CAT sues US giant over royalties on rheumatoid arthritis drug

Cambridge Antibody Technology, the biotech group whose first successful product is a treatment for rheumatoid arthritis, has begun legal proceedings in its bitter battle to reclaim royalties it says it is owed by Abbott Laboratories.

Investors were dismayed by news CAT had failed to resolve the dispute and was now faced with a two-year battle in the UK's High Court.

Abbott, a US giant, has made an initial 3 per cent royalty payment, rather than the 5 per cent CAT says it is owed for its role in helping develop the rheumatoid arthritis treatment Humira, which is based on CAT technology and was launched in the US at the start of the year. Abbott says it is allowed to offset the costs of its work with other partners who helped in the development of Humira.

CAT's chief executive, Peter Chambré, said yesterday that outside arbitration had failed to resolve the dispute - one of a string of recent setbacks for UK biotech groups in their dealings with the largest pharmaceuticals partners.

Mr Chambré said: "The mediation process was clearly not successful. We strongly argued that the sought-for interpretation of the contract is not correct, and we were forceful in our presentations to Abbott."

CAT's move comes days after its UK rival, Celltech, was told by Pfizer, the world's biggest drug maker, that it wanted to renegotiate the terms of its deal to develop Celltech's own rheumatoid arthritis treatment. If CAT loses its High Court battle, it will be faced with the loss of royalties on Humira worth up to £20m a year just on sales in rheumatoid arthritis. The drug is also being developed as a treatment for several other conditions and the deal with Abbott also covers at least one other CAT-derived product which is currently in human trials.

But Mr Chambré insisted even a negative outcome would not jeopardise his promise to turn CAT profitable by 2008. He was speaking as the company unveiled a £10m rise in full-year losses to £41.8m. It was also announced that Peter Garland, one of the company's founding directors, is retiring as chairman, to be replaced by Paul Nicholson, currently the senior non-executive director.