CAT to buy itself out of revenue sharing deal

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The Independent Online

Cambridge Antibody Technology will this week say it issuing £6m of new shares to buy itself out of a revenue sharing deal with one of its early-stage investors.

Cambridge Antibody Technology will this week say it issuing £6m of new shares to buy itself out of a revenue sharing deal with one of its early-stage investors.

The UK biotechnology company, which is developing drugs for scarring and allergies, had promised up to 3.5 per cent of its annual revenues to Drug Royalty of Canada, a Toronto-based pharmaceuticals investor. It can undo the deal now that DRC has been taken over.

CAT, which is chaired by Professor Peter Garland, the former boss of the Institute of Cancer Research, had offered £55m in shares to take over DRC itself, but was trumped by a rival bidder. Although CAT has kept its original offer formally open, it will admit this week that it has lost out to Imwest, a private Canadian investment group that made a higher cash offer last month.

The UK company wanted to take control of DRC to avoid having to pay it a cut of its income from next year. DRC invested £1.5m in 1994 in return for 3.5 per cent of CAT's revenues in 2003 and 2.5 per cent for the following five years.

DRC invests in early-stage drug companies and harvests a royalty from any products that reach the market. Its portfolio of royalty streams includes blockbuster drugs such as Schering-Plough's anti-allergy product Clarinex and Johnson & Johnson's Remicade, for rheumatoid arthritis.

The change of control at DRC gives CAT the right to buy itself out of its revenue sharing obligations for £6.1m, and the subsequent issue of shares to Imwest will dilute existing shareholders by just 1.5 per cent.

CAT shares closed at 1,175p on Friday, compared with a high of more than £48 at the height of the New Economy bubble two years ago.

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