A June 28 antibody development deal between MorphoSys and Xencor highlights the upside of partnering with the rare biotech company that has the financial wherewithal to drive development forward, but remains small and focused on its new-found drug candidate. It also marks the end of a long, difficult in-licensing search by MorphoSys.

Until 2008, the German biotech seemed content making an admirable living as an antibody discovery partner for a variety of large pharmaceutical companies and as a producer of designer antibody reagents. About 18 months ago its fledgling internal pipeline had advanced to the point where the company could contemplate entering the riskier business of internal drug development.

The plan to move forward in the value-chain included in-licensing a pre-clinical/early clinical candidate to augment its early-stage candidates in rheumatoid arthritis and multiple myeloma (Also see "MorphoSys Is At BIO Looking To Buy" - Pink Sheet, 18 May, 2009.).

The search turned out to be exhausting. "We spent all of last year looking really in detail at antibodies in [that space] and finished up the year not doing anything despite a huge amount of work and looking at a lot of candidates," Simon Moroney, MorphoSys CEO, said in an interview. "There just were not a lot of gems lying around out there" (Also see "Will MorphoSys Trade Profitability for More Products, More Opportunities, and More Risk?" - In Vivo, 1 November, 2009.).

With Monrovia, Calif.-based Xencor, however, MorphoSys found a meeting of the minds as well as of the pocketbooks. "We're delighted now to have found [a compound] that we definitely feel is worth pursuing and was at the same time affordable," Moroney said, adding that the two companies discovered they have similar "company cultures" and an understating that facilitated negotiations.

Under the terms of the deal, MorphoSys gets worldwide exclusive license to XmAb5574, a mAb designed by Xencor to treat patients with chronic lymphocytic leukemia. (MorphoSys also reserved rights to develop the antibody in other indications.) The smaller company gets $13 million (€10.5 million) upfront with the promise of milestones and royalties down the road. Xencor will conduct a Phase I study, set to tee off within a few weeks, with data possibly available sometime in 2012. After that MorphoSys picks up development through proof of concept in patients, at which time the plan is to seek a commercial partner for the antibody, which it has renamed MOR208.

More details of the arrangement were not disclosed, but Moroney did say the contract contains diligence clauses to ensure it pursues the compound with vigor. MorphoSys did not change its guidance of investing €26 million - €29 million in proprietary product development for 2010. Overall, the deal fits into the company's mid-term financial planning, Moroney said.

That plan calls for a certain level of investment in product development and this deal "fits well within the context," he said. MorphoSys expects to remain profitable in the medium term, and for the top line to continue to increase by 10 percent to 20 percent for the year, he said.

For Xencor, which had Big Pharma suitors for its humanized anti-CD19 antibody, it was a matter of finding a partner that would maintain a high level of commitment to the antibody's development. Partnering with MorphoSys doesn't have the level of risk a pharma deal would have, Bassil Dahiyat, Xencor's president and CEO, said.

"When you partner with a huge pharmaceutical company, [the compound] could get lost in the mix. A VP changes jobs ... and suddenly your program goes from priority one to priority four." MorphoSys is "a nice mix of being big enough to have the resources to do the program right, and do it better than we could do it alone, frankly, but small enough [that] it's still very important to them."

In addition, said Dahiyat, "I think they're going to be pursuing this in biotech speed ... rather than pharma speed. That was a big draw for us."

MOR208/XmAb5574 was designed using Xencor's XmAb technology to have enhanced antibody-dependent cell-mediated cytotoxicity, meaning that when it has attached itself to its target antigen, its mechanism for recruiting and activating the body's natural immune cells to that target and kill it is altered to improve performance. Dahiyat describes the technology as greatly heightening a natural process.

MorphoSys' lead candidate, MOR103, targets GM-CSF and is in a Phase Ib/IIa trial for rheumatoid arthritis. Its second compound is a preclinical anti-CD38 mAb the company hopes has utility in multiple myeloma. The new addition, "really fills the gap" between the two proprietary compounds. "That was one motivation for us to do this deal," Moroney said.

With the deal completed, the company is no longer looking for in-licensing opportunities. For the time being, MorphoSys' development plate is full, Moroney said. "We have everything we can manage."

-Shirley Haley (s.haley@elsevier.com)

MorphoSys Fills Out Pipeline With Xencor Deal

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