CAT ties up skin treatments deal with Amgen

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The Independent Online

Cambridge Antibody Technology, the biotech group working on new treatments for scarring and skin complaints, has tied up a revised drug development deal with the US giant Amgen.

The UK company - which has been cutting back spending on early stage products to conserve cash this year - said on Christmas Eve that Amgen would pay milestones and royalties in return for taking over full control of the work on two existing projects. Amgen took over Immunex, CAT's original partner, last year.

Peter Chambré, the chief executive of CAT, said: "This was a 50-50 co-development deal, but we decided that these areas, auto-immune diseases and inflammation, are highly competitive and are probably not the best places to be investing our resources. We decided to focus our monies elsewhere and ask Amgen to take responsibility."

Analysts believe CAT will still get single-digit percentage royalties from any products developed by Amgen, but now without having to fund the work.

For its part, Amgen no longer has to share such a big proportion of any proceeds.

Simon Elliott of Lehman Brothers said: "We believe the real motivation behind the decision by CAT to seek or accept these renegotiated terms is due to the increased cost burden associated with developing a drug with Amgen compared to developing a drug with Immunex. When developing a drug with Immunex, CAT could have expected Immunex to have similar ideas as to the costs and speed at which the antibodies should be developed.

"However, Amgen, due to its far greater size, would be expected to develop the drugs at a greater cost and speed, which could be greater than CAT was budgeting for [since CAT would be burdened with half the costs]. Therefore, by receiving a royalty stream and milestones, this is no longer a concern."

Jonathan Senior of Evolution Beeson Gregory said: "CAT can still make money further down the line, but any products are eight to ten years away, and this means they can spend money on new products that are further through development."

CAT has cash resources of around £100m and had a cash outflow in the year to September of £34m.

CAT is planning to license in new drugs as it tries to find a course to profitability by its promised date of 2008. The company's shares, though, have missed out on the biotech rally this year, as investors remain sceptical.

The problem has become particularly acute because Abbott, the US pharmaceuticals giant which has launched a rheumatoid arthritis drug based on CAT technology, wants to cut the level of royalties it pays to CAT for the product and for five others the pair are developing. The dispute is headed for the High Court.