. We exercise professional judgment and maintain
professional skepticism throughout the assurance engagement.
We also:
• Identify and assess the risks of material non-compliance
with the requirements of § 328 Abs. 1 HGB, whether due to
fraud or error, design and perform assurance procedures re-
sponsive to those risks, and obtain assurance evidence that
is sufficient and appropriate to provide a basis for our assur-
ance conclusion.
Additional Information
215
Independent Auditor’s Report
German Public Auditor Responsible
for the Engagement
The German Public Auditor responsible for the engagement is
Holger Lutz.
Munich, March 11, 2021 / limited to the initial submission of the
ESEF documents stated in the “Note on Supplementary Audit”
section above: March 15, 2021
PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft
Stefano Mulas
Holger Lutz
Wirtschaftsprüfer
(German Public Auditor)
Wirtschaftsprüfer
(German Public Auditor)
Additional Information
216
Glossary
A
ADS – American Depositary Share; share of a non-
U.S. company that is held by a U.S. depositary bank
and is traded at a stock exchange in the U.S.
aMN – Autoimmune membranous nephropathy
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 library – A collection of genes that
encode corresponding human antibodies
Antigen – Foreign substance stimulating anti-
body production; binding partner of antibody
anti-PLA2R-positive membranous nephropa-
thy – autoimmune kidney disease
ASCT – Autologous stem cell transplantation;
Treatment with stem cells from a patients own
body for the treatment of lymphomas
B
B cells – White blood cells, part of the immune
system, capable of generation antibodies
BLA – Biologics License Application; request to
the FDA for permission to introduce, or deliver
for introduction, a biologic product into inter-
state commerce
B-MIND – Study to evaluate Bendamustine-
MOR208 IN DLBCL
Bruton tyrosine kinase inhibitor – a key
kinase of the B cell receptor signaling pathway
that plays a significant role in the proliferation,
differentiation and survival of B cells
C
C5a – Part of the immune system; involved in
growth of certain cancers
C5aR – Receptor for C5a
CD3 – Potential target for T-cell engagement
Glossary
CD20 – Potential therapeutic target for immuno-
therapy
CD38 – Potential therapeutic target for immuno-
therapy
Clinical trial – Clinical trials allow safety and
efficacy data to be collected for new drugs or de-
vices; depending on the type of product and the
stage of its development, investigators enroll
healthy volunteers and/or patients into small
pilot studies initially, followed by larger-scale
studies in patients
CLL – Chronic lymphocytic leukemia; most com-
mon type of cancer of the blood and bone marrow,
affecting the B cells
COSMOS – CLL patients assessed for ORR/Safety
in MOR208 Study
CR – Complete response
G
GCP – Good clinical practice; an international
ethical and scientific quality standard for design-
ing, conducting, recording and reporting trials
that involve the participation of human subjects
GDP – Good distribution practice; guidelines
on quality standards for distribution practice of
pharmaceutical products
GLP – Good laboratory practice; a formal frame-
work for the implementation of safety tests on
chemical products
GM-CSF – Granulocyte-macrophage colony-
stimulating factor; underlying target molecule of
MOR103 program
GMP – Good manufacturing practice; term for
the control and management of manufacturing
and quality control testing of pharmaceutical
products and medical devices
Crohn’s Disease – Chronic inflammatory bowel
disease
GVP – Good pharmacovigilance practice; quality
standard for monitoring the safety of medicinal
products
D
DLBCL – Diffuse large B cell lymphoma, a sub-
form of ›› NHL
DoR – duration of response
E
EMA – European Medicines Agency
F
FDA – Food and Drug Administration; US federal
agency for the supervision of food and drugs
Felzartamab – MOR202; recombinant human
monoclonal HuCAL-IgG1-antibody directed against
the target molecule CD38
firstMIND – Clinical phase 1b study with tafasit-
amab in first-line patients with DLBCL
GxP – General abbreviation for the “good practice”
quality guidelines and regulations
H
HDC – Highdose chemotherapy
Hemibody-Technology – Multispecific anti-
body technology for the recruitment of effector
cells (T cell engager)
HuCAL – Human Combinatorial Antibody Li-
brary; proprietary antibody library enabling
rapid generation of specific human antibodies
for all applications
I
IFRS – International Financial Reporting Stan-
dards; accounting standards issued by the IASB
and adopted by the EU
IND – Investigational New Drug; application
for permission to test a new drug candidate on
humans, i.e. in clinical studies
frontMIND – Pivotal phase 3 study with tafasit-
amab in first-line patients with DLBCL (trial initia-
tion expected in H1 2021)
inMIND – Pivotal phase 3 study with tafasitamab
in patients with indolent lymphomas (trial initia-
tion expected in H1 2021)
CD19 – Potential therapeutic target for immuno-
therapy
FL – Follicular lymphoma
Glossary
Additional Information
217
L
L-MIND – Study to evaluate Lenalidomide-
MOR208 IN DLBCL
M
MAA – Marketing Authorization Application; ap-
plication seeking permission to bring a medicinal
product to the market in Europe
Market capitalization – Value of a company’s
outstanding shares, as measured by shares times
current price
MM – Multiple Myeloma; Type of cancer that devel-
ops in a subset of white blood cells called plasma
cells formed in the bone marrow
Monjuvi® (tafasitamab-cxix) – First propri-
etary drug on the market; approved in the U.S. in
July 2020 in combination with lenalidomide for
the treatment of adult patients with relapsed or
refractory diffuse large B-cell lymphoma (DLBCL)
not otherwise specified, including DLBCL arising
from low grade lymphoma, and who are not eligi-
ble for autologous stem cell transplant (ASCT)
M-PLACE – Phase 1/2 study with felzartamab in
anti-PLA2R-positive membranous nephropathy
MZL – Marginal zone lymphoma
N
NHL – Non-Hodgkin lymphoma; diverse group of
blood cancers that include any kind of lymphoma
except Hodgkin lymphoma
New-PLACE – Phase 2 study with felzartamab in
anti-PLA2R-positive membranous nephropathy
O
OkapY – New bispecific antibody technology
ORR – Overall response rate
OS – Overall survival
P
PDUFA – Prescription Drug User Fee Act; law al-
lowing the FDA to collect fees from drug manu-
facturers to fund the new drug approval process
with the FDA being required to meet certain per-
formance benchmarks, primarily related to the
speed of the new drug review process.
PFS – Progression-free survival
PsA – Psoriatic arthritis Chronic joint inflamma-
tion that occures in connection with psoriasis
Psoriasis – A chronic, non-contagious autoim-
mune disease which affects the skin and joints
T
Tafasitamab – MOR208, formerly XmAb5574
Target – Target molecule for therapeutic inter-
vention, e.g. on the surface of diseased cells
T cells – An abbreviation for T-lymphocytes; a
subtype of white blood cells that together with
B-lymphocytes are responsible for the body’s im-
mune defense
U
Ulcerative Colitis – Chronic inflammatory
bowel disease; Crohn’s disease
Q
QPCTL – glutaminyl peptide cyclotransferase-
like enzymes
Y
Ylanthia – The novel next-generation antibody
platform of MorphoSys
R
R-CHOP – Rituximab, Cyclophosphamid, Doxo-
rubicin, Vincristin and Prednison; Combination
treatment with rituximab and combination che-
motherapy as standard first-line treatment of
›› DLBCL
RE-MIND – Retrospective observational study to
compare the efficacy in the L-MIND study to the
efficacy results of lenalidomide monotherapy
based on real-world data of patients
Rheumatoid arthritis – Inflammatory disease
of the joints; abbreviation: RA
Royalties – Percentage share of ownership of
the revenue generated by drug products
r/r – relapsed/refractory
S
SLL – Small lymphocytic lymphoma
Slonomics – DNA engineering and protein library
generation platform acquired by MorphoSys in 2010
Otilimab – formerly MOR103/GSK3196165
SOX – Sarbanes-Oxley Act of 2002
Additional Information
218
List of Figures and Tables
List of Figures and Tables
Figures
01 Performance of the MorphoSys Share in 2020
02 Performance of the MorphoSys Share 2016 – 2020
03 Revenues of the MorphoSys Group by Segment
04 Total Headcount of the MorphoSys Group
05 Employees by Gender
06 Revenues by Region
47
47
65
67
69
72
07 Revenues Proprietary Development and Partnered
Discovery
08 Selected R&D Expenses
09 Risk and Opportunity Management System at
MorphoSys
10 Compliance Management Program (CMP)
72
74
94
129
Tables
46
01 Key Data for the MorphoSys Share
48
02 Analyst Recommendations
03 Development of Key Financial Performance Indicators 55
77
04 Multi-Year Overview – Statement of Profit or Loss
81
05 Multi-Year Overview – Financial Situation
82
06 Multi-Year Overview – Balance Sheet Structure
07 Contractual Obligations
83
08 Comparison of Actual Business Results Versus
Forecasts
09 Summary of MorphoSys’s Key Short- and Medium-Term
Risks
10 Summary of MorphoSys’s Key Long-Term Risks
11 Summary of MorphoSys’s Key Opportunities
84
100
101
101
12 Composition of the Supervisory Board until
Termination of the 2020 Annual General Meeting
106
13 Composition of the Supervisory Board since
Termination of the 2020 Annual General Meeting
14 Participation of Supervisory Board Members
15 Compensation of the Management Board in
2020 and 2019
16 Components of Executive Board compensation in
2020 and 2019
17 Compensation of the Supervisory Board in
2020 and 2019
18 Directors’ Holdings
19 Managers Transactions in 2020
106
108
116
122
124
125
126
Imprint
MorphoSys AG
Semmelweisstrasse 7
82152 Planegg
Germany
+49-89-89927-0
Phone:
+49-89-89927-222
Fax:
Email:
info@morphosys.com
Website: www.morphosys.com
Investor Relations
Phone:
Fax:
Email:
+49-89-89927-404
+49-89-89927-5404
investors@morphosys.com
Concept and Design
3st kommunikation GmbH, Mainz
Photography/Picture Credits
Andreas Pohlmann, Munich
Webb Chappell, Boston
Getty Images
This Annual Report is also available in
German and can be downloaded from the
Company’s website.
For better readability, this report uses the
masculine form only but refers equally to
all genders.
Translation
Klusmann Communications, Niedernhausen
Leinhäuser Language Services GmbH,
Unterhaching
HuCAL®, HuCAL GOLD®, HuCAL PLATINUM®,
CysDisplay®, RapMAT®, arYla®, Ylanthia®, 100
billion high potentials®, Slonomics®, CyCAT®,
OkapY™, MONJUVI® and ENFORCER® are
trademarks of the MorphoSys Group.
Editorial Office
Götz Translations and Proofreading GmbH,
Hamburg
Tremfya® is a registered trademark of Janssen
Biotech, Inc. XmAb® is a registered trademark
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Copy Deadline
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(except financial statements)
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Financial Calendar
2021
March 15
Publication of 2020
Year-End Results
May 5
Publication of 2021
First Quarter Interim Statement
May 19
2021 Annual General
Meeting
July 28
Publication of 2021
Half-Year Report
November 10
Publication of 2021
Third Quarter Interim Statement
MorphoSys AG
Semmelweisstrasse 7
82152 Planegg
Germany
Phone: +49-89-89927-0
Fax: +49-89-89927-222
www.morphosys.com