3 Segment Reporting
MorphoSys Group applies IFRSIFRS: International Financial Reporting Standards; future EU-wide standards produced by the IASB 8 “Segment Reporting”. An operating segment is defined as a division of an entity that engages in business activities from which it can earn revenues and incur expenses and 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 provided for the Group’s operating segments based on the Group’s management and internal reporting structures. The segment results and segment assets include items that can be either directly attributed to the individual segment or allocated to the segments on a reasonable basis.
The Management Board evaluates a segment’s economic success using selected key figures so that all income and expenses are included. Operating earnings before interest and taxes, or EBIT, is the key benchmark for measuring and evaluating the operating results. The EBIT margin reflects the ratio of EBIT to revenues.
The Group consists of the following operating segments.
3.1 PROPRIETARY DEVELOPMENT
This segment comprises all activities related to the proprietary development of therapeutic antibodies and peptides. The activities of this segment currently comprise 14 antibodies and peptides in total, including the clinical development of the proprietary programs MOR208, MOR209/ES414 and MOR202. The MOR202 cooperation with Celgene was terminated as of March 26, 2015. MOR202 is continued by MorphoSys. The proprietary program MOR103, which is also included in this segment, was out-licensed to GSK with all activities now conducted by GSK. MorphoSys is also pursuing other programs that are either at an early stage of proprietary development or fall under co-development agreements. This includes since May 2015 the MOR107 preclinical program (formerly LP2) resulting from the acquisition of Lanthio Pharma B.V. The program MOR106, a cooperation with the partner Galapagos, is also in pre-clinical development. A further eight programs are in the pre-clinical search.
3.2 PARTNERED DISCOVERY
MorphoSys possesses one of the leading technologies for generating therapeutics based on human antibodies. The Group markets this technology commercially through its partnerships with numerous pharmaceutical and biotechnology companies. The Partnered Discovery segment encompasses all operating activities relating to these commercial agreements and most of the Company’s technological development.
3.3 CROSS-SEGMENT DISCLOSURE
The information on segment assets is based on the assets’ respective locations.
|Proprietary Development||Partnered Discovery||Unallocated||Group|
For the 12-month
31 December (in 000’s €)
|Other Operating Expenses||54,057||33,535||25,918||23,041||13,753||13,533||93,728||70,109|
|Profit before Taxes||10,723||(18,389)||20,369||25,918||(10,467)||(11,838)||20,625||(4,309)|
|Total Segment Assets||76,142||36,279||29,109||43,234||294,828||346,965||400,079||426,478|
|Total Segment Liabilities and Equity||24,012||65,757||5,950||6,821||370,117||353,900||400,079||426,478|
|Depreciation and Amortization||858||1,149||2,243||2,621||354||364||3,455||4,134|
The segment result is defined as a segment’s revenue less the segment’s operating expenses. In the 2015 financial year, impairments totaling € 3.7 million were recognized in the Partnered Discovery segment (2014: impairments of € 2.1 million were attributable to the Proprietary Development segment and € 2.0 million to the Partnered Discovery segment).
The Group’s key customers are allocated to the Partnered Discovery segment and Proprietary Development segment. As of December 31, 2015, the single most important customer represented accounts receivables of a carrying amount of € 8.3 million (December 31, 2014: € 9.3 million). Three of the Group’s individual customers contributed € 59.3 million, € 41.5 million and € 1.9 million to total revenues in 2015, respectively. The largest customer was allocated to the Proprietary Development segment and the other two customers to the Partnered Discovery segment. In 2014, three customers mainly assigned to the Partnered Discovery segment accounted for € 43.2 million, € 13.5 million and € 2.0 million of the Group’s total revenues.
The following overview shows the Group’s regional distribution of revenue.
|in 000’ €||2015||2014|
|Europe and Asia||41,800||44,628|
|USA and Canada||62,240||18,617|
A total of € 67.5 million (December 31, 2014: € 102.3 million) and € 32.1 million (December 31, 2014: € 0) of the Group’s non-current assets, excluding deferred tax assets, are located in Germany and the Netherlands, respectively. The Group’s total investments of € 8.7 million (December 31, 2014: € 20.5 million) were made in Germany, except for € 0.1 million (December 31, 2014: € 0), which were made in the Netherlands. In accordance with internal definitions, investments only include additions to property, plant and equipment as well as intangible assets which are not related to business combinations.