HAMBURG, Germany - MorphoSys AG has signed a research collaboration and license agreement with Bayer AG that it said entailed an investment of more than US$10 million.

MorphoSys, of Martinsried, separately entered a collaboration with BioSite Diagnostics, of San Diego, that will further enhance MorphoSys' intellectual property position.

The deal with Bayer, of Leverkusen, specifies four collaborative areas in which MorphoSys' proprietary library of human combinatorial antibodies (HuCAL) will be used: to develop human antibodies against up to 10 targets in different disease areas provided by Bayer; to identify and validate new targets emerging from Bayer's genomics program; to develop antibodies identified by MorphoSys' technology as tools for in vitro diagnostics; and to find antibodies useful for monitoring progress in clinical trials. The collaboration is scheduled to last for two years but includes an option to be extended to up to another four years.

"Bayer has chosen a strategy to establish a small number of strategic alliances with biotech companies," Simon Moroney, CEO of MorphoSys, told BioWorld International. "With Millennium, Bayer is looking for new targets, and with LION, the company has started an important bioinformatics collaboration. Now with MorphoSys, Bayer wants to make use of the vast potential of human antibodies as research tools, therapeutics and diagnostic instruments for Bayer's in-house research and development projects."

Moroney said negotiations went on for more than a year. "Bayer has evaluated our intellectual property position very carefully. Apart from our technology, this has been the other decisive factor in striking the deal. Bayer is known to choose its partners with great care, so we view the decision not only as a proof that our technology is very flexible and trend-setting indeed, but as a signal that our patent and license position is secure. I am confident that the signing of this collaboration will have considerable influence on our ability to sign further deals."

Under the terms of the agreement, Bayer will make an up-front payment and pay annual technology access fees including support for research and development at MorphoSys. "In addition, we get exclusivity fees for the use of our HuCAL technology on up to 10 targets and milestone payments upon development of antibodies that meet pre-agreed success criteria," he said. "Products developed from the collaboration will trigger further milestone and royalty payments. We expect the flow of a series of therapeutic and diagnostic products during the next two years, so that this deal is of great importance to us." Financial details were not disclosed, though Moroney indicated it was a double-digit million dollar collaboration.

To strengthen its intellectual property position and to become a one-stop shop in human antibody technology, MorphoSys has initiated license agreements with companies holding patents on antibody technology. Following a contract with SCA Ventures, of Piscataway, N.J., MorphoSys now signed a license agreement with BioSite Diagnostics. BioSite develops, manufactures and markets antibody-based diagnostic products. The company holds key patents fundamental for the practice of phage display of antibodies. A couple of months ago, the company formed a collaborative antibody development program for the discovery of novel targets and corresponding antibodies, primarily in the area of cancer, cerebrovascular, cardiovascular and infectious diseases.

MorphoSys obtained a non-exclusive license that allows MorphoSys and its partners to generate fragment antigen binding (FAB) and other multi-chain antibodies using the phage display library. In return, MorphoSys will pay revenues on the sale of licensed products and provide BioSite with access to certain diagnostic markers generated in MorphoSys' collaborations with pharma and biotech partners. On the other hand, MorphoSys will receive revenues on the sale of licensed products developed from diagnostic targets provided by MorphoSys.

"To us, this is a another license fundamental for our business model," Thomas von R|den, MorphoSys chief scientific officer, told BioWorld International.