MorphoSys AG (FSE: MOR; Prime Standard Segment; TecDAX) today announced financial results for the year ending December 31, 2010, with revenues of EUR 87 million and an operating profit of EUR 9.8 million. The year was marked by substantial progress in the Company's pipeline of therapeutic antibody candidates, and by several significant transactions, including the in-licensing of MOR208, the acquisition of Sloning Biotechnology and a major new deal with Pfizer. Overall, the number of clinical programs more than doubled, from 8 at the beginning of the year to 17 at year-end. Much of the progress in 2010 was driven by substantially increased investment in proprietary research & development, which totaled EUR 26.5 million in 2010, up by 37 % compared to the previous year. The Company also provided a positive outlook for 2011, with revenue growth forecast to exceed 20 %, an operating profit at least as high as in 2010 and substantial growth expected in its clinical drug candidate pipeline.

* Differences due to rounding

Highlights of the Year 2010

Pipeline: The total number of programs in clinical trials increased from eight at the beginning of 2010 to 17 at year-end.

·         Proprietary Development Progress: At the end of 2010, MorphoSys had two proprietary programs in clinical development (MOR103 and MOR208). The clinical trial application for a third program (MOR202) was filed in Q4 2010. MorphoSys in-licensed MOR208 from Xencor in Q2 2010. At the end of 2010, ten proprietary programs were active.

·         Partnered Development Progress: At the end of 2010, 15 partnered programs were in clinical development, an increase of eight during the year. Altogether, at the end of 2010, 65 partnered programs were ongoing.

AbD Serotec: The structural improvements that were implemented during 2009 and 2010 led to an improved operating profit margin of 6 %.

Technology: In October 2010, MorphoSys acquired Sloning BioTechnology GmbH. Sloning's world-leading technology for building protein libraries was rapidly integrated into a new antibody optimization platform called arYla. MorphoSys expects arYla to transform the way antibodies are optimized, increasing both speed and success rates. The Sloning acquisition promises to open up a new era of partnering opportunities for MorphoSys, as evidenced by the agreement entered into with Pfizer just weeks after the Sloning transaction was announced.

'We have made very good progress as a company in the last 12 months, and nowhere is this progress more evident than in our pipeline of therapeutic antibodies. The number of clinical programs more than doubled and now stands at 17,' stated Dr. Simon Moroney, Chief Executive Officer of MorphoSys AG. 'The depth and breadth of our development pipeline speaks to the power of our technology. The richness of clinical programs we see today holds the promise of multiple products coming to market in the years ahead coupled with a lucrative royalty stream.'

'Despite very significant and continued increases in proprietary R&D investment, we delivered yet again another year of solid operating profits,' commented Dave Lemus, Chief Financial Officer of MorphoSys AG, adding: 'For 2011, we expect even stronger revenue and profit growth, and due to our excellent financial and operational health will continue to invest heavily in proprietary R&D. We expect these higher levels of R&D investment to yield very substantial longer term value for our shareholders.'

Financial Review for the Fiscal Year 2010 (IFRS)

Group revenues for the full year 2010 amounted to EUR 87.0 million (2009: EUR 81.0 million), an increase of 7 % over the prior year. Revenues in the Partnered Discovery segment comprised EUR 57.2 million in funded research and licensing fees (2009: EUR 48.6 million) and EUR 9.1 million in success-based payments (2009: EUR 13.1 million). The Proprietary Development segment recorded funded research revenues of EUR 1.8 million (2009: EUR 1.0 million). Assuming constant foreign exchange rates at the average rate of 2009, segment revenues in the Partnered Discovery and Proprietary Development segments would have remained unchanged. The AbD Serotec segment provided 23 % or EUR 20.2 million of total revenues (2009: EUR 19.3 million), an increase of 5 %. Assuming constant foreign exchange rates at the average rate of 2009, revenues in the AbD Serotec segment would have amounted to EUR 19.6 million. Other operating income increased by EUR 0.1 million to EUR 0.2 million in 2010 and comprised grant income from governmental agencies.

Total operating expenses for the full year 2010 increased by 11 % to EUR 77.4 million (2009: EUR 69.6 million). The change in operating expenses of € 7.8 million was mainly caused by increased proprietary research and development (R&D) expenses. Cost of goods sold (COGS), a line item specific to AbD Serotec, increased by 9 % to EUR 7.3 million (2009: EUR 6.7 million). Total research and development expenses rose by EUR 7.9 million or 20 % to EUR 46.9 million in 2010 (2009: EUR 39.0 million). The increase in R&D expenses mainly resulted from a higher level of investment in proprietary product development (including segment allocations) amounting to EUR 26.5 million (2009: EUR 19.3 million). Sales, general and administrative expenses slightly decreased by 3 % to EUR 23.2 million (2009: EUR 23.9 million). Non-cash charges related to stock-based compensation are embedded in COGS, S,G&A and R&D expenses and amounted to EUR 2.1 million (2009: EUR 1.7 million).

Total Group operating profit decreased to EUR 9.8 million (2009: EUR 11.4 million). Partnered Discovery showed a segment operating profit of EUR 42.7 million (2009: EUR 39.6 million) while EUR 26.5 million were invested into proprietary development (2009: investment of EUR 19.3 million). In the AbD Serotec segment, operating profit increased to EUR 1.2 million (2009: EUR 1.0 million), an operating margin of 6 %.

Non-operating income and expenses, including taxes, resulted in a loss of EUR 0.6 million (2009: non-operating loss of EUR 2.4 million). For the full year 2010, MorphoSys realized a net profit of EUR 9.2 million compared to a net profit of EUR 9.0 million in the previous year. The resulting diluted earnings per share for the year 2010 remained constant at EUR 0.40 (2009: EUR 0.40).

On December 31, 2010, the Company had EUR 108.4 million in cash, cash equivalents, and marketable securities, compared to EUR 135.1 million as of December 31, 2009. The decrease resulted mainly from the financing of the acquisition of Sloning and the in-licensing of MOR208, a compound from Xencor, Inc. Outstanding accounts receivable at year-end 2010 amounted to EUR 15.0 million, the majority of which is expected to be settled during the course of Q1 2011. Net cash inflow from operations in 2010 amounted to EUR 2.5 million (2009: net cash outflow EUR 1.0 million). The number of issued shares at December 31, 2010 was 22,890,252, compared to 22,660,557 shares at December 31, 2009.

Fourth Quarter of 2010 (IFRS)

In the fourth quarter of 2010, the Company generated revenues of EUR 24.3 million, compared to EUR 23.4 million in the same quarter of 2009, an increase of 4 %. Total operating expenses amounted to EUR 22.6 million, compared to EUR 21.4 million in the same quarter of 2009. The increase of operating expenses was mainly due to increased material and personnel costs. The resulting operating profit amounted to EUR 1.9 million (Q4 2009: EUR 2.1 million). Net profit for the fourth quarter 2010 was EUR 2.0 million, compared to EUR 1.3 million in the fourth quarter of 2009.

Outlook for 2011

For 2011, MorphoSys anticipates total Group revenues of between EUR 105 million and EUR 110 million and anticipates an operating profit in the range of EUR 10 million to EUR 13 million. Backed by its sound financial position, MorphoSys will continue to increase its investment in proprietary research and development to between EUR 40 million and EUR 45 million during 2011. For 2011, MorphoSys expects to make major progress in advancing its product pipeline and by the end of the year the Company expects its partnered and proprietary pipeline to comprise up to 22 programs in clinical trials. MorphoSys's management team will provide a more detailed outlook in today's conference call.