MorphoSys AG — Interim / Quarterly Report 2009

Oct 28, 2009

Contents

MorphoSys Group: 3rd Interim Report January – September 2009

• 3 Letter to the Shareholders
• 4 Interim Group Management Report
• 14 Consolidated Statement of Operations (IFRS) for the Periods Ended September 30, 2009 and 2008 (unaudited)
• 15 Consolidated Statement of Comprehensive Income (IFRS) for the Periods Ended September 30, 2009 and 2008 (unaudited)
• 16 Consolidated Balance Sheet (IFRS) as of September 30, 2009 (unaudited) and December 31, 2008
• 18 Consolidated Statement of Changes in Stockholders' Equity (IFRS) as of September 30, 2009 and 2008 (unaudited)
• 20 Consolidated Statement of Cash Flows (IFRS) for the Periods Ended September 30, 2009 and 2008 (unaudited)
• 22 Notes to the Interim Consolidated Financial Statements (unaudited)

Dear Shareholders,

THE SHARE- MANAGEMENT HOLDERS REPORT

Revenues for the first nine months were € 57.6 million, an 8 % increase over the same period in the previous year while operating profits came in at € 9.3 million. These solid results underlie the significant progress made by the various operating segments of the MorphoSys Group during the third quarter.

In the Partnered Discovery segment, a third partner in 2009, Bayer Schering Pharma, advanced a HuCAL-based antibody program into clinical trials. This brings the number of partnered antibody programs in clinical trials to a total of seven with three programs in phase 2 clinical trials.

Progress in the Proprietary Development segment remained on an even keel. Along these lines, the Company continues to expect to be able to start a phase 1b/2a clinical trial in rheumatoid arthritis for its lead compound MOR103 before year-end. Additionally, MorphoSys hired a new Head of Clinical Development, thereby continuing to expand and strengthen its clinical development team.

The Company's third business segment, AbD Serotec, continued to build its presence in the diagnostics industry by signing two new agreements during the quarter – one with Spinreact, a provider of clinical diagnostic reagents, and the other with FIND Diagnostics. AbD Serotec's collaboration with FIND Diagnostics is particularily interesting in that it targets a serious global healthcare challenge – the development of new robust diagnostic tools for poverty-related diseases such as tuberculosis, malaria and sleeping sickness.

Sincerely yours,

Dave Lemus Chief Financial Officer MorphoSys AG

Interim Group Management Report: January 1 – September 30, 2009

Industry Overview

In the third quarter of 2009, antibody-related transactions included Bristol-Myers Squibb's acquisition of US-based antibody provider Medarex, Inc. for a purchase price of approximately US\$ 2.1 billion and Alcon's acquisition of Swiss-based ESBATech AG, a private biotechnology company focused on single-chain antibody fragment therapeutics for a purchase price of up to US\$ 439 million.

Significant licensing deals included an alliance in the area of infectious diseases between Johnson & Johnson and Crucell focusing on the discovery, development and commercialization of monoclonal antibodies and vaccines for the treatment and prevention of influenza and other infectious and non-infectious diseases. Additionally, Amgen and GlaxoSmithKline announced a collaboration in which the companies will share commercialization of Amgen's monoclonal antibody Denosumab® for postmenopausal osteoporosis in Europe, Australia, New Zealand and Mexico.

Looking at product-related newsflow, US-based Immunomedics and its pharma partner UCB presented positive data from a phase II trial for their lupus drug Epratuzumab® while Genmab's and GlaxoSmithKline's new blood cancer drug Azerra® produced rather disappointing results in a phase II study in patients with non-Hodgkin's lymphoma.

MorphoSys Share Price Performance

The MorphoSys share price increased during the third quarter by 5%, lagging the major benchmark indices. More specifically, the NASDAQ Biotechnology Index increased during the quarter by 13%, the TecDAX by 19%, and the DAXsubsector Biotechnology Performance Index increased by 8%. By comparison, a basket of international antibody companies (Source: BioCentury) increased by 2.2%. Year-to-date, MorphoSys's share price was down 5% at the end of the third quarter compared to the beginning of the year.

The MorphoSys Share (January 2, 2009 = 100%)

Financial Analysis

Revenues

Compared to the same period of the previous year, Group revenues increased by 8% to € 57.6 million in the first nine months of 2009 (first nine months 2008: € 53.3 million). This increase is due to both higher levels of funded research, licensing fees and success-based revenues in the Partnered Discovery segment as well as revenues from funded research in the new Proprietary Development segment. A further increase in revenues derived from stronger sales in the AbD segment. Revenues arising from the Partnered Discovery and Proprietary Development segments accounted for 76% or € 43.7 million (first nine months 2008: € 40.6 million) of total segment revenues while the AbD segment generated 25% (€ 14.6 million) of the total segment revenues (first nine months 2008: € 13.4 million).

Geographically, 19% or € 11.2 million of MorphoSys's commercial revenues were generated with biotechnology and pharmaceutical companies or non-profit organizations located in North America and 81% or € 46.4 million with companies located mainly in Europe and Asia. This compares to 23% and 77%, respectively, in the same period of the prior year.

Partnered Discovery and Proprietary Development Segments

Segment revenues arising from the Partnered Discovery segment comprised € 35.1 million in funded research and licensing fees (first nine months 2008: € 33.3 million) as well as € 7.8 million success-based payments (first nine months 2008: € 7.3 million), representing 18% of total Partnered Discovery and Proprietary Development revenues. Segment revenues arising from the Proprietary Development segment included € 0.8 million in funded research (first nine months 2008: € 0.0 million). Approximately 82% of Partnered Discovery and Proprietary Development revenues and 62% of total revenues arose from the Company's three largest alliances with Novartis, Daiichi Sankyo and Merck (first nine months 2008: Novartis, Daiichi Sankyo and Centocor, 82% and 62%, respectively).

Assuming constant foreign exchange rates at the average rate of 2008, segment revenues in the Partnered Discovery and Proprietary Development segments would have totaled € 43.4 million.

Revenue Development by Segment (in € million)

AbD Serotec Segment

Compared to the same period of the previous year, AbD Serotec segment's revenues increased by 9%, or € 1.2 million, to € 14.6 million in 2009 (first nine months 2008: € 13.4 million). Assuming constant foreign exchange rates at the average rate for 2008, revenues in the AbD segment would have amounted to € 14.7 million.

The largest part of revenues (approx. 82% or € 12.0 million) was generated with catalog and industrial customers (first nine months 2008: approx. 81% or € 10.9 million), while custom manufacture antibodies contributed 18% or € 2.6 million (first nine months 2008: 19% or € 2.5 million).

As of September 30, 2009, orders in the amount of € 2.3 million were classified as backorders in the segment (September 30, 2008: € 1.0 million).

Operating Expenses

Compared to the first nine months of 2008, total operating expenses increased by approximately 26% to € 48.3 million in 2009 (first nine months 2008: € 38.2 million). The change in operating expenses of € 10.1 million was mainly impacted by research and development (R&D) expenses increasing by 50% or € 9.2 million and sales, general and administrative (S, G&A) expenses increasing from € 14.6 million to € 15.7 million. Total purchase price allocation (PPA) effects on operating profit amounted to € 0.4 million (first nine months 2008: € 0.5 million).

Operating expenses increased by 7% to € 15.6 million (first nine months 2008: € 14.6 million) in the Partnered Discovery segment and by 173% to € 13.1 million (first nine months 2008: € 4.8 million) in the Proprietary Development segment. In the AbD segment, operating expenses increased by 2% to € 13.2 million (first nine months 2008: € 13.0 million) and would have amounted to € 14.0 million under the assumption of constant foreign exchange rates at the average rate of 2008.

Stock-based compensation expenses are embedded in COGS, S, G&A and R&D expense amounts. Stock-based compensation for the first nine months of 2009 amounted to € 1.3 million (first nine months 2008: € 0.8 million) and is a non-cash charge.

THE SHARE- M A N A G E M E N T HOLDERS R E P O R T

Cost of Goods Sold

COGS is composed of the AbD segment's cost of goods sold in the first nine months of 2009 and – compared to the same period of the prior year – slightly decreased from € 5.2 million to € 5.1 million, which was mainly due to foreign exchange effects.

Research and Development Expenses

In the first nine months of 2009, expenses for research and development increased by € 9.2 million to € 27.5 million (first nine months 2008: € 18.3 million). This was mainly due to higher costs for external lab funding (first nine months 2009: € 7.1 million; first nine months 2008: € 2.1 million), as well as increased personnel costs (first nine months 2009: € 10.6 million; first nine months 2008: € 7.7 million). In the first nine months of 2009, the Company incurred costs for proprietary product development (excluding allocations for segment purposes) in the amount of € 11.9 million (first nine months 2008: € 3.6 million) as well as costs for technology development in the amount of € 0.4 million (first nine months 2008: € 0.4 million) which is accounted for in the Partnered Discovery segment.

Sales, General and Administrative Expenses

Compared to the same period of the previous year, sales, general and administrative expenses increased by € 1.1 million to € 15.7 million (first nine months 2008: € 14.6 million), mainly from increased personnel costs as well as costs for external services.

Development of Operating Expenses (in € million)

Cost by Expenditure Type

In the first nine months of 2009, personnel costs (excluding stock-based compensation) amounted to € 18.7 million (first nine months 2008: € 15.7 million) or 39% of total operating expenses, thus representing the largest cost block within operating expenses.

Expenses for external services, representing the second-largest block by cost type, amounted to € 10.6 million (first nine months 2008: € 5.1 million) or 22% of total operating expenses and included external lab funding (first nine months 2009: € 7.1 million; first nine months 2008: € 2.1 million) and consulting fees (first nine months 2009: € 1.4 million; first nine months 2008: € 1.6 million).

Costs for intangibles accounted for € 6.2 million (first nine months 2008: € 5.8 million) or 13% of total operating expenses and mainly consisted of expenses for licenses (first nine months 2009: € 3.1 million; first nine months 2008: € 2.8 million) as well as amortization of licenses capitalized (first nine months 2009: € 1.8 million; first nine months 2008: € 1.8 million).

Non-operating Items

For the first nine months of 2009, non-operating items included mainly finance income of € 1.9 million (first nine months 2008: € 2.0 million), other income of € 0.2 million (first nine months 2008: € 0.4 million) and other expenses of € 0.6 million (first nine months 2008: € 1.0 million). Finance income mainly comprised realized gains from marketable securities.

Taxes

For the first nine months of 2009, the Company reported income tax expenses in the amount of € 3.1 million. This line item mainly included current tax expenses (€ 2.0 million) and deferred tax expenses (€ 1.3 million) mainly from the release of deferred tax assets capitalized in 2007.

Operating Profit / Net Profit

Group operating profit for the first nine months of 2009 amounted to € 9.3 million (first nine months 2008: € 15.1 million). Earnings before interest and taxes (EBIT) amounted to € 10.5 million, compared to an EBIT of € 15.3 million in the first nine months of the previous year. The Partnered Discovery and Proprietary Development segments showed an operating profit of € 27.3 million (first nine months 2008: € 26.0 million) and an operating loss of € 12.4 million (first nine months 2008: operating loss of € 4.8 million), respectively. In the AbD segment, operating profit significantly increased to € 1.4 million (first nine months 2008: € 0.3 million) and would have amounted to € 0.8 million under the assumption of constant foreign exchange rates using foreign exchange rates of the previous year.

A net profit after taxes of € 7.7 million was achieved in the first nine months of 2009, compared to a net profit after taxes of € 11.8 million in the same period of the prior year. The resulting basic net profit per share for the first nine months of 2009 amounted to € 0.34 (first nine months 2008: € 0.53).

Liquidity / Cash Flows

Net cash inflow from operations in the first nine months of 2009 amounted to € 3.0 million (first nine months 2008: cash inflow of € 18.7 million). Investing activities resulted in a cash inflow of € 1.9 million (first nine months 2008: cash outflow of € 25.7 million) whereas financing activities resulted in a cash inflow of € 0.9 million (first nine months 2008: cash inflow of € 1.7 million).

As of September 30, 2009, the Company held € 139.8 million in cash, cash equivalents and available-for-sale financial assets, compared to a year-end 2008 balance of € 137.9 million.

Assets

Total assets increased by € 3.6 million to € 206.9 million as of September 30, 2009, compared to € 203.3 million as of December 31, 2008. Current assets increased by € 6.0 million mainly as a result of an increase in both accounts receivable (€ 3.2 million) and cash, cash equivalents and available-for-sale financial assets (€ 1.9 million).

Compared to December 31, 2008, non-current assets decreased by € 2.4 million mainly as a consequence of the release of deferred tax assets capitalized in 2007 (€ 1.3 million) as well as of the amortization of licenses (€ 1.2 million).

Liabilities

In the first nine months of 2009, current liabilities decreased from € 27.4 million as of December 31, 2008, to € 26.3 million as of September 30, 2009, arising mainly from a decrease in current deferred revenue (€ 1.0 million).

Non-current liabilities decreased by € 4.9 million to € 9.0 million in the first nine months of 2009, which was mainly impacted by a decrease in non-current deferred revenue of € 4.6 million resulting from contracts signed in previous years.

Equity

Total stockholders' equity amounted to € 171.5 million as of September 30, 2009, compared to € 162.0 million as of December 31, 2008.

As of September 30, 2009, the total number of shares issued amounted to 22,604,457 of which 22,524,561 were outstanding, compared to 22,478,787 and 22,398,891 as of December 31, 2008, respectively.

The increase of shares outstanding by 125,670 shares arose from exercised options issued to employees.

Capital Expenditure

MorphoSys's investment in property, plant and equipment amounted to € 1.5 million for the nine-month period ended September 30, 2009, compared to € 1.0 million in the same period of the prior year. Depreciation of property, plant and equipment for the first nine months of 2009 accounted for € 1.2 million compared to € 1.1 million in the first nine months of 2008.

During the first nine months of 2009, the Company invested € 1.0 million in intangible assets (first nine months 2008: € 1.7 million). Amortization of intangibles amounted to € 2.8 million and remained unchanged in comparison to the first nine months of 2008.

Human Resources

Number and Qualification of Employees

On September 30, 2009, the MorphoSys Group employed 404 people (December 31, 2008: 334). On average, the MorphoSys Group employed 367 people for the first nine months of 2009 (first nine months 2008: 306).

Of the 404 employees, 129 were employed in MorphoSys's subsidiaries on September 30, 2009, and on average, 118 were employed (first nine months 2008: 113 and 109 on average, respectively).

Of the 404 employees, 239 worked in research and development and 165 in sales, general and administration (December 31, 2008: 191 and 143, respectively).

On September 30, 2009, 112 of MorphoSys's employees had a PhD degree (December 31, 2008: 91).

Of the 404 employees, 204 worked for the Partnered Discovery segment, 50 for the Proprietary Development segment and 150 for the AbD Serotec segment (December 31, 2008: Partnered Discovery and Proprietary Development segments 201 and AbD segment 133, respectively).

On September 30, 2009, MorphoSys had 4 apprenticeship positions (December 31, 2008: 2).

Senior Management Group – Appointments

In September 2009, MorphoSys announced the appointment of Lisa Rojkjaer, MD, as Vice President and Head of Clinical Development. Dr. Rojkjaer joins MorphoSys from Novartis Pharma AG where she most recently held the position of Head of Medical Affairs - Hematology, Europe, following her appointment as global clinical program head for Exjade® . Here she was responsible for all clinical activities in Europe for Novartis's Hematology portfolio including Gleevec® and Exjade® . Prior to her tenure at Novartis, she spent five years with Novo Nordisk, in Copenhagen, Denmark, and Princeton, USA as the Director of Global Medical Affairs Biopharmaceuticals and later Director, Clinical Development Hematology. During her time with Novo Nordisk she established a global medical affairs group for biopharmaceuticals and headed the clinical development of the US hematology portfolio amongst other accomplishments. Dr. Rojkjaer is a board certified hematologist and received her MD degree from the University of Toronto, where she also did her residency in internal medicine and fellowship in hematology. She has held academic and hospital appointments in the US, Canada and Europe.

Pipeline Update

Partnered Discovery

During the third quarter of 2009, MorphoSys's existing partnered therapeutic antibody pipeline increased to 62 active antibody development programs in total (up from 55 at the beginning of the year), of which currently seven programs are in clinical development, 27 in preclinical development, and 28 in research (not including the co-development candidate with Novartis).

In the first nine months of 2009, MorphoSys recorded 13 new program starts with its partners.

During the third quarter of 2009, Bayer Schering Pharma had filed all necessary documentation to initiate a phase 1 clinical trial with a HuCAL-derived antibody-drug conjugate (ADC) in the therapeutic area of oncology. This event triggered a clinical milestone payment to MorphoSys.

The program is directed against the target molecule MN, also known as Carbonic Anhydrase or CA IX for short, a tumor associated antigen expressed in many tumor types under hypoxic conditions. The antibody is the first fully human HuCAL-based ADC to enter clinical trials. ADCs comprise antibodies linked to cytotoxic drugs, and combine the targeting properties of the antibody with the cell-destroying effect of the conjugated drug. In the present program, the HuCALderived antibody-drug conjugate incorporates technology licensed to Bayer Schering Pharma from Seattle Genetics.

MorphoSys projected that in 2009 between two and four partnered programs could enter clinical trials. Following Novartis and Centocor Ortho Biotech, Bayer Schering Pharma was the third partner to advance a HuCAL-derived antibody into clinical trials during the course of the year.

Proprietary Development

MOR103

In June 2009, MorphoSys has submitted an application to conduct a Phase 1b/2a clinical study in patients with active rheumatoid arthritis and MorphoSys expects clearance in the final quarter of 2009. The trial, which will be conducted in multiple centers in several European countries, is expected to enroll 135 patients in total.

Early-stage Pipeline

Work on MOR202, MOR205 and MOR203, three cancer programs in pre-clinical and discovery stage, continues as planned and work on MOR104, an early-stage program in inflammation, was initiated in the third quarter of 2009.

Business Development

Partnered Discovery

The therapeutic license agreement with Eli Lilly and Company signed in September 2005 as part of a settlement to resolve patent litigation initiated by Lilly's subsidiary Applied Molecular Evolution, was concluded during the third quarter 2009. However, the relationship with Eli Lilly continues on the AbD Serotec side of the business.

AbD Serotec

In July 2009, MorphoSys announced that its research and diagnostic antibody segment AbD Serotec and Spinreact S.A., a Spanish biotechnology company and provider of clinical diagnostic reagents, have signed a supply agreement. Initially, the agreement covers the use of two antibodies which Spinreact will incorporate in a series of clinical diagnostic kits. AbD Serotec will continuously supply Spinreact with antibody material. Following Swedish diagnostic company Phadia AB, Spinreact became the second significant diagnostic company to implement antibodies provided by AbD Serotec into a clinical diagnostic kit.

In September 2009, AbD Serotec also initiated a research collaboration with FIND (Foundation for Innovative New Diagnostics), a Swiss foundation that develops, evaluates and accelerates the implementation of new diagnostic tools for poverty-related diseases such as tuberculosis, malaria and sleeping sickness. The goal of the research alliance is to establish a series of heatstable HuCAL-based antibodies as key components of novel diagnostic tests that are robust in tropical climates. Using MorphoSys's proprietary HuCAL technology, AbD Serotec will identify heat-stable fully human antibodies specific for rapid diagnostic test applications for parasite detection.

Currently, rapid diagnostic test applications can allow detection of parasite antigens in a finger prick blood sample. However, most commercial diagnostic tests are developed for storage and use at 25–30ºC. High disease burden countries usually have higher ambient temperatures, which can lead to test degradation especially when taking into account the need for delivery to relatively remote locations in the developing world. Thus, temperature stability and prolonged shelf-life of diagnostic kits are critical factors for improving infectious disease control.

Under the terms of the agreement, FIND receives the rights for the commercial use of heatstable HuCAL-derived antibodies for in vitro diagnostics. AbD Serotec will participate in sales of diagnostic tests using such antibodies in industrialized countries. If concluded successfully, the collaboration could be expanded to cover other disease areas of relevance for FIND's objectives.

Risk and Opportunity Report

The risks and opportunities have not changed materially compared to the situation described in the Annual Report 2008.

Outlook

At the occasion of the reporting of the financial results of the first nine months of 2009, MorphoSys reconfirmed full-year guidance. The Company estimates full-year 2009 Group revenues between € 80 million and € 85 million, and an operating profit of € 8 million to € 11 million, including investments in technology and product development in the amount of € 18 million to € 20 million (2008: € 7.7 million)

Regarding the AbD segment, the Company continues to expect revenues of approximately € 20 million but has increased the operating margin guidance (previously at least 2%) to up to 6%, depending on operational developments and currency exchange rates.

LETTER TO	GROUP	FINANCIAL STATEMENTS	1 3
THE SHARE-	M A N A G E M E N T
HOLDERS	R E P O R T

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Consolidated Statement of Operations (IFRS) – unaudited

	Three Months	Three Months	Nine Months	Nine Months
	Ended	Ended	Ended	Ended
	09/30/2009	09/30/2008	09/30/2009	09/30/2008
Note	€	€	€	€
Revenues 2	19,708,225	20,002,476	57,585,938	53,258,282
Operating Expenses 2
Cost of Goods Sold	1,737,379	1,706,263	5,057,271	5,232,897
Research and Development	9,532,870	6,792,959	27,487,848	18,322,615
Sales, General and Administrative	5,723,055	4,392,914	15,714,291	14,602,572
Total Operating Expenses	16,993,304	12,892,136	48,259,410	38,158,084
Profit from Operations	2,714,921	7,110,340	9,326,528	15,100,198
Finance Income	736,366	669,438	1,874,561	2,002,316
Finance Expense	1,683	1,617	6,271	4,851
Other Income	10,245	68,637	203,589	351,959
Other Expense	385,584	490,837	622,812	1,002,003
Profit before Taxes	3,074,265	7,355,961	10,775,595	16,447,619
Income Tax Expense	462,940	1,886,962	3,120,279	4,677,222
Net Profit	2,611,325	5,468,999	7,655,316	11,770,397
Basic Net Profit per Share	0.12	0.25	0.34	0.53
Diluted Net Profit per Share	0.12	0.24	0.34	0.53
Shares Used in Computing Basic Net Profit per Share	22,471,053	22,261,362	22,431,195	22,174,437
Shares Used in Computing Diluted Net Profit per Share	22,591,518	22,398,351	22,508,245	22,298,088

LETTER TO GROUP FINANCIAL STATEMENTS 1 5

• HOLDERS REPORT Statement of Comprehensive Income

• Balance Sheet Statement of Changes in Stockholders' Equity

  • Statement of Cash Flows

Notes to the Financial Statements

Consolidated Statement of Comprehensive Income (IFRS) – unaudited

	Three Months	Three Months	Nine Months	Nine Months
	Ended	Ended	Ended	Ended
	09/30/2009	09/30/2008	09/30/2009	09/30/2008
	€	€	€	€
Net Profit	2,611,325	5,468,999	7,655,316	11,770,397
Change in Unrealized Gains and Losses on
Available-for-sale Securities	(564,568)	699,693	(1,070,152)	1,679,251
(thereof Reclassifications of unrealized gains
and losses to profit and loss)	(661,577)	(102,111)	(1,585,955)	(665,515)
Deferred taxes	148,651	(184,229)	281,771	(442,147)
Change in Unrealized Gains and Losses, Net of
Deferred Tax	(415,917)	515,464	(788,381)	1,237,104
Effects from Equity-related Recognition of Deferred
Taxes	8,494	(171)	(4,522)	10,309
Foreign Currency Gain/(Loss) from Consolidation	(536,195)	(2,346)	385,883	(705,862)
Comprehensive Income	1,667,707	5,981,946	7,248,296	12,311,948

Consolidated Balance Sheet (IFRS)

	Sept. 30, 2009	Dec. 31, 2008
	(unaudited)
Note	€	€
ASSETS
Current Assets
Cash and Cash Equivalents	45.958.290	40.113.727
Available-for-sale Financial Assets	93.806.391	97.752.015
Accounts Receivable	7.403.238	4.211.258
Income Tax Receivables	533.590	1.122.495
Other Receivables	126.417	109.900
Inventories, Net	4.023.604	3.521.451
Prepaid Expenses and Other Current Assets	3.485.339	2.563.030
Assets Classified as Held for Sale	755.187	722.036
Total Current Assets	156.092.056	150.115.912
Non-current Assets
Property, Plant and Equipment, Net	4.361.034	3.967.405
Patents, Net	898.659	1.199.267
Licenses, Net	14.204.843	15.377.995
Software, Net	729.473	663.964
Know-how and Customer Lists, Net	2.194.568	2.492.537
Goodwill	26.732.557	26.672.397
Deferred Tax Asset	455.814	1.720.750
Prepaid Expenses and Other Assets, Net of Current Portion	1.192.991	1.082.665
Total Non-current Assets	50.769.939	53.176.980
Total Assets	206.861.995	203.292.892

LETTER TO GROUP FINANCIAL STATEMENTS 1 7 THE SHARE- MANAGEMENT Statement of Operations HOLDERS REPORT Statement of Comprehensive Income

• Balance Sheet
• Statement of Changes in Stockholders' Equity
• Statement of Cash Flows Notes to the Financial Statements

		Sept. 30, 2009	Dec. 31, 2008
		(unaudited)
	Note	€	€
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable		11,415,266	11,616,376
Licenses Payable		187,176	450,969
Provisions		1,222,842	881,999
Current Portion of Deferred Revenue		13,494,599	14,453,680
Total Current Liabilities		26,319,883	27,403,024
Non-current Liabilities
Provisions, Net of Current Portion		117,839	117,839
Deferred Revenue, Net of Current Portion		6,622,652	11,193,421
Convertible Bonds Due to Related Parties		80,150	48,670
Deferred Tax Liability		2,185,165	2,542,750
Total Non-current Liabilities		9,005,806	13,902,680
Stockholders' Equity
Common Stock, € 1.00 Par Value;
Ordinary Shares Authorized (42,759,630 and 42,759,630 for 2009 and 2008, respectively)
Ordinary Shares Issued (22,604,457 and 22,478,787 for 2009 and 2008, respectively)
Ordinary Shares Outstanding (22,524,561 and 22,398,891 for 2009 and 2008, respectively)
Treasury Stock (79,896 and 79,896 shares for 2009 and 2008, respectively), at Cost	3	22,594,683	22,469,013
Additional Paid-in Capital	3	160,698,515	158,523,363
Reserves		1,282,691	1,689,711
Accumulated Deficit		(13,039,583)	(20,694,899)
Total Stockholders' Equity		171,536,306	161,987,188
Total Liabilities and Stockholders' Equity		206,861,995	203,292,892

Consolidated Statement of Changes in Stockholders' Equity (IFRS) – unaudited

	Common Stock
	Shares	€
Balance as of January 1, 2008	22,160,259	22,160,259
Compensation Related to the Grant of Stock Options and Convertible Bonds	0	0
Exercise of Options and Convertible Bonds Issued, to Related Parties Net of Issuance Cost of € 15,500	245,049	245,049
Reserves:
Change in Unrealized Gain on Available-for-sale Securities, Net of Deferred Tax	0	0
Effects from Equity-related Recognition of Deferred Taxes	0	0
Foreign Currency Loss from Consolidation	0	0
Net Profit for the Period	0	0
Comprehensive Income	0	0
Balance as of September 30, 2008	22,405,308	22,405,308
Balance as of January 1, 2009	22,478,787	22,478,787
Compensation Related to the Grant of Stock Options and Convertible Bonds	0	0
Exercise of Options and Convertible Bonds Issued to Related Parties	125,670	125,670
Reserves:
Change in Unrealized Gain on Available-for-sale Securities, Net of Deferred Tax	0	0
Effects from Equity-related Recognition of Deferred Taxes	0	0
Foreign Currency Gain from Consolidation	0	0
Net Profit for the Period	0	0
Comprehensive Income	0	0
Balance as of September 30, 2009	22,604,457	22,604,457

• HOLDERS REPORT Statement of Comprehensive Income
• Balance Sheet
• Statement of Changes in Stockholders' Equity
• Statement of Cash Flows
• Notes to the Financial Statements

	THE SHARE-
	H O L D E R S

	Treasury Stock	Additional	Revaluation	Translation	Accumulated	Total
		Paid-in Capital	Reserve	Reserve	Deficit	Stockholders'
						Equity
Shares	€	€	€	€	€	€
80,196	(9,811)	155,376,343	2,241,328	(382,418)	(33,848,252)	145,537,449
0	0	816,496	0	0	0	816,496
(300)	37	1,346,569	0	0	0	1,591,655
0	0	0	1,237,104	0	0	1,237,104
0	0	0	10,309	0	0	10,309
0	0	0	0	(705,862)	0	(705,862)
0	0	0	0	0	11,770,397	11,770,397
0	0	0	1,247,413	(705,862)	11,770,397	12,311,948
79,896	(9,774)	157,539,408	3,488,741	(1,088,280)	(22,077,855)	160,257,548
79,896	(9,774)	158,523,363	4,163,972	(2,474,261)	(20,694,899)	161,987,188
0	0	1,340,736	0	0	0	1,340,736
0	0	834,416	0	0	0	960,086
0	0	0	(788,381)	0	0	(788,381)
0	0	0	(4,522)	0	0	(4,522)
0	0	0	0	385,883	0	385,883
0	0	0	0	0	7,655,316	7,655,316
0	0	0	(792,903)	385,883	7,655,316	7,248,296
79,896	(9,774)	160,698,515	3,371,069	(2,088,378)	(13,039,583)	171,536,306

Consolidated Statement of Cash Flows (IFRS) – unaudited

	2009	2008
For the Period Ended September 30, Note	€	€
Operating Activities
Net Profit	7,655,316	11,770,397
Adjustments to Reconcile Net Profit to Net Cash Provided by Operating Activities:
Non-cash Charges from PPA	0	67,895
Depreciation and Amortization of Tangible and Intangible Assets	3,966,682	3,924,046
Income Tax Benefit	(129,250)	(184,947)
Net Gain on Sales of Financial Assets	(1,629,941)	(868,379)
Unrealized Net Loss on Derivative Financial Instruments	123,212	13,490
Loss/ Gain on Sale of Property, Plant and Equipment	334	(12,182)
Recognition of Deferred Revenue	(20,117,251)	(25,343,427)
Stock-based Compensation	1,333,864	816,496
Changes in Operating Assets and Liabilities:
Accounts Receivable	(3,180,701)	3,653,247
Prepaid Expenses, Other Assets and Tax Receivables	275,786	(1,053,700)
Accounts Payable and Provisions	467,065	1,827,378
Licenses Payable	(263,793)	685,648
Other Liabilities	312,203	(2,616,504)
Deferred Revenue	14,587,401	25,543,088
Cash Generated from Operations	3,400,927	18,222,546
Interest Paid	(1,940)	0
Interest Received	244,689	1,134,054
Income Taxes Paid	(690,967)	(648,559)
Net Cash Provided by Operating Activities	2,952,709	18,708,041

LETTER TO GROUP FINANCIAL STATEMENTS 2 1 THE SHARE- MANAGEMENT Statement of Operations H O L D E R S R E P O R T Statement of Comprehensive Income

• Balance Sheet
• Statement of Changes in Stockholders' Equity Statement of Cash Flows
• Notes to the Financial Statements

	2009	2008
For the Period Ended September 30, Note	€	€
Investing Activities:
Purchases of Financial Assets	(10,988,704)	(33,791,318)
Proceeds from Sales of Financial Assets	15,411,595	10,496,738
Purchases of Property, Plant and Equipment	(1,529,807)	(1,041,487)
Proceeds from Disposals of Property, Plant and Equipment	535	316,193
Additions to Intangibles	(975,623)	(1,723,888)
Net Cash Provided by/Used in Investing Activities	1,917,996	(25,743,762)
Financing Activities:
Proceeds from the Exercise of Options and Convertible Bonds Granted to Related Parties	960,087	1,607,154
Net of Proceeds and Payments from the Issuance of Convertible Bonds Granted to Related Parties	31,480	(10,116)
Purchases of Derivative Financial Instruments	(173,304)	(75,000)
Proceeds from the Disposal of Derivative Financial Instruments	47,000	170,359
Net Cost of Share Issuance	0	(15,500)
Net Cash Provided by Financing Activities	865,263	1,676,897
Effect of Exchange Rate Differences on Cash	108,595	33,219
Increase/(Decrease) in Cash and Cash Equivalents	5,844,563	(5,325,605)
Cash and Cash Equivalents at the Beginning of the Period	40,113,727	48,407,064
Cash and Cash Equivalents at the End of the Period	45,958,290	43,081,459

Notes to the Interim Consolidated Financial Statements – unaudited

The accompanying consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), IAS 34 "Interim Financial Reporting" adopted by the International Accounting Standards Board (IASB), London, in consideration of the interpretations of the Standing Interpretations Committee (SIC), the International Financial Reporting Interpretations Committee (IFRIC) and the IFRS adopted by the European Commission.

The consolidated financial statements for the period ended September 30, 2009, include MorphoSys AG, MorphoSys IP GmbH, MorphoSys USA, Inc., MorphoSys UK Ltd. (former Serotec Ltd.), MorphoSys US, Inc. (former Serotec, Inc.), MorphoSys AbD GmbH (former Serotec GmbH), Oxford Biotechnology Ltd. and Poole Real Estate Ltd. (former Biogenesis UK Ltd.), together referred to as the "Group".

1 Changes in Accounting Policies

The accounting policies applied for the financial statements as of December 31, 2008, have been used throughout the first nine months of 2009.

The Group applies IFRS 8 "Operating Segments" (effective from January 1, 2009). IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements of the US standard SFAS 131 "Disclosures about segments of an enterprise and related information". The new standard requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. As of June 30, 2009, the Group implemented a third operating segment Therapeutic Antibodies – Proprietary Development.

2 Segment Reporting

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker and for which discrete financial information is available.

Segment information is presented in respect of the Group's operating and geographical segments. The operating segments are based on the Group's management and internal reporting structure. Segment results and assets include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Intersegment pricing is determined on an arm's length basis according to the Group transfer pricing policy.

Notes to the Financial Statements

The Group consists of the following three main operating segments:

Partnered Discovery

MorphoSys possesses one of the leading technologies for the generation of human antibody therapeutics. The Company commercially exploits this technology via partnerships with multiple pharmaceutical and biotechnology companies. All activities related to these collaborations as well as technology development are reflected in this segment.

Proprietary Development

This segment involves all activities relating to proprietary therapeutic antibody development. Presently, this includes the Company's two lead compounds in its proprietary product portfolio, MOR103 and MOR202. Proprietary compounds, once developed to a stage where clinical proof of concept is achieved, can then be outlicensed to third parties.

AbD Serotec

The AbD Serotec segment leverages MorphoSys's core technological capabilities in the design and manufacture of antibodies for research and diagnostic purposes. It commercializes the HuCAL technology, focusing on generation of bespoke research antibodies for its customers. The segment also generates sales from catalog antibodies and bulk/industrial production of antibodies.

GEOGRAPHICAL SEGMENTS

In presenting information on the basis of geographical segments, segment revenues are based on the geographical location of the customers and segment assets on the geographical location of the assets.

Ended September 30,	Partnered Discovery		Proprietary Development
(in 000's €)	2009	2008	2009	2008
Revenues, total	42,902	40,586	759	-
External Revenues	42,902	40,586	759	-
Inter-segment Revenues	-	-		-
Total Operating Expenses	15,649	14,617	13,115	4,768
Cost of Goods Sold	-	-		-
Other Operating Expenses	14,956	13,954	13,115	4,768
Inter-segment Costs	693	663		-
Segment Result	27,253	25,969	(12,356)	(4,768)
Finance Income	-	-	-	-
Finance Expense	-	-	-	-
Other Income	-	-	-	-
Other Expense	-	-	-	-
Profit before Taxes	-	-	-	-
Income Tax Expense	-	-	-	-
Net Profit	-	-	-	-

For the Nine Months Period

For the Three Months Period

Ended September 30,	Partnered Discovery		Proprietary Development
(in 000's €)	2009	2008	2009	2008
Revenues, total	14,799	15,882	253	-
External Revenues	14,799	15,882	253	-
Inter-segment Revenues	-	-		-
Total Operating Expenses	5,529	4,484	4,578	2,246
Cost of Goods Sold	-	-		-
Other Operating Expenses	5,298	4,253	4,578	2,246
Inter-segment Costs	231	231		-
Segment Result	9,270	11,398	(4,325)	(2,246)
Finance Income	-	-	-	-
Finance Expense	-	-	-	-
Other Income	-	-	-	-
Other Expense	-	-	-	-
Profit before Taxes	-	-	-	-
Income Tax Expense	-	-	-	-
Net Profit	-	-	-	-

LETTER TO GROUP FINANCIAL STATEMENTS 2 5 THE SHARE- MANAGEMENT Statement of Operations

• HOLDERS REPORT Statement of Comprehensive Income
• Balance Sheet
• Statement of Changes in Stockholders' Equity
• Statement of Cash Flows

Notes to the Financial Statements

AbD Serotec			Unallocated	Elimination		Group
2009	2008	2009	2008	2009	2008	2009	2008
14,618	13,335	-	-	(693)	(663)	57,586	53,258
13,925	12,672	-	-	-	-	57,586	53,258
693	663	-	-	(693)	(663)	-	-
13,224	13,029	6,964	6,407	(693)	(663)	48,259	38,158
5,057	5,233	-	-	-	-	5,057	5,233
8,167	7,796	6,964	6,407	-	-	43,202	32,925
-	-	-	-	(693)	(663)	-	-
1,394	306	(6,964)	(6,407)	-	-	9,327	15,100
-	-	-	-	-	-	1,874	2,002
-	-	-	-	-	-	6	5
-	-	-	-	-	-	203	352
-	-	-	-	-	-	623	1,002
-	-	-	-	-	-	10,775	16,447
-	-	-	-	-	-	3,120	4,677
-	-	-	-	-	-	7,655	11,770

AbD Serotec			Unallocated		Elimination Group
2009	2008	2009	2008	2009	2008	2009	2008
4,887	4,351	-	-	(231)	(231)	19,708	20,002
4,656	4,120	-	-	-	-	19,708	20,002
231	231	-	-	(231)	(231)	-	-
4,566	4,222	2,551	2,171	(231)	(231)	16,993	12,892
1,737	1,706	-	-	-	-	1,737	1,706
2,829	2,516	2,551	2,171	-	-	15,256	11,186
-	-	-	-	(231)	(231)	-	-
321	129	(2,551)	(2,171)	-	-	2,715	7,110
-	-	-	-	-	-	736	669
-	-	-	-	-	-	2	2
-	-	-	-	-	-	10	69
-	-	-	-	-	-	385	490
-	-	-	-	-	-	3,074	7,356
-	-	-	-	-	-	463	1,887
-	-	-	-	-	-	2,611	5,469

For services performed by the AbD segment for the Partnered Discovery segment, a revenue sharing agreement was established in 2007. The compensatory fee to the AbD segment amounted to € 0.7 million for the first nine months of 2009.

The following table shows the split of the Company's consolidated revenues by geographical market:

For the Period Ended September 30,
(in 000's €)	2009	2008
Germany	5,635	4,054
Other Europe and Asia	39,879	35,724
USA and Canada	11,152	12,278
Other	920	1,202
Total	57,586	53,258

3 Changes in Stockholders' Equity

Common Stock

On September 30, 2009, the common stock of the Company amounted to € 22,604,457 (December 31, 2008: € 22,478,787). Through the exercise of 125,670 options issued to management and employees, common stock increased by € 125,670 in the first nine months of 2009. Treasury stock amounted to € 9,774 as of September 30, 2009 (December 31, 2008: € 9,774).

Additional Paid-in Capital

On September 30, 2009, additional paid-in capital amounted to € 160,698,515 (December 31, 2008: € 158,523,363). The total increase of € 2,175,152 is due to stock-based compensation in the amount of € 1,340,736. A further increase of € 834,416 arose from the exercise of issued stock options.

4 Changes in Convertible Bonds and Stock Options

On April 01, 2009, 422,200 stock options and 101,000 convertible bonds were granted to members of the Management Board and to employees under the 2002 Plan.

5 Directors' Dealings

The Group has related party transactions with its management and with members of the Supervisory Board. In addition to the cash remuneration, the Company has issued stock options and convertible bonds to the Management Board. The table below shows the shares, stock options and convertible bonds as well as the changes of ownership of the same which were held by members of the Management Board and the Supervisory Board during the first nine months of 2009:

LETTER TO GROUP FINANCIAL STATEMENTS 2 7 THE SHARE- MANAGEMENT Statement of Operations HOLDERS REPORT Statement of Comprehensive Income Balance Sheet

Statement of Changes in Stockholders' Equity

Statement of Cash Flows

Notes to the Financial Statements

Shares
	01/01/09	Additions	Forfeitures	Sales	30/09/09
Management Board
Dr. Simon E. Moroney	406,383	75,000	0	64,998	416,385
Dave Lemus*	300	17,595	0	17,595	300
Dr. Arndt Schottelius	0	500	0	0	500
Dr. Marlies Sproll	105	0	0	0	105
Total	406,788	93,095	0	82,593	417,290
Supervisory Board
Dr. Gerald Möller	7,500	0	0	0	7,500
Prof. Dr. Jürgen Drews	7,290	0	0	0	7,290
Dr. Walter Blättler	2,019	0	0	0	2,019
Dr. Daniel Camus	0	0	0	0	0
Dr. Metin Colpan	0	0	0	0	0
Dr. Geoffrey N. Vernon	0	0	0	0	0
Total	16,809	0	0	0	16,809

* On September 30, 2009, Mr. Lemus exercised 17,595 stock options and sold the resulting shares. Subsequently, Mr. Lemus exercised additional 18,000 stock options on October 1, 2009 and October 5, 2009. Mr. Lemus sold 15,000 of the resulting new shares and holds 3,000 of the shares received.

Stock Options
	01/01/09	Additions	Forfeitures	Exercises	30/09/09
Management Board
Dr. Simon E. Moroney	293,445	81,000	0	75,000	299,445
Dave Lemus*	147,267	36,600	0	17,595	166,272
Dr. Arndt Schottelius	0	90,000	0	0	90,000
Dr. Marlies Sproll	141,267	36,600	0	0	177,867
Total	581,979	244,200	0	92,595	733,584
Supervisory Board
Dr. Gerald Möller	0	0	0	0	0
Prof. Dr. Jürgen Drews	0	0	0	0	0
Dr. Walter Blättler	0	0	0	0	0
Dr. Daniel Camus	0	0	0	0	0
Dr. Metin Colpan	0	0	0	0	0
Dr. Geoffrey N. Vernon	0	0	0	0	0
Total	0	0	0	0	0

* On September 30, 2009, Mr. Lemus exercised 17,595 stock options and sold the resulting shares. Subsequently, Mr. Lemus exercised additional 18,000 stock options on October 1, 2009 and October 5, 2009. Mr. Lemus sold 15,000 of the resulting new shares and holds 3,000 of the shares received.

Convertible Bonds

	01/01/09	Additions	Forfeitures	Exercises	30/09/09
Management Board
Dr. Simon E. Moroney	16,647	30,000	0	0	46,647
Dave Lemus	13,872	30,000	0	0	43,872
Dr. Arndt Schottelius	0	0	0	0	0
Dr. Marlies Sproll	11,100	30,000	0	0	41,100
Total	41,619	90,000	0	0	131,619
Supervisory Board
Dr. Gerald Möller	0	0	0	0	0
Prof. Dr. Jürgen Drews	0	0	0	0	0
Dr. Walter Blättler	0	0	0	0	0
Dr. Daniel Camus	0	0	0	0	0
Dr. Metin Colpan	0	0	0	0	0
Dr. Geoffrey N. Vernon	0	0	0	0	0
Total	0	0	0	0	0

6 Transactions with Related Parties

Except for the transactions described in "Directors' Dealings", no other transactions with related parties have been entered into in the first nine months of 2009.

Imprint

Contact

Corporate Communications & Investor Relations Phone: +49 89 899 27-404 Fax: +49 89 899 27-5404 investors@morphosys.com

MorphoSys AG Lena-Christ-Str. 48 82152 Martinsried / Planegg Germany

E-mail: info@morphosys.com Internet: www.morphosys.com

Published on October 28, 2009

This interim report is also published in German and is available for download from our website.

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