Dr. Simon Moroney - MorphoSys

Annual General Meeting 2010 

Munich, Hanns-Seidel-Stiftung, May 21, 2010


Agenda 

1. Presentation of the confirmed annual financial statements as of December 31, 2009, 

the management report together with the consolidated financial statements, the 

consolidated management report and the report of the Supervisory Board for the 

business year 2009 

2. Formal approval on behalf of the Board of Management 

3. Formal approval on behalf of the Supervisory Board 

4. Appointment of the auditors for the business year 2010 

5. Resolution on the Approval of the Remuneration Scheme of Members of the Board of 

Management 

6. Resolution on the Authorization to purchase and use Treasury Stock and on the 

Exclusion of Subscription Rights 

7. Resolution on Amendments of the Articles of Association in accordance with the Act 

Implementing the Shareholders’ Rights Directive (ARUG) 

8. Partial Deletion of the Conditional Capital 2003-II, amendment of the Articles 

9. Compensation of the Supervisory Board 

MorphoSys AG – Annual General Meeting, May 21, 2010 © MorphoSys AG 

Page 2


Report of the Management Board

Overview 

� Operational Review 2009 

� Group Review (Dr. Simon Moroney) 

� Segment Review: Partnered Discovery (Dr. Marlies Sproll) 

� Segment Review: Proprietary Development (Dr. Arndt Schottelius) 

� Segment Review: AbD Serotec (Dr. Simon Moroney) 

� Financial Review 2009 & Q1 2010 (Dave Lemus) 

� Outlook 2010 (Dr. Simon Moroney) 

MorphoSys AG – Annual General Meeting, May 21, 2010 

© MorphoSys AG 

Page 4

Operational Review 2009 

Group Review – Dr. Simon Moroney, CEO

Successful Performance in 2009 

�Partnered 

Discovery 

�Proprietary 

Development 

�AbD Serotec 

�Financial 

Performance 

Goals for 2009 Current Status 

� 2 – 4 INDs 


� Up to 20 new program starts 17 

� MOR103: Complete Ph 1 

� MOR103: Start Ph 1b/2a 

� Up to 5 new programs 3 

� Revenues of approx. € 20m 

� Profit margin of at least 2% 

� Revenues of € 80m - € 85m 

� Operating profit of € 8m - € 11m 

� 65 programs, 7 in clinic 

� Full-term commitment from Novartis 

� New infectious disease opportunities 

� Development organization built 

� 7 programs, 1 in Ph 2, 1 pre-IND 

� New leadership 

� Burgeoning diagnostic relationships 

� Ongoing double-digit revenue growth 

� Strong cash-flow funds own R&D 


Page 6

Employees 

2009 2008 

Total Employees 413 334 

Geographic Split 

Germany 312 236 

UK 82 82 

USA 19 16 

Split by Segment 

Partnered Discovery 217 

Proprietary Development 56 

201 

AbD Serotec 140 133 



Page 7

Shareprice Development Since 


150% 

140% 

130% 

120% 

110% 

100% 

90% 

May Mai 09 Jun 09 Jul 09 Aug 09 Sep 09 Oct Okt 09 Nov 09 Dez Dec 09 Jan 10 Feb 10 Mrz Mar 10 Apr 10 May Mai 10 

Morphosys Prime IG Biotech 

+29% 

+15% 

� Performance 2009: 

MorphoSys: -9% 

TecDAX: 59% 

Prime 

Biotech: 


Seite 8 

15% 

� Market Capitalization 

(May 2010): 

~ € 340 million

Segment Review 2009 

Partnered Discovery – Dr. Marlies Sproll, CSO

Partnered Discovery – 

Achievements in 2009 

� Pipeline Progress & Expansion 

� 65 programs in total, up from 55 at the beginning of the year 

� Three new INDs, two new Ph 2 starts, 17 new program starts 

� Secured Novartis commitment for full 10-year term of alliance 

� Committed payments total over € 400 million 

� Final ramp up of Novartis’s R&D teams concluded 

� Existing alliances extended & expanded 

� Schering-Plough 

� Shionogi 

� First alliance in infectious diseases with Daiichi-Sankyo 



Page 10

Big Pharma’s Rising Appetite for 

Infectious Disease Biologicals 

� Big medical need 

� Hospital acquired infections 

� Resistance to antibiotics 

� Deals around antibodies vs. infections have surged 

� MorphoSys 

� First infectious disease deal with Daiichi Sankyo in October 2009 

� Features: 

HuCAL PLATINUM 

Funded development of ID specific technology 



Page 11

Partnered Programs in Clinical Development 

Name Partner Target / Indication Phase 1 Phase 2 Phase 3 Market 

BHQ880 Novartis DKK-1 

Multiple Myeloma 

n.d. Centocor n.d. 

Oncology/IPF 

n.d. Novartis n.d. 

Gantenerumab Roche 

Amyloid-β 

Alzheimer‘s Disease 


Inflammatory Diseases 

BAY 79-4620 

n.d.: not disclosed 

Bayer 

Schering 

CA IX (MN) 

Oncology 


02/2009: Start of phase 1/2 

Combinatorial study with Zometa 

10/2009: Start of phase 2 in oncology 

10/2008: Start of phase 2 in IPF 

06/2009: Start of phase 1 

05/2010: Clinical proof of concept 

2009: Two phase 1-trials ended in 2010: 

Start of phase 2 planned 

06/2009: Start of phase 1 in inflammatory 

diseases 

10/2009: Start of phase 1; first HuCALbased 

immunoconjugate 


Page 12

Partnered Discovery – 

Highlights for 2010 

� First P-o-C from HuCAL program with Novartis 

� Pipeline continues to grow & mature 

� 4 - 6 INDs with various partners 

� Progress into Ph 2 

� Roche plans to move into Ph 2 in 2010 with Gantenerumab (AD) 

� Potentially other Ph 2 programs 

� Continue technology development during 2010 

� Dedicated team of 15 employees 



Page 13

Segment-Review 2009 

Proprietary Development – Dr. Arndt Schottelius, CDO

Achievements in 2009 – 

Development Organization Built 

� Established a high-class development 

organization 

� Attracted experienced professionals from 

Genentech, Novartis, Medigene, Fresenius, 

BMS, MSD 

� Raised MorphoSys’s profile as a drug 

developer in the industry 

� New targets in-licensed from academia and 

biotech companies 

� Established network of key opinion 

leaders, academic collaborators, clinical 

investigators & centers 


Segment Headcount 

Proprietary Development* 56 

Pre-clinical and Clinical 

Development, including 

Quality Assurance & 

Regulatory Affairs 

Target Scouting, 

Antibody Discovery & 

Pre-development 

* not including protein sciences group 


15 

41 

Page 15

Achievements in 2009 – 

Proprietary Pipeline 

� MOR103 (anti-GM-CSF) 

� Successfully developed into Ph 1b/2a trial in rheumatoid arthritis 

� Moved first proprietary HuCAL antibody MOR103 into clinical testing 

in patients 

� Promising pre-clinical data for second indication 

� MOR202 (anti-CD38) 

� Successfully developed towards the clinic 

� Tapped external government funding through 

„m 4 high tech cluster“ participation 

� Increased breadth of pipeline 

� Added three new programs in 2009 

� Two targets secured through in-licensing transactions 



Page 16

MOR103 – Ph 1b/2a (MSC-1001) in 

Rheumatoid Arthritis – Clinical Trial Update 

� Trial approved in Germany, Bulgaria, The Netherlands 

� Geographic mix provides access to full spectrum from biologics-pretreated to biologics-naïve 

RA patients 

� Trial design 

� Primary outcome measures: Adverse event rate and safety profile 

� Secondary outcome measures: pharmacokinetics, immunogenicity, DAS28, ACR core set measures 

and EULAR28 response criteria; cytokines, synovitis, bone edema, and patient reported outcomes 

(up to 16 weeks) 

� Stable regimen of concomitant RA therapy (including anti-TNFs) 

Ph 1 

Ph 1b/2a 

Data Analysis 

Final Ph 1b/2a Data 


2008 2009 2010 2011 2012 


Page 17

MOR202 – Sharpen Competitive Profile 

� Manufacturing of clinical grade material completed according to plan 

� Prepare for Ph 1/2 in multiple myeloma in 2011 

� File CTA in Q4 2010 

� Rationale for extended timeline of MOR202 

� Sharpened competitive profile 

� Longer chronic toxicity study to enable long-term clinical development 

� Competitive advantage: Tox species available (cross-reactivity), robust development plan 

Manufacturing 

Toxicity Study 

CTA Preparation 

CTA Filing 

Start of Ph 1/2a 


2009 2010 2011 


Page 18

Proprietary Pipeline 2008 - 2010 

Name 

MOR103 

MOR202 

Name / Source 

of Target 

Target: GM-CSF 

In-licensed 

Target: CD38 

Target Scouts 

Indication Discovery Preclinic Phase 1 Phase 2 Phase 3 Market 

Rheumatoid 

Arthritis 

2 nd Indication 

Cancer 

MOR205 In-licensed Cancer 

MOR104 In-licensed 

MOR/NOV 

(Co-development) 

Novartis n.d. 

MOR105 Target Scouts 

Inflammatory 

Diseases 

Inflammatory 

Diseases 

MOR206 In-licensed Cancer 

New projects n.d. n.d. 


Targets selected 


� 2008A 

� 2009A 

� 2010E 

Page 19

Segment Review 2009 

AbD Serotec – Dr. Simon Moroney, CEO

Achievements in 2009 

� New research partnerships in the 

diagnostics field 

� FIND Diagnostics: Diagnostic kits for tropical 

diseases 

� Establish HuCAL as source for 

immunodiagnostics 

� Expansion of major account base 

� Less dependent on single major accounts 

� Added >1,500 products to catalog 

� Strong financial result: 

� Profit margin 5% 

� +8% revenue growth (at constant average 

exchange rates of 2008) 


19.6 

19.2 

18.8 

18.4 

18.0 

17.6 

Revenue 

2008 2009 

Revenue 

1 

0.8 

0.6 

0.4 

0.2 

0 


2008 2009 

Segment result 

Page 21

Promising Market Opportunities 


Optimized antibodies based on HuCAL technology 

Focus on diagnostics market 

� Market value ~US$ 7bn – Strong growth 

� Strong demand for optimized antibodies for existing 

assays 

� Need to develop new tools for diagnostic applications 

Market for research antibodies 

� Solid and profitable business base 

� Succesful supply agreements established 

� Technological advantages in several areas of the market 


Page 22

Financial Review 2009 

Financial Review - Dave Lemus, CFO

FY2009: Key Financials 

in million € 

90 

80 

70 

60 

50 

40 

30 

20 

10 

0 

71.6 

+ 13% 

81.0 

27.6 

39.0 

16.4 


11.4 

Group Revenues R&D Expenses Profit from Operations 


+ 41% 

2008 2009 

- 30% 

Page 24

Expenditure on Proprietary Programs 

� Expansion of proprietary development 

team & activities reflected in year-onyear 

increase of proprietary R&D spend 

Split of MorphoSys’s Investment in 

Proprietary Development in 2010 

MOR103 and MOR202 Other programs 


in million € 

20 

18 

16 

14 

12 

10 

8 

6 

4 

2 

0 

8.9 


19.3 

2008 2009 

Page 25

Results by Segment 

in million € 2009 2008 

Differences due to rounding 

Partnered Discovery 

Segment Revenues 61.7 54.3 

Operating Expenses 22.1 19.9 

Segment Result 39.6 34.4 

Proprietary Development 

Segment Revenues 1.0 0 

Operating Expenses 19.3 8.9 

Segment Result (18.3) (8.9) 

AbD Serotec 

Segment Revenues 19.4 18.2 

COGS 6.7 7.1 

Gross Profit 12.7 11.1 

Other Operating Expenses 11.6 10.7 

Segment Result 1.0 0.4 



Page 26

Consolidated Statement of Operations (Group) 

Q1 2010 

in million € Q1 2010 Q1 2009 

Revenues 20.6 19.1 

Cost of Goods Sold 1.7 1.7 

Research and Development Expenses 9.3 8.5 

Sales, General & Administrative Expenses 4.9 4.8 

Total Operating Expenses 15.9 14.9 

Profit from Operations 4.7 4.2 

Other Expenses/Income, net (0.1) 0.9 

Profit before Taxes 4.6 5.1 

Income Tax Expense 1.4 1.6 

Net Profit 3.2 3.5 

Diluted Net Profit per Share 

in € 


0.14 0.16 


Page 27

Consolidated Balance Sheet 

Q1 2010 

in million € 03/31/2010 12/31/2009 

Assets 

Cash, Cash Equivalents and Available-forsale 

Financial Assets 

147.3 135.2 

Other Current Assets 13.7 20.4 

Total Non-current Assets 50.1 50.5 

Total Assets 211.1 206.1 

Liabilities 

Total Current Liabilitites 26.5 24.3 

Total Non-current Assets 6.7 7.9 

Total Stockholders‘ Equity 177.9 173.9 

Total Liabilities and Stockholders‘ Equity 211.1 206.1 



Page 28

Outlook 

Dr. Simon Moroney, CEO

Partnered Discovery 

Short-Term Goals 

� Further maturation of the 

pipeline 

� Novartis proves clinical 

efficacy of a HuCALantibody 

� More INDs 

� At least one additional Ph 2 

program 

� 4 - 6 new INDs 

� Announcement of new 

technological 

developments 


Long-Term Perspective 

� Strong increase of clinical 

programs with partners 

� Increased visibility of 

clinical data 

� Overall growth of number 

of programs in the pipeline 

� New business 

opportunities 

� In the field of infectious 

diseases 

� Arising from technological 

developments 


Page 30

Proprietary Development 


� MOR103 

� Progress in the current Ph 

1b/2a trial 

� Advance second indication 

further 

� MOR202 

� CTA of a Ph 1/2 in Q4/2010 

� Strengthening of 

proprietary portfolio 

� Start new programs 

including co-development 

options 



� Clinical data of MOR103 

and MOR202 as basis for 

lucrative partnerships with 

pharma 

� Increasing demand of 

pharma companies to fill 

their pipelines 

� Growing need for 

innovative biological drugs 


Page 31

Complete Pipeline 2009 – 2010 

Around 80 Product Candidates at Year End 

Name Partner Target Indication Discovery Präkinik Phase 1 Phase 2 Phase 3 Market 

BHQ880 Novartis DKK-1 Cancer 


Gantenerumab Roche Amyloid-β 


n.d. Novartis n.d. n.d. 

Immunology/ 

Cancer 

Alzheimer‘s 

Disiease 

Inflammatory 

Diseases 

BAY79-4620 Bayer Schering CA IX (MN) Cancer 

4-6 INDs Various Various Various 

~30 Programs Various Various Various 

~30 Programs Various Various Various 

MOR103 Proprietary GM-CSF RA & others 

MOR202 Proprietary CD38 Cancer 

MOR205 Proprietary n.d. Cancer 

MOR104 Proprietary n.d. 

MOR105 Proprietary n.d. 

Inflammatory 

Diseases 

Inflammatory 

Diseases 

MOR206 Proprietary n.d. Cancer 

~3 new programs Proprietary n.d. n.d. 

MOR/NOV Novartis n.d. n.d. 



� 2009A 

� 2010E 

Page 32

AbD Serotec 


� Increased market share 

� Revenue growth of ~10 % 

� Operating margin 5 - 8 % 



� Potential for HuCAL 

technology in delivering truly 

differentiated diagnostic 

products 

� Growing importance of 

diagnostics in 

pharmaceutical development 

� Increasing regulatory 

demands for post market 

monitoring, patient 

segmentation, etc. 

� Synergies with therapeutic 

area 


Page 33

MorphoSys Group 


� Revenue growth of 10 – 15 % 

� Increasing investment in proprietary 

development 

� Operating profit of € 5 – 9m 

� Possible strategic transactions 

� Expansion of the existing technology 

platform 

� Growth of AbD Serotec in the diagnostics 

field 

� Focus on fit and financial strength 



� Ability to finance long-term plans from 

strong operating cash-flow without 

need to raise new money 

� Prospects for strong revenue increase 

driven by lucrative partnerships and 

marketed products 

� Growing importance of diagnostics for 

drug development and during treatment 

� Proprietary technologies and business 

segment AbD Serotec as link between 

both fields 


Page 34

Future Value Creation 

Strategic 

Partnership with 

Novartis 


Increased Investment in 

Proprietary 

Development 

First Clinical Proof 

of Concept 

2009 

First HuCAL antibody on the 

market 

Out-licensing of 

Proprietary 

Compounds 

Proprietary HuCAL 

antibodies on the market 


Page 35


Agenda 

1. Presentation of the confirmed annual financial statements as of December 31, 2009, 

the management report together with the consolidated financial statements, the 

consolidated management report and the report of the Supervisory Board for the 

business year 2009 

2. Formal approval on behalf of the Board of Management 

3. Formal approval on behalf of the Supervisory Board 

4. Appointment of the auditors for the business year 2010 

5. Resolution on the Approval of the Remuneration Scheme of Members of the Board of 

Management 

6. Resolution on the Authorization to purchase and use Treasury Stock and on the 

Exclusion of Subscription Rights 

7. Resolution on Amendments of the Articles of Association in accordance with the Act 

Implementing the Shareholders’ Rights Directive (ARUG) 

8. Partial Deletion of the Conditional Capital 2003-II, amendment of the Articles 

9. Compensation of the Supervisory Board 


Page 36


Report of the Supervisory Board

Item 5: Approval of the Remuneration Scheme 

of Members of the Board of Management 

Ongoing discussion about the 

appropriateness of the 

remuneration of Management 

Boards 

� Remuneration now aims at a stronger alignment of the companies‘ compensation 

system towards the realization of long-term sustainable corporate success 

� The shareholders‘ plenum might cast a non-committal vote about the compensation 

system for Executive Board members during the Annual General Meeting 


Reaction of legislative body: 

Executive Compensation Act 

(VorstAG) 

(enacted in 08/2009) 


Page 38

Current Remuneration Scheme 

Fixed Variable Flexible 

Remuneration 

Long-term 

incentive / 

Long-term 

variable 

Short-term 

incentive / 

Bonus 

Fixed 

allowance/ 

Annual gross 

base salary 


Elements of total direct compensation 

Long-term variable elements of the compensation are 

sufficiently dependent on long-term development of the 

company 

Executive Board members receive performance-related 

annual bonus 

The fixed allowance differentiates CEO and other 

members of the Executive Board and its respective 

amount is appropriate 

Result 

The remuneration 

is already now in 

accordance with 

VorstAG, 

regarding both 

pay-mix as well 

as amount 


Page 39

Adjustments of the Remuneration Scheme 

as of July 1, 2010 

� Extension of the vesting-period for convertible bonds to 4 years 

� Adjustment of the D&O-insurance: 10% deductible per incident 

(up to max. 1,5 x annual base salary) for Executive Board 

members, corresponding adjustment of deductible for members 

of the Supervisory Board 

� In case of a deterioration of the Company‘s performance the 

Supervisory Board might reduce bonus/compensation of 

Executive Board to an appropriate amount 



Page 40

Planned Remuneration Scheme 

� The Executive Board‘s activities have to be aligned with the 

major corporate targets of MorphoSys and therefore with a 

long-term positive company development 

� Long-term incentive components of the compensation in 

accordance with the requirements of the VorstAG are being 

adjusted together with an external remuneration expert 

� Special attention is paid to the sustainability of variable 

compensation components 

Aim: 

Ideal liaison between economic success of MorphoSys and 

shareholders‘ interests 



Page 41

Appropriateness of the Compensation of the 

Supervisory Board 

� Corporate Governance Code provides for a performance-related remuneration of 

Supervisory Board members, but: 

Increasing number of remuneration experts is of another opinion: 

� Performance-related remuneration of the Supervisory Board carries the inherent 

danger of colliding interests 

� Control and monitoring function must not be influenced by the economic situation of 

the company 

� Compensation of the Supervisory Board will comprise only fixed components 

� Increase of the fixed remuneration due to the discontinuation of performance-related 

components 

� Level of fixed compensation is also appropriate when compared to competitors 


MorphoSys agrees with the experts‘ opinion: 


Page 42


MorphoSys thanks its shareholders! 

HuCAL®, HuCAL GOLD®, HuCAL PLATINUM®, AutoCAL®, CysDisplay®, Agx® and RapMAT® are registered trademarks of MorphoSys AG

Dr. Simon Moroney - MorphoSys

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