4 Business Combinations

On May 7, 2015, MorphoSys acquired all outstanding shares of the Dutch biopharmaceutical company Lanthio Pharma B.V. for a one-time payment of € 20.0 million. Since this date, Lanthio Pharma B.V.’s activities have been fully included in MorphoSys’s consolidated financial statements. Prior to the acquisition, MorphoSys held 19.98 % of Lanthio Pharma B.V. The transaction added Lanthio Pharma’s leading LP2 program – a novel lanthipeptide currently in development for diabetic nephropathy and possibly other fibrotic diseases – to MorphoSys’s growing proprietary portfolio.

In accordance with IFRSIFRS: International Financial Reporting Standards; future EU-wide standards produced by the IASB 3, this business combination is accounted for according to the acquisition method under which the acquired identifiable assets and liabilities are recognized at their fair value as of the acquisition date. The positive difference between the business combination’s acquisition costs and the share in the net fair value of the assets, liabilities and contingent liabilities identified during the acquisition is separately recognized as goodwill and allocated to the respective cash-generating unit.

The fair value of the acquired receivables was € 0.5 million. This amount corresponded to the gross amount of the receivables.

In the period from May 7, 2015 to December 31, 2015, the acquired company contributed a net loss of € 2.2 million to the Group’s net profit. Group revenues were not affected by the acquisition.

Had the acquisition occurred on January 1, 2015, management estimates that the Group’s net profit as of December 31, 2015, would have amounted to € 14.1 million.

The cash consideration paid for all outstanding shares was € 20,000,000. Furthermore, the conversion right included in the loan (€ 0.7 million) was exercised in exchange for shares in the company. As a result, the share in the company temporarily increased to 25.63 %.

The earnings effect resulting from the measurement of the initial interest in Lanthio Pharma B.V. at fair value amounted to € 4.5 million and was recognized in “other operating income”.

As of May 7, 2015, the acquired and identifiable assets and liabilities resulting from the acquisition included the following items:

in 000’ € Fair value
Cash and Cash Equivalents 1,830
Trade and Other Receivables 537
Prepaid Expenses and Other Current Assets 144
Property, Plant and Equipment 127
In-process R&D Programs 28,211
Software 1
Deferred Tax Asset 124
Other Non-current Assets 29
Accounts Payable and Accrued Expenses and Provisions (752)
Deferred Tax Liabilities (7,047)
Fair Value of Net Assets and Liabilities 23,204
Goodwill on Acquisition 3,689
Fair Value of Investment (25.63 %) 6,893
Consideration Paid 20,000
Cash (acquired) (1,830)
Net Cash Outflow 18,170

The following amount of goodwill was recognized as a result of the acquisition:

Consideration Paid 20,000
Fair Value of Investment (25.63 %) 6,893
Fair Value of Identifiable Net Assets and Liabilities (23,204)
Goodwill 3,689

Goodwill is primarily attributable to synergy effects expected from the entities’ integration into the Group’s Proprietary Development segment and partially attributable to the know-how of the employees acquired.

The Company incurred transaction-related costs of € 0.2 million that mainly related to fees for external legal advice, valuations in the context of the purchase price allocation and notary costs. All transaction-related costs are included in the consolidated income statement under “general and administrative expenses”.

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