Financial Analysis
Revenues
Compared to the same period of the previous year, Group revenues increased by 8% to € 20.6 million in Q1 of 2010 (Q1 2009: € 19.1 million). This increase mainly resulted from higher levels of funded research and licensing fees in the Partnered Discovery segment as well as from stronger sales in the AbD Serotec segment. Revenues arising from the Partnered Discovery and Proprietary Development segments accounted for 74% or € 15.3 million (Q1 2009: € 14.5 million) of total segment revenues while the AbD Serotec segment generated 26% (€ 5.5 million) of the total segment revenues (Q1 2009: € 4.9 million).
Geographically, 15% or € 3.0 million of MorphoSys’s commercial revenues were generated with biotechnology and pharmaceutical companies or non-profit organizations located in North America and 85% or € 17.6 million with companies located mainly in Europe and Asia. This compares to 20% and 80%, respectively, in the same period of the prior year.
Partnered Discovery and Proprietary Development Segments
Segment revenues arising from the Partnered Discovery segment comprised € 13.7 million in funded research and licensing fees (Q1 2009: € 11.5 million) as well as € 1.3 million success-based payments (Q1 2009: € 2.8 million), representing 8% of total Partnered Discovery and Proprietary Development revenues. Segment revenues arising from the Proprietary Development segment included € 0.3 million in funded research (Q1 2009: € 0.3 million). Approximately 93% of Partnered Discovery and Proprietary Development revenues and 69% of total revenues arose from the Company’s three largest alliances with Novartis, Daiichi Sankyo and Merck (Q1 2009: Novartis, Daiichi Sankyo and Merck, 87% and 65%, respectively).
Assuming constant foreign exchange rates at the average rate of Q1 2009, segment revenues in the Partnered Discovery and Proprietary Development segments would have totaled € 15.4 million.
Revenue Development by Segment (in € million)*
* Differences due to rounding
AbD Serotec Segment
Compared to the same period of the previous year, AbD Serotec segment’s revenues increased by 12%, or € 0.6 million, to € 5.5 million in 2010 (Q1 2009: € 4.9 million). Assuming constant foreign exchange rates at the average rate for Q1 2009, revenues in the AbD Serotec segment would have remained unchanged.
As of March 31, 2010, orders in the amount of € 1.0 million were classified as backorders in the segment (March 31, 2009: € 2.0 million).
Operating Expenses
Compared to the first three months of 2009, total operating expenses increased by approximately 7% to € 15.9 million in Q1 2010 (Q1 2009: € 14.9 million). The change in operating expenses of € 1.0 million was mainly impacted by research and development (R&D) expenses increasing by 9% or € 0.8 million and sales, general and administrative (S, G&A) expenses slightly increasing from € 4.8 million to € 4.9 million.
Operating expenses increased by 2% to € 5.0 million (Q1 2009: € 4.9 million) in the Partnered Discovery segment and increased by 12% to € 4.6 million (Q1 2009: € 4.1 million) in the Proprietary Development segment. In the AbD Serotec segment, operating expenses increased by 7% to € 4.6 million (Q1 2009: € 4.3 million) and would have amounted to € 4.5 million under the assumption of constant foreign exchange rates at the average rate of Q1 2009.
Stock-based compensation expenses are embedded in COGS, S, G&A and R&D expenses. Stock-based compensation for the first three months of 2010 amounted to € 0.4 million (Q1 2009: € 0.3 million) and is a non-cash charge.
Cost of Goods Sold
COGS is composed of the AbD Serotec segment’s cost of goods sold in the first three months of 2010 and – compared to the same period of the prior year – remained unchanged at € 1.7 million.
Research and Development Expenses
In the first three months of 2010, expenses for research and development increased by € 0.8 million to € 9.3 million (Q1 2009: € 8.5 million). This was mainly due to higher personnel costs (Q1 2010: € 3.9 million; Q1 2009: € 3.3 million) as well as increased material costs (Q1 2010: € 0.8 million; Q1 2009: € 0.4 million). In the first three months of 2010, the Company incurred costs for proprietary product development (excluding allocations for segment purposes) in the amount of € 3.8 million (Q1 2009: € 3.7 million) as well as costs for technology development in the amount of € 0.5 million (Q1 2009: € 0.1 million) which is accounted for in the Partnered Discovery segment.
Sales, General and Administrative Expenses
Compared to the same period of the previous year, sales, general and administrative expenses slightly increased by € 0.1 million to € 4.9 million (Q1 2009: € 4.8 million).
Development of Operating Expenses (in € million)
Non-operating Items
For the first three months of 2010, non-operating items mainly included other expenses of € 0.2 million (Q1 2009: € 0.1 million) and other income of € 0.1 million (Q1 2009: € 0.1 million).
Taxes
For the first three months of 2010, the Company reported income tax expenses in the amount of € 1.4 million (Q1 2009: € 1.6 million), which mainly consisted of current taxes.
Operating Profit / Net Profit
Group operating profit for the first three months of 2010 amounted to € 4.7 million (Q1 2009: € 4.2 million). Earnings before interest and taxes (EBIT) amounted to € 4.5 million, compared to an EBIT of € 5.0 million in the first three months of the previous year. The Partnered Discovery and Proprietary Development segments showed an operating profit of € 10.0 million (Q1 2009: € 9.3 million) and an operating loss of € 4.3 million (Q1 2009: operating loss of € 3.8 million), respectively. In the AbD Serotec segment, operating profit significantly increased to € 0.9 million (Q1 2009: € 0.6 million) and would have amounted to € 1.0 million under the assumption of constant foreign exchange rates using the first-quarter 2009 average rates of the previous year.
A net profit after taxes of € 3.2 million was achieved in the first three months of 2010, compared to a net profit after taxes of € 3.5 million in the same period of the prior year. The resulting basic net profit per share for the first three months of 2010 amounted to € 0.14 (Q1 2009: € 0.16).
Liquidity / Cash Flows
Net cash inflow from operations in the first three months of 2010 amounted to € 13.1 million (Q1 2009: cash outflow of € 1.7 million). Investing activities resulted in a cash outflow of € 9.0 million (Q1 2009: cash inflow of € 7.1 million) whereas financing activities resulted in a cash inflow of € 0.1 million (Q1 2009: cash outflow of € 0.1 million).
As of March 31, 2010, the Company held € 147.3 million in cash, cash equivalents and available-for-sale financial assets, compared to a year-end 2009 balance of € 135.1 million.
Assets
Total assets increased by € 5.0 million to € 211.1 million as of March 31, 2010, compared to € 206.1 million as of December 31, 2009. Current assets increased by € 5.4 million mainly as a result of an increase in both marketable securities (€ 8.1 million) and cash and cash equivalents (€ 4.0 million), partly offset by a decrease in accounts receivable by € 5.9 million.
Compared to December 31, 2009, non-current assets decreased by € 0.4 million, mainly as a consequence of the amortization of licenses and patents.
Liabilities
In the first three months of 2010, current liabilities increased from € 24.3 million as of December 31, 2009, to € 26.5 million as of March 31, 2010, arising mainly from an increase in current deferred revenue (€ 5.2 million), which was partly offset by a decrease in accounts payable of € 4.1 million.
Non-current liabilities decreased by € 1.2 million to € 6.7 million in the first three months of 2010, which was mainly impacted by a decrease in non-current deferred revenue.
Equity
Total stockholders’ equity amounted to € 177.9 million as of March 31, 2010, compared to € 173.9 million as of December 31, 2009.
As of March 31, 2010, the total number of shares issued amounted to 22,677,078 of which 22,597,182 were outstanding, compared to 22,660,557 and 22,580,661 as of December 31, 2009, respectively.
The increase of shares outstanding by 16,521 arose from exercised options issued to employees.
Capital Expenditure
MorphoSys’s investment in property, plant and equipment amounted to € 0.6 million for the three-month period ended March 31, 2010, compared to € 0.2 million in the same period of the prior year. Depreciation of property, plant and equipment for Q1 of 2010 accounted for € 0.5 million compared to € 0.4 million in the first three months of 2009.
During the first three months of 2010, the Company invested € 0.4 million in intangible assets (Q1 2009: € 0.1 million). Amortization of intangibles amounted to € 0.9 million and remained unchanged in comparison to the first three months of 2009.