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Biopharm Development & Manufacturing Surfing The Peaks And Troughs Of The Biotech Ocean By Suzanne Elvidge, contributing editor S ince its founding 20 years ago, German biotech MorphoSys has come from a tough start as a company fighting patent battles and struggling to get funding to success as a profitable, fee-forservice organization. Today, MorphoSys is well on its way to becoming a fully integrated biotechnology company, primed to take its own products from concept to patient. So how has the company survived through some of the most turbulent economic times the industry has seen and succeeded where many others have failed? To find out, let's start at the beginning. MorphoSys was founded in Martinsried, Germany, in 1992 as a fee-for-service antibody company, and its team of founders included the current CEO, Simon Moroney, Ph.D. The company is based on its proprietary technology HuCAL, its human combinatorial antibody library containing several billion fully human antibodies, and a proprietary phage display technology, which it describes as "the most successful antibody library technology in the pharmaceutical industry." In 1997, the company signed its first commercial partnership, with Pharmacia-Upjohn, and followed this up in 1999 with an ongoing collaboration with Bayer. GETTING THROUGH THE TOUGH TIMES As many companies soon realize, early successes don't always equate to ongoing triumphs. MorphoSys and Cambridge Antibody Technology (CAT, now part of AstraZeneca) both developed antibody platforms based on phage display. In 1999, MorphoSys filed a lawsuit against CAT seeking to invalidate one 40 LifeScienceLeader.com of CAT's patents. In 2001, CAT filed a number of lawsuits against MorphoSys, claiming infringement of a patent covering antibody expression libraries and their generation. After a lot of legal wrangling, claims, and counterclaims, the two companies agreed to settle in 2002. The agreement gave MorphoSys the freedom to develop and commercialize its HuCAL technologies. Under the agreed terms, CAT received an annual payment of €1 million (about $1.4 million) a year over five years, along with milestone and royalty payments for products developed using the HuCAL libraries, and an equity stake in MorphoSys. Around this time, MorphoSys was also trying for the first time to develop its own proprietary pipeline, but was struggling to raise the funds it needed. These two endeavors combined to have a devastating impact on the company, resulting in a need to restructure. The company cut its spending on its own pipeline and changed its business plan to partner proprietary products before it moved into clinical development. It also had to reduce headcount from 120 to 91 employees. These spending cuts assured that the company could continuously operate for at least three years. As Moroney's goal had always been to develop the company's own products, this was a tough decision to make, but it allowed the company to get through the tough times. "We went back to our core skills and February 2014 refocused the company on fee-for-service. We had to downsize, unfortunately, but this meant we could work our way through the difficult times and survive. It took two to three years to get back on our feet, but I think we emerged stronger," says Moroney. "We had to accept that morale would suffer. It's important to know how to manage it. The best way to handle the situation is to be honest and explain what is going on, why it's happening, and what people should expect. When people see things play out as predicted, it restores faith and confidence." REBUILDING AND VALIDATION This refocusing, under Moroney's leadership, helped MorphoSys to move to where it is now — a company with a strong financial position that's able to fund its own internal development activities and still remain profitable. This rather enviable position is not one that many development-stage biopharma companies can match. The first significant step was the deal signed with Novartis in 2004 to discover and develop therapeutic antibodies using HuCAL technology. This included a €9 million (around $12.3 million) investment in MorphoSys and more than $30 million in R&D; funding license fees over three years. In 2006, Novartis extended the deal until May 2011. Other partners included Boehringer Ingelheim, Daiichi Sankyo, GlaxoSmithKline, Janssen Biotech, Merck, Pfizer, and Roche.