Therapeutic Antibody Pipeline Increases to 75 Programs in Total

MorphoSys AG (FSE: MOR; Prime Standard Segment; TecDAX) today announced its financial results according to International Financial Reporting Standards (IFRS) for the nine months ending September 30, 2010. Group revenues increased by 9 % to EUR 62.8 million (first nine months 2009: EUR 57.6 million) and operating profit decreased by 14 % to EUR 8.0 million (first nine months 2009: EUR 9.3 million). Net profit amounted to EUR 7.2 million (first nine months 2009: EUR 7.7 million). As previously communicated and planned, MorphoSys's investment in proprietary research and development increased to EUR 18.4 million (first nine months 2009: EUR 13.1 million). The Company's cash position on September 30, 2010 was EUR 132.1 million (December 31, 2009: EUR 135.1 million). The cash position at balance sheet date does not reflect payment of EUR 19.0 million, which was paid for the acquisition of Sloning on October 7, 2010. The Company re-confirmed and narrowed the range of its full year guidance for 2010.

Recent Highlights

• Shortly after the end of the third quarter, MorphoSys acquired Sloning BioTechnology GmbH, a company developing new methods of synthetic biology. The transaction makes MorphoSys the sole source of Sloning's state-of-the-art Slonomics technology, which dramatically improves the assembly and quality of protein libraries. By integrating Slonomics into its existing antibody technology platform, MorphoSys expects to increase the proportion of programs reaching clinical development to 50%.
• MorphoSys's drug pipeline now comprises 75 therapeutic antibody programs in total, of which twelve are currently in clinical development, 25 are in preclinical development and 38 are in the discovery phase. Nine of these are MorphoSys's proprietary programs, including two joint pre-development programs with Novartis.
• MorphoSys received one phase 1 milestone payment within its Novartis alliance, for an antibody commencing clinical development in ophthalmology.
• MorphoSys announced a new proprietary development program in the area of infectious diseases. As part of this initiative, MorphoSys has signed a license and collaboration agreement with Absynth Biologics, providing access to novel target molecules associated with Staphylococcus aureus infections including MRSA (methicillin-resistant S. aureus).
• MorphoSys has been awarded two grants by the German Federal Ministry of Education and Research. The first grant supports MorphoSys in accelerating the development of its HuCAL-based cancer program MOR202 into clinical development for the treatment of multiple myeloma in collaboration with Klinikum rechts der Isar. The second grant supports MorphoSys and Proteros Biostructures in establishing a new technology platform for analyzing antibody-antigen interactions.
• MorphoSys's research and diagnostic antibodies unit AbD Serotec signed two exclusive license agreements, with UCL Business PLC, the technology development arm of University College London, and the VU University Medical Center. The agreements provide AbD Serotec with worldwide exclusive access to several antibodies for research and diagnostics applications.
• The US Patent and Trademark Office granted a new patent providing extended protection for the Company's CysDisplay technology. The new patent (US 7,785,859) covers the host cells used in this enhanced phage display technology.

'Our corporate development activities during the quarter resulted in the acquisition of Sloning BioTechnology in early October. Importantly, the transaction secures our cutting-edge position at the forefront of antibody technology,' commented Dave Lemus, Chief Financial Officer of MorphoSys AG. 'Moreover, the acquisition of Sloning clearly supports our future growth plans and we look forward to reaping the large synergistic benefits that will arise from integrating their technology into our platform.'

Financial Review for the First Nine Months of 2010 (IFRS)

Group revenues for the first nine months of 2010 amounted to EUR 62.8 million (first nine months 2009: EUR 57.6 million), an increase of 9 % over the prior year. Segment revenues arising from the Partnered Discovery segment accounted for EUR 47.4 million of the total (first nine months 2009: EUR 42.9 million) and included success-based payments in the amount of EUR 4.8 million (first nine months 2009: EUR 7.8 million). The Proprietary Development segment, comprising the Company's own and joint drug development activities contributed EUR 1.1 million to total revenues (first nine months 2009: EUR 0.8 million). These revenues arise from Novartis's funding of two joint pre-development programs. Revenues in the Research and Diagnostics segment AbD Serotec increased by 3 % to EUR 15.0 million (first nine months 2009: EUR 14.6 million). Measured at constant foreign exchange rates as of the first nine months of 2009, segment revenues in the Partnered Discovery and Proprietary Development segments remained unchanged and revenues in the AbD Serotec segment would have totaled EUR 14.7 million.

Total operating expenses for the first nine months of 2010 amounted to EUR 54.8 million (first nine months 2009: EUR 48.3 million), representing an increase of 13 % over the prior year, which was mainly the result of a higher level of investment in proprietary drug development. Cost of goods sold (COGS) increased in comparison to the first nine months of 2009 by 8 % to EUR 5.5 million. Research and development expenses increased by 18 % to EUR 32.5 million (first nine months 2009: EUR 27.5 million). These R&D expenses comprised costs for proprietary product development in the amount of EUR 18.4 million (first nine months 2009: EUR 13.1 million) as well as costs incurred on behalf of partners. Sales, general and administrative expenses increased by 7 % to EUR 16.8 million (first nine months 2009: EUR 15.7 million). Non-cash charges related to stock-based compensation are embedded in COGS, S, G&A and R&D expenses and amounted to EUR 1.6 million (first nine months 2009: EUR 1.3 million). Total operating profit amounted to EUR 8.0 million (first nine months 2009: EUR 9.3 million).

The segment income for the Partnered Discovery segment amounted to EUR 31.4 million (first nine months 2009: segment income of EUR 27.3 million), while the Proprietary Development segment showed a segment loss of EUR 17.3 million (first nine months 2009: segment loss of EUR 12.4 million). In the AbD Serotec segment, operating profit decreased to EUR 0.7 million (first nine months 2009: segment income of EUR 1.4 million) and would have remained unchanged under the assumption of constant foreign exchange rates at the average rate of the first nine months of 2009. Unallocated corporate costs in the first nine months of 2010 amounted to EUR 6.9 million (first nine months 2009: EUR 7.0 million).

For the first nine months of 2010, non-operating income amounted to EUR 2.2 million (first nine months 2009: non-operating income of EUR 1.5 million). Profit before taxes amounted to EUR 10.2 million (first nine months 2009: EUR 10.8 million).

For the first nine months of 2010, the Company reported income tax expenses in the amount of EUR 3.0 million (first nine months 2009: EUR 3.1 million).

Net profit for the first nine months of 2010 amounted to EUR 7.2 million (first nine months 2009: EUR 7.7 million). The resulting diluted earnings per share for the first nine months of 2010 amounted to EUR 0.32 (first nine months 2009: diluted earnings per share of EUR 0.34).

On September 30, 2010, the Company had EUR 132.1 million in cash, cash equivalents, and marketable securities, compared to EUR 135.1 million as of December 31, 2009. Net cash inflow from operations in the first nine months of 2010 amounted to EUR 8.0 million (first nine months 2009: cash inflow of EUR 3.0 million). The number of issued shares at September 30, 2010 was 22,794,258, compared to 22,660,557 shares at December 31, 2009.

Financial Review for the Third Quarter of 2010 (IFRS)

In the third quarter of 2010, revenues decreased by 2 % to EUR 19.3 million, compared to EUR 19.7 million in the same quarter of 2009. Total operating expenses amounted to EUR 19.7 million, compared to EUR 17.0 million in the same period of 2009. The resulting loss from operations for the third quarter of 2010 amounted to EUR 0.4 million, compared to an operating profit of EUR 2.7 million in the same period of 2009. A net profit of EUR 1.4 million was achieved in the third quarter of 2010, compared to EUR 2.6 million during the same period in 2009.

Financial Outlook for 2010

MorphoSys re-confirmed and narrowed the range of its financial guidance for 2010 as previously communicated in February. The Company estimates full-year 2010 Group revenues between EUR 89 million and EUR 90 million. The revenue guidance for 2010 assumes higher milestone and commercial revenues in the 4th quarter than in previous quarters. MorphoSys expects an operating profit of EUR 7 million to EUR 9 million, including investments in proprietary R&D in the amount of EUR 27 million to EUR 29 million (2009: EUR 19.3 million).

MorphoSys will hold a public conference call today at 02:00 p.m. CEST (08:00 a.m. EST, 01:00 p.m. BST) to present the Nine Months Results 2010 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.

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