| Notes to the Balance Sheet | Notes to the Balance SheetCash and Cash Equivalents in 000' € 12/31/2021 12/31/2020 Bank Balances and Cash in Hand 123,248 109,797 Impairment 0 (2) Cash and Cash Equivalents 123,248 109,795 The presentation of the development of the expected twelve-month loss for cash and cash equivalents can be found in Note 7.4.1. Other Financial Assets include, on the one hand, money market funds classified as FVTPL and on the other hand term deposits and bonds classified as AC. The financial assets at fair value, with changes recognized in profit or loss, are shown in the following overview. Unrealized in 000' € Maturity Cost Gross Profit Losses Market Value December 31, 2021 Money Market Funds daily 8,874 1 0 8,875 Total 8,875 December 31, 2020 Money Market Funds daily 288,050 293 (405) 287,938 Total 287,938 Realized and unrealized gains and losses on money market funds were recognized in the finance result in profit or loss. The valuation of money market funds resulted in a net gain of €0.6 million in 2021 (2020: net loss of €6.1 million; 2019: net gain of €0.4 million). The financial assets at amortized cost are shown in the following overview. in 000’ € Maturity Cost Effective Interest Income (+) / Expense (-) Impairment Carrying Amount December 31, 2021 Term Deposits, Current Portion 4 to 12 months 562,369 0 (491) 561,878 Bonds 4 to 12 months 285,144 (2,025) (185) 282,934 Total 844,812 December 31, 2020 Term Deposits, Current Portion 4 to 12 months 649,745 380 (412) 649,713 Bonds more than 12 months 197,827 (652) (587) 196,588 Total 846,301 As of December 31, 2021, these assets mainly consisted of term deposits with fixed or variable interest rates, as well as corporate bonds with fixed interest. Net interest expense from financial assets classified as “at amortized cost” amounted to €1.7 million in 2021 (2020: €0.5 million net interest expense; 2019: €0.1 million net interest income) and was recognized in the finance result. The risk associated with these financial instruments results primarily from bank credit risks. Further information on the credit risk for term deposits and corporate bonds can be found in Note 7.4.1. All accounts receivable are non-interest-bearing and generally have payment terms of between 30 and 180 days. As of December 31, 2021, accounts receivable mainly included receivables against Incyte from shared development costs as well as receivables from Monjuvi product sales. As of December 31, 2020, accounts receivable mainly consisted of royalty payments not yet received and receivables against Incyte from shared development costs. The Group‘s single most significant customer Incyte accounted for €38.5 million of accounts receivables as of December 31, 2021 (December 31, 2020: €50.1 million), or 51% of the Group‘s total accounts receivable at the end of 2021 (December 31, 2020: 60%). The table below shows the accounts receivable by region as of the reporting date. in 000' € 12/31/2021 12/31/2020 Europe and Asia 6,368 4,452 USA and Canada 69,903 79,326 Impairment (360) (424) Total 75,911 83,354 The presentation of the development of the risk provisions in the 2021 and 2020 financial years for accounts receivable using the simplified impairment model can be found in Note 7.4.1. Other receivables as of December 31, 2021, mainly consisted of receivables from creditors with debit accounts in the amount of €1.1 million (December 31, 2020: €1.2 million). As of December 31, 2021 and December 31, 2020, there were no impairments recognized on other receivables due to immateriality. Inventories amounted to €20.8 million as of December 31, 2021 (December 31, 2020: €10.0 million) and consisted of raw materials and supplies (€12.1 million; December 31, 2020: €5.3 million), unfinished goods (€4.1 million; December 31, 2020: €0.0 million) and finished goods (€4.5 million; December 31, 2020: €4.7 million). There were no impairment losses to be recognized in 2021 and 2020. The impairment to a net realizable value of zero on antibody material (tafasitamab), which was recognized in cost of sales and research and development expenses in prior periods, was reversed due to the market approval of Monjuvi in 2020. At the time of the reversal, tafasitamab was allocated only under inventories. The reversal resulted in a net gain of €13.3 million in 2020, which was fully attributable to financial year 2019. The reversal of the impairment loss was recognized in cost of sales of €9.9 million and in research and development expenses of €3.3 million. The current prepaid expenses and other assets are shown in the following table. in 000' € 12/31/2021 12/31/2020 Combination Drugs 15,945 10,003 Receivables due from Tax Authorities from Input Tax Surplus 6,563 3,920 Upfront Fees for External Laboratory Services 1,724 1,210 Upfront Fees for Sublicenses 1,304 777 Other Prepayments 13,787 4,711 Total 39,323 20,621 An impairment of €3.5 million was recognized on combination drugs in 2021 (December 31, 2020: €0.5 million). Other prepayments mainly include payments made in advance for maintenance contracts, insurances, sublicenses as well as external laboratory services. The non-current prepaid expenses and other assets are shown in the following table. in 000' € 12/31/2021 12/31/2020 Prepaid Expenses 9,192 183 Other Assets 4,059 1,384 Total 13,251 1,567 The non-current prepaid expenses mainly include prepayments for external services that will be utilized from 2023 onwards. The Group has classified certain items within other assets as “restricted cash” that is not available for operational purposes of the Group. As of December 31, 2021, the Group had non-current restricted cash of €3.8 million for rental deposits issued (December 31, 2020: €1.2 million). As of December 31, 2021, €0.2 million were deposited as collateral for credit cards by MorphoSys US Inc. (December 31, 2020: €0.2 million). in 000' € Office and Laboratory Equipment Furniture and Fixtures Total Cost January 1, 2021 20,041 3,942 23,983 Additions 3,334 367 3,701 Additions through Business Combination 1,488 134 1,622 Disposals (2,101) (67) (2,168) Exchange differences 6 232 238 December 31, 2021 22,768 4,608 27,376 Accumulated Depreciation and Impairment January 1, 2021 16,834 825 17,659 Depreciation Charge for the Year 2,165 678 2,843 Impairment 1,572 0 1,572 Disposals (1,764) (67) (1,831) Exchange differences 2 24 26 December 31, 2021 18,809 1,460 20,269 Carrying Amount January 1, 2021 3,207 3,117 6,324 December 31, 2021 3,959 3,148 7,107 Cost January 1, 2020 18,386 2,390 20,776 Additions 2,662 1,672 4,334 Disposals (1,006) (8) (1,014) Exchange differences (1) (112) (113) December 31, 2020 20,041 3,942 23,983 Accumulated Depreciation and Impairment January 1, 2020 15,654 469 16,123 Depreciation Charge for the Year 2,101 363 2,464 Disposals (921) (2) (923) Exchange differences 0 (5) (5) December 31, 2020 16,834 825 17,659 Carrying Amount January 1, 2020 2,732 1,921 4,653 December 31, 2020 3,207 3,117 6,324 No borrowing costs were capitalized during the reporting period, and there were neither restrictions on the retention of title nor property, plant and equipment pledged as security for liabilities. There were no material contractual commitments for the purchase of property, plant and equipment as of the reporting date. Depreciation is contained in the following line items of profit or loss. in 000' € 2021 2020 2019 Cost of Sales — — — Research and Development 1,681 1,663 1,478 Research and Development (Impairment) 1,537 — 10 Selling 63 132 92 General and Administrative 1,089 692 396 Total 4,370 2,487 1,976 The development of the right-of-use assets and lease liabilities is shown below. Right-of-Use Assets Lease Liabilities in 000' € Building Cars Technical Equipment Total Balance as of January 1, 2020 42,586 238 336 43,160 42,557 Additions 4,660 196 12 4,868 5,286 Depreciation of Right-of-Use Assets (3,218) (162) (152) (3,532) 0 Interest Expenses on Lease Liabilities 0 0 0 0 1,173 Lease Payments 0 0 0 0 (3,918) Disposals (78) 0 0 (78) (79) Balance as of December 31, 2020 43,950 272 196 44,418 45,019 Balance as of January 1, 2021 43,950 272 196 44,418 45,019 Additions 0 166 1,219 1,385 316 Depreciation of Right-of-Use Assets (3,317) (141) (230) (3,688) 0 Interest Expenses on Lease Liabilities 0 0 0 0 1,170 Lease Payments 0 0 0 0 (4,286) Disposals 0 (51) 0 (51) (173) Exchange differences 418 0 3 421 538 Balance as of December 31, 2021 41,051 246 1,188 42,485 42,584 Lease agreements had the following effects on the statement of profit or loss. in 000' € 2021 2020 2019 Depreciation of Right-of-Use Assets 3,648 3,586 2,805 Interest Expenses on Lease Liabilities 1,157 1,174 932 Expenses for Short Term Leases 1,553 0 0 Expenses for Leases of Low Value Assets 17 81 41 Total 6,375 4,841 3,778 Depreciation of right-of-use assets is contained in the following line items of profit or loss. in 000' € 2021 2020 2019 Cost of Sales 221 98 100 Research and Development 1,636 1,991 1,985 Selling 79 145 123 General and Administrative 1,711 1,352 597 Total 3,648 3,586 2,805 The maturity analysis of the lease liabilities as of December 31, 2021 is as follows. December 31, 2021; in 000’ € Contractual Maturities of Financial Liabilities Less than 1 Year Between One and Five Years More than 5 Years Total Contractual Cash Flows Carrying Amount Liabilities Lease Liabilities 4,256 16,750 28,559 49,565 42,584 The rental conditions for leases are negotiated individually and include different terms. Leases are generally concluded for fixed periods but may include extension options. Such contractual conditions offer the Group the greatest possible operational flexibility. In determining the term of the lease, all facts and circumstances are taken into account that provide an economic incentive to exercise extension options. If extension options are exercised with sufficient certainty, they are taken into account when determining the term of the contract. The leases contain fixed and variable lease payments linked to an index. in 000' € Patents Licenses Licenses for Marketed Products In-process R&D Programs Internally Generated Intangible Assets Software Total Cost January 1, 2021 18,214 35,396 56,449 0 0 5,847 115,906 Additions 345 0 0 10,429 11,517 205 22,496 Additions through Business Combination 0 0 0 719,399 0 16 719,415 Disposals (309) (1,000) 0 0 0 (3,447) (4,756) Exchange differences 0 0 0 30,679 0 0 30,679 December 31, 2021 18,250 34,396 56,449 760,507 11,517 2,621 883,740 Accumulated Amortization and Impairment January 1, 2021 16,276 23,560 963 0 0 5,731 46,530 Amortization Charge for the Year 235 986 2,312 0 0 94 3,627 Impairment 2 0 0 0 0 14 16 Disposals (309) (999) 0 0 0 (3,447) (4,755) December 31, 2021 16,204 23,547 3,275 0 0 2,392 45,418 Carrying Amount January 1, 2021 1,938 11,836 55,486 0 0 116 69,376 December 31, 2021 2,046 10,849 53,174 760,507 11,517 229 838,322 Cost January 1, 2020 18,034 23,896 0 52,159 0 5,758 99,847 Additions 290 12,000 0 32,501 0 90 44,881 Disposals (110) (500) 0 (28,211) 0 (1) (28,822) Reclassification 0 0 56,449 (56,449) 0 0 0 December 31, 2020 18,214 35,396 56,449 0 0 5,847 115,906 Accumulated Amortization and Impairment January 1, 2020 15,053 21,546 0 16,475 0 5,651 58,725 Amortization Charge for the Year 990 206 963 0 0 81 2,240 Impairment 233 2,000 0 11,736 0 0 13,969 Disposals 0 (192) 0 (28,211) 0 (1) (28,404) December 31, 2020 16,276 23,560 963 0 0 5,731 46,530 Carrying Amount January 1, 2020 2,981 2,350 0 35,684 0 107 41,122 December 31, 2020 1,938 11,836 55,486 0 0 116 69,376 There were no material contractual commitments for the purchase of intangible assets as of the reporting date. Amortization was included in the following line items of profit or loss. in 000' € 2021 2020 2019 Cost of Sales 2,312 963 0 Research and Development 1,272 1,258 1,444 Research and Development (Impairment) 13 13,969 1,639 Selling 2 5 11 General and Administrative 24 17 37 Total 3,623 16,212 3,131 Licenses for Marketed Products Tafasitamab Since the market approval of Monjuvi, the compound is classified as an intangible asset with a finite useful life and amortized as of that date. The Group amortizes the intangible asset on a straight-line basis over the estimated useful life of the acquired license until 2044 and recognizes the amortization in cost of sales. The duration and method of amortization are reviewed at the end of each financial year. In the event of triggering events, the asset is tested for impairment, if any. As of December 31, 2021, no indications of impairment were identified. In-Process R&D Programs Tafasitamab In 2021, a milestone payment of €10.4 million was capitalized for tafasitamab. This was made for an indication for which marketing approval has not yet been granted. As an intangible asset not yet available for use and a carrying amount of €10.4 million, tafasitamab was subject to an annual impairment test on September 30, 2021, as required by IAS 36. The recoverable amount of the tafasitamab cash-generating unit was determined on the basis of value-in-use calculations, which concluded that the recoverable amount exceeded its carrying amount. The cash flow forecasts took into account expected cash inflows from the potential commercialization of tafasitamab, the cash outflows for anticipated research and development, and the costs for tafasitamab’s commercialization. The cash flow forecasts are based on the period of patent protection for tafasitamab. For this reason, a planning horizon of approximately 22 years is considered appropriate for the value-in-use calculation. The values of the underlying assumptions were determined using both internal (past experience) and external sources of information (market information). Based on the updated cash flow forecast, the value-in-use was determined as follows: A beta factor of 0.9 and WACC before taxes of 8.1%. A sensitivity analysis was performed for the discount rate. A sensitivity analysis for changes in the cash flows was not performed since the cash flows from research and development and the commercialization of the compound have already been probability adjusted in the value-in-use calculations so as to reflect the probabilities of success in phases of clinical trials. The analysis did not reveal any need for impairment. The values ascribed to the assumptions correspond to the Management Board’s forecasts for future development and are based on internal planning scenarios, as well as external sources of information. No indicators of impairment were identified on December 31, 2021. Pelabresib and CPI-0209 As part of the acquisition of Constellation, not yet available for use research and development programs in development (pelabresib and CPI-0209) in the amount of €717.4 million (pelabresib) and €2.0 million (CPI-0209) were identified and capitalized in 2021. Further information can be found in Note 3 of these notes. As intangible assets not yet available for use and a carrying amount of together €719.4 million, pelabresib and CPI-0209 were subject to an annual impairment test on December 31, 2021, as required by IAS 36. Pelapresib and CPI-0209 each constitute a cash-generating unit. The recoverable amount was determined on the basis of value-in-use calculations, which concluded that the recoverable amount exceeded its carrying amount. The cash flow forecasts took into account expected cash inflows (revenues based on patient numbers and the price obtained in the market) from the potential commercialization of pelabresib and CPI-0209, the cash outflows for anticipated research and development, and the costs for the commercialization of pelabresib and CPI-0209. The cash flow forecasts are based on the period of patent protection for pelabresib and CPI-0209. For this reason, a planning horizon of approximately 23 years is considered appropriate for the value-in-use calculation. The values of the underlying assumptions were determined using both internal (past experience) and external sources of information (market information). Based on the updated cash flow forecast, the value-in-use was determined as follows: A beta factor of 1.7 and WACC before taxes of 12.8%. A sensitivity analysis was performed for the underlying estimates. In each case, one planning assumption is changed and all other estimates are kept constant. This would have resulted in the following effects on the value-in-use. The analysis did not reveal any need for impairment. The values ascribed to the assumptions correspond to the Management Board’s forecasts for future development and are based on internal planning scenarios, as well as external sources of information. in million € +1% (1)% Change in Patient Numbers or Price obtained in the Market (revenue related) 14.5 (14.5) Change in WACC before Taxes (15.6) 15.9 Change in Foreign Exchange Rate for future Royalties and Net Sales (0.8) 0.8 Slonomics Technology As of September 30, 2021, goodwill of €1.6 million from the 2010 acquisition of Sloning BioTechnology GmbH was subject to an annual impairment test. The recoverable amount of the cash-generating unit Slonomics technology was determined on the basis of value-in-use calculations. The calculation showed that the value-in-use was higher than the carrying amount of the cash-generating unit. The cash flow forecasts took into account future free cash flows from the contribution of the Slonomics technology to partnered programs. The cash flow forecasts are based on a period of 10 years because the Management Board believes that commercialization through licensing agreements, milestone payments, and royalties is only feasible by means of medium- to long-term contracts. For this reason, a planning horizon of ten years is considered appropriate for the value-in-use calculation. The values of the underlying assumptions were determined using both internal (past experience) and external sources of information (market information). Based on the updated ten-year cash flow forecast, the value-in-use was determined as follows: A beta factor of 0.9 (2020: 0.9), WACC before taxes of 8.5% (2020: 8.5%) and a perpetual growth rate of 1% (2020: 1%). A sensitivity analysis was performed for the growth rate and the discount rate for calculating value-in-use. The sensitivity analysis took into account the change in one assumption, with the remaining assumptions remaining unchanged from the original calculation. A change in the pre-tax WACC of + 1% would cause a €0.2 million lower value-in-use of goodwill and an impairment by this amount would be necessary. A sensitivity analysis for changes in the cash flows has not been performed since the cash flows have already been probability-adjusted in the value-in-use calculations so as to reflect the probabilities of success in phases of clinical trials. This analysis did not reveal any need for impairment. The values ascribed to the assumptions correspond to the Management Board’s forecasts for future development and are based on internal planning scenarios as well as external sources of information. No indication of impairment was identified as of December 31, 2021. Constellation As of December 31, 2021, goodwill of €564.7 million from the acquisition of Constellation was subject to an impairment test. Goodwill was allocated to the group of cash-generating units Constellation, as goodwill is monitored at this level. In addition, future potential cash flows of this group of cash-generating units will only be generated by Constellation's own compounds, which are also recognized by these companies. MorphoSys decided in the last quarter of the reporting year 2021 to focus its research efforts on the most advanced discovery and technology programs and to centralize all laboratory activities at its German research hub in Planegg, Germany. Consequently, all US-based activities relating to discovery biology and drug discovery departments were abandoned. Therefore, any early pipeline projects cannot be realized anymore and the expected cash flows from these projects will not materialize accordingly. Since the early pipeline was part of the goodwill acquired as of July 15, 2021, an impairment test was performed as of December 31, 2021, based on the latest cash flow projections. The recoverable amount of the group of cash-generating units Constellation was determined on the basis of value-in-use calculations. The calculation showed that the value-in-use (€334.0 million) was lower than the carrying amount of this group of cash-generating units and an impairment of €(230.7) million was recognized as a result. After impairment, the carrying amount as of December 31, 2021 is €334.0 million. The cash flow projections included expected payments from the commercialization of pelabresib and other compounds, the cash outflows for anticipated research and development, and the costs for pelabresib’s and the other compounds' commercialization. The cash flow forecasts are based on the period of patent protection for pelabresib and the other compounds. For this reason, a planning horizon of approximately 23 years is considered appropriate for the value-in-use calculation. The values of the underlying assumptions were determined using both internal (past experience) and external sources of information (market information). Based on the cash flow forecast, the value-in-use was determined as follows: A beta factor of 1.7 and WACC before taxes of 14.1%. A sensitivity analysis was performed for the underlying estimates. In each case, one planning assumption is changed and all other estimates are kept constant. This would have resulted in lower or higher impairment of goodwill. The values ascribed to the assumptions correspond to the Management Board’s forecasts for future development and are based on internal planning scenarios, as well as external sources of information. in million € +1% (1)% Change in Patient Numbers or Price obtained in the Market (revenue related) 16.6 (16.6) Change in WACC before Taxes (19.1) 19.5 Change in Foreign Exchange Rate for future Royalties and Net Sales (0.8) 0.8 Accounts payable and licenses payable were non-interest-bearing and, under normal circumstances, have payment terms of no more than 30 days. Accounts payable and accruals are listed in the following table. In the financial reporting 2020, licenses payable were presented separately. These have been included in accounts payable in 2021. The prior year’s presentation of the figures has been adjusted accordingly in order to provide comparable information for the previous years. in 000' € 12/31/2021 12/31/2020 Accounts Payable 73,787 47,818 Accruals 113,055 79,200 Other Liabilities 1,235 1,536 Total 188,077 128,554 Accruals are shown in the following overview: in 000' € 12/31/2021 12/31/2020 Accruals for External Laboratory Services 65,026 43,500 Accrued Personnel Expenses for Payments to Employees and Management 29,666 17,320 Accruals for Outstanding Invoices 12,515 15,236 Accruals for Revenue Deductions from Product Sales 1,998 943 Accruals for Legal Fees 169 472 Accruals for Audit Fees and other related Costs 703 683 Accruals for License Payments 2,978 1,046 Total 113,055 79,200 At the Company’s Annual General Meeting in May 2021, PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC GmbH), Munich, was appointed as the auditor. The Supervisory Board engaged PwC GmbH to audit the financial statements. The table below shows the total fees PwC GmbH received. in 000' € 12/31/2021 12/31/2020 Audit Fees 2,141 1,561 Fees for Other Assurance Services 116 70 Tax Service Fees 0 — Other Fees for Other Services 2 2 Total 2,258 1,633 The other assurance services comprised fees in connection with the non-financial group report as well as the audit of the content of the remuneration report. As of December 31, 2021, the Group recorded tax liabilities and provisions of €4.7 million (December 31, 2020: €67.3 million). Tax liabilities included primarily provisions for income taxes. Provisions included mainly expenses for share-based payments when these are settled by other assets equivalent to the value of a certain number of shares or stock options (“cash settlement”), as well as personnel recruitment measures. The table below shows the development of tax liabilities and current and non-current provisions in the 2021 financial year. in 000' € 01/01/2021 Additions Utilization Release 12/31/2021 Tax Liabilities 65,728 362 (65,562) 0 528 Provisions, current 0 2,549 0 0 2,549 Provisions, non-current 1,528 494 (445) 0 1,577 Total 67,256 3,405 (66,007) 0 4,654 Contract liabilities related to transaction prices paid by customers that were allocated to unfulfilled performance obligations as of December 31, 2021. It is expected that the realization of current contract liabilities will be in the 2022 financial year and non-current contract liabilities mainly in the 2023 financial year. The changes in this item are shown in the table below. in 000' € 2021 2020 Opening Balance 2,616 1,686 Prepayments Received in the Financial Year 4,323 13,430 Revenues Recognized in the Reporting Period that was included in the Contract Liability at the Beginning of the Period (2,544) (1,571) Revenues Recognized for Received Prepayments and Services Performed in the Financial Year (4,142) (10,929) Closing Balance 253 2,616 thereof short-term 224 2,544 thereof long-term 29 72 As of December 31, 2021 , deferred tax liabilities of €22.1 million were recognized after offsetting ( December 31, 2020 : €5.1 million). The increase is mainly due to the addition of the net deferred tax liabilities from the purchase price allocation of Constellation. MorphoSys AG placed non-subordinated, unsecured convertible bonds in 2020 for a nominal amount of €325.0 million, equal to 3,250 bonds with a nominal amount of €100,000 each, and maturing on October 16, 2025. The convertible bonds were issued at 100% of their nominal amount and carry a coupon of 0.625% p.a. payable semi-annually. The conversion price is €131.29. The convertible bonds are traded on the Open Market Segment (Freiverkehr) of the Frankfurt Stock Exchange. The convertible bonds are convertible between November 26, 2020 and the fortieth trading day prior to maturity. As of the maturity date, MorphoSys has the right to either pay the full amount in cash or to settle a certain amount through the delivery of shares. The convertible bonds are convertible into approximately 2,475,436 new or existing bearer ordinary shares MorphoSys. MorphoSys is entitled to redeem the convertible bonds at any time the market price of MorphoSys shares reaches at least 130% of the then applicable conversion price over a period of twenty trading days or when only 20% or less of the original total nominal amount of the convertible bond is still outstanding. Repayment is then made in the amount of the nominal value plus accrued interest. The holders of the convertible bonds have a conditional call right should an investor directly or indirectly acquire at least 30% of the voting rights in MorphoSys (representing a change of control). In the event of such a change of control, each convertible bondholder has the right to call the bonds that have not yet been converted or redeemed. Repayment is then made in the amount of the nominal value plus accrued interest. The conversion right securitized in the convertible bond represents an equity instrument and was recognized in equity for an amount of €49.2 million net of issuance costs attributable to the equity component. The equity component is not adjusted over time, and the liability component is classified as a financial liability at amortized cost. As of the date of initial recognition, the liability component amounted to €270.7 million after the deduction of issuance costs. The difference between this amount and the nominal value of €325.0 million is recognized as an interest expense over the term of the financial liability using the effective interest method. The early termination rights from MorphoSys (issuer call and clean-up call) and the put option of the convertible bondholders in the case of change of control all represent embedded derivatives that, however, have not been separated in accordance with IFRS 9, as they are considered to be closely related to the base contract. Accordingly, these components are included in the financial liability. There were no bond conversions in 2021 and 2020. MorphoSys AG and Incyte Corporation signed a collaboration and license agreement in 2020 for the further global development and commercialization of MorphoSys’s proprietary anti-CD19 antibody tafasitamab. Under the terms of this agreement, MorphoSys could, among other things, pending on the achievement of certain developmental, regulatory, and commercial milestones, receive milestone payments amounting to up to US$1.1 billion (approximately €971.2 million). MorphoSys also receives tiered royalties in a mid-teen to mid-twenties percentage of net sales of Monjuvi outside the US. In the US, MorphoSys and Incyte co-commercialize Monjuvi, with MorphoSys being responsible for the commercial relationship with the end customer, which also comprises the deliveries of the drug and the collection of the related cash inflows. The revenues from product sales of Monjuvi are, therefore, recognized by MorphoSys, as it is the principal of the transaction. Incyte and MorphoSys are jointly responsible for the commercialization activities in the US and will equally share any profits and losses (50/50 basis). Outside the US, Incyte has received exclusive commercialization rights, determines the commercialization strategy and is responsible for the commercial relationship with the end customer, including the deliveries of the drug and the collection of the related cash inflows. Therefore, Incyte will recognize all revenues generated from sales of tafasitamab outside the US and will pay royalties to MorphoSys on these sales. As part of the agreement, MorphoSys recorded the balance sheet items "Financial Assets from Collaborations" and "Financial Liabilities from Collaborations". The financial asset represents MorphoSys’s current reimbursement claim against Incyte from the expected future losses associated with the US commercialization activities (as Incyte has agreed to compensate MorphoSys for 50% of said losses) measured at fair value. The non-current financial liability, measured initially at fair value, represents Incyte’s prepaid entitlement to future profit sharing on sales of Monjuvi in the US (as MorphoSys will share 50% of these profits with Incyte). Incyte has already acquired this right with the payments made in 2020; therefore, a liability had to be recognized at that time. The basis for the initial valuation at fair value is the corporate planning and its shared profits and losses thereof in connection with the commercialization activities of MorphoSys and Incyte in the United States for the years ahead. The financial asset is subsequently measured at fair value through profit or loss and the financial liability at amortized cost using the effective interest method. Any resulting effective interest is recognized in the finance result. The basis for the valuation at fair value is the corporate planning and its shared profits and losses thereof in connection with the commercialization activities of MorphoSys and Incyte in the US for the years ahead. Cash flows from the profits and losses shared equally between the two parties are generally recognized directly against the financial asset or financial liability. Differences between the planned and actual cash flows from the financial asset or financial liability are recorded in the finance result. Effects resulting from changes in planning estimates regarding the expected net cash flows from financial assets and financial liabilities are also recognized in the finance result. The initial effective interest rate continues to be applied for the subsequent measurement of the financial liability, whereas the current yield curve is used for the financial assets. Foreign currency translation effects from the financial asset or financial liability are also recognized in the finance result. The planning assumptions are influenced by estimates and mainly comprise revenues and costs for the production and sale of Monjuvi in the US, the discount rate and the expected term of cash flows. Revenues are affected by variable influencing factors such as patient numbers and the number of doses of Monjuvi administered, as well as the price that can be obtained in the market. Costs include the manufacturing costs for these doses of Monjuvi and other cost components for e.g. sale, transport, insurance and packaging. To determine |
