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MorphoSys and Novartis Forge new Strategic Alliance to Establish Therapeutic Antibody Pipeline

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MorphoSys AG has announced the formation of one of the most comprehensive strategic alliances with Novartis in the discovery and development of biopharmaceuticals.

The deal is aimed at establishing a pipeline of innovative drugs, and combines MorphoSys's and Novartis's research and development capabilities.

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 new or extended 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. In addition to programs pursued jointly, Novartis has accelerated its plan to internalize MorphoSys's leading human antibody technology, HuCAL, at its research sites under the option agreed in the original contract.

The structure and the financial terms of the collaboration further create a solid financial footing allowing MorphoSys to accelerate and broaden its proprietary drug development efforts and participate in development activities with Novartis.

Under the agreement, Novartis will make a major long-term commitment to MorphoSys's HuCAL technology. The collaboration has a term of 10 years. Novartis has the option to prolong the collaboration for a further two years or to conclude the alliance after 7 years in certain limited circumstances.

Over the lifetime of the agreement, the parties will engage in approximately double the annual number of therapeutic antibody discovery programs as compared to the 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.

Based on a 10-year term, committed total annual payments sum to more than US $600 million in technology access, internalization fees and R&D funding, excluding reimbursement of R&D costs related to early stage development activities.

Total payments under the agreement, including committed payments and probability-weighted success-based milestones, contingent upon successful clinical development and market approval of multiple products, could potentially exceed US$1 billion, assuming the collaboration successfully runs its maximum term. In addition to these payments, MorphoSys would also be entitled to royalty payments and/or profit sharing on any future product sales.