Shares and the Capital Market

The MorphoSys AG share price started the reporting year at € 57.65. Shortly after the year began, the pharmaceutical and biotechnology shares experienced massive downturns with the NASDAQ Biotechnology Index falling as much as 28 %. MorphoSys shares suffered disproportionately from this negative development and fell to their first low for the year in February with a drop of almost 40 %. The shares tried to recover as the year progressed but remained volatile due to the industry’s negative news flow. Novartis’s announcement of disappointing results from a partner phase 2b/3 RESILIENT study with bimagrumab also hurt the MorphoSys share price. The shares began to regain strength with the announcement of positive phase 3 trial results with guselkumab and the corresponding regulatory approval submission by partner Janssen in the fourth quarter. A successful capital increase placed with selected institutional investors in November confirmed the renewed confidence in MorphoSys. The shares closed the financial year at € 48.75 per share and a market capitalization of € 1.42 billion.

Although MorphoSys shares declined 15 % for the year, their performance was still within the benchmark range. While the TecDAX fell only 1 % for the year, the NASDAQ Biotechnology Index experienced a sharp decline of 22 %. Sentiment remained poor following some setbacks in major indications, such as Alzheimer’s disease, and in new technologies, such as CAR-T, and due to the ongoing debate on healthcare prices in the US.

09 Figure Performance of the MorphoSys Share in 2016
(January 1, 2016 = 100%)

10 Figure Performance of the MorphoSys Share in 2012 - 2016
(January 1, 2012 = 100%)

Stock Market Development

Stock markets also began the year 2016 with heavy losses, but the year as a whole saw fewer disruptions than in 2015. The surprising Brexit decision and the outcome of the US presidential election caused uncertainty, but have not led to any lasting market volatility. After getting off to a weak start, Germany’s leading DAX index gained 7 % for the year accompanied by high volatility. Low interest rates continued to provide support in a market with little positive momentum. The US Dow Jones Index, in contrast, after performing poorly in 2015, regained its former strength and climbed even higher following the presidential election.

Investments in the biotechnology sector are generally of a long-term nature. The lack of a solid framework and the loss of faith in the sector in 2016 caused investors to turn increasingly to short-term investments such as futures and index certificates. MorphoSys continued to expand its investor relations activities during the year, focusing its efforts once again on Europe and the United States. The greatest understanding and interest in investing in biotechnology companies continues to be in the United States.

Liquidity and Index Membership

The average daily trading volume in MorphoSys shares for all of the regulated market’s trading platforms combined fell 35 % year-on-year to € 9.7 million (2015: € 14.9 million). The difficult trading year for biotechnology shares significantly discouraged investors from buying shares. The trading volume in shares traded on the TecDAX, the index for the 30 largest technology stocks on the Frankfurt Stock Exchange, also fell more than 11 % on average with the drop being attributed to the general uncertainty surrounding Brexit. By the end of 2016, MorphoSys ranked 11th in the TecDAX in terms of trading volume (2015: 8th) and 11th in terms of market capitalization (2015: 10th).

The average daily trading volume in MorphoSys shares on alternative trading platforms (“dark pools”) in 2016 was approximately € 4.4 million, or 103,700 shares (2015: approx. 89,800 shares valued at € 5.8 million), representing a year-on-year increase of 15 %.

Common Stock

The Company’s common stock increased in 2016 to 29,159,770 shares, or € 29,159,770.00. This increase is the result of the capital increase executed on November 15, 2016 in the form of a private placement via an accelerated bookbuilding process. The issue of 2,622,088 new shares from authorized capital to institutional investors in Europe and North America at a price of € 44.00 per share yielded gross proceeds of € 115.4 million. The execution of the capital increase was entered into the commercial register on November 17, 2016, and on November 21, 2016 the new shares were admitted for trading on the Frankfurt Stock Exchange.

MorphoSys issued stock options and non-interest-bearing convertible bonds respectively under its employee incentive program until 2013. In 2011, the Company introduced a performance-based long-term incentive (LTI) program for the first time. In the following years, similar LTI- programs have been established. The Company repurchases shares annually for these programs, a detailed description of which can be found in the Corporate Governance Report contained in this Annual Report. In the 2016 reporting year, a total of 90,995 treasury shares were issued to the Management Board and the Senior Management Group under the performance-based LTI program. For more information, please refer to the Notes (see Item 7.2.5). Stock options were not issued to the Management Board, the Senior Management Group nor the workforce in the reporting year. Convertible bonds were not exercised.

07 table Key Data for the MorphoSys Share (December 31)

2016 2015 2014 2013 2012
Total stockholders’ equity (in million €) 415.5 362.7 348.8 352.1 202.0
Number of shares issued (number) 29,159,770 26,537,682 26,456,834 26,220,882 23,358,228
Market capitalization (in million €) 1,422 1,530 2,027 1,464 685
Closing price in € (Xetra) 48.75 57.65 76.63 55.85 29.30
Average daily trading volume (in million €) 9.7 14.9 11.9 6.9 1.9
Average daily trading volume (in % of common stock) 0.78 0.87 0.65 0.59 0.38

International Investor Base

Various voting right notifications were issued during the reporting year in accordance with Section 26 (1) of the German Securities Trading Act (WpHG). These notifications were published on the MorphoSys website and can be found under Media and Investors – Stock Information – Shareholder Structure.

According to the definition given by the Deutsche Börse, 98.6 % of MorphoSys AG’s shares were in free float at the end of the reporting year.

08 table MorphoSys AG Shareholder Structure (December 31, 2016)

in % Shareholdings in MorphoSys AG exceeding 3 %1
Baillie Gifford & Co 5.41
Mark N. Lampert/BVF 4.17
Schroder International Selection Fund 3.03
1
According to voting right notifications pursuant to Section 26 (1) WpHG

An overview of the current shareholder structure can also be found on the Company’s website (Media and Investors – Stock Information – Shareholder Structure).

Annual General Meeting

The Management and Supervisory Boards of MorphoSys AG welcomed shareholders to the Company’s 18th Annual General Meeting in Munich on June 2, 2016. The shareholders and proxies attending represented more than 54.1 % of the common stock of MorphoSys AG (2015: 50.8 % of the common stock).

Eight of the nine agenda items submitted for resolution were adopted by a clear majority. The resolution for the creation of Authorized Capital 2016-II and the authorization to grant subscription rights to the MorphoSys AG Management Board, governing bodies of affiliated companies in Germany and abroad and selected executives of MorphoSys AG and affiliated companies in Germany and abroad (Performance Share Plan 2016) (Amendment to the Articles of Association) was supported by 72.25 % of the common stock present but did not receive the 75 % majority of votes necessary.

Investor Relations Activities

During the 2016 financial year, MorphoSys continued to strengthen its communication with the capital markets. The Company took part in over 20 international investor conferences and held an Investor’s Event in Chicago, IL, USA in June on the occasion of the ASCO Annual Meeting, the world’s largest conference for cancer. Several road shows were held at various locations in both Europe and the USA. The strongest interest continued to be in the United States where a large number of specialized healthcare investors are located. Currently, approximately 30 % of MorphoSys AG shares are held by institutional investors based in the USA.

The Management Board held conference calls with the publication of the annual, half-yearly and quarterly results to report past and expected business developments and answer questions from analysts and investors.

The key topics when speaking with investors were the progress of the Company’s pipeline and the development of the proprietary portfolio, which had a total of 14 active programs at the end of the reporting year. Investors were particularly interested in the clinical results of our partnered programs, especially the data and plans for the pivotal studies.

There were a total of 14 analysts covering MorphoSys shares at the end of 2016. Four of these analysts had initiated coverage of the shares in 2016.

09 table Analyst Recommendations (December 31, 2016)

Buy/Overweight Hold Sell n/a
10 3 0 1
Buy/Overweight; Hold; Sell; n/a = not available (no rating)

Detailed information on MorphoSys shares, financial ratios, the Company’s strategic direction and the Group’s recent developments can be found on the Company’s website (Media and Investors).

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