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To: Salt'n'Peppa who wrote (8524)	1/27/2002 8:36:36 PM
From: David Graham	Respond to of 14101

S&P, Apparently, the reason for this takeover was that DRI held a lucrative royalty on a Cambridge RA product. Unfortunately, there's no pent up demand for Canuck biotech. British drug maker to acquire Drug Royalty Paying $126-million, cancelling Ontario firm's royalty interest in arthritis medicine Leonard Zehr 00:00 EST Friday, January 18, 2002 In an unusual twist, British drug developer Cambridge Antibody Technology Group PLC is buying Drug Royalty Corp. for $126-million in stock so it can cancel an eight-year-old investment by Drug Royalty in Cambridge before its potential blockbuster drug to treat rheumatoid arthritis is launched next year. The relationship between the two companies dates back to 1994 when Drug Royalty invested $3-million for a 3.5-per-cent interest in Cambridge's revenue until 2004 and 2.5 per cent of the revenue until 2009. "Cambridge has wanted to repurchase the royalty interest for a number of years but we could never come to a meeting of minds over a price and we were never really motivated," Jim Webster, president of Toronto-based Drug Royalty, said in an interview yesterday. In July, Mr. Webster and John Ashton, finance director of Cambridge, had lunch at Toronto's CN Tower. "I basically told him that if he wanted to buy back the royalty interest, he'd have to buy the whole company," Mr. Webster recalls. He also acknowledged that another company was interested in buying Drug Royalty last summer and the Drug Royalty board considered both proposals. "Cambridge is the one that was considered attractive because we knew the company, the technology and management," he said. Drug Royalty acquires royalty positions in drug companies and pharmaceuticals. At Nov. 30, 2001, it had net assets of $82.7-million and cash and investments of $26-million. Cambridge has six drug products in clinical trials under various collaborations with drug companies. Its flagship drug, D2E7, is licensed to Abbott Laboratories Inc., which plans to file for U.S. marketing approval in the second quarter. D2E7 is a new generation of drugs to treat rheumatoid arthritis. The leading drug in the field is Immunex Inc.'s hot-selling Enbrel, which prompted Amgen Inc. to bid $16-billion (U.S.) for Immunex late last year. Johnson & Johnson launched a similar arthritis drug last year called Remicade and D2E7 would be the third to reach the market. Drug Royalty also has an interest in Remicade. Cambridge said Drug Royalty shareholders can elect to receive Cambridge common shares listed on the London Stock Exchange or American depositary shares on the Nasdaq Stock Market in a stock swap that values each Drug Royalty share at $3 (Canadian) apiece. The offer, which is slated to be mailed next month, represents a 20-per-cent premium on Drug Royalty's 60-day average trading price. On the Toronto Stock Exchange yesterday, Drug Royalty rose 9 cents to close at $2.87. MDS Capital Corp. and Canadian Medical Discoveries Fund have agreed to tender their combined 30-per-cent stake in Drug Royalty to Cambridge. Ezra Lwowski, an analyst at Yorkton Securities Inc., said Drug Royalty has made "superb investments over the years and got great returns. But it never succeeded as a public company because it didn't make deals often enough and didn't attract investor interest." Mr. Webster said the company has already earned $6-million from its original $3-million investment in Cambridge. He also said there is no breakup fee in the Cambridge takeover bid. However, if Drug Royalty is acquired by another company, Cambridge can repurchase Drug Royalty's interest in Cambridge for $14-million. Copyright © 2001 The Globe and Mail