Dear Shareholders,

At the occasion of the year-end press conference in February, MorphoSys confirmed its commitment to accelerate in-house drug development over the course of 2010. The Company will invest € 26 million to € 29 million into this important future value driver in this year, while remaining profitable. In addition to conducting the phase 1b/2a trial in rheumatoid arthritis and preparing for phase 2 testing of our lead compound MOR103 in a second indication, MorphoSys will further accelerate and expand its proprietary development activities during the next 12 months. We aim to file a clinical trial application for our cancer compound MOR202 in the final quarter of the year. The Company also plans to add up to four new proprietary programs including both fully owned and co-development opportunities. In that vein, MorphoSys has selected two new target molecules for yet to be started internal programs, namely MOR105 and MOR206.

Additionally, in its Partnered Discovery segment, MorphoSys was able to expand its research alliance with Shionogi. Following a six-month beta test period to compare HuCAL PLATINUM, the latest and most powerful MorphoSys antibody library, with its predecessor HuCAL GOLD, Shionogi decided to implement HuCAL PLATINUM. Their decision to upgrade speaks clearly to the quality and the success of our internal technology development work in recent years.

The AbD Serotec segment has made preparations to expand its sales organization and support growth in continental and eastern Europe. Additionally, the segment has demonstrated significant progress using the HuCAL technology to generate custom-made monoclonal antibodies for research and diagnostic use. The increased success rates resulted, again, from implementing our latest technology platform HuCAL PLATINUM, as well as through ongoing process refinements and increasing degree of automation.

On a Group level, revenues for the first three months ended March 31, 2010 were € 20.6 million, an 8% increase over the same period in the previous year. Operating profits came in at € 4.7 million, and it is anticipated that expenses for proprietary product development will increase in the next three quarters of the year.

Thank you for your continued interest in and support of MorphoSys.

Sincerely yours,

Dave Lemus
Chief Financial Officer
MorphoSys AG