By Karen Pihl-Carey

Staff Writer

Abgenix Inc. intends to pay $47 million to acquire Japan Tobacco Inc.'s share in XenoMouse technology and another $10 million for the Tokyo-based company to relinquish its option and license rights.

The agreement will give Abgenix, of Fremont, Calif., 100 percent ownership of Xenotech Inc. and Xenotech LP, a limited partnership that created the XenoMouse. Abgenix and Japan Tobacco equally own the partnership.

With sole ownership, Abgenix can execute future deals without the limitations imposed by the partnership.

"There was an annual ceiling on the number of licenses that we could [issue] to use the technology, and now that ceiling is removed," said Kurt Leutzinger, vice president and chief financial officer of Abgenix. "Now, with this ceiling removed, there's no limit with how many product candidates we can generate and then partner off with large drug companies."

Japan Tobacco will continue to use the XenoMouse technology under a research license. It also will have options to license the technology for a small number of antigen targets each year, and Abgenix will provide Japan Tobacco with licenses to related technology. In return, Japan Tobacco will pay Abgenix $10 million.

Japan Tobacco will retain options and licenses to antigen targets previously nominated under the Xenotech structure. It will pay license fees and royalties to Abgenix for any antibody products generated using XenoMouse and developed by Japan Tobacco.

Cell Genesys Inc., of Foster City, Calif., and a subsidiary of Japan Tobacco formed Xenotech in 1991. Cell Genesys assigned its interest in Xenotech to Abgenix, its subsidiary, in 1996.

Japan Tobacco invested more than $40 million in the creation of XenoMouse.

"They wanted to use it for their own internal product development and did not intend to use the mouse as we had used it and that is to make the technology broadly available, and this is really the reason they decided to sell," Leutzinger said. "They're getting use of the mouse, and the excess capacity, which they never needed, they're selling back to us."

Abgenix has 15 XenoMouse partners pursuing at least 20 product candidates.

"The existing collaborations were all done within the constraints of the joint venture structure," Leutzinger said. "The business was becoming so large that we were running up against those constraints."

The transaction between Abgenix and Japan Tobacco will not affect those collaborations, other than to eliminate a 1 percent to 1.5 percent royalty Cell Genesys had to pay Japan Tobacco under terms of each of the deals.

"The expected value of the avoided royalties is well over the price that we are paying, and we think it's a very attractive deal for us," Leutzinger said. "But it's also an attractive deal for Japan Tobacco because they are getting what they want."

The agreement is expected to close by the end of the year.

Abgenix collaborates with the U.S. Army Medical Research Institute of Infectious Diseases to make fully human antibodies that can provide protection against filovirus and poxvirus infections, which pose a potential biological warfare threat.

The company recently entered into a five-year alliance to use XenoMouse to generate antibodies to cancer antigens in New Haven, Conn.-based CuraGen Corp.'s database. (See BioWorld Today, Dec. 10, 1999, p. 1.)

Early this month, it also signed its largest XenoMouse collaboration, with Human Genome Sciences Inc., of Rockville, Md. (See BioWorld Today, Dec. 2, 1999, p. 1.)

Abgenix has several antibody product candidates under development and three in clinical trials. ABX-IL8 is in a Phase I trial for rheumatoid arthritis and recently completed a Phase I/II trial in psoriasis. ABX-EGF is in a Phase I trial for cancer. And ABX-CBL, Abgenix's compound for graft-vs.-host disease, is moving into a Phase III trial. (See BioWorld Today, Dec. 9, 1999, p. 1.)

With news of the collaborations, the move of ABX-CBL into a Phase III trial and the company's acquisition of XenoMouse, Abgenix's stock (NASDAQ:ABGX) rose from $60.125 on Dec. 1 to its closing price Tuesday of $112, up $5.25 from Monday. The stock was trading at about $15 in June.