CAT dispute with Abbott may go to arbitration

Cambridge Antibody Technology, the biotech group whose first successful product is a treatment for rheumatoid arthritis, is likely to need outside arbitration in its royalties dispute with Abbott, the US giant.

Talks between the two sides have reached stalemate and it is now expected that Abbott will make a 3 per cent royalty payment next month, rather than the 5 per cent CAT says it is owed.

CAT's chief executive, Peter Chambré, said yesterday that he is "not anticipating resolution of this issue in the near future". The company's shares fell 4 per cent - or 25p - to 545p on fears the dispute may not even be resolved by arbitration and may have to be resolved in the courts.

Abbott developed the rheumatoid arthritis pill, called Humira, using CAT technology. Humira is on sale in the US and is close to approval in Europe. Abbott recently revised up sales expectations for the drug to $250m this year; it is widely expected to top global sales of $1bn a year when it is fully established.

The US giant says clauses in the original deal with CAT in 1993 gave it the right to cut royalty rates if it has also needed to license intellectual property from elsewhere to develop the drugs. But CAT is holding out against a compromise deal.

Mr Chambré said: "We are convinced and very confident of our position on this and that their decision to pay only minimum royalties is incorrect and inappropriate. But given the sums involved, which are substantial, Abbott will not come to a different view easily."

If Abbott is successful, it will in effect slash CAT's income from Humira by a third and also curtail earnings from other Abbott products developed using CAT's technology. Mr Chambré has been sacking staff and cutting research spending as he struggles to come up with a way to make CAT profitable as promised by 2008.

CAT lost £29.2m in the nine months to 30 June, compared with £22.4m last time. Nine of its products are now being trialled on humans, two more than three months ago. The new products are a new treatment for advanced cancers and a potential protection against anthrax.

There was disappointment, however, that an early-stage product failed as a treatment for allergic conjunctivitis.