BioWorld International Correspondent

LONDON - Cambridge Antibody Technology Group plc committed its future to a five-year deal with AstraZeneca plc, in which the partners will invest $175 million to fund 25 antibody discovery programs and AstraZeneca will pay £75 million (US$139.1 million) to become CAT's largest shareholder at 19.9 percent.

Peter Chambré, CEO, told BioWorld Today: "This is extremely important for us. We saw some time ago what we believed was the opportunity for a major strategic alliance with a major pharma company. The opportunity in monoclonal antibodies is substantial and capabilities within CAT are now at a scale where we can move from multiple small deals to one big one."

CAT will dedicate the majority of its discovery resources to generating a single pipeline with London-based AstraZeneca, and between 100 to 150 of CAT's scientists are expected to be involved. The principal focus will be inflammatory disorders, including respiratory diseases, and CAT has 11 existing projects in that field.

"We have offered the 11 programs to the partnership," Chambré said. "AstraZeneca needs to look at them. I'm sure they won't decide to put them all in." The remaining targets are expected to come from AstraZeneca's internal resources. "While the initial focus is inflammatory and respiratory diseases, the opportunity AstraZeneca and CAT see is to go beyond this, across the full range of AstraZeneca's therapeutic fields," Chambré said.

The programs will be jointly managed and funded equally by the partners. "At the end of research, both we and AstraZeneca will decide whether to take programs forward. We will then co-fund to the end of Phase II," Chambré said. "At the end of Phase II there will be another opportunity for [CAT] to fund jointly the development of one in every five products up to launch."

Beyond each decision point, CAT will be entitled to a greater share of milestones and royalties. For products that it funds to market, Cambridge, UK-based CAT will get sales milestones and the option to co-promote products in the U.S.

CAT will be responsible for antibody discovery, developing manufacturing processes and supplying material for clinical trials. AstraZeneca will oversee biology, clinical development, regulatory filings and commercialization.

The announcement coincided with the first day of hearings at the High Court in London in CAT's case against Abbott Laboratories, of Abbott Park, Ill. CAT is seeking to have its royalty rate for the rheumatoid arthritis treatment Humira reinstated after Abbott unilaterally decided to reduce it.

Despite the mess with Abbott, Chambré said he was not worried that the deal with AstraZeneca leaves CAT too dependent on a single company. "What is important is that we are committed to CAT becoming a product company. To do that we need to have a significant economic stake in future products," he said.

AstraZeneca is buying 10.2 million CAT shares at £7.34 per share, a 27.3 percent premium to the closing price over the previous five days. There are restrictions on AstraZeneca's ability to increase its stake or to sell shares. The deal is subject to approval by CAT's shareholders.

CAT's share price rose 45 pence to £6.05 when the deal was announced Monday. In the U.S., the stock (NASDAQ:CATG) rose 68 cents to close at $11.14.

The £75 million to be invested by AstraZeneca will pay for CAT's share of the joint research program over the next five years. That leaves the antibody company with £93.7 million in existing cash to fund ongoing clinical development programs, including its anti-TGF-beta collaboration with Genzyme Corp., of Cambridge, Mass.

The lead antibody in that program, CAT-192 for treating diffuse systemic sclerosis, is in Phase II, while a second product, GC-1008, is expected to commence clinical trials in 2005 in idiopathic pulmonary fibrosis and cancer.

To some extent the deal with AstraZeneca is reminiscent of the way CAT has developed its relationship with Genzyme, which was set up in September 2000. In September 2003, CAT agreed to broaden its financial contribution to 50 percent in return for a significant increase in its share of the profits. At the same time Genzyme invested £22.9 million, for what was then 11 percent of CAT.