MorphoSys AG and Bayer Sign Agreement to Apply Innovative Technology to Accelerate Drug Discovery

December 22, 1999 / 12:00 am, CET

Martinsried / Leverkusen – MorphoSys AG (Neuer Markt: MOR) and Bayer AG today announced a research collaboration and licence agreement for the application of MorphoSys’ proprietary technologies in a number of Bayer’s research and development programmes. The value of the deal to MorphoSys is in a double digit US million dollar range. Under the terms of the collaboration Bayer will make up-front payments and pay license fees to MorphoSys as well as milestone payments and royalties on any resulting antibody product. The agreement is scheduled to last for two years with an option for Bayer to extend for another four years, and will initially involve MorphoSys scientists working together with Bayer scientists.

The agreement specifies four areas in which the two companies will apply the MorphoSys technologies. MorphoSys’ HuCAL® (Human Combinatorial Antibody Library) technology will be used to generate fully human therapeutic antibodies against up to ten targets provided by Bayer. Secondly, Bayer has an option to develop antibodies generated using the HuCAL® technology as in vitro diagnostics. Thirdly, HuCAL® will be used to identify antibodies for use in monitoring the progress of clinical trials with selected drugs. The fourth area of application will use the MorphoSys technologies to identify and validate new targets emerging from Bayer’s genomics programme, which will be used by Bayer in screens for new drug candidates.

Under the terms of the agreement Bayer will make an up-front payment to MorphoSys as well as paying annual technology access fees including support for R&D at MorphoSys. In addition, Bayer will pay exclusivity fees for using the HuCAL® technology on up to ten potential targets, as well as milestone fees on antibodies delivered by MorphoSys which meet pre-agreed success criteria. Any antibody-based products developed in the collaboration will trigger development-related milestone and royalty payments by Bayer to MorphoSys.

“The signing of this agreement is a major milestone for us”, commented Dr. Simon Moroney, Chief Executive Officer of MorphoSys. “It is a vote for confidence in our technologies from Bayer, a company which has a reputation for choosing the very best partners for its R&D programmes. The committed funding is significant and if, as we expect, a series of products flows from the programme, the resulting milestone and royalty payments make this a very important deal for MorphoSys.”

“We have entered this agreement with MorphoSys because of the strength of their HuCAL® technology”, said Prof. Dr. Wolfgang Hartwig, Head of Research, Pharmaceuticals Business Group, Bayer AG. “We see this collaboration as an essential component of Bayer’s strategy of accessing those technologies which will play an important role in the development of tomorrow’s drugs.”

Professor Dr. Wolf-Dieter Busse, Head of Bayer’s Biotechnology Business in Berkeley, California, added: “The collaboration with MorphoSys will add an important element to the enabling technology platforms at Bayer Biotechnology, aiming at the discovery of novel protein therapeutics.”

About MorphoSys:
MorphoSys develops and applies innovative technologies for the production of synthetic antibodies which accelerate drug discovery and target characterisation. Founded in 1992, the Company's proprietary Human Combinatorial Antibody Library (HuCAL®) technology is used by researchers world-wide for human antibody generation. The Company has partnered with several international pharmaceutical companies. In March 1999, MorphoSys AG became the first biopharmaceutical company to list on Germany's new stock market segment “Neuer Markt”.

About Bayer:
Bayer is an international, research-based group with major businesses in life sciences, polymers and specialty chemicals. With 145,000 employees world-wide, the group recorded income before taxes of DM 5.3 billion on sales of DM 54.9 billion in 1998. For the current year DM 5.2 billion is earmarked for capital expenditures. A record DM 4.3 billion is budgeted for research and development, attesting to the company’s drive for innovation.

Statements included in this press release which are not historical in nature are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbour provided by Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words including “anticipates”, “believes”, “intends”, “estimates”, “expects” and similar expressions. The company cautions readers that forward-looking statements, including without limitation those relating to the company’s future operations and business prospects, are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements. Factors that may affect future operations and business prospects include, but are not limited to, clinical and scientific results and developments concerning corporate collaborations and the company’s proprietary rights and other factors described in the prospectus relating to the company’s recent public offering.

For further information, please contact:

MorphoSys AG

Dave Lemus
Chief Financial Officer
Tel.: +49 (0) 89 / 899 27-439
Fax: +49 (0) 89 / 899 27-5309

Dr. Claudia Gutjahr-Löser
Manager Corporate Communications
Tel.: +49 (0) 89 / 899 27-122
Fax: +49 (0) 89 / 899 27-5122