Novartis taps MorphoSys

Ten-year program to develop therapeutic antibody pipeline is valued at up to $1 billion.

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PLANEGG (MUNICH), Germany—In an agreement that MorphoSys' CEO Dr. Simon Moroney says, "Locks in all of the benefits of our partnering business model," the company has entered into a broad agreement with Novartis for antibody discovery and development. 
According to Moroney, the 10-year program, if it runs its course, will result in payment by Novartis to MorphoSys of $30 million per year in technology access and licensing fees, which will essentially flow to MorphoSys' bottom line. By way of comparison, the company returned net profit of E6 million in 2006. The company will also receive a total of $300 million in research support over the lifetime of the agreement and $400 million in milestone payments, a number Dr. Moroney says is "derived from expectation."

Though the Novartis alliance may indeed "lock in the benefits" of partnering for MorphySys, it also radically alters the scope and thrust of the business model. Moroney says that Novartis will have "preferred access" to his company's HuCAL-based antibody drug discovery platform and he adds, "not exclusive, but preferred." Although he later reveals that "existing partnerships will run their full course but will not be renewed."

Novartis, he notes, a partner over the past three years, has been building an antibody program and is in the clinic with a cancer therapeutic against an undisclosed target. "Novartis has proven to be the best in terms of speed and commitment," he says.

Unstated, perhaps, was the desire to partner with a big pharma in the light of acquisitions Moroney noted in his letter to shareholders in March. Citing them as "further proof of the sustained interest of pharmaceutical groups in antibodies," he cited the acquisition of Abgenix by Amgen, Cambridge Antibody Technology by AstraZeneca, Rinat by Pfizer and NeuTech by Novartis over the previous 18 months.

The deal will combine MorphoSys's and Novartis's research and development capabilities. A team at MorphoSys will be working on targets selected by Novartis, which will then take over for preclinical and clinical development. Novartis becomes MorphoSys's preferred collaborator for HuCAL-based drug discovery, allowing MorphoSys to progress to the next stage of its corporate development, which involves a greater focus on drug discovery and development within the Novartis alliance, and proprietary drug development, thereby substantially reducing MorphoSys's reliance on fee-for-service discovery deals.
The expanded alliance also includes rights to co-detail co-developed products in specific territories through creation of MorphoSys's own sales force.

Referring to the agreement as "a transforming deal for MorphoSys," Dr. Moroney claims the result will be "the broadest antibody pipeline in the industry." Over the lifetime of the agreement the two companies plan to collaborate on double the annual number of therapeutic antibody discovery programs in comparison to their past level of activity. No specific number—past or future—was revealed. "The breadth and size of Novartis' commitment are what stand out," Dr. Moroney sums up.

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