European Biotechs Clinch R&D Deals

Two small European firms are the latest biotech specialists to benefit as large pharmaceutical companies seek innovative ways to fill their product pipelines.

In the larger of the two deals, Munich-based MorphoSys has formed a 10-year alliance in therapeutic antibody development with Novartis that could be worth more than $1 billion, according to MorphoSys CEO Simon Moroney.

The sum includes more than $600 million from Novartis over 10 years for R&D funding and technology access. Future royalty payments could add even more to the total, Moroney adds. He points out that the deal does not include an equity purchase by Novartis, which is already the German company's largest shareholder.

In the agreement, Novartis becomes the preferred collaborator for MorphoSys' HuCAL human antibody technology. The two companies began working together in 2004. Now, Novartis will accelerate its plan to install the HuCAL technology at its research sites.

Over the lifetime of the agreement, the parties will double their therapeutic antibody discovery programs in a wide variety of areas. During a conference call with securities analysts, Moroney would not elaborate on specific areas of investigation but did say that MorphoSys' own projects, particularly in rheumatoid arthritis, would be unaffected by the deal.

The analysts seemed enthusiastic about the deal, which Patrick Fuchs, an analyst at DZ Bank, termed "very elegant financially and strategically." It is "a transforming deal for MorphoSys," Moroney said, giving his company more resources to power its own corporate development. The deal allows the firm to reduce its reliance on fee-for-service discovery deals. In fact, MorphoSys will not extend collaborations with BayerSchering and Centocor, which are due to expire at the end of this month. Other ongoing collaborations will also be wound up at the end of their terms.

In the other deal, Addex Pharmaceuticals, a Swiss company specializing in allosteric modulation???which centers on tuning receptor-drug interactions???has entered an exclusive collaboration and license agreement with Merck & Co. with the goal of developing a new class of orally available drugs. Initial projects will focus on Parkinson's disease. The partners will discover and develop positive allosteric modulators targeting the metabotropic glutamate receptor 4, which is implicated in the development of Parkinson's disease.

Addex will receive $3 million up-front and is eligible for up to $106.5 million in research, development, and regulatory milestones for the first product developed for multiple indications. Additional milestones of up to $61 million will be payable if second and third products are developed. Addex is eligible to receive undisclosed royalties on sales of any products resulting from the collaboration.