2. Segment Reporting
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity’s chief operating decision maker and for which discrete financial information is available.
Segment information is presented in respect of the Group’s operating and geographical segments. The operating segments are based on the Group’s management and internal reporting structure. Segment results and assets include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Intersegment pricing is determined on an arm’s length basis according to the Group transfer pricing policy.
The Group consists of the following two main operating segments:
Therapeutic antibodies
MorphoSys possesses one of the leading technologies in the generation of human antibody therapeutics and bespoke antibody research projects. The Company makes use of its technology in collaborations with international pharmaceutical and biotechnology companies as well as on its own account.
Antibodies direct — AbD
The AbD segment leverages MorphoSys’s core technological capabilities in the design and manufacture of antibodies for research purposes. It commercializes the HuCAL technology, focusing on the custom generation of research antibodies for partners on an individual basis. The segment generates sales from custom antibodies as well as catalog antibodies and industrial bulk production.
Geographical segments
In presenting information on the basis of geographical segments, segment revenues are based on the geographical location of the customers and segment assets on the geographical location of the assets.
For the Period Ended March 31,
| Therapeutic Antibodies | AbD | Unallocated | Elimination | Group | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in 000’s €) | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||||||||||
| Revenues, total | 14,487 | 12,163 | 4,879 | 4,317 | 0 | 0 | (231) | (201) | 19,135 | 16,279 | ||||||||||
| External Revenues | 14,487 | 12,163 | 4,648 | 4,116 | 0 | 0 | - | 0 | 19,135 | 16,279 | ||||||||||
| Inter-segment Revenues | 0 | 0 | 231 | 201 | 0 | 0 | (231) | (201) | 0 | 0 | ||||||||||
| Operating Expenses, total | 8,977 | 6,023 | 4,255 | 4,278 | 1,915 | 2,119 | (231) | (201) | 14,916 | 12,219 | ||||||||||
| Cost of Goods Sold | 0 | 0 | 1,664 | 1,680 | 0 | 0 | - | 0 | 1,664 | 1,680 | ||||||||||
| Other Operating Expenses | 8,746 | 5,822 | 2,591 | 2,598 | 1,915 | 2,119 | - | 0 | 13,252 | 10,539 | ||||||||||
| Inter-segment Costs | 231 | 201 | 0 | 0 | 0 | 0 | (231) | (201) | 0 | 0 | ||||||||||
| Segment Result | 5,510 | 6,140 | 624 | 39 | (1,915) | (2,119) | 0 | 0 | 4,219 | 4,060 | ||||||||||
| Interest Income | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 136 | 361 | ||||||||||
| Interest Expense | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 2 | ||||||||||
| Other (Expense)/Income, Net | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 735 | 236 | ||||||||||
| Profit before Taxes | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 5,089 | 4,655 | ||||||||||
| Income Tax Expense | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1,582 | 1,390 | ||||||||||
| Net Profit | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 3,507 | 3,265 | ||||||||||
A segment result is defined as segment revenues less operating segment expenses. As a compensation for therapeutic revenues generated from contracts that had been originally initiated by the AbD segment, the Therapeutic Antibodies segment granted a compensatory fee of € 0.2 million to the AbD segment for the first three months of 2009 as a result of the revenue sharing agreement established between the two segments in 2007.
The following table shows the split of the Company’s consolidated revenues by geographical market:
For the Period Ended March 31,
| (in 000’s €) | 2009 | 2008 | ||
|---|---|---|---|---|
| Europe and Asia | 14,948 | 12,723 | ||
| USA and Canada | 3,894 | 3,151 | ||
| Other | 293 | 405 | ||
| Total | 19,135 | 16,279 |