Protein Design Labs Inc. is banking on some better financials, courtesy of a new business development initiative as well as an agreement with MedImmune Inc.

Fremont, Calif.-based PDL will receive an up-front fee from MedImmune after licensing rights under its antibody humanization patents for up to three humanized antibodies over five years. Upon exercise of a license for a particular antibody, PDL would receive an additional license fee and royalties on net sales of any resulting antibody products. More specific financial terms were not disclosed, although PDL updated its financial guidance to reflect an increase in expected revenue and a decrease in expected net loss.

As part of the agreement, Gaithersburg, Md.-based MedImmune can increase the number of available licenses to as many as six antibodies during the five-year period by paying additional fees. The agreement follows licenses granted to MedImmune in 1997 under PDL's antibody humanization patents for Synagis (palivizumab), the first monoclonal antibody approved to prevent an infectious disease, and for siplizumab, an antibody in Phase II testing to treat psoriasis.

PDL said it expects total revenues to be 4 percent to 5 percent higher in 2002 compared to 2001, with higher royalty revenues partially offset by lower revenues from patent license and humanization agreements (revenues were $35.7 million through nine months of 2002). The company in part draws some of its revenue from a growing royalty stream from four marketed products that use PDL technology.

For the fiscal year ending Dec. 31, PDL expects a net loss in the range of about $12 million to $15 million, or about 13 cents to 17 cents per basic and diluted share. At the end of its most recently reported quarter, for the period ended Sept. 30, PDL reported cash, cash equivalents and marketable securities totaling about $624 million. The company at that time reported the expected net loss to range from $15 million to $23 million.

PDL, which in recent months has hired new management executives, including CEO Mark McDade, is looking to further improve its financials by refocusing its research, clinical development and commercial initiatives.

"We're working hard on an overall goal of becoming a fully integrated biopharmaceutical company," McDade said during a conference call. "Our initiatives are focused on building and changing PDL in three ways."

Included in the narrowed focus is a decision to drop three clinical development programs. PDL plans to cease further development of its cancer antibody Remitogen.

The anti-interleukin-12 antibody, which has completed Phase I, will be returned to preclinical status while further research is undertaken. PDL said the potential role of IL-23 in multiple sclerosis led to a decision not to move forward immediately with clinical studies of anti-IL-12 in that setting.

"Oncology will continue to be a core focus for us, even though we've had unquestionably some disappointments during the past couple of years in this area," McDade said. "We're certainly not going to give up."

Another drug, Nuvion, no longer will be pursued for a primary graft-vs.-host disease (GvHD) indication because of slow enrollment in a Phase I trial.

But the drug's development is not being dropped altogether - an ongoing Phase II trial of Nuvion for steroid-refractory GvHD will continue. PDL also said it would report initial Phase I data from an ongoing trial of Nuvion in severe steroid-refractory ulcerative colitis during the Digestive Disease Week meeting in May.

PDL expects to continue its focus on inflammatory bowel disease. Such programs include the anti-gamma interferon antibody in Crohn's disease, in one Phase II trial, and for which a second Phase II trial examining a higher dose is expected to begin in the second quarter. PDL said it would begin a Phase II trial of daclizumab in ulcerative colitis in the second quarter.

Two ongoing Phase II trials in asthma are moving forward. A proof-of-concept trial of the anti-IL-4 antibody in steroid-naive asthma patients has completed enrollment. PDL said it would decide whether or not to further develop the antibody based on trial results, expected in May. The daclizumab trial in asthma patients continues to accrue patients, with results expected in about a year.

"Our teams have been looking at each antibody, focusing on the likelihood of success based on our understanding of the disease situation, available therapies, mechanism of action and our available data," Steven Benner, PDL's newly hired senior vice president and chief medial officer, said during the conference call.

On the research front, PDL said it plans to improve antibody target validation and speed development of antibodies advancing to preclinical and clinical development. Specifically, PDL said it would continue to direct its research focus on developing antibodies against targets in oncology, autoimmune diseases and inflammatory conditions, with a goal of entering an average of two antibodies into clinical development annually beginning next year.

PDL's commercialization initiative aims to provide the company sustained profitability through a combination of a growing royalty stream related to its antibody humanization technology, and by commercializing products in core franchises.

To support its commercialization initiatives, PDL has begun construction of a large commercial-scale manufacturing facility in Brooklyn Park, Minn. To further support its commercialization initiative, PDL plans to create a specialty North American sales and marketing force by 2007.

PDL said other options to improve the company's overall revenue stream include acquiring a late-stage or already-marketed product, and to seek partnerships outside the U.S.

"We're looking at many creative approaches to building around our own pipeline toward a sustainable, profitable future - selling and marketing our own drugs, which for the most part are antibody based," McDade said.

PDL's stock (NASDAQ:PDLI) closed Tuesday at $9.32, up 15 cents. MedImmune's shares (NASDAQ:MEDI) closed at $28.09, down 2 cents.