UPDATE 1-Galapagos partners with MorphoSys on antibodies

* Galapagos, MorphoSys to partner on antibody drug creation

* Venture to cost 30-60 million euros over next 4-5 yrs

* Galapagos, MorphoSys to split costs, revenues 50-50

* Galapagos CEO confirms FY revenue, cash guidance

* Shares rise

(Adds details after conference call, share price)

BRUSSELS, Nov 26 (Reuters) - Belgian biotechnology company Galapagos (GLPG.BR) said on Wednesday it would partner with German peer MorphoSys AG (MORG.DE) to develop antibody drugs to treat bone and joint disease, sending both sets of shares higher.

"We finally have a great entry into this market without having to invest massively," Onno Van de Stolpe, Galapagos Chief Executive, said in a conference.

At 0912 GMT, Galapagos shares were up 4.96 percent at 3.60 euros on Euronext Brussels, while the Bel20 blue-chip index dropped 1.1 percent. MorphoSys shares edged up 1.52 percent to 47.90 euros.

The antibody development will likely cost between 10 million euros and 20 million euros ($12.99 million to $25.98 million) total per drug programme between now and when the new drugs enter their first phase of human trials in four or five years, van de Stolpe said.

He added that the companies currently plan to develop three drug programmes for clinical trials, which would mean a total investment of between 30 and 60 million euros over the next four to five years and between 15 and 30 million euros per company.

"It's a 50-50 alliance. We'll share the costs and we'll share all the future revenues," van de Stolpe said.

The number of drug programmes could increase, van de Stolpe added.

Analysts at SNS Securities welcomed the deal, saying in a note to clients that it could become very valuable in the future.

Van de Stolpe, whose company specialises in bone and joint diseases such as rheumatoid arthritis, was upbeat about the group's prospects in light of this recent deal.

While the total pharmaceutical market is expected to grow some 13 percent to 520 billion dollars by 2013 from 460 billion dollars currently, the market for antibody drugs is expected to skyrocket nearly 100 percent in the same period to 50 billion dollars from over 25 billion dollars today, van de Stolpe said.

Despite the global downturn and tight credit markets, van de Stolpe said the company is in a comfortable cash position and is well able to finance the venture, reiterating previous guidance of a year-end cash position of 25 million euros and 2008 revenues of between 75 and 80 million euros.

Van de Stolpe said a large pharmaceutical company will carry out the final phases of testing of the new drugs following their initial human trials. Galapagos and MorphoSys would then collect milestone payments and royalties from the drugs.

"Big pharma are extremely interested in antibodies as such," said van de Stolpe, though he declined to name any firms which are looking specifically at the drugs that Galapagos and MorphoSys plan to develop together.

Van de Stolpe added that Galapagos might also explore, down the line, the possibility of developing antibody drugs in other disease areas, citing the need for new approaches for diabetes, respiratory disease and Alzheimer's disease, to name a few. ($1=.7698 Euro) (Reporting by Anne Jolis; Editing by Mike Nesbit)