Technology Milestone Payment Drives Revenues and Profits
MorphoSys AG (FSE: MOR; Prime Standard Segment; TecDAX) today announced its financial results for the three months ending March 31, 2011 according to International Financial Reporting Standards (IFRS). Group revenues more than doubled to EUR 48.6 million (Q1 2010: EUR 20.6 million). This significant increase was mainly due to a technology milestone payment from Novartis in connection with the completion of the installation of MorphoSys's HuCAL antibody platform at Novartis Institutes for BioMedical Research in Basel, Switzerland. Group operating profit increased to EUR 28.8 million (Q1 2010: EUR 4.7 million) and net profit amounted to EUR 18.8 million (Q1 2010: EUR 3.2 million). As planned, MorphoSys further increased its investment in proprietary research and development, to EUR 7.2 million (Q1 2010: EUR 5.0 million). MorphoSys's cash position on March 31, 2011 was EUR 119.8 million (December 31, 2010: EUR 108.4 million) and the Company re-confirmed its full year guidance for 2011.
| In EURO million | Q1 2011 | Q1 2010 |
| Group Revenues | 48.6 | 20.6 |
| hereof AbD Serotec | 4.4 | 5.5 |
| Other Operating Income | 0.1 | 0.01 |
| Total Operating Expenses | 19.9 | 15.9 |
| Operating Profit | 28.8 | 4.7 |
| Net Profit | 18.8 | 3.2 |
| EPS (diluted) in EURO | 0.81 | 0.14 |
Highlights of the First Quarter
- Alliances: MorphoSys completed installation of its HuCAL technology at Novartis, triggering a double-digit million Euro payment from the pharmaceutical partner.
- Pipeline: At the end of the first quarter of 2011, MorphoSys's partnered and proprietary pipeline comprised 74 programs, of which 17 were in clinical development. Based on the number of programs in the clinic, MorphoSys's HuCAL is now the most successful antibody library technology in the pharmaceutical industry.
- Proprietary Development: At the end of Q1 2011, nine proprietary programs were active, including two co-development programs with Novartis.
- MOR103: A US patent was granted covering MorphoSys's HuCAL antibody against
GM-CSF. The patent has a scheduled expiry date in 2026, not including any potential extensions. - Management: MorphoSys announced a change in its Executive Management Board with Jens Holstein joining MorphoSys as Chief Financial Officer from Fresenius Kabi.
'The successful installation of our HuCAL technology at Novartis was the most significant event during the first quarter' stated Dr. Simon Moroney, Chief Executive Officer of MorphoSys AG. 'Financially, the double digit million Euro payment associated with this milestone led us to a record quarter and will help us to achieve more than 20 % revenue growth in 2011. Overall, our pipeline is stronger than ever, and based on the number of antibodies in clinical development, HuCAL is the industry's most successful antibody library technology. This underlines the point that HuCAL has truly become an industry standard for therapeutic antibody generation.'
Financial Review for First Quarter of 2010 According to IFRS
Group revenues for the first quarter of 2011 were EUR 48.6 million (Q1 2010: EUR 20.6 million), an increase of 136 % over the same period of the previous year. This large increase was mainly due to the successful installation of the HuCAL technology at the Novartis Institutes for BioMedical Research in Basel, Switzerland. Revenues in the Partnered Discovery segment comprised EUR 13.3 million in funded research and licensing fees (Q1 2010: EUR 13.7 million) and EUR 30.4 million in success-based payments (Q1 2010: EUR 1.3 million), including the technology transfer milestone from Novartis. The Proprietary Development segment recorded funded research revenues of EUR 0.6 million (Q1 2010: EUR 0.3 million). Assuming constant foreign exchange rates at the average rate of Q1 2010, segment revenues in the Partnered Discovery and Proprietary Development segments would have totaled EUR 43.6 million. The AbD Serotec segment provided 9 % or EUR 4.4 million of total revenues (Q1 2010: EUR 5.5 million), a decrease of 20 %. The unfavorable comparison with the prior year's revenue is due to a large OEM order which was placed in Q1 2010. Assuming constant foreign exchange rates at the average rate of Q1 2010, revenues in the AbD Serotec segment would have amounted to EUR 4.3 million. Other operating income amounted to EUR 0.1 million (Q1 2010: EUR 0.01 million), comprising grant income from governmental agencies.
Total operating expenses for the first quarter of 2011 increased by 25 % to EUR 19.9 million (Q1 2010: EUR 15.9 million). The increase of EUR 4.0 million was mainly caused by increased proprietary research and development (R&D) expenses in line with the Company's plans. Cost of goods sold (COGS), a line item specific to AbD Serotec, increased by 6 % to EUR 1.8 million (Q1 2010: EUR 1.7 million). The gross margin for the segment decreased to 58 %, in comparison to 68 % in the first quarter of 2010, due to a less favorable sales mix in Q1 2011. Total research and development expenses rose by EUR 3.4 million or 37 % to EUR 12.7 million (Q1 2010: EUR 9.3 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 7.2 million (Q1 2010: EUR 5.0 million). Sales, general and administrative expenses increased by 8 % to EUR 5.3 million (Q1 2010: EUR 4.9 million). Non-cash charges related to stock-based compensation are embedded in COGS, S,G&A and R&D expenses and amounted to EUR 0.5 million (Q1 2010: EUR 0.4 million).
Total Group operating profit increased to EUR 28.8 million (Q1 2010: EUR 4.7 million). Partnered Discovery showed a segment operating profit of EUR 37.6 million (Q1 2010: operating profit of EUR 10.0 million) while the increased investment in proprietary development led to negative segment result of EUR 6.2 million (Q1 2010: negative segment result of EUR 4.3 million). The AbD Serotec segment showed an operating loss of EUR 0.2 million (Q1 2010: operating profit of EUR 0.9 million).
Non-operating items, including taxes, resulted in expense of EUR 10.0 million (Q1 2010: non-operating expense of EUR 1.5 million). For the first quarter of 2011, MorphoSys realized a net profit of EUR 18.8 million compared to a net profit of EUR 3.2 million in the same period of the previous year. The resulting diluted earnings per share for the first three months of 2011 increased to EUR 0.81 (Q1 2010: EUR 0.14).
Another highlight was the Company's strong cash position. On March 31, 2011, the Company had EUR 119.8 million in cash, cash equivalents, and marketable securities, not including the technology milestone payment from Novartis, compared to EUR 108.4 million as of December 31, 2010. The accounts receivable position increased to EUR 38.4 million (Q1 2010: 15.0 million), due to the outstanding milestone payment from Novartis at the balance sheet due date. Net cash inflow from operations in Q1 2011 amounted to EUR 11.7 million (Q1 2010: net cash inflow EUR 13.1 million). The number of issued shares at March 31, 2011 was 22,938,167, compared to 22,890,252 shares at December 31, 2010.
Outlook for 2011
As presented in February of this year, 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 make investments into proprietary research and development of between EUR 40 million and EUR 45 million during 2011. For 2011, MorphoSys anticipates major progress across its product pipeline and specifically, by the end of the year the partnered and proprietary pipeline is expected to comprise up to 22 programs in clinical trials.