Abgenix's Big Deals
Matthew Herper, 10.16.03, 3:46 PM ET
NEW YORK - Some biotech companies pick a single molecule and set about spending their investors' money to make that molecule a sellable drug. Fremont, Calif.-based Abgenix is trying a different tack, using collaborations and royalties to build its way to profitability.
Chief Executive Raymond Withy says today's deal with drug giant AstraZeneca (nyse: AZN - news - people ) is one more step along that direction--and another validation that antibodies, the immune system's guard dogs against bacteria and other infectious agents, can be effectively made into drugs. "Abgenix is developing an interim strategy of partnering, and us doing what we do best," says Withy. "We create antibodies, and, more importantly, we manufacture them."
In financial terms, the AstraZeneca deal is certainly impressive. The London-based cancer powerhouse will sink $100 million into convertible preferred stock in Abgenix (nasdaq: ABGX - news - people ). It will also send along up to 36 drug targets--proteins that appear as though they might be worth blocking to treat disease. Abgenix will use its technology to create antibodies that attack these drug targets. Abgenix will put them through the early stages of pre-clinical testing, and move them into patients. (The antibodies are injected directly into a vein.) AstraZeneca will pay for all this work.
Astra will take the most effective drugs through the last stages of the development process, and market them. Abgenix will receive a royalty on marketed drugs, which will be determined on a case-by-case basis. "What we've done," says Withy, "is create a very robust cash-flow stream for some years out which will essentially cover much of our fixed cost."
In the meantime, Withy says some of Abgenix's earlier deals are already bearing fruit. Pfizer (nyse: PFE - news - people ) has started testing two compounds in humans, although it hasn't disclosed what these experimental drugs do. Another compound, ABX-EGF, is moving through clinical trials. The drug, which is being developed with biotech giant Amgen (nasdaq: AMGN - news - people ), attacks the same target hit by ImClone's (nasdaq: IMCL - news - people ) Erbitux. The target, the epidermal growth factor (EGF), is a protein contained on the surface of cancer cells that tell them when to divide.
Abgenix and Amgen recently changed the terms of their deal in a way that gives Amgen control over the drug's final development. It's too early to tell, Withy says, whether ABX-EGF will be more effective than Erbitux. But it doesn't seem to cause an allergic reaction as often as ImClone's drug. "Whether ABX-EGF will differentiate itself based on efficacy we won't know yet," Withy says. "We can clearly differentiate the product based on safety."
"Increasingly safe drugs that can be used at high doses," he says, "are going to be the drugs of the future."
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