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Biotech / Medical : Abgenix, Inc. (ABGX) -- Ignore unavailable to you. Want to Upgrade?

To: Icebrg who wrote (268)	10/16/2003 8:26:16 PM
From: mopgcw	Read Replies (1) \| Respond to of 590

GS take on AZ deal: ABGX (IL/N): AstraZeneca alliance strategic for pipeline and cash 52-Week Range US$17-5 YTD Price Change 82.90% Market Cap US$1.2bn Fiscal Year (ending in Dec) 2002 2003E US$-1.52 US$-1.97 Abgenix and AstraZeneca announced this morning, a strategic collaboration for the joint development of antibodies to up to 36 cancer targets. As part of the agreement AstraZeneca plans to invest $100M in Abgenix convertible preferred stock, with $50M convertible at $30 per share in 7 and 10 years, and possibly an additional $60M in convertible preferred stock, depending on the achievement of certain milestones. Abgenix will receive milestone payments as candidates progress and royalties on potential sales. The companies may also develop additional candidates on an equal cost and profit sharing basis. We believe that this partnership provides solid leverage to Abgenix technology in oncology. On the heels of the amended agreement announced with Amgen earlier this week, Abgenix has significantly strengthened its balance sheet. We maintain In-Line rating and Neutral coverage view. Key risks include potential clinical failures, long development timeframes and volatility in the biotech sector. INVESTMENT OUTLOOK: We believe that Abgenix is trading at an attractive valuation for long-term oriented investors. Abgenix is distinguished by its ability to make fully human antibodies to a broad range of targets, a platform technology that can fuel an expansive, diversified pipeline. Abgenix has established a blue chip partner list and a growing roster of proprietary therapeutic antibodies. Abgenix' most advanced candidate, ABX- EGF is a cancer antibody in development with Amgen. Phase II data and plans for pivotal development will likely be important valuation drivers. Over the next several years, we expect a range of new antibodies to enter the clinic on a proprietary and partnered basis. We maintain In-Line rating and Neutral coverage view. I. COLLABORATION WITH ASTRAZENECA Technology validation Antibodies to up to 36 cancer targets will be selected. AstraZeneca will have exclusive commercial rights to these candidates, and Abgenix will receive development milestone payments as candidates progress through the clinic as well as potential royalties on future sales. Milestone and potential royalty payments will likely differ from program to program. For these candidates, Abgenix will conduct early clinical testing, process development, early clinical manufacturing, and manufacturing for the first 5 years of commercial sales. AstraZeneca will pay Abgenix for its work at competitive market prices. It is not clear at this point when the first antibody candidates may enter the clinic. The deal with AstraZeneca will not impact oncology programs already in place with pharmaceutical and biotechnology partners. While we would not expect to see additional broad collaborations in the oncology setting, we think it possible that other strategic alliances could be formed in different focus areas, such as inflammation, infectious disease, or metabolism. Abgenix has established over 50 collaborations with biotechnology, pharmaceutical and academic partners. Expanding proprietary reach In addition to antibodies to the 36 targets, the collaboration provides for the development of a separate pool of antibodies by Abgenix, with the potential for 50/50% cost and profit sharing between the companies. Solid cash infusion AstraZeneca plans to invest $100 million in convertible preferred stock, upon closing of the deal. There is no interest and no dividend payment required. The stock is convertible at $30 per share, in 7 years for the first $50 million and in 10 years for the remaining $50 million. In addition, depending upon the achievement of unspecified milestones, Abgenix could require AstraZeneca to invest in another $60 million in convertible preferred stock. II. NICE LEVERAGE OF ABGENIX MANUFACTURING CAPACITY Abgenix has completed construction of its manufacturing facility, which is capable of producing 200-400 Kg of material annually. Given the typically high production requirements for antibody therapeutics, we regard the facility as a strategic asset. In addition to programs selected for development with AstraZeneca, Abgenix plans also to manufacture clinical and initial commercial supply of lead antibody candidate, ABX-EGF, in development with Amgen. === 2003 milestones === * Phase II data for ABX-EGF monotherapy in second and third line colon cancer at ASCO - Fremont manufacturing facility to come on line === 2003/2004 milestones === - Phase II ABX-EGF monotherapy time-to-progression data in renal cancer - Phase II data for ABX-EGF monotherapy in prostate cancer - Phase II data for ABX-EGF combination therapy in non-small cell lung cancer - Phase II data for ABX-EGF combination therapy in first-line colon cancer - Phase I data for ABX-MAI in cancer * Milestone attained I, Meg Malloy, hereby certify ..

To: Icebrg who wrote (268)	10/17/2003 7:52:50 AM
From: Icebrg	Read Replies (1) \| Respond to of 590

ABGX/AZN deal - no appetite for drug development. A look at the deal from the perspective of both companies. AstraZeneca. Why did they do it? Was it for the targets or for the tools? Clearly it wasn't for the targets as it seems that most of them are either not known yet or under the "control" of AZN. There is a possibility that some of the mAbs/targets that currently are in the portfolio of Abgenix might be included, but that didn't seem to be the main driver behind the deal. Normally a pharma wishing access to antibody technology would have negotiated a licencing deal, taken delivery of some mice and done the rest of the work themselves. AZN didn't take that route. They bought the complete package from Abgenix. From target to marketing approval with the exception of the late-stage clinical development which they would like to run themselves. Maybe they feel that they are too late into the game and that it would have taken too long and been too laborious to build up the expertise required in-house. To get everything including manufacturing services for a mere 100 mUSD seems to have been a good deal for Astra. Abgenix will take care of everything practical. AZN will just have to provide the target and Abgenix will do the "rest". Abgenix So, where will this leave Abgenix? Not looking too good I am afraid. In a way they are back at start, out-licensing their technology with some CRO- and manufacturing services thrown in. They will be compensated at going market rates for what they do, but I doubt there will be any rich royalty fees included in the agreement. Especially in those cases where the targets have come from AZN's collection. Withy & Co. have traded away the potential upside that can come from drug development for the relative security of having AZN paying a large portion of their bills. (And another part of the bill will indirectly be paid by Amgen). Evidently their early experiences from drug development were enough to convince them that this part of the business was too expensive and risky for their company. And that it was not enough to know how to create fully human antibodies to be successful in drug development. Instead they seem to be on their way to become a mAb-based super CRO providing all the services needed to convert a target into a mAb-based biological agent. Perhaps I am too pessimistic. Perhaps the recent deals just represent an effort to create a relatively secure platform on which to base future drug development efforts. For the time being it seems however to me as while a lot of the risk has disappeared a lot of the potential has gone the same way. Erik