Commercial Development

MorphoSys was able to further strengthen its pipeline in both business segments – Partnered Discovery and Proprietary Development – in the past financial year. At the end of 2012, MorphoSys announced the sale of substantially all of the third business unit, AbD Serotec, to Bio-Rad. The sale of substantially all of the AbD Serotec segment enables MorphoSys to concentrate on its core business, the development of therapeutic antibodies and technologies for drug development.

PROPRIETARY DEVELOPMENT

Through the development advances achieved in its own programs in 2012, MorphoSys created the basis for future outlicensing contracts with pharmaceutical partners.

In September 2012 MorphoSys published positive results with respect to the safety and efficacy of its own antibody MOR103 from a phase 1b/2a study on patients with rheumatoid arthritis. The results underscore the compound’s potential to become an important drug in a field with a high therapeutic need.

In November 2012, the Company’s own most advanced compound against cancer, MOR208, also met the primary and secondary goals of a phase 1/2a study in patients with chronic lymphocytic leukemia or small lymphatic lymphoma. MOR208 was in-licensed from US fi rm Xencor in 2010. After the phase 1/2a study, MorphoSys will assume sole responsibility and bear the costs for further clinical development.

In 2012, the activities in the Proprietary Development segment contributed to Group turnover in the form of payments from Novartis for both pre-development programs and compensatory payments for relinquishing options on jointly pursued development programs. A significant increase in turnover can only be expected with the conclusion of the first out-licensing contracts for the Company’s proprietary projects.

PARTNERED DISCOVERY

The new contractual agreements reached in 2012 meant the partnership business was strengthened and rendered more flexible for the purposes of expanding activities.

The strategic cooperation with Novartis was decisively extended at the end of 2012. The long-standing collaboration will also profit from MorphoSys’s new technology platform Ylanthia, which should accelerate the development of new therapeutic antibodies and further improve the alliance’s productivity. At the same time, MorphoSys secured the opportunity to conclude further licensing agreements with commercial partners based on Ylanthia  technology. The contract period was retained up to 2017, with an option for Novartis to extend it by another two years.

In February 2012, MorphoSys announced the start of an alliance in the field of protein optimization. In the process, the Company is delivering multiple gene libraries based on the Slonomics  platform to an undisclosed biopharmaceutical group. Over the three-year duration of the contract, MorphoSys will receive guaranteed annual research services for the preparation of the libraries as well as additional development-dependent milestone payments and royalties for products resulting from the collaboration. This agreement was the third deal based on the Slonomics platform and thus increased the return on investment for the technology acquired in the Sloning takeover in 2010.

In 2012, the Partnered Discovery division was again a mainstay of revenue for the Group.

ABD SEROTEC

MorphoSys was able to further strengthen the diagnostics business of its AbD Serotec division in the reporting year. Among other things, a new product line of anti-drug antibodies was introduced that is specially aimed at the needs of contract research organizations and pharmaceutical groups. Further, MorphoSys was able to sign a licensing agreement with the diagnostics group DiaSorin S.p.A. for two HuCAL  antibodies, which will be implemented as recombinant controls for two tests in the field of infectious diseases that are already on the market.

MorphoSys agreed to sell substantially all of its segment for research- related and diagnostic antibodies AbD Serotec to Bio-Rad for strategic reasons.

MorphoSys AG and a subsidiary of Bio-Rad Laboratories Inc., Hercules/California, USA (Bio-Rad Inc.) agreed upon the acquisition of all shares of MorphoSys UK Ltd., Oxford, Great Britain (MorphoSys UK) on 16 December 2012 with the notarial authentication of 17 December 2012. The agreement comprised all shares in both of MorphoSys UK’s subsidiaries. On 16 December 2012, at the time of signing, MorphoSys UK held all of the shares in MorphoSys AbD GmbH, Düsseldorf, Germany and MorphoSys US Inc., Raleigh, USA (MorphoSys US). Additionally, MorphoSys AG and a further subsidiary of Bio-Rad Laboratories Inc. agreed on 16 December 2012 upon the takeover of individual assets (trademarks) of the segment AbD Serotec and a nonexclusive license regarding the use of the HuCAL-Technology for research reagents  and diagnostic purposes. On 16 December 2012, after the agreed takeover of the shares in MorphoSys UK by the subsidiary of Bio-Rad Inc., all assets and liabilities attributed to the segment AbD-Serotec of MorphoSys AG were transferred to MorphoSys AbD GmbH. Bio-Rad Inc., Bio-Rad Inc.’s subsidiaries including MorphoSys AbD GmbH are hereinafter referred to as „acquirer“ or „Bio-Rad“. The shares in Poole Real Estate Ltd., Poole, GB, were not sold by MorphoSys AG. The completion of the transaction was conditional on the fulfi llment of certain obligations. Substantially all of the segment AbD Serotec was transferred at the closing date (10 January 2013) due to the fulfi llment of the previously defined obligations. Hence, at 31 December 2012 substantially all of the segment AbD Serotec was classified as discontinued operation in accordance to IFRS 5, hereinafter referred to as “discontinued operation”. Assets, liabilities, financial position and profit or loss are shown in accordance with IFRS 5 as well. The remaining part of AbD Serotec, which was not subject to the transaction, was classified as “continued operation”, along with the segments Partnered Discovery and Proprietary Development at the balance sheet date. The presentation of the net assets, financial position and results of operations of the MorphoSys Group follows the basic concept of IFRS 5 in this respect.

Bio-Rad, as an international producer and provider of life science research tools and diagnostic products acquired substantially all of MorphoSys’s discontinued operation AbD Serotec for € 53 million in total. The amount comprises the purchase price, a compensation for cash reserves accounting for € 5.3 million as well as a license fee. Due to the sale of the non-exclusive license, MorphoSys will generate additional sales in 2013 and expects impact also in the following years. Further information about the financial results of the transaction is described in the financial report.