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BioTech Navigator Investment Newsletter - 1 00 News (Page 18)

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BioTech Navigator Investment Newsletter - 1 00 News
sought after by the pharmaceutical/
biotech companies because they offer
the potential for products with better
efficacy through higher affinity-
human antibodies to human disease
targets-and cleaner safety (no mouse
protein). Of the 22 antibody agree-
ments formed since December 1997
(when Abgenix began to license the
XenoMouse) 19 are for human anti-
bodies, 10 for Abgenix, 8 for Medarex
(the only competing transgenic mouse
technology) and 1 for Morphosys
(phage display). The future of the
antibody area lies in human antibod-
ies, and Abgenix is the leader.
Abgenix's strategy is to become a
leading creator of antibody products
for the pharmaceutical industry and to
achieve this goal there are two ways.
One is to make the technology avail-
able to corporate partners, pharma-
ceutical and biotechnology compa-
nies, through XenoMouse technology
deals. These are deals where mice are
shipped to corporate partners to be
immunized or mice that have been
already immunized. Currently Ab-
genix has 10 of these corporate part-
ners covering 15 product candidates,
and the company expects that number
to grow at a 5 to 6 per annum rate. In
return Abgenix gets up-front and
milestone payments, as well as royal-
ties on product sales. The second type
of deal is when Abgenix has discov-
ered the antigen target, made the anti-
body product candidate, performed
preclinical testing and maybe early
clinical testing, and then selling a
product package to pharmaceutical or
biotechnology companies. These deals
are likely to be more lucrative because
Abgenix invested more as it will have
taken more of the product risk with
those opportunities. However, because
they require more resources, Abgenix
cannot do as many of them, therefore
BioTech Sage Report, January 2000
in a number of inflammatory diseases
including psoriasis, rheumatoid ar-
thritis and inflammatory bowel dis-
ease. ABX-IL8 is being used to target
psoriasis because it appears that IL8 is
playing a multi-part role in this dis-
ease. The third drug is ABX-EGF, its
Abgenix's lead cancer product. This
is an antibody that targets the epider-
mal growth factor receptor, which is a
receptor that sits on the outsides of a
number of different tumor types, and
acts like an off and on switch for tu-
mor proliferation. When tumor
growth factors bind the EGF recep-
tors, it stimulates tumor proliferation.
Abgenix's antibody binds to the re-
ceptors, so that the tumor growth fac-
tors can't get to it. Its mechanism of
action is very similar to that of Her-
ceptrin, a recently approved antibody
for breast cancer. In addition to breast
cancer, ABX-EGF could potentially
treat prostate, colorectal, head and
neck, pancreatic and renal cancers.
Their fourth product underdevelop-
ment is ABX-RB2, to potentially treat
autoimmune diseases and aid in trans-
Therapeutic antibodies do work
and they have the potential to gener-
ate billions of dollars in revenues.
The magic bullets, as they were once
called is not just a dream at this point
anymore, as there are several that are
blockbusters. Abgenix is ideally posi-
tioned to benefit from the wealth of
information and discoveries generated
in the area of genomics to deliver new
therapeutic products to newly discov-
ered targets. If Abgenix can imple-
ment its strategy, the upside is tre-
mendous. Right now, the stock is
trading at an all time high, so buy on


the target number is one to two of this
type. The company is a developmen-
tal organization that's capable of tak-
ing products through Phase II, but
does not have the infrastructure re-
quired to take products into large piv-
otal Phase III clinical trials. So rather
than taking one product all the way
and bearing all that risk, Abgenix's
strategy is to put more products in the
clinic and then to find partners to
complete the development. It's a risk-
diversification strategy. The com-
pany's goal is to quickly build a large
pipeline of product candidates from
which it'll receive a piece of the ac-
tion. At the end of last year, Abgenix
had 13 product candidates in its port-
folio with maybe 20 by the end of
1999 and growing into the mid-30s by
the year 2001. As a result, the com-
pany will have a large number of
product candidates in the pipeline
from which it could receive royalties.
At the end of the third quarter,
Abgenix had about $56 million in
cash and in mid-November did a pri-
vate placement of $75 million, so the
company is in a strong financial posi-
tion. The burn rate is expected to be
around $15 million, so Abgenix has
adequate cash to get the company to a
break-even point.
Abgenix has four products that are
in development. ABX- CBL, its lead
product, is being targeted to the treat-
ment of graft- versus-host disease.
This is an often fatal side effect of
bone marrow transplants. It occurs
where the transplanted immune cells
begin to attack the patient. Abgenix's
antibody targets those activated im-
mune cells and destroys them. It
doesn't eliminate the resting immune
cells; it only targets the ones that are
actively involved in an unwanted im-
mune response. ABX-CBL just en-
tered Phase III clinical trials. Their
second drug, ABX-IL8 is an inflam-
mation product. It targets interleukin
8, which is a cytokine that's involved
Abgenix Inc.
Continued from page 17, column 3

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