MorphoSys AG Reports Nine Months' 2011 Results

MorphoSys AG (FSE: MOR; Prime Standard Segment; TecDAX) today announced its financial results for the nine months ending September 30, 2011, according to International Financial Reporting Standards (IFRS). Group revenues increased by 33 % to EUR 83.7 million (first nine months 2010: EUR 62.8 million), mainly due to a technology milestone payment, which was booked in Q1 2011. Group operating profit increased to EUR 19.9 million (first nine months 2010: EUR 8.0 million) and net profit to EUR 13.0 million (first nine months 2010: EUR 7.2 million). As planned, MorphoSys further increased its investment in proprietary research and development, to EUR 26.1 million (first nine months 2010: EUR 19.4 million). MorphoSys's cash position on September 30, 2011 was EUR 143.0 million (December 31, 2010: EUR 108.4 million). The Company updated its financial guidance for 2011 and re-confirmed its operating profit guidance between EUR 10 million and EUR 13 million despite a slightly lower level of revenues.

Highlights of the Third Quarter 2011

• During the third quarter, MorphoSys dosed the first patient in a phase 1/2a clinical trial for MOR202; the study will evaluate the safety and preliminary efficacy of MOR202 as monotherapy and in combination with standard therapy in a maximum of 82 patients with relapsed or refractory multiple myeloma
• MorphoSys reached a second clinical milestone with Bayer HealthCare; the antibody-drug-conjugate BAY 94-9343 will be evaluated in a phase 1 trial in oncology
• Novartis advanced a HuCAL antibody into phase 2 clinical trials. In total, Novartis has currently three HuCAL-based antibodies in phase 2, and two in phase 1
• At the end of the third quarter of 2011, MorphoSys's partnered and proprietary pipeline comprised 78 programs, of which 19 were in clinical development
• AbD Serotec entered a research and supply agreement with the Department of Cancer Immunology and AIDS at Dana-Farber Cancer Institute in Boston
• AbD Serotec and Merck & Co. amended the existing license agreement to include the use of MorphoSys's HuCAL GOLD technology in the field of vaccines
• Shortly after the quarter, Roche published first amyloid imaging data from the HuCAL-based Alzheimer's disease program Gantenerumab. The data, published in the Archives of Neurology, demonstrated a dose-dependent reduction of beta amyloid in the brain of patients treated with the monoclonal antibody, while amyloid load increased in patients on placebo. The program is currently being evaluated in a phase 2 clinical trial.

'The MorphoSys Group is on track to show double-digit revenue growth in 2011 and sound profitability. In addition to a very solid financial performance, we are able to advance our proprietary product portfolio as planned and show significant progress in our partnered antibody pipeline,' stated Jens Holstein, Chief Financial Officer of MorphoSys AG.

Financial Review of the First Nine Months of 2011 According to IFRS

Group revenues for the first nine months of 2011 were EUR 83.7 million (first nine months 2010: EUR 62.8 million), an increase of 33 % over the same period of the previous year. This significant increase was mainly due to the successful installation of the HuCAL technology at the Novartis Institutes for BioMedical Research in Basel, Switzerland, which was achieved in Q1 2011. Revenues in the Partnered Discovery segment comprised EUR 35.7 million in funded research and licensing fees (first nine months 2010: EUR 42.6 million) and EUR 32.2 million in success-based payments (first nine months 2010: EUR 4.8 million), including the technology transfer milestone from Novartis. The Proprietary Development segment recorded funded research revenues of EUR 1.9 million (first nine months 2010: EUR 1.1 million). Assuming constant foreign exchange rates using the average rates of the first nine months of 2010, segment revenues in the Partnered Discovery and Proprietary Development segments would have totaled EUR 70.7 million. The AbD Serotec segment provided 17 % or EUR 14.1 million of total revenues (first nine months 2010: EUR 15.0 million), a decrease of 6 %. The unfavorable comparison with the prior year's revenue is due to a large OEM order which was placed in Q1 2010 as well as due to unfavorable foreign exchange rates. Assuming constant foreign exchange rates revenues in the AbD Serotec segment would have amounted to EUR 14.6 million.

Total operating expenses for the first nine months of 2011 increased by 17 % to EUR 64.1 million (first nine months 2010: EUR 54.8 million). The increase of EUR 9.3 million was mainly caused by increased proprietary product development (R&D) expenses in line with the Company's plans. Cost of goods sold (COGS), a line item specific to AbD Serotec, remained unchanged compared to the same period of the previous year at EUR 5.5 million. The gross margin for the segment slightly decreased to 61 %, in comparison to 63 % in the first nine months of 2010, due to the above mentioned OEM order. Total research and development expenses rose by EUR 9.4 million or 29 % to EUR 41.9 million (first nine months 2010: EUR 32.5 million). The increase in R&D expenses mainly resulted from a higher level of investment in proprietary product and technology development (including segment allocations) amounting to EUR 26.1 million (first nine months 2010: EUR 19.4 million). Sales, general and administrative expenses remained unchanged at EUR 16.8 million. Non-cash charges related to stock-based compensation are embedded in COGS, S,G&A and R&D expenses and amounted to EUR 1.1 million (first nine months 2010: EUR 1.6 million).

Total Group operating profit increased to EUR 19.9 million (first nine months 2010: EUR 8.0 million). Partnered Discovery showed a segment operating profit of EUR 50.9 million (first nine months 2010: operating profit of EUR 31.4 million), while the increased investment in proprietary development led to a segment loss for the Proprietary Development segment of EUR 22.9 million (first nine months 2010: segment loss of EUR 17.3 million). The AbD Serotec segment showed an operating profit of EUR 0.4 million (first nine months 2010: operating profit of EUR 0.7 million).

Non-operating items included other expenses of EUR 2.0 million (first nine months of 2010: EUR 0.7 million), which predominantly resulted from foreign exchange losses. For the first nine months of 2011, the Company reported income tax expenses in the amount of EUR 6.0 million (first nine months of 2010: EUR 3.0 million). For the first nine months of 2011, MorphoSys realized a net profit of EUR 13.0 million compared to a net profit of EUR 7.2 million in the same period of the previous year. The resulting diluted earnings per share for the first nine months of 2011 increased to EUR 0.56 (first nine months 2010: EUR 0.32).

On September 30, 2011, the Company had EUR 143.0 million in cash, cash equivalents, and marketable securities, compared to EUR 108.4 million as of December 31, 2010. Net cash inflow from operations in the first nine months 2011 amounted to EUR 35.9 million (first nine months 2010: net cash inflow EUR 8.0 million). The number of issued shares at September 30, 2011 was 23,047,541, compared to 22,890,252 shares at December 31, 2010.

Financial Review of the Third Quarter of 2011 (IFRS)

In the third quarter of 2011, revenues decreased as anticipated by 11 % to EUR 17.1 million, compared to EUR 19.3 million in the same quarter of 2010. Total operating expenses amounted to EUR 20.6 million, compared to EUR 19.7 million in the same period of 2010. The resulting loss from operations for the third quarter of 2011 amounted to EUR 3.4 million, compared to a loss from operations of EUR 0.4 million in the same period of 2010. A net loss of EUR 2.0 million was achieved in the third quarter of 2011, compared to a net profit of EUR 1.4 million during the same period in 2010.

Outlook for 2011

The Company updated its financial guidance for 2011, re-confirming its operating profit guidance of EUR 10 to EUR 13 million despite full-year revenue slightly below the original EUR 105 to EUR 110 million range due to currency effects and minor shifts in milestone payments.

MorphoSys will hold a public conference call and webcast today at 02:00 p.m. CEST (08:00 a.m. EST, 01:00 p.m. BST) to present the Nine Months Results 2011 and report on current developments.

Dial-in number for the Conference Call (listen-only):
Germany:                               +49 89 2444 32975
For U.K. residents:                 +44 20 3003 2666
For U.S. residents:                 +1 212 999 6659

Please dial in 10 minutes before the beginning of the conference.

In addition, MorphoSys offers participants the opportunity to follow the presentation through a simultaneous slide presentation online at http://www.morphosys.com.

A live webcast, slides, webcast replay and transcript will be made available at http://www.morphosys.com.

Approximately two hours after the press conference, a slide-synchronized audio replay of the conference will be available on http://www.morphosys.com.