The agreement remains subject to approval by US anti-trust authorities.
The deal will involve an upfront payment of around $111m, followed by approximately $1bn in potential milestone-based payments and royalties.
As part of an agreement signed by Galapagos and MorphoSys in 2008, the companies will equally share these payments.
Under the new agreement, which covers development and commercialisation, the partners will work to significantly expand MOR106’s existing development plan for the treatment of atopic dermatitis.
Novartis will hold exclusive rights for the commercialisation of any products resulting from the deal, and will be responsible for all future research, development, manufacturing and commercialisation costs.
The agreement is also for costs associated with the ongoing Phase II IGUANA clinical trial and a planned Phase I trial to assess the safety and efficacy of subcutaneous MOR106.
MorphoSys and Galapagos will perform additional trials to support the drug candidate’s use in atopic dermatitis, while Novartis plans to investigate its application in other indications as well.
MorphoSys CEO Simon Moroney said: “This collaboration with Novartis will enable us to accelerate and broaden the development of MOR106 beyond our current focus on atopic dermatitis and to exploit the potential of MOR106 to the maximum.
“Data from preclinical models and expression analyses suggest that the target of MOR106 might be involved in other diseases, which justifies expanding the development programme.”
MOR106 is an investigational, fully human IgG1 monoclonal antibody being developed to specifically target IL-17C to treat inflammatory diseases. The drug candidate was strategically discovered and co-developed by Galapagos and MorphoSys.
Last year, MOR106 was evaluated in a Phase I trial in both healthy volunteers and atopic dermatitis patients, and the IGUANA study for moderate-to-severe atopic dermatitis was initiated in May this year.