Riding the biotech rollercoaster

Expat Kiwi Simon Moroney knows all too well the vagaries of the share market through his listed German biotech company, MorphoSys, writes Fiona Rotherham.

Imagine listing your company at a share price of 25 euros (AUD$40) and then seeing it go through the roof to 400 euros (AUD$640) within a year.

Most people would break out the bubbly. But expatriate New Zealander Simon Moroney is not one for getting exuberant -- he says he was unprepared for the rapid share price rise of his biotech company MorphoSys after its 1999 listing on the German technology market, the Neuer Markt. "You can't plan," he says. "You can't think, 'now I'll use this currency to buy such-and-such a company' -- it all happens just too fast, and you're not prepared to react to it."

It's lucky the Cambridge-born chemist didn't get too carried away, because by the end of 2002 the share price had plummeted from 400 euros to just 4 euros. Moroney found it hard to stomach the rollercoaster ride. "As a small company you can't afford to ignore your share price because it affects how people think about you and it affects your ability to raise money... it has too much of a bearing on the company's ability to do anything for you to be able to ignore it completely."

Given share prices went down overall in Germany, there was little the now grey-haired chief executive could do about it, other than keep his cool and continue to perform and generate good results. Moroney has a poster hanging in his Munich office that reads: 'Leadership is the ability to hide your panic from others.' Today his well-concealed panic is over, with the share price hovering around 36 euros -- well above its listing price.

MorphoSys has developed a unique laboratory technology for making real human antibodies. The HuCAL antibody library is used to develop therapeutic antibody drugs developed and commercialised by partners worldwide. From the outset, Moroney has been a steady hand at the helm of the now profitable company which employs 132 staff. But he didn't initially plan to be an entrepreneur.

Chemical passion

He left New Zealand in 1981, armed with two degrees from Waikato University, to do a PhD in chemistry at Oxford University. Moroney has always been interested in medical applications of chemistry -- using molecules to do something constructive. That's the reason he shifted to Harvard Medical School in Boston where he worked for ImmunoGen, on the development of antibody-based cancer drugs.

Moroney moved on to do theoretical research on DNA letters in Zurich and later had a short stint teaching at the University of British Columbia in Canada before deciding he wasn't cut out for a classic academic career. After leaving Vancouver he bumped into an old friend in Switzerland who had also gone to an academic position in the US, but became disillusioned and quit. The pair had something else in common -- they were both thinking about starting a biotech company. Moroney and his friend Christian Schneider joined forces with an up-and-coming German professor, Andreas Plueckthun, who Moroney claims was the first to figure out how to make antibodies in bacteria. In mid-1992, after scrounging around for venture capital, they launched MorphoSys.

It was a slightly crazy move because there was no German biotech industry to speak of at the time. But both Moroney and Schneider had little to lose. "It wasn't like we had stable, successful jobs with secure incomes and we were jumping out of that. We had nothing, so in that sense it was kind of easy to start."

Coupled with that, the Berlin Wall had just come down and the company's investors were optimistic that Germany would go through a massive growth phase and that the hostile climate to biotech would change over time. Initial venture capital came from a small London-based fund, Korda & Co, run by Alex Korda (the nephew of the famous Hungarian-born film director of the same name). "I think today there is no way we would have raised money based on what we had then, but this guy Korda was extremely entrepreneurial and he just felt that we could make something out of it," Moroney says. And he was right.

Difference of opinion

But there have been some big hurdles. Running the company with two chief executives didn't last long, and Moroney became the sole boss when Schneider left in 1994, following a difference of opinion about strategy. "We still talk to each other," Moroney says dryly.

The hardest challenge has been raising money. During the 1990s the company did four fundraising rounds, raising more than 90 million euros in equity and grants, which Moroney acknowledges is a lot more than small Kiwi biotechs dream of attracting. He has retained around 3 per cent of his start-up and is critical of company founders who find it hard giving away a big slice of the pie to venture capitalists. "Without cash you get nowhere. I think too many companies are concerned about control or dilution, at the expense of getting enough cash into the business to do anything meaningful."

And Moroney intends to be meaningful. Antibodies is the fastest-growing class of pharmaceuticals in the market today but the way antibodies are made generally uses 30-year-old technology that is animal-based. MorphoSys, along with a couple of competitors, have developed an in vitro technology without using animals and he wants this to become the dominant global method. "I think that is a noble enough goal, that our technology becomes a worldwide industry standard," he says seriously.

Partnered early

The share market rollercoaster ride wiped Moroney's initial plans to commercialise the company's compounds on its own. He instead partnered at an earlier stage with some pretty big names in the pharmaceutical industry -- the likes of Pfizer and Roche. MorphoSys now has 25 antibody programs underway which will pay royalties of around 5 per cent if the drugs make it to market. "Let's say six or eight or ten do. I would argue that is equally as attractive as having 50 per cent interest in two programs... It is a lower-risk strategy, but overall could be equally as attractive."

The first MorphoSys compound to make it to market so far is an antibody treatment for lymphoma, in partnership with a German biotech company. It went to clinical trials at the start of this year and another three are likely to in the next nine months. Moroney has also personally won some kudos, being awarded the German Cross of the Order of Merit for his services to the biotech industry. He has no plans to return to live in New Zealand, although he visits family there once a year and there are some things he misses -- winters that are like summers in Germany for one.

Long-time colleague Achim Knappik says the Kiwi is considered "very British" in Germany because he comes across as so serious and trustworthy. "I really like him but he always stays at some distance regardless of how long you have known him." And Knappik thinks Moroney's biggest challenge as the company grows bigger will be learning how to delegate. "This is something he has difficulty with, in my opinion, he needs to have everything under control."

The only work Moroney's company has done in New Zealand is supplying antibodies to Dunedin-based biotech Pacific Edge. CEO David Darling says MorphoSys's monoclonal antibodies are a bit like "a fish hook with a particular piece of bait specifically for one fish" that helped his company research methods for diagnosing and monitoring cancers. "We gave them a particularly difficult task to build a monoclonal antibody for a cancer antigen that had some close cousins. They did a great job with a fast turnaround," Darling says.

Moroney wears a suit more often than a white laboratory coat these days. He travels frequently all over Europe, and to the US about six times a year, wooing investors and big pharma on the company's technology. "Among the industry we have a really good reputation," he says. "Some investors with longer memories remember the rollercoaster. I know investors now feel that we've come through the hard times and we're looking like an attractive investment opportunity again."

And even in the tough times Moroney never contemplated giving up. "It's enormously gratifying when you see what you have planned and hoped would work out, actually work out."

-- Unlimited