MorphoSys dons new hat as venture capitalist in Lanthio deal

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Add “venture capitalist” to the words used to describe MorphoSys. A technology deal with the private Netherlands peptide specialist Lanthio Pharma has the German antibody developer leveraging its ample cash to stimulate early-stage innovation.

As part of a joint technology agreement with the University of Gröningen spinout, MorphoSys joins a €4.8m ($6.2m) series A round to support development of Lanthio’s durable and targeted peptide technology while shouldering the burden of commercialising the peptide platform. “The approach they have and the technology they have is something we wanted to have our hands on,” MorphoSys finance chief Jens Holstein told EP Vantage.

Shifting focus

Lanthio specialises in constrained peptides – molecules that are resistant to the actions of proteases, are more selective and can, like small molecules, penetrate into cell interiors. Lanthio has created a platform for building peptides for specific targets, but also has developed five specific agents, one of which, PanCyte, has been licensed to a Massachusetts-based developer, Tarix Pharmaceuticals.

In forging the pact, Lanthio signs over to MorphoSys the responsibility of commercialising its drug discovery services, taking advantage of the expertise the German group has developed in marketing its own antibody and genetic-engineering platform.

In deciding on the deal Lanthio found itself caught between competing demands. “What many platform companies are struggling with is bringing in some money with service contracts, and also discovering and developing products,” said its chief executive, Bart Wuurman. With this collaboration, “they do the service deals. We get the revenue for it. We spend it.”

Mr Wuurman said the revenue from the MorphoSys collaboration, along with the venture capital, left Lanthio sufficiently funded to advance one of its peptides through to the end of phase I by the end of 2014 or early 2015. Its most advanced project is an LP2-AT2 agonist, which has shown signs of effectiveness for idiopathic pulmonary fibrosis.

This would be respectable progress for a company that emerged in 2011 from a university incubator with backing from BioGeneration Ventures, a seed capital fund affiliated with the well-known European VC firm Forbion Capital Partners. Joining MorphySys in the series A round funding were BioGeneration, along with INKEF Capital and Hanzepoort.

Looking for deals

For MorphoSys, the funding round was a chance to invest in a technology it felt fitted well with its own approach to human therapeutics technologies, Mr Holstein said.

The group had €48.9m at September 30. Revenue from technology deals offsetting most of its R&D and other costs, and the limitation of losses to €2m so far in 2012, has left MorphoSys looking to make use of its cash pile.

There is also a precendent for such deal-making: in 2010 the group acquired Sloning BioTechnology, giving it access to a genetic engineering platform (Platform deals boost MorphoSys but pipeline needs to deliver, December 15, 2010).

But an acquisition of Lanthio was never on the table. Mr Holstein compared the relationship between the two biotechs to that of MorphoSys and Novartis, with whom the German company has a long-standing collaboration. “They could have bought us easily as well,” he said. “Instead we keep the people with the knowledge independent; that’s a good approach.”

Mr Holstein said MorphoSys had been “screening the market” for technologies and compounds for potential deal-making, so there is probably more to come, but this perhaps does not include large acquisitions.

“We will be cautious about investing our money,” he said. “We felt [Lanthio] was the right target and the right technology.”

To contact the writer of this story email Jonathan Gardner in London at jonathang@epvantage.com

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