Novartis, MorphoSys Enter 10-Year Antibody R&D Pact

Novartis and MorphoSys AG have formed a comprehensive, 10-year, $600 million strategic alliance for the discovery and development of biopharmaceuticals. The deal is aimed at establishing a pipeline of innovative drugs, and establishes Novartis as MorphoSys’s preferred collaborator for HuCAL-based drug discovery. According to a MorphoSys statement, this will allow the company to focus on drug discovery and development and help it wean itself from new or extended fee-for-service discovery deals. The agreement supersedes the existing one between the companies.

Under the agreement, Novartis will make a major long-term commitment to MorphoSys’s human antibody technology, HuCAL. Over the 10-year lifetime of the agreement, the parties will engage in approximately double the annual number of therapeutic antibody discovery programs as compared to their previous alliance, encompassing a wide range of diseases. MorphoSys also has options to participate in certain development activities in various programs, with part of the early stage costs being funded by Novartis. Under the co-development options, MorphoSys may elect to participate in these projects through cost and profit sharing with financial participation reflecting its level of investment in the respective programs.

The alliance also includes rights to co-promote products in specific territories through creation of MorphoSys’s own sales force. In addition to programs pursued jointly, Novartis has accelerated its plan to internalize HuCAL at its research sites under the option agreed in the original contract between the companies.

Based on a 10-year term, committed total annual payments sum to more than $600 million in technology access, internalization fees and R&D funding, not including reimbursement of R&D costs related to early stage development activities. Including development milestones, total payments could exceed $1 billion, assuming the collaboration successfully runs its maximum term (Novartis has  the option to end the alliance after seven years or extend it to 12 years). MorphoSys is also entitled to royalty payments and/or profit sharing on any future product sales.

“This is a transforming deal for MorphoSys. This alliance heralds a new chapter in our corporate development as it offers us the perfect construct to increase significantly the value of our proprietary drug development pipeline while simultaneously maximizing our financial interest in partnered programs,” commented Dr. Simon Moroney, chief executive officer of MorphoSys AG. “The first antibody from our collaboration with Novartis entered the clinic three years after signature. The proven success of our relationship and demonstrated commitment of the collaborator was a key factor in our decision to enter this substantially expanded new deal. This deal maximizes the value of our partnered antibody pipeline and the additional cash-flows within the strategic partnership with Novartis will become a major value driver for MorphoSys.”

“Over the past three years MorphoSys has been an instrumental collaborator in the build up of Novartis internal biologics discovery and development efforts,” said Abbie Celniker, Global Head, Novartis Biologics.  “We look forward to continuing our collaboration with the MorphoSys team under this expanded alliance.”