MorphoSys AG — Interim / Quarterly Report 2010

Oct 29, 2010

3rd INTERIM REPORT JANUARY – SEPTEMBER 2010

Contents

MorphoSys Group: 3rd Interim Report January – September 2010

• 3 Letter to the Shareholders
• 4 Interim Group Management Report
• 12 Consolidated Statement of Operations (IFRS) for the Periods Ended September 30, 2010 and 2009 (unaudited)
• 13 Consolidated Statement of Comprehensive Income (IFRS) for the Periods Ended September 30, 2010 and 2009 (unaudited)
• 14 Consolidated Balance Sheet (IFRS) as of September 30, 2010 (unaudited) and December 31, 2009
• 16 Consolidated Statement of Changes in Stockholders' Equity (IFRS) as of September 30, 2010 and 2009 (unaudited)
• 18 Consolidated Statement of Cash Flows (IFRS) for the Periods Ended September 30, 2010 and 2009 (unaudited)
• 20 Notes to the Interim Consolidated Financial Statements (unaudited)

HOLDERS R E P O R T

THE SHARE- MANAGEMENT

Dear Shareholders,

During the third quarter of 2010, MorphoSys made significant progress in further developing its business on several different fronts.

On the proprietary side of our therapeutic business, we secured access to a collection of novel target molecules associated with hospital-acquired infections, including MRSA (methicillin-resistant S. aureus), also sometimes referred to as a "superbug". We see these new targets as a very promising basis of antibody therapy for an increasingly serious medical problem.

On the partnered side of our therapeutic business, the announcement of a third partnered program IND helps us keep on track to meet our goal of up to six clinical milestones with various partners over the course of this year.

In our third segment, AbD Serotec, the segment continues to execute its strategy and during the quarter secured exclusive licenses for two antibodies representing key value drivers in their portfolio. More specifically, in one agreement, AbD Serotec gained exclusive access to a key diagnostic antibody involved in analyzing a patient's calcium level. A second agreement granted AbD Serotec exclusive access to certain research antibodies to study the innate immune system.

Last but not least, immediately after quarter end, in October, we acquired Sloning BioTechnology GmbH. This transaction has made MorphoSys the sole source of Sloning's state-of-the-art Slonomics technology, which dramatically improves the assembly and quality of protein libraries.

Again, thank you for your continued interest in and support of MorphoSys AG.

Sincerely yours,

Dave Lemus Chief Financial Officer MorphoSys AG

Interim Group Management Report: January 1 – September 30, 2010

Industry Overview

In the third quarter of 2010, large-scale acquisitions continued to play an important role in the pharmaceutical industry. With Johnson & Johnson announcing plans to acquire Crucell and Sanofi-Aventis's move to acquire Genzyme, two significant transactions emerged during the third quarter. With regard to clinical data from antibody drugs in development, Seattle Genetics and Millennium Pharmaceuticals reported positive data from a pivotal phase 2 trial of Brentuximab to treat relapsed or refractory Hodgkin's lymphoma. Brentuximab is an antibody-drug conjugate targeting CD30.

MorphoSys Share Price Performance

Year to date, the MorphoSys share price had decreased by 3% at the end of the third quarter, in line with the TecDAX which decreased by 6% during the first nine months. The NASDAQ Biotechnology Index increased by 4% in the same period.

The MorphoSys Share (January 4, 2010 = 100%)

Financial Analysis

Revenues

Compared to the same period of the previous year, Group revenues increased by 9% to € 62.8 million in the first nine months of 2010 (first nine months of 2009: € 57.6 million). This increase mainly resulted from higher levels of licensing fees and funded research in the Partnered Discovery segment as well as from increased sales in the AbD Serotec segment. Revenues arising from the Partnered Discovery and Proprietary Development segments accounted HOLDERS R E P O R T

THE SHARE- M A N A G E M E N T

for 77% or € 48.5 million (first nine months of 2009: € 43.7 million) of total revenues while the AbD Serotec segment generated 24% (€ 15.0 million) of total revenues (first nine months of 2009: € 14.6 million).

Geographically, 19% or € 11.7 million of MorphoSys's commercial revenues were generated with biotechnology and pharmaceutical companies or non-profit organizations located in North America and 81% or € 51.1 million with companies located mainly in Europe and Asia. This compares to 19% and 81%, respectively, in the same period of the prior year.

Partnered Discovery and Proprietary Development Segments

Segment revenues arising from Partnered Discovery comprised € 42.6 million in funded research and licensing fees (first nine months of 2009: € 35.1 million) as well as € 4.8 million success-based payments (first nine months of 2009: € 7.8 million), representing 10% of total Partnered Discovery and Proprietary Development revenues. Segment revenues arising from Proprietary Development included € 1.1 million in funded research (first nine months of 2009: € 0.8 million). Approximately 90% of Partnered Discovery and Proprietary Development revenues and 70% of total revenues arose from the Company's three largest alliances with Novartis, Daiichi Sankyo and Pfizer (first nine months of 2009: Novartis, Daiichi Sankyo and Merck, 82% and 62%, respectively).

Assuming constant foreign exchange rates at the average rate for the first three quarters of 2009, segment revenues in the Partnered Discovery and Proprietary Development segments would have remained unchanged.

Revenue Development by Segment (in € million)*

* Differences due to elimination of inter-segment revenues

AbD Serotec Segment

Compared to the same period of the previous year, AbD Serotec revenues increased by 3%, or € 0.4 million, to € 15.0 million in 2010 (first nine months of 2009: € 14.6 million). Assuming constant foreign exchange rates at the average rate for the first three quarters of 2009, revenues in the AbD Serotec segment would have totaled € 14.7 million.

As of September 30, 2010, orders in the amount of € 1.0 million were classified as backorders in the segment (September 30, 2009: € 2.3 million).

Operating Expenses

Compared to the first nine months of 2009, total operating expenses increased by approximately 13% to € 54.8 million in Q3 2010 (first nine months of 2009: € 48.3 million). The increase in operating expenses of € 6.5 million was mainly impacted by research and development (R&D) expenses increasing by 18% or € 5.0 million and sales, general and administrative (S, G&A) expenses increasing by 7% from € 15.7 million to € 16.8 million.

Operating expenses increased by 3% to € 16.0 million (first nine months of 2009: € 15.6 million) in the Partnered Discovery segment and by 40% to € 18.4 million (first nine months of 2009: € 13.1 million) in the Proprietary Development segment. In the AbD Serotec segment, operating expenses increased by 9% to € 14.4 million (first nine months of 2009: € 13.2 million) and would have amounted to € 14.0 million under the assumption of constant foreign exchange rates at the average rate for the first three quarters of 2009.

Stock-based compensation expenses are embedded in COGS as well as S, G&A and R&D expenses. Stock-based compensation for the first nine months of 2010 amounted to € 1.6 million (first nine months of 2009: € 1.3 million) and is a non-cash charge.

Cost of Goods Sold

COGS is composed of the AbD Serotec segment's cost of goods sold in the first nine months of 2010 and – compared to the same period of the prior year – increased by 8% from € 5.1 million to € 5.5 million.

Research and Development Expenses

In the first nine months of 2010, expenses for research and development increased by € 5.0 million to € 32.5 million (first nine months of 2009: € 27.5 million). This was mainly due to higher personnel costs (first nine months of 2010: € 12.9 million; first nine months of 2009: € 10.6 million) as well as increased costs for external services (first nine months of 2010: € 9.5 million; first nine months of 2009: € 7.6 million). In the first nine months of 2010, the Company incurred costs for proprietary product development (excluding allocations for segment purposes) in the amount of € 16.3 million (first nine months of 2009: € 11.9 million) as well as costs for technology development in the amount of € 1.4 million (first nine months of 2009: € 0.4 million) which is accounted for mainly 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 € 16.8 million (first nine months of 2009: € 15.7 million).

Development of Operating Expenses (in € million)

Non-operating Items

For the first nine months of 2010, non-operating items mainly included finance income of € 2.5 million (first nine months of 2009: € 1.9 million), other expenses of € 0.7 million (first nine months of 2009: € 0.6 million) and other income of € 0.4 million (first nine months of 2009: € 0.2 million).

Taxes

For the first nine months of 2010, the Company reported income tax expenses in the amount of € 3.0 million (first nine months of 2009: € 3.1 million), which mainly consisted of current income taxes.

Operating Profit / Net Profit

Group operating profit for the first nine months of 2010 amounted to € 8.0 million (first nine months of 2009: € 9.3 million). Earnings before interest and taxes (EBIT) amounted to € 10.1 million, compared to an EBIT of € 10.5 million in the first nine months of the previous year. The Partnered Discovery and Proprietary Development segments showed an operating profit of € 31.4 million (first nine months of 2009: € 27.3 million) and an operating loss of € 17.3 million (first nine months of 2009: operating loss of € 12.4 million), respectively. In the AbD Serotec segment, operating profit decreased to € 0.7 million (first nine months of 2009: € 1.4 million) and would have remained unchanged under the assumption of constant foreign exchange rates using the average rates for the first three quarters of 2009.

A net profit after taxes of € 7.2 million was achieved in the first nine months of 2010, compared to a net profit after taxes of € 7.7 million in the same period of the prior year. The resulting basic net profit per share for the first nine months of 2010 amounted to € 0.32 (first nine months of 2009: € 0.34).

Liquidity / Cash Flows

Net cash inflow from operations in the first nine months of 2010 amounted to € 8.0 million (first nine months of 2009: cash inflow of € 3.0 million). Investing activities resulted in a cash outflow of € 9.5 million (first nine months of 2009: cash inflow of € 1.9 million) whereas financing activities resulted in a cash inflow of € 1.4 million (first nine months of 2009: cash inflow of € 0.9 million).

As of September 30, 2010, the Company held € 132.1 million in cash, cash equivalents and available-for-sale financial assets, compared to a year-end 2009 balance of € 135.1 million.

Assets

Total assets increased by € 4.4 million to € 210.5 million as of September 30, 2010, compared to € 206.1 million as of December 31, 2009. Current assets decreased by € 4.5 million mainly as a result of a decrease in marketable securities (€ 3.0 million) and accounts receivable (€ 0.8 million).

Compared to December 31, 2009, non-current assets increased by € 8.8 million, mainly as a consequence of the capitalization of an upfront payment in connection with the in-licensing of a compound from Xencor.

Liabilities

In the first nine months of 2010, current liabilities slightly increased from € 24.3 million as of December 31, 2009, to € 24.6 million as of September 30, 2010, arising from an increase in deferred revenues, provisions and tax liabilities as well as licenses payable which was partly offset by a decrease in accounts payable.

Non-current liabilities decreased by € 5.1 million to € 2.8 million in the first nine months of 2010, which was mainly impacted by a decrease in non-current deferred revenue.

Equity

Total stockholders' equity amounted to € 183.1 million as of September 30, 2010, compared to € 173.9 million as of December 31, 2009.

As of September 30, 2010, the total number of shares issued amounted to 22,794,258 of which 22,714,362 were outstanding, compared to 22,660,557 and 22,580,661 as of December 31, 2009, respectively.

The increase of shares outstanding by 133,701 arose from the exercise of options issued to the Management Board and to employees.

Capital Expenditure

MorphoSys's investment in property, plant and equipment amounted to € 1.4 million for the nine-month period ended September 30, 2010, compared to € 1.5 million in the same period of the prior year. Depreciation of property, plant and equipment for the first three quarters 2010 accounted for € 1.5 million compared to € 1.2 million in the first nine months of 2009.

During the first nine months of 2010, the Company invested € 11.3 million in intangible assets (first nine months of 2009: € 1.0 million). Amortization of intangibles amounted to € 2.8 million and remained unchanged in comparison to the first nine months of 2009.

Human Resources

Number and Qualification of Employees

On September 30, 2010, the MorphoSys Group employed 436 people (December 31, 2009: 404). On average, the MorphoSys Group employed 426 people for the first nine months of 2010 (first nine months of 2009: 366).

Of the 436 employees, 278 worked in research and development and 158 in sales, general and administration (December 31, 2009: 248 and 156, respectively).

On September 30, 2010, 131 of MorphoSys's employees had a PhD degree (December 31, 2009: 121).

Of the 436 employees, 148 worked for the Partnered Discovery segment, 96 for the Proprietary Development segment, 153 for the AbD Serotec segment and 39 employees were unallocated (December 31, 2009: 144 for the Partnered Discovery segment, 71 for the Proprietary Development segment, 148 for the AbD Serotec segment and 41 were unallocated).

On September 30, 2010, MorphoSys had five apprenticeship positions (December 31, 2009: 3).

Pipeline Update

Partnered Discovery

During the third quarter of 2010, MorphoSys's partnered therapeutic antibody pipeline increased from 64 to 66 active antibody development programs in total, with one program moving into phase 1, increasing the number of partnered programs in clinical development to 10 in total. 24 programs are in preclinical development and 32 in research (not including two pre-development programs with Novartis).

In the third quarter of 2010, MorphoSys's partner Novartis advanced another HuCAL-based antibody program into phase 1 clinical trials, being the third partnered program to enter human clinical trials in 2010. The event triggered a clinical milestone payment to MorphoSys. Novartis's program is the first HuCAL-derived drug candidate aiming at the therapeutic area of ophthalmology to enter clinical trials. Altogether, it is the fourth program to reach this stage within the collaboration.

Altogether, MorphoSys projects that in 2010 between four and six partnered programs could enter clinical trials.

Proprietary Development

Co-development Programs

During the third quarter of 2010, MorphoSys has nominated within its collaboration with Novartis the second therapeutic antibody program for joint pre-development. The pre-development agreement provides MorphoSys with the option to enter a formal co-development for the respective program with Novartis. Until the program reaches formal co-development status, Novartis carries all project-related costs. MorphoSys's share of the funded research will add to revenues in its Proprietary Development segment.

The first pre-development candidate with Novartis was announced in September 2008, giving MorphoSys the opportunity to benefit from working with a very experienced pharmaceutical partner and strengthening its own drug development capabilities.

Proprietary Portfolio

MOR103 is a fully human HuCAL antibody directed against GM-CSF (granulocyte macrophagecolony stimulating factor), currently in a phase 1b/2a clinical trial in rheumatoid arthritis patients. Enrollment is expected to be completed in the first half of 2011 with the final results expected in H1 2012.

MOR208 (XmAb5574) is a humanized anti-CD19 monoclonal antibody for the treatment of B-cell malignancies. A phase 1 trial in patients with chronic lymphocytic leukemia (CLL) in the USA is open for enrollment. Under the terms of the agreement this phase 1 trial will be fully sponsored by Xencor.

MOR202 is a fully human HuCAL antibody directed against CD38, a membrane-bound glycoprotein that is a promising target for the treatment of multiple myeloma. The Company expects to file a clinical trial application (CTA) before the end of 2010 and commence a phase 1/2 trial in the first half of 2011.

Work with MOR104 and MOR105, two discovery programs in inflammation, as well as with MOR205 and MOR206, two discovery programs in the therapeutic area of cancer, continues as planned.

Work with a new target molecule in the indication of cancer, which will form the basis for the program MOR207, continues as planned.

Target Discovery

In September 2010, MorphoSys announced a new proprietary development program against novel infectious disease targets. As part of this initiative, MorphoSys has signed a license and collaboration agreement with UK-based Absynth Biologics, providing access to novel target molecules associated with Staphylococcus aureus infections including MRSA (methicillinresistant S. aureus). MorphoSys will generate antibodies using its proprietary HuCAL PLATI-NUM antibody library which Absynth will test in relevant disease models.

Business Development

Partnered Discovery

The therapeutic collaboration with Boehringer Ingelheim, which was initially signed in 2003, was concluded during the third quarter 2010.

AbD Serotec

Diagnostic Antibodies

In July 2010, MorphoSys's research and diagnostic antibodies unit AbD Serotec signed an exclusive license agreement with UCL Business, the technology development company of University College London. The agreement provides AbD Serotec with worldwide exclusive access to a potent anti-PTH antibody for commercial use in research and diagnostic applications. Parathyroid hormone (PTH) is the most important regulator of calcium levels in the human body. PTH assays are used as a routine clinical tool to detect decreases in plasma PTH levels

HOLDERS R E P O R T

THE SHARE- M A N A G E M E N T

after surgeries and provide clinicians with important information that assists in managing patients with abnormal calcium levels.

Research Antibodies

In September 2010, AbD Serotec signed a license agreement with VU University Medical Center (VUmc) in the Netherlands, providing the business unit with worldwide exclusive rights to commercialize a number of antibody clones for research applications, including the "ED series" of antibodies, which are the world's most widely used reagents for studying macrophage subsets in rats. These antibodies are key reagents for studying various cell types and processes which play a central role in the innate immune system, an initial line of defense against diverse invading foreign pathogens and damaged or infected host cells.

Risk and Opportunity Report

The risks and opportunities have not changed materially compared to the situation described in the Annual Report 2009.

Outlook

.

The Company's most recent guidance was given in February 2010. At the occasion of the reporting of the financial results of the third quarter of 2010, MorphoSys reconfirmed full-year guidance and narrowed the range of its previous guidance.

The Company estimates full-year 2010 Group revenues between € 89 million and € 90 million, and an operating profit of € 7 million to € 9 million. The revenue guidance for 2010 assumes higher milestone and commercial revenues in the 4th quarter than in previous quarters. MorphoSys expects an operating profit of € 7 million to € 9 million, including investments in proprietary R&D in the amount of € 27 million to € 29 million (2009: € 19.3 million).

Consolidated Statement of Operations (IFRS) – unaudited

	Three Months Ended	Three Months Ended	Nine Months Ended	Nine Months Ended
	09/30/2010	09/30/2009	09/30/2010	09/30/2009
Note	€	€	€	€
Revenues 2	19,317,597	19,708,225	62,779,139	57,585,938
Operating Expenses 2
Cost of Goods Sold	1,697,264	1,737,379	5,504,902	5,057,271
Research and Development	12,013,338	9,532,870	32,491,733	27,487,848
Sales, General and Administrative	5,957,485	5,723,055	16,827,859	15,714,291
Total Operating Expenses	19,668,087	16,993,304	54,824,494	48,259,410
Profit/(Loss) from Operations	(350,490)	2,714,921	7,954,645	9,326,528
Finance Income	1,788,974	736,366	2,539,588	1,874,561
Finance Expense	2,068	1,683	11,107	6,271
Other Income	239,752	10,245	417,006	203,589
Other Expense	195,927	385,584	701,484	622,812
Profit before Taxes	1,480,241	3,074,265	10,198,648	10,775,595
Income Tax Expense	127,770	462,940	2,981,796	3,120,279
Net Profit	1,352,471	2,611,325	7,216,852	7,655,316
Basic Net Profit per Share	0.06	0.12	0.32	0.34
Diluted Net Profit per Share	0.06	0.12	0.32	0.34
Shares Used in Computing Basic Net Profit per Share	22,694,207	22,471,053	22,627,934	22,431,195
Shares Used in Computing Diluted Net Profit per Share	22,807,024	22,591,518	22,734,648	22,508,245

THE SHARE- MANAGEMENT Statement of Operations

LETTER TO GROUP F I N A N C I A L S T A T E M E N T S 1 3

• 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
	09/30/2010	09/30/2009	09/30/2010	09/30/2009
	€	€	€	€
Net Profit	1,352,471	2,611,325	7,216,852	7,655,316
Change in Unrealized Gains and Losses on Available-for sale Securities	(1,637,028)	(564,568)	(2,151,277)	(1,070,152)
(thereof Reclassifications of Unrealized Gains and Losses to Profit and Loss)	(1,748,343)	(661,577)	(2,389,747)	(1,585,955)
Deferred Taxes	431,029	148,651	566,431	281,771
Change in Unrealized Gains and Losses on Available-for sale Securities, Net of Deferred Taxes	(1,205,999)	(415,917)	(1,584,846)	(788,381)
Effects from Equity-related Recognition of Deferred Taxes	3,925	8,494	(6,200)	(4,522)
Foreign Currency Gain/Loss from Consolidation	(313,019)	(536,195)	490,049	385,883
Comprehensive Income	(162,622)	1,667,707	6,115,855	7,248,296

Consolidated Balance Sheet (IFRS)

	Sept. 30, 2010	Dec. 31, 2009
	(unaudited)
Note	€	€
ASSETS Current Assets
Cash and Cash Equivalents
	41,220,930	41,255,316
Available-for-sale Financial Assets	90,908,915	93,883,571
Accounts Receivable	10,355,259	11,156,559
Income Tax Receivables	264,595	794,855
Other Receivables	257,122	257,550
Inventories, Net	3,753,258	3,990,238
Prepaid Expenses and Other Current Assets	3,546,120	3,481,709
Assets Classified as Held for Sale	817,251	771,798
Total Current Assets	151,123,450	155,591,596
Non-current Assets
Property, Plant and Equipment, Net	4,984,933	4,996,804
Patents, Net	457,931	789,798
Licenses, Net	12,652,125	13,780,534
Intangible Assets under Development	10,513,100	-
Software, Net	583,515	712,482
Know-how and Customer Lists, Net	1,817,180	2,083,633
Goodwill	26,762,414	26,742,173
Deferred Tax Asset	247,653	221,534
Prepaid Expenses and Other Assets,
Net of Current Portion	1,328,572	1,172,041
Total Non-current Assets	59,347,423	50,498,999
Total Assets	210,470,873	206,090,595

LETTER TO GROUP F I N A N C I A L S T A T E M E N T S 1 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

		Sept. 30, 2010	Dec. 31, 2009
		(unaudited)
	Note	€	€
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable		12,259,557	14,106,352
Licenses Payable		277,917	100,746
Provisions and Tax Liabilities		1,868,656	1,426,760
Current Portion of Deferred Revenue		10,182,992	8,618,250
Total Current Liabilities		24,589,122	24,252,108
Non-current Liabilities
Provisions, Net of Current Portion		43,344	43,344
Deferred Revenue, Net of Current Portion		712,129	5,579,610
Convertible Bonds Due to Related Parties		114,444	32,670
Deferred Tax Liability		1,917,089	2,248,498
Total Non-current Liabilities		2,787,006	7,904,122
Stockholders' Equity
Common Stock, € 1.00 Par Value;
Ordinary Shares Authorized (41,935,950 and 42,400,635 for 2010 and 2009, respectively)
Ordinary Shares Issued (22,794,258 and
22,660,557 for 2010 and 2009, respectively)
Ordinary Shares Outstanding (22,714,362 and
22,580,661 for 2010 and 2009, respectively)
Treasury Stock (79,896 and 79,896 shares
for 2010 and 2009, respectively), at Cost	3	22,784,484	22,650,783
Additional Paid-in Capital	3	164,542,092	161,631,268
Reserves		282,121	1,383,118
Accumulated Deficit		(4,513,952)	(11,730,804)
Total Stockholders' Equity		183,094,745	173,934,365
Total Liabilities and Stockholders' Equity		210,470,873	206,090,595

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

Common Stock

	Shares	€
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/Loss 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
Balance as of January 1, 2010	22,660,557	22,660,557
Compensation Related to the Grant of Stock Options and Convertible Bonds	0	0
Exercise of Options and Convertible Bonds Issued to Related Parties	133,701	133,701
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/Loss from Consolidation	0	0
Net Profit for the Period	0	0
Comprehensive Income	0	0
Balance as of September 30, 2010	22,794,258	22,794,258

• HOLDERS REPORT Statement of Comprehensive Income

• Statement of Changes in Stockholders' Equity

• Statement of Cash Flows
• Notes to the Financial Statements

	Balance Sheet

	Treasury Stock	Additional	Revaluation	Translation	Accumulated	Total
		Paid-in Capital	Reserve	Reserve	Deficit	Stockholders'
						Equity
Shares	€	€	€	€	€	€
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
79,896	(9,774)	161,631,268	3,371,195	(1,988,077)	(11,730,804)	173,934,365
0	0	1,598,605	0	0	0	1,598,605
0	0	1,312,219	0	0	0	1,445,920
0	0	0	(1,584,846)	0	0	(1,584,846)
0	0	0	(6,200)	0	0	(6,200)
0	0	0	0	490,049	0	490,049
0	0	0	0	0	7,216,852	7,216,852
0	0	0	(1,591,046)	490,049	7,216,852	6,115,855
79,896	(9,774)	164,542,092	1,780,149	(1,498,028)	(4,513,952)	183,094,745

Consolidated Statement of Cash Flows (IFRS) – unaudited

	2010	2009
For the Periods Ended September 30, Note	€	€
Operating Activities
Net Profit	7,216,852	7,655,316
Adjustments to Reconcile Net Profit to Net Cash Provided by Operating Activities:
Depreciation and Amortization of Tangible and Intangible Assets	4,318,449	3,966,682
Income Tax Benefit	(279,279)	(129,250)
Net Gain on Sales of Financial Assets	(2,432,660)	(1,629,941)
Unrealized Net Loss on Derivative Financial Instruments	156,478	123,212
Loss on Sale of Property, Plant and Equipment	3,953	334
Recognition of Deferred Revenue	(28,907,799)	(20,117,251)
Stock-based Compensation	1,556,910	1,333,864
Changes in Operating Assets and Liabilities:
Accounts Receivable	877,416	(3,180,701)
Prepaid Expenses, Other Assets and Tax Receivables	726,045	275,786
Accounts Payable and Provisions	933,070	467,065
Licenses Payable	177,170	(263,793)
Other Liabilities	(1,076,217)	312,203
Deferred Revenue	25,605,060	14,587,401
Cash Generated from Operations	8,875,448	3,400,927
Interest Paid	(7,295)	(1,940)
Interest Received	106,882	244,689
Income Taxes Paid	(946,374)	(690,967)
Net Cash Provided by Operating Activities	8,028,661	2,952,709

LETTER TO GROUP F I N A N C I A L S T A T E M E N T S 1 9 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
For the Periods Ended September 30, Note	€	€
Investing Activities:
Purchases of Financial Assets	(20,783,313)	(10,988,704)
Proceeds from Sales of Financial Assets	24,039,351	15,411,595
Purchases of Property, Plant and Equipment	(1,422,025)	(1,529,807)
Proceeds from Disposals of Property, Plant and Equipment	0	535
Additions to Intangibles	(11,335,123)	(975,623)
Net Cash (Used In) / Provided by Investing Activities	(9,501,110)	1,917,996
Financing Activities:
Proceeds from the Exercise of Options and Convertible Bonds
Granted to Related Parties	1,461,366	960,087
Net of Proceeds and Payments from the Issuance of Convertible Bonds
Granted to Related Parties	81,774	31,480
Purchases of Derivative Financial Instruments	(175,900)	(173,304)
Proceeds from the Disposal of Derivative Financial Instruments	9,176	47,000
Cost of Share Issuance	(15,500)	0
Net Cash Provided by Financing Activities	1,360,916	865,263
Effect of Exchange Rate Differences on Cash	77,147	108,595
Increase in Cash and Cash Equivalents	(34,386)	5,844,563
Cash and Cash Equivalents at the Beginning of the Period	41,255,316	40,113,727
Cash and Cash Equivalents at the End of the Period	41,220,930	45,958,290

Notes to the Interim Consolidated Financial Statements

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, 2010, 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) and Poole Real Estate Ltd. (former Biogenesis UK Ltd.), together referred to as the "Group".

1 Changes in Accounting Policies and Estimates

As of June 1, 2010, the Company estimates that certain success criteria for a cooperation are met earlier than planned. This change in accounting estimate is applied prospectively and had a financial impact of € 0.7 million (additional revenues) for the first nine months of 2010.

The accounting policies applied for the financial statements as of December 31, 2009, have been used throughout the first nine months of 2010.

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 segment 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.

The Group consists of the following three 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 and the major part of 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 three lead compounds in its proprietary product portfolio, MOR103, MOR202 and MOR208, as well as four programs in the discovery phase and two pre-development programs with Novartis. In June 2010, MorphoSys in-licensed an anti-CD19 program from Xencor. The program was renamed MOR208. The Company currently plans to out-license proprietary compounds after proof of concept.

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 and diagnostic antibodies for its customers. The segment also generates sales from catalog antibodies and bulk/industrial production of antibodies.

ENTITY-WIDE DISCLOSURES

In presenting entity-wide disclosures, segment revenues are based on the geographical location of the customers.

Ended September 30,	Partnered Discovery			Proprietary Development
(in 000's €)	2010	2009	2010	2009
Revenues, total	47,404	42,902	1,119	759
External Revenues	47,404	42,902	1,119	759
Inter-segment Revenues	-	-		-
Total Operating Expenses	16,001	15,649	18,376	13,115
Cost of Goods Sold	-	-		-
Other Operating Expenses	15,308	14,956	18,308	13,115
Inter-segment Costs	693	693	68	-
Segment Result	31,403	27,253	(17,257)	(12,356)
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 €)	2010	2009	2010	2009
Revenues, total	14,609	14,799	486	253
External Revenues	14,609	14,799	486	253
Inter-segment Revenues	-	-		-
Total Operating Expenses	5,414	5,529	7,275	4,578
Cost of Goods Sold	-	-		-
Other Operating Expenses	5,183	5,298	7,275	4,578
Inter-segment Costs	231	231	-	-
Segment Result	9,195	9,270	(6,789)	(4,325)
Finance Income	-	-	-	-
Finance Expense	-	-	-	-
Other Income	-	-	-	-
Other Expense	-	-	-	-
Profit before Taxes	-	-	-	-
Income Tax Expense	-	-	-	-
Net Profit	-	-	-	-

LETTER TO GROUP F I N A N C I A L S T A T E M E N T S 2 3

• 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
2010	2009	2010	2009	2010	2009	2010	2009
15,017	14,618	-	-	(761)	(693)	62,779	57,586
14,256	13,925	-	-	-	-	62,779	57,586
761	693	-	-	(761)	(693)	-	-
14,356	13,224	6,853	6,964	(761)	(693)	54,825	48,259
5,505	5,057	-	-	-	-	5,505	5,057
8,851	8,167	6,853	6,964	-	-	49,320	43,202
-	-	-	-	(761)	(693)	-	-
661	1,394	(6,853)	(6,964)	-	-	7,954	9,327
-	-	-	-	-	-	2,540	1,874
-	-	-	-	-	-	11	6
-	-	-	-	-	-	417	203
-	-	-	-	-	-	701	623
-	-	-	-	-	-	10,199	10,775
-	-	-	-	-	-	2,982	3,120
-	-	-	-	-	-	7,217	7,655

	AbD Serotec	Unallocated			Elimination		Group
2010	2009	2010	2009	2010	2009	2010	2009
4,455	4,887	-	-	(231)	(231)	19,319	19,708
4,224	4,656	-	-	-	-	19,319	19,708
231	231	-	-	(231)	(231)	-	-
4,654	4,566	2,557	2,551	(231)	(231)	19,669	16,993
1,697	1,737	-	-	-	-	1,697	1,737
2,957	2,829	2,557	2,551	-	-	17,972	15,256
-	-	-	-	(231)	(231)	-	-
(199)	321	(2,557)	(2,551)	-	-	(350)	2,715
-	-	-	-	-	-	1,789	736
-	-	-	-	-	-	2	2
-	-	-	-	-	-	240	10
-	-	-	-	-	-	196	385
-	-	-	-	-	-	1,481	3,074
-	-	-	-	-	-	128	463
-	-	-	-	-	-	1,353	2,611

For services performed by the AbD Serotec segment for the Partnered Discovery segment, a revenue sharing agreement was established in 2007. The compensatory fee to the AbD Serotec segment amounted to € 0.7 million for the first nine months of 2010 (first nine months of 2009: € 0.7 million).

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

For the Periods Ended September 30,
(in 000's €)	2010	2009
Germany	2,956	5,635
Other Europe and Asia	47,119	39,879
USA and Canada	11,691	11,152
Other	1,013	920
Total	62,779	57,586

3 Changes in Stockholders' Equity

Common Stock

On September 30, 2010, the common stock of the Company amounted to € 22,794,258 (December 31, 2009: € 22,660,557). Through the exercise of 133,701 options issued to management and employees, common stock increased by € 133,701 in the first nine months of 2010. Treasury stock amounted to € 9,774 as of September 30, 2010 (December 31, 2009: € 9,774).

Additional Paid-in Capital

On September 30, 2010, additional paid-in capital amounted to € 164,542,092 (December 31, 2009: € 161,631,268). The total increase of € 2,910,824 is due to stock-based compensation in the amount of € 1,598,605; a further increase of € 1,312,219 arose from the exercise of issued stock options.

4 Changes in Convertible Bonds and Stock Options

On April 1, 2010, 352,800 convertible bonds were granted to members of the Management Board and to employees as part of the management compensation plan 2010.

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

THE SHARE- MANAGEMENT Statement of Operations HOLDERS REPORT Statement of Comprehensive Income

LETTER TO GROUP F I N A N C I A L S T A T E M E N T S 2 5

Balance Sheet

Statement of Changes in Stockholders' Equity Statement of Cash Flows

Notes to the Financial Statements

members of the Management Board and the Supervisory Board during the first nine months of 2010:

01/01/10	Additions	Forfeitures	Sales	30/09/10
416,385	0	0	0	416,385
5,400	0	0	0	5,400
500	1,000	0	0	1,500
105	0	0	0	105
422,390	1,000	0	0	423,390
7,500	0	0	0	7,500
7,290	0	0	0	7,290
2,019	0	0	0	2,019
0	0	0	0	0
0	0	0	0	0
0	0	0	0	0
16,809	0	0	0	16,809

Stock Options

	01/01/10	Additions	Forfeitures	Exercises	30/09/10
Management Board
Dr. Simon E. Moroney	299,445	0	0	108,000	191,445
Dave Lemus	110,172	0	0	7,305	102,867
Dr. Arndt Schottelius	90,000	0	0	0	90,000
Dr. Marlies Sproll	177,867	0	0	0	177,867
Total	677,484	0	0	115,305	562,179
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

Convertible Bonds

	01/01/10	Additions	Forfeitures	Exercises	30/09/10
Management Board
Dr. Simon E. Moroney	30,000	58,800	0	0	88,800
Dave Lemus	30,000	33,000	0	0	63,000
Dr. Arndt Schottelius	0	33,000	0	0	33,000
Dr. Marlies Sproll	30,000	33,000	0	0	63,000
Total	90,000	157,800	0	0	247,800
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 2010.

7 Subsequent Events

On October 07, 2010, MorphoSys announced the acquisition of Sloning BioTechnology GmbH, a German biotechnology company developing new methods of synthetic biology. The transaction has made MorphoSys the sole source of Sloning's patented Slonomics technology, which significantly improves the assembly and quality of protein libraries. The core technology of Sloning enables the precise construction of protein libraries comprising defined mixtures of amino acids at pre-determined positions with unprecedented speed.

By integrating Slonomics into its existing antibody technology platform, MorphoSys expects to improve the generation of drug candidates such that one in every two projects started reaches clinical development. This technology opens the way to a new and flexible approach to generating optimized proteins, such as antibodies and will be used to accelerate the generation of both therapeutic and diagnostic antibodies.

Sloning's shareholders received a one-off EUR 19 million cash payment upon signing. The companies' financial results will be fully consolidated into MorphoSys's accounts from the closing date onwards. The transaction is not material in respect of MorphoSys's financial guidance for 2010.

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 29, 2010

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.

MorphoSys AG

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

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