4 Notes to the Income Statement
In 2016, revenues consisted of license fees and milestone payments totaling € 28.4 million (2015: € 85.4 million). All revenues were generated by the Partnered Discovery segment (2015: € 59.2 million in the Proprietary Development segment and € 26.2 million in the Partnered Discovery segment).
Of the service fees totaling € 21.4 million (2015: € 20.8 million), € 0.6 million (2015: € 0.7 million) were attributable to the Proprietary Development segment and € 20.8 million (2015: € 20.1 million) to the Partnered Discovery segment.
4.2 OPERATING EXPENSES
4.2.1 RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased compared to the prior year due to substantial investments in proprietary product development as well as the partial impairment of MOR209/ES414 (see also Item 5.7.3 of these notes) and consist of the items below.
|in million €||2016||2015||2014||2013||2012|
|R&D Expenses on behalf of Partners||17,2||22,1||19,5||17,5||16,0|
|Proprietary Development Expenses||77,1||54,1||33,6||27,5||18,1|
|Technology Development Expenses||1,4||2,5||2,9||4,2||3,6|
4.2.2 GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses include the items below.
|in 000’ €||2016||2015|
|Other Operating Expenses||978||913|
|Amortization of Intangible Assets||111||109|
Depreciation and Other Costs
4.2.3 PERSONNEL EXPENSES
Personnel expenses include the items below.
|in 000’ €||2016||2015|
|Wages and Salaries||27,146||26,559|
|Social Security Contributions||4,570||4,271|
|Temporary Staff (External)||1,061||610|
In 2016 and 2015, other personnel expenses consisted mainly of recruitment costs.
The average number of employees in the 2016 financial year was 354 (2015: 356). Of the 345 employees on December 31, 2016 (December 31, 2015: 365), 289 were active in research and development (December 31, 2015: 305) and 56 were engaged in general and administrative functions (December 31, 2015: 60 employees). As of December 31, 2016, there were 135 employees in the Proprietary Development segment and 156 employees in the Partnered Discovery segment; 54 employees were not allocated to a segment (December 31, 2015: 132 in the Proprietary Development segment, 176 employees in the Partnered Discovery segment and 57 employees were unallocated). Costs for defined-contribution plans amounted to € 0.5 million in 2016 (2015: € 0.5 million).
4.3 OTHER INCOME AND EXPENSES, FINANCE INCOME AND FINANCE EXPENSES
The line items “other income and expenses” and “finance income and finance expenses” include the following items.
|in 000’ €||2016||2015|
|Gain from Revaluation of Participations||0||4,495|
|Gain on Exchange||192||306|
|Appreciation of Accounts Receivable Previously Deemed Impaired||15||0|
|Loss on Exchange||(400)||(460)|
|Impairment of Other Receivables||(7)||(214)|
|Gain on Available-for-sale Financial Assets and Bonds||294||94|
|Gain on Derivatives||74||1,826|
|Loss on Derivatives||(44)||(287)|
|Loss on Available-for-sale Financial Assets and Bonds||(1,209)||(95)|
MorphoSys AG and its German subsidiary Sloning BioTechnology GmbH are subject to corporate taxes, the solidarity surcharge and trade taxes. The Company’s corporate tax rate of 15.0 % and the solidarity surcharge of 5.5 % remained unchanged. The effective trade tax rate of increased by 0.35 % from 10.50 % to 10.85 %.
The Dutch entities Lanthio Pharma B.V. and LanthioPep B.V. are subject to an income tax rate of 25 % on annual income exceeding € 200,000; annual income below € 200,000 is subject to a tax rate of 20 %. Subject to certain conditions, a tax rate of 5 % may be applicable under what is known as the “Innovation Box”.
Income taxes for the past financial year consist of the items listed below.
|in 000’ €||2016||2015|
|Current Tax Income/(Expense) (Thereof Regarding Prior Years: k€ (60); 2015: k€ 3)||45||(4,182)|
|Deferred Tax Expenses||(564)||(1,543)|
|Total Income Tax Expense||(519)||(5,725)|
|Total Amount of Current Taxes Resulting from Entries Directly Recognized in Equity||0||(1)|
|Total Amount of Current Taxes Resulting from Entries Directly Recognized in Other Comprehensive Income||(82)||38|
|Total Amount of Deferred Taxes Resulting from Entries Directly Recognized in Other Comprehensive Income||(112)||35|
|Total Amount of Tax-Effects Resulting from Entries Directly Recognized in Equity or Other Comprehensive Income||(194)||72|
The following table reconciles the expected income tax expense with the actual income tax expense as presented in the consolidated financial statements. The combined income tax rate of 26.675 % in the 2016 financial year (2015: 26.33 %) was applied to profit before taxes to calculate the statutory income tax expense. This rate consisted of a corporate income tax of 15.0 %, a solidarity surcharge of 5.5 % on the corporate tax and an average trade tax of 10.85 % applicable to the Group.
|in 000’ €||2016||2015|
|Profit Before Income Taxes||(59,864)||20,626|
|Expected Tax Rate||26.675 %||26.330 %|
|Expected Income Tax||15,969||(5,431)|
|Tax Effects Resulting from:|
|Differences in Profit and Loss Neutral Adjustments||812||1,689|
|Non-Recognition of Deferred Tax Assets on Temporary Differences||(3,766)||0|
|Non-Recognition of Deferred Tax Assets on Current Year Tax Losses||(13,354)||(684)|
|Tax Rate Differences to Local Tax Rates||(46)||(28)|
|Effect of Tax Rate Changes||0||(4)|
|Prior Year Taxes||0||(3)|
|Actual Income Tax||(519)||(5,725)|
As of December 31, 2016, neither deferred tax assets in the amount of € 12.8 million on tax loss carryforwards nor deferred tax assets on temporary differences in the amount of € 3.8 million were recognized by MorphoSys AG due to continued substantial investments in proprietary product development and related business development.
As of December 31, 2016, deferred tax assets in the amount of € 0.5 million were recognized on tax loss carryforwards due to the expected profit of Sloning BioTechnology GmbH on financial years 2017 through 2021 (December 31, 2015: € 1.2 million). The tax loss carryforwards may be carried forward indefinitely and in unlimited amounts. Since 2004, German tax law restricts the offsetting of taxable income against existing tax loss carryforwards up to an amount of € 1.0 million plus 60 % of taxable income exceeding € 1.0 million.
As of December 31, 2016, deferred tax assets in the amount of € 2.5 million (December 31, 2015: € 2.1 million) on tax loss carryforwards were not recognized for Lanthio Group due to continued substantial investments in proprietary product development and related business development.
Deferred tax assets and liabilities are composed as follows.
|Changes in Deferred Taxes in 2016|
|in 000’ €, as of December 31||Recognized in Profit and Loss Income/(Expense)||Recognized in Other Comprehensive Income|
|Receivables and Other Assets||192||0|
|Prepaid Expenses and Deferred Charges||1||0|
|Short-term Securities Investments||0||(148)|
As of December 31, 2016, temporary differences existed in connection with investments in subsidiaries (known as outside basis differences) of € 0.3 million for which no deferred tax liabilities were recognized.
4.5 EARNINGS PER SHARE
Basic earnings per share is computed by dividing the 2016 consolidated net loss of € 60,382,776 (2015: consolidated net profit of € 14,900,768) by the weighted-average number of ordinary shares outstanding during the respective year (2016: 26,443,415; 2015: 26,019,855).
The table below shows the calculation of the weighted-average number of ordinary shares.
|Shares Issued on January 1||26,537,682||26,456,834|
|Effect of Treasury Shares Held on January 1||(434,670)||(450,890)|
|Effect of Repurchase of Treasury Stock||(34,812)||(63,054)|
|Effect of Share Issuance||327,761||0|
|Effect of Transfer of Treasury Stock to Management Board and Senior Management Group||0||60,894|
|Effect of Transfer of Treasury Stock / Shares Issued in January||0||975|
|Effect of Transfer of Treasury Stock / Shares Issued in February||0||2,650|
|Effect of Transfer of Treasury Stock / Shares Issued in March||0||1,578|
|Effect of Transfer of Treasury Stock / Shares Issued in April||12,638||0|
|Effect of Transfer of Treasury Stock / Shares Issued in May||10,039||0|
|Effect of Transfer of Treasury Stock / Shares Issued in June||17,749||3,875|
|Effect of Transfer of Treasury Stock / Shares Issued in July||0||3,208|
|Effect of Transfer of Treasury Stock / Shares Issued in August||6,463||1,021|
|Effect of Transfer of Treasury Stock / Shares Issued in September||490||0|
|Effect of Transfer of Treasury Stock / Shares Issued in October||76||0|
|Effect of Transfer of Treasury Stock / Shares Issued in November||0||629|
|Effect of Transfer of Treasury Stock / Shares Issued in December||0||2,135|
|Weighted-average Number of Shares of Common Stock||26,443,415||26,019,855|
Diluted earnings (loss) per share is calculated by taking into account the potential increase in the Group’s ordinary shares as the result of granted convertible bonds.
The following table shows the reconciliation of basic earnings per share to diluted earnings per share (in €, except for disclosures per share).
|Consolidated Net Profit/(Loss)||(60,382,776)||14,900,768|
|Weighted-average Shares Used for Basic EPS||26,443,415||26,019,855|
|Dilutive Shares Arising from Convertible Bonds||99,764||224,437|
|Earnings per Share (in €)|