Cambridge Antibody Says Abbott Flap May End Up In Court
Monday May 19, 6:50 am ET
By Susannah Rodgers, Of Dow Jones Newswires
LONDON -- Cambridge Antibody Technology Group PLC said Monday it may have to go to court to clear up its dispute with Abbott Laboratories over royalties on its lead drug Humira.
The news came as CAT reported a pretax loss for its first half of 10 million British pounds ($16.23 million), in line with consensus forecasts of a full-year loss of 34 million pounds. Analysts had hoped CAT would accompany its earnings with news that the dispute has been resolved.
Abbott, CAT's partner in developing Humira to treat rheumatoid arthritis, said recently it plans to pay CAT less royalties than originally agreed by deducting the cost of intellectual property license fees. CAT, however, says the terms of their agreement doesn't allow this.
The dispute is crucial for CAT. Humira is the first of CAT's drugs to be approved by regulators and has been billed by Abbott as a potential blockbuster with annual sales of over $1 billion. If Abbott's claims are upheld, then royalty payments could slip to around 1.5% of revenue from around 4%.
"They (analysts) and we would wish to have the Humira royalty situation cleared up," CAT Chief Executive Peter Chambre told Dow Jones Newswires. "We're strongly of the view that Abbott's assertions aren't correct."
Mr. Chambre said CAT will try to resolve the dispute over the next few months leading up to October, when the first Humira royalty payments are due. But if it is still unresolved by then, CAT will have to resort to formal dispute resolution, he said.
Shares were unchanged at 443 pence at 0830 GMT (4:30 a.m. EDT).
"There was no news on the main driver for the stock, the future royalty rates CAT will earn on Humira," said Sam Fazeli, analyst at Nomura. He is keeping the stock at a "reduce" rating.
Humira is the first in the class of drugs known as fully human antibodies to be approved by U.S. regulator the Food and Drug Administration (News - Websites). CAT was founded in order to commercialize its skills in turning human antibody research into drugs.
CAT said its five-year objective to push through other drugs in its pipeline to market remains unchanged despite the uncertainty over royalties.
"Objectives remain the same, but does the level of income remain the same?" said Navid Malik, analyst at Williams de Broe. He plans to quiz CAT management later Monday.
Samir Devani, an analyst at Altium Capital, said he plans to review his hold rating on the stock as it looks likely CAT will have to accept lower royalties from Abbott. He welcomed, however, news that CAT plans to reduce its cash-burn rate this year to less than 40 million pounds, from previous expectations of around 45 million pounds.
The company, like most of its European biotech peers, remains unprofitable as it continues to plow cash into research and development while most of its drugs are still some way from completing clinical trials.
CAT recently lost out to fellow U.K. biotech Celltech Group PLC in a bidding war for Oxford GlycoSciences PLC . Had CAT's all-share deal not lost to Celltech's cash offer, the tie-up would have created a Cambridge-based company with 260 million pounds in cash, two drugs on the market and a goal of profitability by 2008.
Mr. Chambre said in the wake of the failed deal that he plans to continue to expand CAT's own pipeline. Acquisitions are likely to be limited to products, he said, and in particular to drugs for respiratory disease and ophthalmic conditions that are already in clinical trials.
Company web site: cambridgeantibody.com |
