Cambridge Antibody to pay £55m for Canadian firm

Cambridge Antibody Technology is to buy a Canadian investment company in a deal that will provide the it with an income from other drug companies' products.

Cambridge Antibody Technology is to buy a Canadian investment company in a deal that will provide the it with an income from other drug companies' products.

The UK biotech company, which develops drugs based on the body's own immune system, will pay £55m in shares for Drug Royalty of Canada. DRC invests in early-stage drug companies and harvests a royalty from any drugs that reach the market.

Cambridge Antibody is due to begin paying royalties to DRC itself next year, an arrangement that will be cancelled under the deal. The Canadian company invested £1.5m in 1994 in return for a 3.5 per cent cut of Cambridge Antibody's revenues in 2003 and 2.5 per cent for the following five years.

DRC will cease new investments if its shareholders agree the takeover. That will leave Cambridge Antibody with a portfolio of royalty streams which includes blockbuster drugs such as Schering-Plough's anti-allergy product Clarinex and Johnson & Johnson's Remicade, for rheumatoid arthritis.

Cambridge Antibody's own rheumatoid arthritis drug, D2E7, is due to be launched next year by its US partner Abbott Laboratories, which believes it could have peak sales of more than $1bn (£694m) a year.

David Chiswell, the chief executive of Cambridge Antibody, who has announced his intention to stand down, said the acquisition of DRC was complementary to the biotech's business, since its own revenues will be dominated by royalties from D2E7 from next year.

"DRC's net cash position [£11.3m at the end of November] will provide Cambridge Antibody with further funding as it continues the creation and development of its growing pipeline of new antibody drugs," Mr Chiswell said.