2018 Annual Report 2018 annual report annual MorphoSys AG Semmelweisstrasse 7 82152 Planegg Germany Phone: +49-89-89927-0 Fax: +49-89-89927-222 www.morphosys.com Product Pipeline MorphoSys’s Product Pipeline (December 31, 2018) MOST ADVANCED MOST ADVANCED DEVELOPMENT STAGE DEVELOPMENT STAGE PROGR AM / PARTNER PROGR AM / PARTNER INDICATION INDICATION DISCOVERY PRECLINIC PHASE 1 PHASE 2 PHASE 3 MARKET DISCOVERY PRECLINIC PHASE 1 PHASE 2 PHASE 3 MARKET Tremfya®* (guselkumab) / Janssen/J&J Utomilumab (PF-05082566) / Pfizer Psoriasis Cancer Gantenerumab / Roche Xentuzumab (BI-836845) / BI Alzheimer’s disease Solid tumors MOR208 / not partnered BAY2287411 / Bayer Hematological malignancies Cancer Anetumab ravtansine (BAY94-9343) / Bayer Elgemtumab (LJM716) / Novartis Solid tumors Cancer BAY1093884 / Bayer MOR107*** (LP2-3) / not partnered Hemophilia Not disclosed BHQ880 / Novartis NOV-7 (CLG561) / Novartis Multiple myeloma Eye diseases Bimagrumab (BYM338) / Novartis NOV-8 / Novartis Metabolic disease Inflammation CNTO6785 / Janssen/J&J NOV-9 (LKA651) / Novartis Inflammation Diabetic eye diseases Ianalumab (VAY736) / Novartis NOV-10 (PCA062) / Novartis Inflammation Cancer MOR103 (GSK3196165) / GlaxoSmithKline NOV-11 / Novartis Inflammation Blood disorders MOR106 / Novatis/Galapagos NOV-13 (HKT288) / Novartis Inflammation Cancer MOR202 / I-Mab Biopharma** NOV-14 / Novartis Multiple myeloma Asthma NOV-12 (MAA868) / Novartis PRV-300 (CNTO3157) / ProventionBio Prevention of thrombosis Inflammation Setrusumab (BPS804) / Mereo/Novartis Vantictumab (OMP-18R5) / OncoMed Brittle bone syndrome Solid tumors ® Tesidolumab (LFG316) / Novartis * We still consider Tremfya a phase 3 compound due to ongoing studies in various indications. ** For development in China, Hong Kong, Taiwan, Macao. Eye diseases *** A phase 1 study in healthy volunteers was completed. MOR107 is currently in preclinical investigation with a focus on oncology indications. legend: mor program out-licensed mor program partnered discovery program phase 1 phase 2 phase 3 In addition, 6 proprietary programs and 56 partnered discovery programs are in discovery stage, 1 proprietary and 24 partnered 12 14 3 discovery programs are in preclinic. Programs Programs Programs* MorphoSys at a Glance Figures, data, facts (December 31, 2018) 329 employees 12 programs in MOR Programs discovery 34 nations 62 More than 70 programs in active clinical studies with preclinic MorphoSys antibodies PRODUCT PIPELINE – MORPHOSYS A GLANCE AT programs in phase 1 25 106.4 programs in phase 2 * We still consider Tremfya® a phase 3 compound due to ongoing studies in various indications. ** For development in China, Hong Kong, Taiwan, Macao. *** A phase 1 study in healthy volunteers was completed. MOR107 is currently in preclinical 14 programs in investigation with a focus on oncology indications. 12 phase 3 27.6 3 r&d expenses (in million €) million expenses (in r&d 2008 2018 FINANCIAL STATEMENTS GROUP MANAGEMENT REPORT ENGINEERING THE MEDICINES OF TOMORROW Our mission is to make exceptional, innovative biopharmaceuticals to improve the lives of patients suffering from serious diseases. Our focus is on cancer. Innovative technologies and smart development strategies are central to our approach. Success is created by our employees, who focus on excellence in all they do and col- laborate closely across disciplines. CONTENTS Please find additional information in our online magazine. https://reports.morphosys.com/2018/ Contents FINANCIAL STATEMENTS the company GROUP MANAGEMENT REPORT 06 Roadmap 10 Clinical Development at MorphoSys 12 MorphoSys – A Strong Development Partner 14 Research at MorphoSys 16 Letter to the Shareholders group management report 25 Operations and Business Environment 49 Operating and Financial Review and Prospects 63 Outlook and Forecast 67 Shares and the Capital Market 71 Sustainable Business Development 76 Risk and Opportunity Report 84 Statement on Corporate Governance, Group Statement on Corporate Governance and Corporate Governance Report 113 Subsequent Events financial statements 116 Consolidated Statement of Profit or Loss (IFRS) 117 Consolidated Statement of Comprehensive Income (IFRS) 118 Consolidated Balance Sheet (IFRS) 120 Consolidated Statement of Changes in Stockholders’ Equity (IFRS) 122 Consolidated Statement of Cash Flows (IFRS) 124 Notes 176 Responsibility Statement additional information 177 Independent Auditor’s Report 182 Report of the Supervisory Board 186 Supervisory Board of MorphoSys AG 188 Glossary 191 List of Figures and Tables 192 Imprint Magazine Roadmap 4 As a fully inte- grated biopharma- ceutical company, we are driven by a desire to develop the medicines of tomorrow. The jour- ney towards this goal has been and continues to be exciting. Roadmap Magazine 5 FINANCIAL STATEMENTS GROUP MANAGEMENT REPORT Magazine Roadmap 6 1992 the beginning: The company was founded in Martinsried near Munich. first ipo: MorphoSys AG goes public on the Frankfurt Stock Exchange in 1999. On September 6, 2004, the Company entered into the TecDAX and in 2018 to the MDAX. Since late 2016 the headquarters is located in Planegg near Munich antibody technology: In 2000, MorphoSys presented its HuCAL antibody library. This was followed by the HuCAL Gold antibody library (2001) and the HuCAL PLATINUM an- tibody library (2008). Ylanthia, the next generation of anti- online report body technologies, was launched in 2011. Slonomics, which https://www.morphosys.com/ has been part of the MorphoSys technology portfolio since company/history#roadmap 2010, enables the precise optimization of antibodies from the Ylanthia library. a novel agent against alzheimer’s: In 2006 new partnerships for proprietary Partner Roche starts clinical development of a HuCAL anti- development: MorphoSys is increasingly entering body against Alzheimer’s disease (gantenerumab). Six years into development and marketing partnerships with later, gantenerumab became the fi rst MorphoSys antibody other biotech and pharmaceutical companies in order to enter late stage clinical development (phase 3). In 2018, to advance its proprietary drug candidates. These in- new phase 3 trials where initiated to evaluate and approve clude partnerships with GSK (2013 for MOR103), Merck gantenerumab in an optimized dosage regimen. (2014 for immunoncology), I-Mab Biopharma (2017 for 22 MOR202 and 2018 for MOR210), Novartis (2018 for Total Partnerships MOR106, together with Galapagos). (as of Dec. 2018) service and discovery partnerships: Initia- tion of a strategic partnership with Novartis in 2004, development of mor208: In 2010, MorphoSys signs which expands into one of the largest antibody research a license agreement with Xencor Inc. for MOR208. In the collaborations in biotech and pharmaceuticals in 2007. same year, MorphoSys starts clinical development of the MorphoSys has been researching and discovering anti- antibody. The fi rst positive data on MOR208 where presen- bodies on behalf of pharmaceutical partners since 1997. ted in 2012. In 2017, the U.S. Food and Drug Administra- These include further partnerships with Bayer (1999), tion awarded MOR208 breakthrough therapy designation Roche (2000), Centocor (today: Janssen, 2000), Schering in the blood cancer indication of diffuse large B cell lym- (2001) and Pfi zer (2003). phoma (DLBCL). MorphoSys intends to develop MOR208 toward regulatory approval as soon as possible. proprietary drug development: The fi rst first approval: In 2017, MorphoSys’s licensing proprietary antibody MOR103 enters clinical develop- partner Janssen receives approval for Tremfya® ment in 2008. In 2012, MorphoSys publishes positive (guselkumab) for the treatment of moderate to severe study results with MOR103 in rheumatoid arthritis. The plaque psoriasis in the United States, Europe and following year, MorphoSys signs a license agreement Canada. Approvals in other countries to follow. with GlaxoSmithKline for MOR103. In 2018, GlaxoSmith- Kline presents positive data from a phase 2 trial in rheumatoid arthritis patients. a novel agent against alzheimer’s: In 2006 new partnerships for proprietary Partner Roche starts clinical development of a HuCAL anti- development: MorphoSys is increasingly entering body against Alzheimer’s disease (gantenerumab). Six years into development and marketing partnerships with later, gantenerumab became the fi rst MorphoSys antibody other biotech and pharmaceutical companies in order to enter late stage clinical development (phase 3). In 2018, to advance its proprietary drug candidates. These in- new phase 3 trials where initiated to evaluate and approve clude partnerships with GSK (2013 for MOR103), Merck gantenerumab in an optimized dosage regimen. (2014 for immunoncology), I-Mab Biopharma (2017 for 22 MOR202 and 2018 for MOR210), Novartis (2018 for Total Partnerships MOR106, together with Galapagos). (as of Dec. 2018) service and discovery partnerships: Initia- tion of a strategic partnership with Novartis in 2004, development of mor208: In 2010, MorphoSys signs which expands into one of the largest antibody research a license agreement with Xencor Inc. for MOR208. In the collaborations in biotech and pharmaceuticals in 2007. same year, MorphoSys starts clinical development of the MorphoSys has been researching and discovering anti- antibody. The fi rst positive data on MOR208 where presen- bodies on behalf of pharmaceutical partners since 1997. ted in 2012. In 2017, the U.S. Food and Drug Administra- These include further partnerships with Bayer (1999), tion awarded MOR208