Cambridge wins drug royalties battle

Cambridge Antibody Technology, one of the UK's oldest biotech companies, has emerged triumphant in its 18 month-long legal battle to claim unpaid royalties on a blockbuster drug.

Cambridge Antibody Technology, one of the UK's oldest biotech companies, has emerged triumphant in its 18 month-long legal battle to claim unpaid royalties on a blockbuster drug.

The High Court ruled yesterday that Abbott Laboratories, the US pharmaceuticals giant, had violated an agreement when it unilaterally cut the payments due to CAT on Humira, a billion-dollar rheumatoid arthritis treatment developed using the UK company's technology.

The ruling means CAT is owed $30m (£15m) in back pay and will receive royalties of more than 5 per cent of future sales, compared with the 2 per cent Abbott had indicated it would pay. The difference could amount to several hundred million pounds, and is critical to the financial future of loss-making CAT. Abbott said it was disappointed and that it had requested an appeal, an application for which will be heard alongside the discussion of costs late next month.

CAT shares were briefly suspended in the run-up to the judgment to allow the company to make a Stock Exchange announcement. They jumped 28 per cent on their return, closing up 13 per cent at 713.5p.

Peter Chambré, the chief executive, said the victory vindicated his decision not to settle with Abbott at a low royalty rate, and would give the company greater financial flexibility in its dealings with AstraZeneca, the UK pharmaceutical giant with whom it has entered a wide-ranging partnership deal. Under that deal, CAT has the option of sharing the costs of developing new drugs, in return for a higher royalty on any products that reach the market.

Mr Chambré said: "If we now have greater royalties coming in, we have greater flexibility to opt in to those programmes, and therefore keep a greater share of the benefits."

The Abbott case centred on whether Abbott's original deal to license CAT's technology - which helps develops drugs based on the human immune system - allows Abbott to offset royalties to third parties against those that are due to CAT.

Mr Justice Laddie, handing down his judgment, said. "It is overwhelmingly likely that CAT's case as to what was the mutual and real intention and agreement of the parties is correct."

The uncertainty surrounding CAT's future cash flows had overhung its shares and put the company in a strategic bind. The emergence of the dispute also put an end to CAT's hopes of acquiring Oxford GlycoSciences, a biotech group which was won by CAT's rival Celltech.

Sally Bennett, at INH Financial Markets, said: "This is a very strong judgment and good news for CAT. It means they have no requirement to come back to the market for further funds, unless there is a new product they want to license in."