MorphoSys 1st Interim Report 2010

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 three main operating segments:

Partnered Discovery

MorphoSys possesses one of the leading technologies for the generation of human antibody therapeutics. The Company commercially exploits this technology via partnerships with multiple pharmaceutical and biotechnology companies. All activities related to these collaborations as well as technology development are reflected in this segment.

Proprietary Development

This segment involves all activities relating to proprietary therapeutic antibody development. Presently, this includes the Company’s two lead compounds in its proprietary product portfolio, MOR103 and MOR202, as well as four programs in the discovery phase and one pre-development program with Novartis. Proprietary compounds, once developed to a stage where clinical proof of concept is achieved, can then be outlicensed to third parties.

AbD Serotec

The AbD Serotec segment leverages MorphoSys’s core technological capabilities in the design and manufacture of antibodies for research and diagnostic purposes. It commercializes the HuCAL technology, focusing on generation of bespoke research antibodies for its customers. The segment also generates sales from catalog antibodies and bulk/industrial production of antibodies.

ENTITY-WIDE DISCLOSURES

In presenting entity-wide disclosures, segment revenues are based on the geographical location of the customers and segment assets on the geographical location of the assets.

For services performed by the AbD Serotec segment for the Partnered Discovery segment, a revenue sharing agreement was established in 2007. The compensatory fee to the AbD Serotec segment amounted to € 0.2 million for the first three months of 2010.

The following table shows the split of the Company’s consolidated revenues by geographical market: