6 Notes to the Assets of the Balance Sheet
6.1 CASH AND CASH EQUIVALENTS
|in 000’ €||12/31/2015||12/31/2014|
|Bank Balances and Cash in Hand||90,928||32,238|
|Cash and Cash Equivalents||90,928||32,238|
The increase in cash and cash equivalents resulted mainly from the maturity of term deposits close to the balance sheet date that will be reinvested in 2016.
Restricted cash of € 0.6 million mainly consisted of rent deposits (2014: € 0.6 million).
6.2 FINANCIAL ASSETS/SECURITIES
As of December 31, 2015 and December 31, 2014, available-for-sale financial assets consisted of the items below.
|in 000’ €||Maturity||Cost||Gains||Losses||Market Value|
|December 31, 2015|
|Money Market Funds||daily||64,089||204||0||64,293|
|December 31, 2014|
|Money Market Funds||daily||105,961||142||64||106,039|
The Group’s gross unrealized gain from available-for-sale money market funds in the amount of € 203,738 as of December 31, 2015, the gross unrealized gain of € 141,640 and the unrealized loss of € 64,291 as of December 31, 2014 were recorded as a separate item within equity (revaluation reserve). In 2015, the Group recorded a net gain of € 32,539 from the disposal of financial assets contained in the income statement. This gain was previously recognized in stockholders’ equity (2014: € 710,518).
As of December 31, 2015 and December 31, 2014, bonds available-for-sale consisted of the items below.
|in 000’ €||
|December 31, 2015|
|December 31, 2014|
The Group’s gross unrealized gain from available-for-sale bonds in the amount of € 1,050, the gross unrealized loss of € 479,837 as of December 31, 2015 and the gross unrealized loss of € 83,650 as of December 31, 2014 were recognized as a separate item within equity (revaluation reserve). In 2015, the Group recorded a net loss of € 33,555 from the disposal of financial assets contained in the income statement that were previously recognized in stockholders’ equity (2014: net gain of € 17,460). The bonds were purchased at a price above their nominal value. The loss that resulted from the product-specific price development is offset by the bond’s interest income and results in a positive overall result.
As of December 31, 2015, the Company held current financial assets of € 94.6 million (December 31, 2014: € 157.0 million) and non-current financial assets of € 15.5 million (December 31, 2014: € 50.0 million), which were allocated to the “loans and receivables” category in accordance with IAS 39 “Financial Instruments”. These financial assets consisted mainly of term deposits with fixed or variable interest rates. The carrying amounts included interest receivables of € 1.2 million (December 31, 2014: € 0.4 million).
Interest income from financial assets under “loans and receivables” amounted to € 1,858,793 (2014: € 914,140) and was recorded in the finance result. The risk associated with these financial instruments primarily result from bank credit risks. There was no indication of impairment in the financial year 2015.
Further information on accounting for financial assets is provided in Item 2.8.1 of the Notes.
6.3 ACCOUNTS RECEIVABLE
All accounts receivable are non-interest bearing and generally have payment terms of between 30 and 45 days. As of December 31, 2015 and December 31, 2014, accounts receivable included unbilled receivables amounting to € 3,878,771 and € 3,649,124, respectively.
Based on the Management Board’s estimate, no net loss for allowances for doubtful receivables was recognized in profit and loss in 2015 and 2014.
6.4 OTHER RECEIVABLES
Under the Group’s hedging policy, highly probable cash flows and definite foreign-currency receivables collectable within a 24-month period are tested to determine if they should be hedged. MorphoSys began using foreign currency options and forwards to hedge its foreign exchange risk against US dollar receivables in 2003. These derivatives are recorded at their fair values under “other receivables”.
As of December 31, 2015, there were 15 unsettled forward rate agreements with terms ranging from one to 12 months (December 31, 2014: 24 unsettled forward rate agreements). The resulting unrealized gain of € 749,929 (December 31, 2014: € 44,506) and unrealized loss of € 24,984 (December 31, 2014: €0) as of December 31, 2015 were recorded in the finance result.
Impairments of € 0.2 million were taken into account for other receivables, as there is a doubt on the enforcement of the claims.
6.5 INCOME TAX RECEIVABLES, INVENTORIES, PREPAID EXPENSES AND OTHER CURRENT ASSETS
As of December 31, 2015, tax receivables amounted to € 2.7 million (December 31, 2014: € 2.8 million) and consisted of receivables due from tax authorities for value-added taxes payable in the amount of € 1.8 million (December 31, 2014: € 1.7 million) and receivables from capital gain taxes withheld and taxes for prior years in the amount of € 0.8 million (December 31, 2014: € 1.1 million).
Inventories amounting to € 0.4 million as of December 31, 2015 were stored at the Martinsried location and consisted of raw materials and supplies. As in the previous year, no inventories were carried at fair value less selling costs as of December 31, 2015.
As of December 31, 2014, inventories amounting to € 0.6 million were stored at the Martinsried location and consisted of raw materials and supplies.
As of December 31, 2015, prepaid expenses and other current assets mainly consisted of prepaid fees for external laboratory services of € 0.6 million (December 31, 2014: € 0.5 million), prepaid fees for sublicenses of € 0.3 million (December 31, 2014: € 0.2 million) and other prepayments amounting to € 0.5 million (December 31, 2014: € 0.5 million).
6.6 PROPERTY, PLANT AND EQUIPMENT
|in 000’ €||
|January 1, 2015||13,963||1,765||15,728|
|Additions from business combination||126||0||126|
|December 31, 2015||15,040||1,780||16,820|
|January 1, 2015||10,560||1,610||12,170|
|Depreciation Charge for the Year||1,497||45||1,542|
|Write-offs for the Year||25||0||25|
|December 31, 2015||11,691||1,655||13,346|
|January 1, 2015||3,403||155||3,558|
|December 31, 2015||3,349||125||3,474|
|January 1, 2014||12,161||1,867||14,028|
|December 31, 2014||13,963||1,765||15,728|
|January 1, 2014||10,173||1,687||11,860|
|Depreciation Charge for the Year||1,386||60||1,446|
|Write-offs for the Year||57||0||57|
|December 31, 2014||10,560||1,610||12,170|
|January 1, 2014||1,988||180||2,168|
|December 31, 2014||3,403||155||3,558|
Impairment of property, plant and equipment was immaterial in the 2015 financial year. In 2014, impairment of property, plant and equipment amounted to € 0.1 million and mainly related to laboratory equipment in the Partnered Discovery segment. The impairment occurred because an economic benefit is no longer expected from these assets.
No borrowing costs were capitalized during the reporting period. There were neither restrictions on retention of title nor property, plant and equipment pledged as security for liabilities. There were no material contractual commitments for the purchase of property, plant and equipment as of the reporting date.
Depreciation is included in the following line items of the income statement.
|in 000’ €||2015||2014|
|Research and Development||1,295||1,208|
|Research and Development (Write-off)||25||57|
|General and Administrative||247||238|
6.7 INTANGIBLE ASSETS
|in 000’ €||Patents||License Rights||
|January 1, 2015||15,743||21,896||28,254||5,180||7,352||78,425|
Additions from business
|December 31, 2015||16,064||23,896||60,960||5,744||11,041||117,705|
|January 1, 2015||8,755||20,553||0||3,138||0||32,446|
|Depreciation Charge for the Year||1,145||98||0||670||0||1,913|
|Write-offs for the Year||23||0||0||0||3,676||3,699|
|December 31, 2015||9,923||20,651||0||3,808||3,676||38,058|
|January 1, 2015||6,988||1,343||28,254||2,042||7,352||45,979|
|December 31, 2015||6,141||3,245||60,960||1,936||7,365||79,647|
|January 1, 2014||15,470||25,001||12,808||4,376||7,352||65,007|
|December 31, 2014||15,743||21,896||28,254||5,180||7,352||78,425|
|January 1, 2014||7,635||19,604||0||2,619||0||29,858|
|Depreciation Charge for the Year||1,120||824||0||744||0||2,688|
|Write-offs for the Year||0||4,045||0||16||0||4,061|
|December 31, 2014||8,755||20,553||0||3,138||0||32,446|
|January 1, 2014||7,835||5,397||12,808||1,757||7,352||35,149|
|December 31, 2014||6,988||1,343||28,254||2,042||7,352||45,979|
Impairment of patents and licenses was immaterial in the 2015 financial year. In 2014, impairment totaled € 4.1 million. Of this amount, € 2.1 million was recognized in the Proprietary Development segment and € 2.0 million in the Partnered Discovery segment. These impairments were incurred because these assets were no longer expected to generate economic benefits. Further detail information concerning the goodwill impairment can be taken from number 6.7.5 of these notes.
As of December 31, 2015 in-process research and development programs were subject to an impairment test as required by IAS 36. This test did not reveal any impairment.
Amortization is included in the following line items of the income statement.
|in 000’ €||2015||2014|
|Research and Development||1,806||2,562|
|Research and Development (Write-off)||3,699||4,058|
|General and Administrative||107||126|
General and Administrative
In the 2015 financial year, the carrying amount of patents declined by € 0.9 million from € 7.0 million to € 6.1 million. This was the result of additions amounting to € 0.3 million for patent applications, particularly for proprietary programs and technologies, which were mainly offset by straight-line amortization of € 1.1 million.
The carrying amount of licenses increased by € 1.9 million rising from € 1.3 million to € 3.2 million in 2015. Additions during the financial year included one-time payments totaling € 2.0 million for access to target molecules and technologies. Amortization was € 0.1 million.
6.7.3 IN-PROCESS R&D PROGRAMS
The carrying amount of in-process R&D programs increased from € 28.3 million to € 61.0 million in 2015. This increase was primarily the result of the preclinical programs purchased as part of the Lanthio Pharma B.V. acquisition and a milestone payment to Emergent. The MOR107 preclinical program (formerly known as LP2) obtained in the acquisition of Lanthio Pharma B.V. has been included in the proprietary portfolio of MorphoSys since May 2015.
In the 2015 financial year, additions to this line item totaled € 0.6 million. The carrying amount decreased by € 0.1 million from € 2.0 million in 2014 to € 1.9 million in 2015. Additions were offset by amortization of € 0.7 million.
As of September 30, 2015, goodwill of € 7.4 million from the 2010 acquisition of Sloning BioTechnology GmbH was subject to an impairment test as required by IAS 36. The recoverable amount of the cash-generating unit SlonomicsSlonomics: DNA engineering and protein library generation platform acquired by MorphoSys in 2010 technology, which is part of the Partnered Discovery segment, was determined on the basis of value-in-use calculations. The calculation showed that the recoverable amount was lower than the carrying amount of the cash-generating unit and resulted in a goodwill impairment of € 3.7 million. The cash-flow forecasts took into account the payments expected under existing contracts as well as the future free cash flows from the contribution of the Slonomics technology to partnered programs and was offset by expected personnel and administrative expenses. Cash-flow forecasts are based on a period of ten years because the Management Board believes that commercialization through licensing agreements, upfront payments, milestone payments, funded development services and royalties is only feasible by means of medium- to long-term contracts. For this reason, a planning horizon of ten years is considered appropriate for the value-in-use calculation. The comparably lower cash-flow forecasts are largely the result of weaker business expectations. The values of the underlying assumptions were determined using both internal (past experience) and external sources of information (market information). Based on the updated ten-year cash-flow forecast, the value-in-use was determined as follows: A beta factor of 1.2 (2014: 1.2), WACC of 12.7 % (2014: 11.5 %) and a perpetual growth rate of 1 % (2014: 1 %). A detailed sensitivity analysis was performed for the cash-flow components, the growth rate and the discount rate for calculating value-in-use. This analysis did not reveal any additional need for impairment. The values ascribed to the assumptions correspond to the Management Board’s forecasts for future development and are based on internal planning scenarios as well as external sources of information.
As of September 30, 2015, goodwill of € 3.7 million from the Lanthio Group acquisition on May 7, 2015 was tested for impairment. The recoverable amount of the cash-generating unit Lanthio Group, which is part of the Proprietary Development segment, was determined on the basis of valuein- use calculations. The value-in-use was higher than the carrying amount of the cash-generating unit. The cash-flow forecasts included planned cash inflows from the potential sale of compounds based on lanthipeptides expected to achieve market approval. These cash inflows are offset by expected operating expenses for compound development and clinical trials as well as sales and administrative expenses. The duration and likelihood of individual stages of the study were taken into consideration. Cash-flow forecasts are based on a period of 30 years because the Management Board believes that after the successful approval of compounds, the drugs that follow can generate free cash flows within that period of time. The values of the underlying assumptions were determined using both internal (past experience) and external sources of information (market information). On the basis of the updated cash-flow forecast, the value-in-use was determined as follows: A beta factor of 1.2 and WACC of 13.6 %. A detailed sensitivity analysis was also performed on the components of cash flow and discount rate. This analysis did not reveal any need for impairment. The values ascribed to the assumptions correspond to the Management Board’s forecasts for future development and are based on internal planning scenarios as well as external sources of information.
6.8 SHARES, AVAILABLE-FOR-SALE
Shares available-for-sale as of December 31, 2014 consisted of the 19.98 % interest in Dutch Lanthio Pharma B.V. On May 7, 2015, MorphoSys acquired all of the company’s outstanding shares. The business combination is accounted for according to IFRSIFRS: International Financial Reporting Standards; future EU-wide standards produced by the IASB 3 (see Item 4 of the Notes).
6.9 PREPAID EXPENSES AND OTHER ASSETS, NET OF CURRENT PORTION
This line item included the non-current portion of prepaid expenses and other assets. The Group has classified certain line items under other assets as “restricted cash” that are not available for use in the Group’s operations (see Items 2.8.1*, 6.1*, and 6.2* of the Notes). As of December 31, 2015 and December 31, 2014, the Group disposed of restricted cash in the amount of € 0.6 million for issued rent guarantees in each case and in the amount of € 0.2 million and € 0.3 million for convertible bonds granted to employees, respectively.
The table below shows the breakdown of this line item.
|in 000’ €||12/31/2015||12/31/2014|
Net of Current Portion
|Other Current Assets||882||868|